Question 80 Chapter 5 of +2-A
80.Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 their Balance Sheet was:
| Liabilities | Assets | ||||
| Sundry Creditors | 16,000 | Cash in Hand | 1,200 | ||
| Public Deposits | 61,000 | Cash at Bank | 2,800 | ||
| Bank Overdraft | 6,000 | Stock | 32,000 | ||
| Outstanding Liabilities | 2,000 | Prepaid Insurance | 1,000 | ||
| Capital A/cs: | Sundry Debtors | 28,000 | |||
| Deepika | 48,000 | Less: Provision for Doubtful Debt | 800 | 27,200 | |
| Rajshre | 40,000 | 88,00 | Plant and Machinery | 48,000 | |
| Land and Building | 50,000 | ||||
| Furniture | 10,00 | ||||
| 1,73,000 | 1,73,000 |
On 1st April, 2019 the partners admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to calculate the goodwill on the basis of Anshu’s share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at 60,000, Stock at 40,000 and the Provision for Doubtful Debts is to be maintained at 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of Deepika, Rajshree and Anshu.
The solution of Question 80 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| Reserve for D. Debts | 4,000 | Plant and Machinery | 60,000 – 48,000) | 12,000 | |
| Less: Old Reserve | 800 | 3,200 | Stock | (40,000 – 32,000) | 8,000 |
| Furniture | 10,000X 10% | 1,000 | Land and Building | (50,000 × 20%) | 10,000 |
| Outstanding salary | 8,000 | ||||
| Profit transferred to | |||||
| Deepika Capital | 10,680 | ||||
| Rajshree Capita | 7,120 | 17,800 | |||
| 25,000 | 25,000 | ||||
| Partners’ Capital Account the year ended 31st March, 2019 |
|||||||
| Parti culars |
Deepi ka |
Rajsh ree |
Anshu |
Partic |
Deepi ka |
Rajsh ree |
Anshu |
| By Balance B/d | 48,000 | 40,000 | – | ||||
| By Revaluation | 10,680 | 7,120 | – | ||||
| To Balance c/d (before adjustment of Goodwill) | 58,680 | 47,120 | 32,000 | By Cash A/c | – | – | 32,000 |
| 58,680 | 47,120 | 32,000 | 58,680 | 47,120 | 32,000 | ||
| To Deepika’s Capita | – | – | 2,220 | By Balance B/d | 58,680 | 47,120 | 32,000 |
| To Rajshree’s Capita | – | – | 2,220 | By Anshu’s Capital (Goodwill) | 2,220 | 2,220 | – |
| To Balance c/d | 60,900 |
49,340 | 30,000 | ||||
| 60,900 | 49,340 | 32,000 | 60,900 | 49,340 | 32,000 | ||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Outstanding Salaries | 8,000 | Cash in Hand | 1,200 | ||
| Sundry Creditors | 16,000 | Cash at Bank | 28,800 | ||
| Public Deposits | 61,000 | Stock | 40,000 | ||
| Capital: | Debtors | 28,800 | |||
| A | 1,87,875 | Less: 5% Provision for D. Debts | 4,000 | 24,800 | |
| B | 92,625 | Plant and Machinery | 60,000 | ||
| C | 30,000 | 3,10,500 | Prepaid Insurance | 1,000 | |
| Outstanding Liabilities | 1,37,80 | Land and Building | 60,000 | ||
| Furniture | 9,000 | ||||
| 2,24,800 | 2,24,800 | ||||
Working Note:-
Calculation of Sacrificing Ratio
Old Ratio of Deepika and Rajshree = 3 : 2
New Ratio of Deepika , Rajshree and Anshu = 5 : 3 : 2
Sacrificing Ratio = Old Ratio − New Ratio
| Deepika’s New Ratio | = | 3 | – | 5 |
| 5 | 10 |
| = | 6- 5 | |
| 10 |
| = | 1 | |
| 10 |
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| Rajshree’s New Ratio | = | 2 | – | 3 |
| 5 | 10 |
| = | 4 – 3 | |
| 10 |
| = | 1 | |
| 10 |
Sacrifice Ratio of Deepika and Rajshree= 1 : 1
Valuation of Goodwill
| Capitalized value on the basis of Anshu’s share | = | 32,000 | X | 10 |
| 2 | ||||
| = | 1,60,000 |
| Actual Capital of all partners before adjustment of Goodwill | = | 58,680 + 47,120 + 32,000 |
| = | Rs 1,37,800 |
| Goodwill | = | Capitalized value − Actual Capital of all partners before adjustment of Goodwill |
| = | 1,60,000 − 1,37,800 | |
| = | 22,000 |
Valuation of Goodwill
| Anshu’s share of Goodwill | = | 22,200 | X | 2 |
| 10 | ||||
| = | Rs 4,440 |
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| Deepika and Rajshree each will entitle for Goodwill | = | 4,440 | X | 1 |
| 2 | ||||
| = | Rs 2,220 |
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
