# Question 84 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 84 Chapter 5 of +2-A

84.Following is the Balance Sheet of X and Y as at 31st March, 2019 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:

 Liabilities Assets Creditors 45,000 Cash at Bank 15,000 General Reserve 36,000 Debtors 60,000 Capital A/cs: Less: Provision for Doubtful Debts 2,400 57,600 X 1,80,000 Patents 44,400 Y 90,000 2,70,000 Investments 24,000 Current A/cs: Fixed Assets 2,16,000 X 30,000 Goodwill 30,000 Y 6,000 36,000 3,87,000 3,87,000

Z is admitted as a new partner on 1st April, 2019 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to 15,000.
(c) An accrued income of 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of 18,000
.(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Z will bring in 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm’s goodwill valued at twice the average profit of the last three years which were 90,000; 78,000 and 75,000 respectively.
(h) Half of the amount of goodwill is to be withdrawn by X and Y. You are required to pass Journal entries, prepare Revaluation Account, Partners’ Capital and Current Accounts and the Balance Sheet of the new firm.

## The solution of Question 84 Chapter 5 of +2-A: –

 Revaluation Account Particular Amount Particular Amount Prov. for D. Debts 600 Accrued Income 4,500 Outstanding Rent 15,000 Investment 6,000 Loss transferred to X’s Current A/c 10,260 Y’s Current A/c 6,840 17,100 21,600 21,600

 Partners’ Capital Account Particulars X Y Z Particulars X Y Z By Balance B/d 1,80,000 90,000 – By Bank A/c A/c – – 60,000 To Balance c/d 1,80,000 90,000 60,000 1,80,000 90,000 60,000 30,000 90,000 60,000

 Partners’ Capital Account Particulars X Y Z Particulars X Y Z To Revaluation A/c 10,260 6,840 – By Balance B/d 30,000 6,000 – To Goodwill A/c 18,000 12,000 – By General Reserve 21,600 14,400 To Bank A/c 12,600 5,400 – By Premium for Goodwill 25,200 10,800 To Investments A/c 18,000 – – To Balance c/d 17,940 6,960 – – 76,800 31,200 – 76,800 31,200 –

 Balance Sheet Liabilities Amount Assets Amount Creditors 45,000 Patents 44,400 Outstanding Rent 15,000 Fixed Assets 2,16,000 Capital A/cs: Accrued Income 4,500 X Debtors 60,000 Y 1,80,000 Less: 5% Reserve for D. Debts 3,000 57,000 Z 90,000 Cash at Bank (15,000 + 96,000 – 18,000) 93,000 C 60,000 3,30,000 Current A/cs: X 17,940 Y 6,960 24,900 4,14,900 4,14,900

 Date Particulars L.F. Debit Credit Cash A/c Dr 96,000 To Z’s Capital 60,000 To Premium for Goodwill A/c 36,000 (Z brought Capital and share of goodwill) Premium for Goodwill A/c Dr 36,000 To X’s Current A/c 25,200 To Y’s Current A/c 10,800 (Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 7:3) X’s Current A/c Dr 12,600 Y’s Current A/c Dr 5,400 To Bank A/c 18,000 (Half of goodwill withdrawn by partners)

Working Note:-

Calculation of Z’s Share of Premium for Goodwill

 Average Profit = 90,000+78,000+75,000/3 = Rs 81,000 Firm’s Goodwill = 81,000×2 = Rs 1,62,000 Z’s share = 1,62,000×2/9 = Rs 36,000

Calculation of Sacrificing Ratio
Sacrificing Ratio=Old Ratio-New

 X’s Sacrificing Ratio = 3 – 4 5 9
 = 27 – 20 45
 = 7 45
 Y’s Sacrificing Ratio = 2 – 4 5 9
 = 18 – 15 45
 = 3 45

Sacrificing Ratio of X and Y= 7 : 3

Calculation of Share of Premium of Goodwill

 X will get = 36,000 X 7 10 = 25,200
 Y will get = 36,000 X 3 10 = 10,800

Valuation of Goodwill

 X will get = 17,100 X 3 5 = 10,260
 Y will get = 17,100 X 2 5 = 6,840

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. 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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