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Question 73 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 73 Chapter 5 of +2-A
Question No.73 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

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Question 73 Chapter 5 of +2-A

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73. Rajesh and Ravi are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet at 31st March, 2019 stood as:

Liabilities  Assets  
Creditors 38,500Cash 2,000
Outstanding Ren 4,000Stock 15,000
Capital A/cs  Prepaid Insurance 1,500
Rajesh29,000 Debtors9,400 
Ravi15,00034,000Less : Provision for Doubtful Debts4009,000
   Machinery 19,000
   Building 35,000
   Furniture 5,000
  86,500  86,500

Raman is admitted as a new partner introducing a capital of 16,000. The new profit-sharing ratio is decided as 5 : 3 : 2. Raman is unable to bring in any cash for goodwill. So, it is decided to value the goodwill on the basis of Raman’s share in the profits and the capital contributed by him. Following revaluations are made:
(a) Stock to decrease by 5%;
(b) Provision for Doubtful Debts is to be 500;
(c) Furniture to decrease by 10%;
(d) Building is valued at 40,000. Show necessary Ledger Accounts and Balance Sheet of new firm.

 

The solution of Question 73 Chapter 5 of +2-A: –

Revaluation Account
Liabilities
AmountAssetsAmount
To Stock A/c 3,000By Building A/c 5,000
To Provision for D. Debts A/c500    
Less: Old Provision400100   
To Furniture A/c 500   
Profit on Revaluation transferred to    18,400
Rajesh Capital2,190    
Ravi Capital1,4603,650   
  5,000  5,000

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Partners’ Capital Account
the year ended 31st March, 2019

Parti
culars
RajeshRaviRama

Partic
ulars

Rajesh
RaviRama
   By Balance B/d29,00015,000
    By Bank A/c A/c16,000
To Balance c/d 31,19016,46016,000By Reevaluation A/c2,1901,460
 31,19016,46016,000 31,19016,46016,000
To Rajesh’s Capital A/c1,635By Balance c/d A/c31,19016,46016,000
To Raman’s Capital A/c1,635By Raman’s Capital A/c1,6351,635
To Balance c/d 32,825
18,09512,730    
 32,82518,09516,000 32,82518,09516,000

 

 

Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 11,200Cash(2,000 + 16,000)18,000
Outstanding Rent 3,000Stock(15,000 – 750)14,250
   Prepaid Insurance 1,500
Capital:  Debtors9,400 
Rajesh32,825 Less : Provision for D.D5008,900
Ravi18,095 Building(35,000 + 5,000)40,000
Raman12,73063,730Furniture(5,000 – 500)4,500
  1,06,150  1,06,150

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Rajesh and Ravi = 3 : 2
New Ratio of Rajesh, Ravi and Raman = 5 : 3 : 2

Sacrificing Ratio = Old Ratio − New Ratio

Rajesh’s New Ratio=35
510
 =6 – 5
10
 =1
 10

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Ravi’s New Ratio=23
510
 =4 – 3
10
 =1
 10

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Sacrificing Ratio = 1 : 1

Calculation of Goodwill

Actual Capital of all Partners before adjustment of goodwill=Rajesh’s Capital + Ravi’s Capital + Raman’s Capital
 =31,190 + 16,460 + 16,000
Goodwill=Rs 63,650

Calculation of Raman’s share of goodwill

Capitalized value on the basis of Raman’s share=16,000X10
2
 =80,000
  

Calculation of Goodwill

Goodwill of the Firm=Capitalised value of the firm- Actual Capital of the all partner before adjustement of goodwill
 =80,000 – 63,650
Goodwill=16,350

 

Raman’s share of Goodwill=16,350X2
10
 =3,270
  

Adjustment of Raman’s share of goodwill

Rajesh and Ravi each Capital Accounts will be credited by=3,270X1
2
 =1,635
  

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DateParticulars
L.F.DebitCredit
 Raman’s Capital A/cDr 3,270 
 To Rajesh’s Capital A/c   1,635
 To Ravi’s Capital A/c   1,635
 (Raman’s share of goodwill adjusted)
cash)
    

 

Distribution of Profit on Revaluation (in old ratio)

Rajesh will get=3,650X3
5
 =2,190
  

 

Ravi will get=3,650X2
5
 =1,460
  

 

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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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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