Question 80 Chapter 6 of +2-A

Question 80 Chapter 6 of +2-A

80. X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:

Liabilities Amount AssetsAmount
Creditors 2,00,000Building2,00,000
Employees’ Provident Fund 1,50,000Machinery3,00,000
General Reserve 36,000Furniture1,10,000
Investment Fluctuation Reserve 14,000Investment Market value 86,0001,00,000
Capital A/cs:  Debtors80,000
X3,00,000 Cash at Bank1,90,000
Y2,50,000 Advertisement Suspense1,20,000
Z1,50,0007,00,000  
  11,00,000 11,00,000

X died on 1st October 2018 and Y and Z decide to share future profits in the ratio of 7: 5. It was agreed between his executors and the remaining partners that:
i Goodwill of the firm be valued at 212 years’ purchase of average of four completed years’ profit which were:

Years2014-152015-162016-172017-18
Profit1,70,0001,80,0001,90,0001,80,000

ii X’s share of profit from the closure of last accounting year till date of death be calculated on the basis of last years’ profit.
iii Building undervalued by 2,00,000; Machinery overvalued by 1,50,000 and Furniture overvalued by 46,000.
iv A provision of 5% be created on Debtors for Doubtful Debts.
v Interest on Capital to be provided at 10% p.a.
vi Half of the net amount payable to X’s executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X’s Capital Account and X’s Executor’s Account as on 1st October, 2018.

 

The solution of Question 80 Chapter 6 of +2-A: –

 

Revaluation Account
ParticularAmountParticularAmount
To Machinery1,50,000By Building2,00,000
To Furniture46,000  
To Provision for Doubtful Debts4,000  27,000
 2,00,000  2,00,000

 

X’s Capital Account
ParticularAmountParticularAmount
To Advertisement Suspense A/c50,000By Balance b/d3,00,000
To X’s Executors A/c5,05,000By General Reserve15,000
  By Y’s Capital A/c 1,12,500
  By Z’s Capital A/c 75,000
  By Profit & Loss Suspense 37,500
  By Interest on Capital 15,000
 5,55,000  5,55,000

 

X’s Executors Account
ParticularAmountParticularAmount
To Bank A/c2,52,500By X’s Capital A/c5,05,000
To X’s Executors Loan Account2,52,500  
 5,05,000  5,05,000

 

Working Notes:

Calculation of Share in General Reserve

Reserve=36,000X5
12
     
 =Rs 15,000  

 

Calculation of Interest on Capital

Interest on capital=3,00,000X10X6
10012
       
 =Rs 15,000    

Calculation of Profit & Loss Suspense

Profit & Loss Suspense=1,80,000X5X6
1212
       
 =Rs 37,500    


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

 

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

2 Book 1 min - Question 80 Chapter 6 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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