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

Question 71 Chapter 5 of +2-A

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 Account
the year ended 31st March, 2019

Parti
culars
X Y C

Partic
ulars

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)

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

 

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2 Book 1 min - Question 71 Chapter 5 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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