Question 76 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 76 Chapter 5 of +2-A

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
ulars

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)

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 76 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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