Question 86 Chapter 5 of +2-A
86. X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2019 was:
| Liabilities | Assets | |||
| Sundry Creditors | 25,000 | Cash/Bank | 5,000 | |
| General Reserve | 18,000 | Sundry Debtors | 15,000 | |
| Capital A/cs: | Stock | 10,000 | ||
| X | 75,000 | Investments | 8,000 | |
| Y | 62,000 | 1,37,000 | Printer | 5,000 |
| 1,80,000 | 1,80,000 |
They admit Z into partnership on the same date on the following terms:
(a) Z brings in 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at 10,000. X takes over Investments at this value. (d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%. (e) An unrecorded stock of Stationery on 31st March, 2019 is 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis. Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.
The solution of Question 86 Chapter 5 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Revaluation A/c | Dr | 14,700 | |||
| To Typewriter A/c | 1,000 | ||||
| To Fixed Assets A/c | 13,700 | ||||
| (Decrease in value of typewriter and fixed assets transferred to Revaluation Account) | |||||
| Stationery A/c | Dr | 1,000 | |||
| Investment A/c | Dr | 2,000 | |||
| To Revaluation A/c | 3,000 | ||||
| (Increase in stationery and investment transferred to Revaluation Account) | |||||
| X’s Current A/c | Dr | 7,800 | |||
| Y’s Current A/c | Dr | 3,900 | |||
| To Revaluation A/c | 11,700 | ||||
| (Revaluation loss transferred to X and Y’s Capital Account in their old ratio) | |||||
| Reserve Fund A/c | Dr | 18,000 | |||
| To X’s Capital A/c | 12,000 | ||||
| To Y’s Capital A/c | 6,000 | ||||
| (Reserve Fund distributed) | |||||
| Cash A/c | Dr | 55,000 | |||
| To Investment A/c | 40,000 | ||||
| To Revaluation A/c | 15,000 | ||||
| (Z brought capital and share of goodwill) | |||||
| Premium for Goodwill A/c | Dr | 15,000 | |||
| To X’s Capital A/c | 10,000 | ||||
| To Y’s Capital A/c | 5,000 | ||||
| (Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1) | |||||
| X’s Capital A/c | Dr | 5,000 | |||
| Y’s Capital A/c | Dr | 2,500 | |||
| To Cash | 7,500 | ||||
| (Half of the Premium for Goodwill withdrawn by X and Y) | |||||
| X’s Capital A/c | Dr | 10,000 | |||
| To Investments A/c | 10,000 | ||||
| (X took over the Investment) | |||||
| Cash A/c | Dr | 4,800 | |||
| To X’s Capital A/c | 4,800 | ||||
| (X’ brought cash to make up deficiency in capital) | |||||
| Y’s Capital A/c | Dr | 26,600 | |||
| To Cash A/c | 26,600 | ||||
| Y withdrew excess capital after all adjustments) | |||||
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| Typewriter | (5,000 × 20% | 1,000 | Investment | 2,000 | |
| Fixed Assets | (1,37,000 × 10%) | 13,700 | Stationery | 1,000 | |
| Loss transferred to | |||||
| X’s Current A/c | 7,800 | ||||
| Y’s Current A/c | 3,900 | 11,700 | |||
| 14,700 | 14,700 | ||||
| Partners’ Capital Account |
|||||||
| Parti culars |
X | Y |
Z |
Partic |
X |
Y | Z |
| To Revaluation A/c | 7,800 | 3,900 | – | By Balance B/d | 75,000 | 62,000 | – |
| To Investment A/c | 10,000 | – | – | By Reserve Fund | 12,000 | 6,000 | – |
| To Cash A/c | 5,000 | 2,500 | – | By Cash | – | – | 40,000 |
| To Balance c/d | 74,200 | 66,600 | 40,000 | By Premium for Goodwill | 10,000 | 5,000 | – |
| 97,000 | 73,000 | 40,000 | 97,000 | 73,000 | 40,000 | ||
| By Balance B/d | 74,200 | 66,600 | 40,000 | ||||
| By Cash | 5,800 | – | – | ||||
| To Balance c/d |
80,000 |
66,600 |
40,000 |
||||
| 80,000 | 66,600 | 40,000 | 80,000 | 66,600 | 40,000 | ||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Sundry Creditors | 25,000 | Cash | 31,700 | ||
| Outstanding Rent | 15,000 | Sundry Debtors | 15,000 | ||
| Capital A/cs: | Stock | 10,000 | |||
| X | Stationery | 1,000 | |||
| Y | 80,000 | Typewriter | (5,000 – 1,000) | 4,000 | |
| Z | 40,000 | Fixed Assets | (1,37,000 – 13,700) | 1,23,300 | |
| C | 40,000 | 1,60,000 | |||
| 1,85,000 | 1,85,000 | ||||
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Working Note:-
Sacrificing Ratio
Old Ratio of X and Y= 2 : 1
Sacrificing Ratio of X and Y = 2 : 1
Distribution of Revaluation Loss
| Revolution loss transfer to X’s Capital | = | 11,700 | X | 2 |
| 3 | ||||
| = | 7,800 |
| Revolution loss transfer to Y’s Capital | = | 11,700 | X | 1 |
| 3 | ||||
| = | 3,900 |
Distribution of Premium for Goodwill
| X will get | = | 15,000 | X | 2 |
| 3 | ||||
| = | 10,000 |
| Y will get | = | 15,000 | X | 1 |
| 3 | ||||
| = | 5,000 |
Adjustment of Capital
| Total Capital of the firm on the basis of Z’s share | = | 40,000 | X | 4 |
| 1 | ||||
| = | 1,60,000 |
| Total Capital of the firm | = | 1,60,000 |
| Less: Z’s Capital | = | 40,000 |
| Combined Capital of X and Y | = | 1,20,000 |
| X’s Capital Share | = | 1,20,000 | X | 2 |
| 3 | ||||
| = | 80,000 |
| Y’s Capital Share | = | 1,20,000 | X | 1 |
| 3 | ||||
| = | 40,000 |
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
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