# Question 71 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 71 Chapter 5 of +2-A

71. X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2019 was:

 Liabilities Assets Creditors 15,000 Cash at Bank 5,000 Employees’ Provident Fund 10,00 Sundry Debtors 20,000 Workmen Compensation Reserve 5,800 Less: Provision for Doubtful Debts 600 19,400 Capital A/cs: Stock 25,000 X 70,000 Fixed Assets 80,000 Y 31,000 1,01,000 Profit and Loss A/c 2,400 1,31,800 1,31,800

They admit Z into partnership with 1/8th share in profits on 1st April, 2019. Z brings 20,000 as his capital and 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employees’ Provident Fund liability is to be increased by 5,000.
(b) All Debtors are good.
(c) Stock includes 3,000 for obsolete items.
(d) Creditors are to be paid 1,000 more.
(e) Fixed Assets are to be revalued at 70,000. Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.

## The solution of Question 71 Chapter 5 of +2-A: –

 Revaluation Account Liabilities Amount Assets Amount To Stock A/c 3,000 By Provision for D. Debts A/c 600 To Creditors A/c 1,000 To Fixed Assets A/c 10,000 Loss transferred to To Provident Fund A/c 5,000 X Capital 11,500 Y Capital 6,900 18,400 19,000 19,000

 Partners’ Capital Accountthe year ended 31st March, 2019 Particulars X Y C Particulars X Y z To Revaluation A/c (Loss) 11,500 6,900 – By Balance B/d 70,000 31,000 – To Profit and Los A/c 1,500 900 By Workmen’s Comp. Fund A/c 3,625 2,175 – By Cash A/c – – 20,000 By Premium for Goodwill A/c 12,000 – – To Balance c/d 72,625 25,375 20,000 85,625 33,175 20,000 85,625 33,175 20,000

 Balance Sheet Liabilities Amount Assets Amount Creditors (15,000 + 1,000) 16,000 Land and Building 5,000 Provident Fund (10,000 + 5,000) 15,000 Sundry Debtors 20,000 Stock 25,000 – 3,000) 22,000 Capital: Fixed Asset (80,000 – 10,000) 70,000 X 72,625 Cash 32,000 Y 25,375 Z 20,000 1,18,000 1,49,000 1,49,000

Working Note:-

Distribution of Revaluation Loss

 X’s Capital will be Debited by = 18,400 X 5 8 = 11,500

 Y’s Capital will be Debited by = 18,400 X 3 8 = 6,900

Distribution Accumulated Loss

 X’s Capital will be Debited by = 2,400 X 5 8 = 1,500

 Y’s Capital will be Debited by = 2,400 X 3 8 = 900

Distribution of Workmen’s Compensation Fund

 X’s Capital will be Debited by = 5,800 X 5 8 = 3,625

 Y’s Capital will be Debited by = 5,800 X 5 8 = 2,175

Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X

Calculation of New Profit Sharing Ratio
Old Profit Sharing Ratio Between X and Y = 5 : 3
Z acquired 1/8th Share From X

 X’s New Ratio = 5 – 1 8 8
 = 4 8
 Y’s New Ratio = 3 8
 Z’s New Ratio = 1 8

New Profit sharing Ratio between X ,Y and Z = 4 : 3 : 1

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

### T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement