# Question 86 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question No.86 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

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(b) Z brings in 15,000 for goodwill, half of which is withdrawn by old partners.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ratio i.e 2:1) X’s Capital A/c Dr 5,000 Y’s Capital A/c Dr 2,500 To Cash 7,500 (Half of the Premium for Goodwill withdrawn by X and Y) X’s Capital A/c Dr 10,000 To Investments A/c 10,000 (X took over the Investment) Cash A/c Dr 4,800 To X’s Capital A/c 4,800 (X’ brought cash to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 Particulars X Y Z Particulars 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

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

 X will get = 15,000 X 2 3 = 10,000
 Y will get = 15,000 X 1 3 = 5,000

 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. 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