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Question 89 Chapter 5 of +2-A
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89. The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2019 is as follows:
| Liabilities | Assets | |||
| Capital A/cs | Y’s Current Account | 7,000 | ||
| X | 1,75,000 | Land and Building | 1,75,000 | |
| Y | 1,50,000 | Plant and Machinery | 67,500 | |
| Z | 1,25,000 | 4,50,000 | Furniture | 80,000 |
| Current A/cs: | Investments | 36,500 | ||
| X | 4,000 | Bills Receivable | 17,000 | |
| Z | 6,000 | 10,000 | Sundry Debtors | 43,500 |
| General Reserve | 15,000 | Stock | 1,37,000 | |
| Profit and Loss A/c | 7,000 | Bank | 43,500 | |
| Creditors | 80,000 | |||
| Bills Payable | 45,000 | |||
| 6,07,000 | 6,07,000 |
On the above date, W is admitted as a partner on the following terms:
(a) W will bring 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of 7,004 will be created against bills receivable discounted earlier but now dishonored.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W’s Capital through their Current Accounts.
Prepare Revaluation Account, Partners’ Current Accounts and Capital Accounts.
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The solution of Question 89 Chapter 5 of +2-A: –
| Revaluation Account | |||||
| Particular | Amount | Particular | Amount | ||
| Stock | 27,400 | Land and Building | 35,000 | ||
| Furniture | 16,000 | Plant and Machinery | 6,750 | ||
| Investments | 7,300 | ||||
| Loss transferred to | |||||
| X | 4,475 | ||||
| Y | 2,983 | ||||
| Z | 1,492 | 8,950 | |||
| 50,700 | 50,700 | ||||
| Partners’ Capital Account | |||||||
| Parti culars | X | Y | Z | Partic | X | Y | Z |
| To Balance b/d | – | 7,000 | – | By Balance B/d | 4,000 | – | 6,000 |
| To Revaluation (Loss | 4,475 | 2,983 | 1,492 | By General Reserve | 7,500 | 5,000 | 2,500 |
| By Cash | – | – | 10,000 | ||||
| By Profit and Loss A/c | 3,500 | 2,333 | 1,167 | ||||
| By Premium for Goodwill Capital A/c | 15,000 | – | – | ||||
| By Capital A/c | 75,000 | 50,000 | 75,000 | ||||
| To Balance c/d | 100,525 | 47,350 | 83,175 | ||||
| 1,05,000 | 57,333 | 84,667 | 1,05,000 | 57,333 | 84,667 | ||
| Partners’ Capital Account | ||||
| Particulars | X | Y | Z | W |
| Current A/c | 75,000 | 50,000 | 75,000 | |
| To Balance c/d | 1,00,000 | 1,00,000 | 50,000 | 50,000 |
| 1,75,000 | 1,75,000 | 1,25,000 | 50,000 | |
Particulars | X | Y | Z | W |
| By Balance B/d | 1,75,000 | 1,50,000 | 1,25,000 | – |
| By Cash | – | – | – | 50,000 |
| 1,05,000 | 57,333 | 84,667 | 50,000 |
Working Note:-
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Sacrificing Ratio
Old Ratio = 3 : 2 : 1
New Ratio = 2 : 2 : 1 : 1
Sacrificing Ratio=Old Ratio-New Ratio
| X’s New Ratio | = | 3 | – | 2 |
| 6 | 6 |
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| = | 3 – 2 | |
| 6 |
| = | 1 | ||
| 6 |
| Y’s New Ratio | = | 2 | – | 2 |
| 6 | 6 |
| = | 2 – 2 | |
| 6 |
| = | 0 | |
| 6 |
Only X has sacrificed.
Distribution of Goodwill
| W’s Share of Goodwill | = | 90,000 | X | 1 |
| 6 | ||||
| = | 15,000 |
Only X has sacrificed his share, therefore, he will get Rs 15,000
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
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- 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
