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Question 72 Chapter 5 of +2-A
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72. X and Y are partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 was as follows:
| Liabilities | Assets | ||||
| Outstanding Rent | 13,000 | Cash | 10,000 | ||
| Creditors | 20,000 | Sundry Debtos | 80,000 | ||
| Workmen Compensation Reserve | 5,600 | Less : Provision for Doubtful Debts | 4,000 | 76,000 | |
| Capital A/cs | Stock | 20,000 | |||
| X | 50,000 | Profit and Loss A/c | 4,000 | ||
| Y | 60,000 | 1,10,000 | Machinery | 38,600 | |
| 1,48,600 | 1,48,600 |
On 1st April, 2019, they admitted Z as a partner for 1/6th share on the following terms:
(i) Z brings in 40,000 as his share of Capital but he is unable to bring any amount for Goodwill.
(ii) Claim on account of Workmen Compensation is 3,000.
(iii) To write off Bad Debts amounted to 6,000.
(iv) Creditors are to be paid 2,000 more.
(v) There being a claim against the firm for damages, liabilities to the extent of 2,000 should be created.
(vi) Outstanding rent be brought down to 11,200.
(vii) Goodwill is valued at 112 years’ purchase of the average profits of last 3 years, less 12,000. Profits for the last 3 years amounted to 10,000; 20,000 and 30,000. Pass Journal entries, prepare Partners’ Capital Accounts and opening Balance Sheet
The solution of Question 72 Chapter 5 of +2-A: –
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| Date | Particulars | L.F. | Debit | Credit | |
| Revaluation A/c | Dr | 2,000 | |||
| To Provision for Doubtful Debts A/c | 2,000 | ||||
| (Provision on debtors increased) cash) | |||||
| Revaluation A/c | Dr | 2,000 | |||
| To Creditors A/c | 2,000 | ||||
| (Creditors increased) | |||||
| Revaluation A/c | Dr | 2,000 | |||
| To Claim for Damages A/c | 2,000 | ||||
| (Liability increased) | |||||
| Outstanding Rent A/c | Dr | 1,800 | |||
| To Revaluation A/c | 1,800 | ||||
| (Liability decreased) | |||||
| X’s Capital A/c | Dr | 2,520 | |||
| Y’s Capital A/c | Dr | 1,680 | |||
| To Revaluation A/c | 4,200 | ||||
| (Loss on revaluation transferred to Partners’ Capital A/c) | |||||
| Workmen Compensation Reserve A/c | Dr | 5,600 | |||
| To Workmen Compensation Claim A/c | 3,000 | ||||
| To X’s Capital A/c | 1,560 | ||||
| To Y’s Capital A/c | 1,040 | ||||
| (Surplus Workmen Compensation Reserve distributed) | |||||
| Bank A/c | Dr | 40,000 | |||
| To Z’s Capital A/c | 40,000 | ||||
| (Liability increased) | |||||
| Partners’ Capital Account the year ended 31st March, 2019 | |||||||
| Parti culars | X | Y | C | Partic | X | Y | z |
| To Profit & Loss A/c | 2,400 | 1,600 | – | By Balance B/d | 50,000 | 60,000 | – |
| To Revaluation A/c | 2,520 | 1,680 | By Bank A/c A/c | – | – | 40,000 | |
| By Workmen Compensation Reserve A/c | 1,560 | 1,040 | – | ||||
| By Z’s Current A/c | 1,800 | 1,200 | – | ||||
| To Balance c/d | 48,440 | 58,960 | 40,000 | ||||
| 53,360 | 62,240 | 40,000 | 53,360 | 62,240 | 40,000 | ||
| Balance Sheet | |||||
| Liabilities | Amount | Assets | Amount | ||
| Outstanding Rent | 11,200 | Cash | 50,000 | ||
| Workmen Compensation Claim | 3,000 | Stock | 20,000 | ||
| Creditors | 22,000 | Machinery | 38,600 | ||
| Claim for Damages | 2,000 | Z ‘s Current A/c | 3,000 | ||
| Capital: | Debtors | 80,000 | |||
| X | 48,440 | Less : Provision for D.D | 6,000 | 74,000 | |
| Y | 58,960 | ||||
| Z | 40,000 | 1,47,400 | |||
| 1,85,600 | 1,85,600 | ||||
Working Note:-
Calculation of Goodwill
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| Average Profit | = | 10,000+20,000+30,0003=60,0003 |
| = | Rs 20,000 | |
| Goodwill | = | Average Profits × Number of years’ purchase |
| = | (20,000×1.5) – 12,000 | |
| = | 30,000 – 12,000 | |
| = | Rs 18,000 |
Calculation of Z’s share of goodwill
| Z’s share of goodwill | = | 18,0000 | X | 1 |
| 6 | ||||
| = | Rs 3,000 |
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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
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