Question 76 Chapter 5 of +2-A
76. A and B are partners in a firm. The net profit of the firm is divided as follows: 1/2 to A, 1/3 to B and 1/6 carried to a Reserve. They admit C as a partner on 1st April, 2019 on which date, the Balance Sheet of the firm was:
| Liabilities | Assets | |||
| Capital A/cs: | Building | 50,000 | ||
| A | 50,000 | Plant and Machinery | 30,000 | |
| B | 40,000 | 90,000 | Stock | 18,000 |
| Reserve | 10,000 | Debtors | 22,000 | |
| Creditors | 20,000 | Bank | 5,000 | |
| Outstanding Expenses | 5,000 | |||
| 1,25,000 | 1,25,000 |
Following are the required adjustments on admission of C:
(a) C brings in 25,000 towards his capital.
(b) C also brings in 5,000 for 1/5th share of goodwill.
(c) Stock is undervalued by 10%.
(d) Creditors include a liability of 4,000, which has been decided by the court at 3,200.
(e) In regard to the Debtors, the following Debts proved Bad or Doubtful− 2,000 due from X−bad to the full extent; 4,000 due from Y−insolvent, estate expected to pay only 50%. You are required to prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm
The solution of Question 76 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| To Bad Debts | 2,000 | By Stock A/c | 2,000 | ||
| To Provision for Doubtful Debts A/c 4,000 X 50% | 2,000 | By Creditors (4,000 – 3,200) | 800 | ||
| Loss transferred to | |||||
| A Capital | 720 | ||||
| B Capital | 480 | 1,200 | |||
| 4,000 | 4,000 | ||||
| Partners’ Capital Account the year ended 31st March, 2019 |
|||||||
| Parti culars |
A | B | C |
Partic |
A |
B | C |
| To Revaluation A/c | 720 | 480 | – | By Balance B/d | 50,000 | 40,000 | – |
| By Bank A/c A/c | – | – | 25,000 | ||||
| By Reserve A/c | 6,000 | 4,000 | – | ||||
| By Premium for Goodwill | 3,000 | 2,000 | – | ||||
| To Balance c/d | 58,280 |
45,520 | 25,000 | ||||
| 59,000 | 46,000 | 25,000 | 59,000 | 46,000 | 25,000 | ||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Creditors | (20,000 – 800) | 19,200 | Building | 50,000 | |
| Outstanding Expenses | 5,000 | Plant and Machinery | 30,000 | ||
| Stock | (18,000 × 100/90) | 20,000 | |||
| Capital: | Debtors | 22,000 | |||
| A | 58,280 | Less: Bad Debt | 2,000 | ||
| B | 45,520 | Less: Prov. for D. Debts | 2,000 | 18,000 | |
| C | 25,000 | 1,28,800 | Bank | (5,000+30,000) | 35,000 |
| 1,53,000 | 1,53,000 | ||||
Working Note:-
Calculation of Sacrificing Ratio
Old Ratio of A and B = 3 : 2
Sacrificing Ratio = 3 : 2
Distribution of Premium for Goodwill
| A will get | = | 10,000 | X | 3 |
| 5 | ||||
| = | 6,000 |
| B will get | = | 10,000 | X | 2 |
| 5 | ||||
| = | 4,000 |
Distribution of Premium for Goodwill
| A will get | = | 5,000 | X | 3 |
| 5 | ||||
| = | 3,000 |
| B will get | = | 5,000 | X | 2 |
| 5 | ||||
| = | 2,000 |
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
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