Question 71 Chapter 6 of +2-A
71. Virad, Vishad and Roma were partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively. On 31st March, 2013, their Balance Sheet was as under:
| Liabilities | Amount | Assets | Amount | |
| Capital A/cs: | Buildings | 2,00,000 | ||
| Virad | 3,00,000 | Machinery | 3,00,000 | |
| Vishad | 2,50,000 | Patents | 1,10,000 | |
| Roma | 1,50,000 | 7,00,000 | Stock | 1,00,000 |
| Reserve Fund | 60,000 | Debtors | 80,000 | |
| Creditors | 1,10,000 | Cash | 80,000 | |
| 8,70,000 | 8,70,000 |
Virat died on 1st October 2013. It was agreed between his executors and the remaining partners that:
i Goodwill of the firm be valued at 212 years purchase of average profits for the last three years. The average profits were 1,50,000.
ii Interest on capital be provided at 10% p.a. iii Profits for 2013-14 be taken as having accrued at the same rate as that of the previous y
The solution of Question 71 Chapter 6 of +2-A: –
| A’s Capital Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| To Executor’s A/c | 5,70,000 | By Balance b/d | 3,00,000 | ||
| By Vishad’s Capital A/c | 1,12,500 | ||||
| By Roma’s Capital A/c | 75,000 | ||||
| By Profit and Loss Suspense A/c | 37,500 | ||||
| By Reserve Fund | 30,000 | ||||
| By Interest on Capital | 15,000 | ||||
| 5,70,000 | 5,70,000 | ||||
Working Notes:
Calculation of Gaining Ratio of Vishad and Roma:
Old Ratio Virad, Vishad and Roma = 5:3:2
New Ratio Vishad and Roma = 3:2
Gaining Ratio = New Ratio – Old Ratio
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| Vishad’s Share | = | 3 | – | 3 |
| 5 | 10 | |||
| = | 3 | |||
| 10 |
| Roma ’s Share | = | 2 | – | 2 |
| 5 | 10 | |||
| = | 2 | |||
| 10 |
Hence, gaining ratio is 3 : 2
Calculation of Virad’s Share of Goodwill:
Goodwill of the firm = Average Profit X Number of year’s purchased
| Goodwill of Firm | = | 1,50,000 | X | 2 | 1 |
| 2 | |||||
| = | Rs3,75,000 |
| Share of goodwill of Virad | = | 3,75,000 | X | 5 |
| 10 | ||||
| = | Rs 1,87,500 |
| Vishad will give | = | 1,87,500 | X | 3 |
| 5 | ||||
| = | Rs 1,12,500 |
| Roma will give | = | 1,87,500 | X | 2 |
| 5 | ||||
| = | Rs 75,000 |
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Calculation of Profit share of Virad:
Profit for the year = Rs 1,50,000
| Virad’s Share of Profit | = | 1,50,000 | X | 5 | X | 6 |
| 10 | 12 | |||||
| = | Rs 37,500 |
Calculation of Interest on Virad ‘s Capital:
| Interest on capital | = | 3,00,000 | X | 10 | X | 6 |
| 100 | 12 | |||||
| = | Rs 15,000 |
Virad’s share of Reserve fund:
| Share of Reseve Fund | = | 60,000 | X | 5 |
| 10 | ||||
| = | Rs 30,000 |
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
