# Question 87 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 87 Chapter 5 of +2-A

87. A and B are in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet as at 31st March, 2019 was: Cash 1,000; Sundry Debtors 15,000; Stock 22,000; Plant and Machinery 4,000; Sundry Creditors 2,000; Bank Overdraft 15,000; A’s Capital 15,000; B’s Capital 10,000. On 1st April, 2019 they admitted C into partnership on the following terms:
(a) C to purchase one-quarter of the goodwill for 3,000 and provide 10,000 as capital. C brings in necessary cash for goodwill and capital.
(b) Profits and losses are to be shared in the proportion of one-half to A, one-quarter to B and one quarter to C.
(c) Plant and Machinery is to be reduced by 10% and 500 are to be provided for estimated Bad Debts. Stock is to be taken at a valuation of 24,940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profit-sharing basis. Prepare necessary Ledger Accounts in the books of the firm relating to the above arrangement and submit the opening Balance Sheet of the new firm

## The solution of Question 87 Chapter 5 of +2-A: –

 Revaluation Account Particular Amount Particular Amount Plant and Machinery (4,000 × 10%) 400 Stock (24,940 – 22,000) 2,940 Provision for Bad Debts 500 Profit transferred to A Capital 1,360 B Capital 680 2,040 2,940 2,940

 Partners’ Capital Account Particulars A B C Particulars A B C By Balance B/d 15,000 10,000 – By Revaluation 1,360 680 – By Cash – – 10,000 To Balance c/d 18,360 11,680 10,000 By Premium for Goodwill 2,000 1,000 – 18,360 11,680 10,000 18,360 11,680 10,000 To Cash A/c – 1,680 – By Balance B/d 18,360 11,680 10,000 By Cash 1,640 – – To Balance c/d 20,000 10,000 10,000 20,000 11,680 40,000 20,000 11,680 10,000

 Balance Sheet Liabilities Amount Assets Amount Sundry Creditors 2,000 Cash 13,960 Bank Overdraft 15,000 Stock 24,940 Capital A/cs: Plant and Machinery 3,600 X 20,000 Debtors 15,000 Y 10,000 Less: Prov. for Bad Debts 500 14,500 Z 10,000 40,.000 Cash at Bank (15,000 + 96,000 – 18,000) 93,000 4,14,900 4,14,900

Working Note:-

Sacrificing Ratio
Old Ratio of A and B = 2 : 1
New Ratio of A ,B and C = 2 : 1 : 1

 A’s Sacrificing Ratio = 2 – 2 3 4
 = 8 – 6 12
 = 2 12
 B’s Sacrificing Ratio = 1 – 1 3 4
 = 4 – 3 12
 = 1 12

Sacrifice Ratio of A and B = 2 : 1

 A will get = 3,000 X 2 3 = 2,000
 B will get = 3,000 X 1 3 = 1,000

 A will get = 2,040 X 2 3 = 1,360
 B will get = 2,040 X 1 3 = 680

Adjustment of Capitals (in new ratio)

 Total Capital of the Firm = 10,000 X 4 1 = 40,000

 A’s Capital Share = 40,000 X 2 4 = 20,000

 B and C Capital Share = 40,000 X 1 4 = 10,000

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

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