Question 72 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 72 Chapter 5 of +2-A

Question 72 Chapter 5 of +2-A

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: –

 

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
ulars

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

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
   

 

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 72 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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