Question 81 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 81 Chapter 5 of +2-A

Question 81 Chapter 5 of +2-A

81. Atul and Amit are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 is as follows:

Liabilities     Assets  
Capital A/cs:     Plant and Machinery 1,80,000
Atul 1,00,000   Furniture 30,000
Amit 1,00,000 2,00,000 Computer 10,000
Current A/cs:     Stock 40,000
Atul 70,000   Debtors 50,000
Amit 50,000 1,20,000 Bills 10,000
Creditors   40,000 Cash 10,000
Bills Payable   10,000 Bank 40,000
    3,70,000   3,70,000

Abhay is admitted as a partner for 1/4th share on 1st April, 2019 on the following terms:
(a) Abhay is to bring 65,000 as capital after adjusting amount due to him included in creditors and his share of Goodwill.
(b) 10,000 included in creditors is payable to Abhay which is to be transferred to his Capital Account.
(c) Furniture is to reduced by 3,000 and Plant and Machinery is to be increased to 1,98,000.
(d) Stock is overvalued by 4,000.
(e) A Provision for Doubtful Debts is to be created @ 5%.
(f) Goodwill is to be valued at 2 years’ purchase of average profit for four years. Profits of four years ended 31st March were as follows: 2018-19 − 25,000, 2017-18 − 10,000, 2016-17 − 2,500, and 2015-16 − 2,500. Pass the Journal entries for the above arrangement.

 

 

The solution of Question 81 Chapter 5 of +2-A: –

Date Particulars
L.F. Debit Credit
  Creditors A/c Dr   10,000  
  To Abhay’s Capital A/c       10,000
  (Being amount due to Abhay transferred to his Capital A/c)        
  Cash A/c Dr   60,000  
  To Abhay’s Capital A/c       55,000
  To Premium for Goodwill A/c (WN1)       5,000
  (Being Capital and goodwill paid by the new partner        
  Premium for Goodwill A/c Dr   5,000  
  To Atul’s Capital A/c       3,000
  To Amit’s Capital A/c       2,000
  (Being premium for goodwill adjusted in 3:2)        
  Revaluation A/c Dr   9,500  
  To Furniture A/c       3,000
  To Stock A/c       4,000
  To Provision for Doubtful Debts A/c       2,500
  (Being assets revalued and liabilities reassessed)        
  Plant & Machinery A/c Dr   18,000  
  To Revaluation A/c       18,000
  (Being appreciation in plant & machinery provided for)        
  Revaluation A/c (WN2) Dr   8,500  
  To Atul’s Capital Ac       5,100
  To Amit’s Capital A/c       3,400
  (Being revaluation profit transferred to partner’s capital A/c)        



Working Note:-

Calculation of Goodwill brought in by Abhay:

Average Profits = (Normal profits from 31st March, 2016 to 31st March, 2019)/2
  = (25,000 + 10,000 + 2,500 + 2,500)/4
  = 10,000
Goodwill = Average Profits × No. of years of Purchase
  = (10,000 × 2)
  = 20,000
Goodwill brought in by Abhay = (20,000 × 1/4
  = 5,000

 

Calculation of Revaluation Profit/Loss:

Debit side total = (3,000 + 4,000 + 2,500)
  = 9,500
Credit side total = 18,000
Gain on Revaluation = (18,000 – 9,500)
  = 8,500

 

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 81 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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