Question 71 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 71 Chapter 6 of +2-A

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

 

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    

 

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)

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 6 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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