Question 80 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

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  Assets Amount
Creditors   2,00,000 Building 2,00,000
Employees’ Provident Fund   1,50,000 Machinery 3,00,000
General Reserve   36,000 Furniture 1,10,000
Investment Fluctuation Reserve   14,000 Investment Market value 86,000 1,00,000
Capital A/cs:     Debtors 80,000
X 3,00,000   Cash at Bank 1,90,000
Y 2,50,000   Advertisement Suspense 1,20,000
Z 1,50,000 7,00,000    
    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:

Years 2014-15 2015-16 2016-17 2017-18
Profit 1,70,000 1,80,000 1,90,000 1,80,000

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
Particular Amount Particular Amount
To Machinery 1,50,000 By Building 2,00,000
To Furniture 46,000    
To Provision for Doubtful Debts 4,000     27,000
  2,00,000     2,00,000

 

X’s Capital Account
Particular Amount Particular Amount
To Advertisement Suspense A/c 50,000 By Balance b/d 3,00,000
To X’s Executors A/c 5,05,000 By General Reserve 15,000
    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
Particular Amount Particular Amount
To Bank A/c 2,52,500 By X’s Capital A/c 5,05,000
To X’s Executors Loan Account 2,52,500    
  5,05,000     5,05,000

 

Working Notes:

Calculation of Share in General Reserve

Reserve = 36,000 X 5
12
         
  = Rs 15,000    

 

Calculation of Interest on Capital

Interest on capital = 3,00,000 X 10 X 6
100 12
             
  = Rs 15,000        

Calculation of Profit & Loss Suspense

Profit & Loss Suspense = 1,80,000 X 5 X 6
12 12
             
  = 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

 

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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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