Question 83 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 83 Chapter 5 of +2-A

Question 83 Chapter 5 of +2-A

83. Balance Sheet of Ram and Shyam who shares profits in the ratio of their capitals as at 31st March, 2019 is:

Liabilities     Assets  
Capital A/cs:     Freehold Premises 20,000
Ram 30,000   Plant and Machinery 13,500
Shyam 25,000 55,000 Fixtures and Fittings 1,750
Current A/cs:     Vehicles 1,350
Ram 2,000   Stock 14,100
Shyam 1,800 3,800 Bills Receivable 13,060
Creditors   19,000 Debtors 27,500
Bills Payable   16,000 Bank 1,590
      Cash 950
    93,800   93,800

On 1st April, 2019, they admitted Arjun into partnership on the following terms:
(a) Arjun to bring 20,000 as capital and 6,600 for goodwill, which is to be left in the business and he is to receive 1/4th share of the profits.
(b) Provision for Doubtful Debts is to be 2% on Debtors.
(c) Value of Stock to be written down by 5% .
(d) Freehold Premises are to be taken at a value of 22,400; Plant and Machinery 11,800; Fixtures and Fittings 1,540 and Vehicles 800. You are required to make necessary adjustments entries in the firm, give
Balance Sheet of the new firm as at 1st April, 2019 and also determine the ratio in which the partners will share profits, there being no change in the ratio of Ram and Shyam.

 

 

The solution of Question 83 Chapter 5 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
Reserve for D. Debts (27,500 × 2%) 550 Free hold Premises (22,400 – 20,000) 2,400
Stock   705      
Plant and Machinery (13,500 – 11,800) 1,700      
Fixture and Fittings   210      
Vehicles   550 Loss transferred to    
      Ram’s Current 717  
      Shyam’s Current  598 1,315
    25,000     25,000

 

Partners’ Capital Account
Parti
culars
Ram Shyam
Arjun

Partic
ulars

Ram
Shyam Arjun
        By Balance B/d 30,000 25,000
        By Bank A/c A/c 20,000
To Balance c/d 30,000 25,000 20,000        
  30,000 25,000 20,000   30,000 25,000 20,000

 

Partners’ Capital Account
Parti
culars
Ram Shyam
Arjun

Partic
ulars

Ram
Shyam Arjun
To Revaluation A/c 717 598 By Balance B/d 2,000 1,800
               
To Balance c/d 4,883 4,202 By Premium for Goodwill 3,600 3,000
  5,600 4,800   5,600 4,800



Balance Sheet
Liabilities
Amount Assets Amount
Creditors   19,000 Freehold Premises   1,200
Bills Payable   16,000 Plant and Machinery   11,800
Capital A/cs:     Fixture and Fittings   1,540
Ram     Debtors 27,500  
Shyam 30,000   Less: 2% Reserve for D. Debts 550 26,950
Arjun 25,000   Stock (14,100 – 705) 13,395
C 20,000 1,00,700 Bills Receivables   13,060
Current A/cs:     Bank   1,590
Ram 4,883   Cash (950 + 20,000 + 6,600) 27,550
Shyam 4,202 9,085 Vehicles   800
    1,19,085     1,19,085

 

Date Particulars
L.F. Debit Credit
  Cash A/c Dr   26,600  
  To Arjun’s Capital       20,000
  To Premium for Goodwill A/c       6,600
  (Arjun brought Capital and share of goodwill)        
  Premium for Goodwill A/c Dr   6,600  
  To Ram’s Current A/c       3,600
  To Shyam’s Current A/c       3 ,000
  (Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 6:5)        

 

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Ram and Shyam = 3 : 2
Arjun admitted for 1/4 share of profit
Remaining share of A and B after C’s Admission = Total Share –  Arjun’s Share

Remaining share = 1 1
4
  = 4 – 1 
4
  = 3  
  4

New Ratio = Old Ratio − Combined share of Ram and Shyam

New Ratio = Combined share of A and B x Old Ratio

Ram’s Sacrificing Ratio = 6 X 3
11 4
  = 18
  44
Shyam’s Sacrificing Ratio = 5 X 3
11 4
  = 15
  44
New Profit sharing Ratio between ram, Shyam and Arjun = 18 : 15 : 1
44 44 4
  = 18 : 15 : 11
44

Distribution of Premium for Goodwill

 

Ram will get = 6,600 X 6
11
  = 3,600
   
Shyam will get = 6,600 X 5
11
  = 3,000    

Valuation of Goodwill

Ram will get = 1,315 X 2
10
  = 717
   
Shyam will get = 1,315 X 1
2
  = 589
   

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 83 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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