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Question 90 Chapter 5 of +2-A
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90. Shikhar and Rohit were partners in a firm sharing profits in the ratio of 7 : 3. On 1st April, 2013, they admitted Kavi as a new partner for 1/4th share in profits of the firm. Kavi brought 4,30,000 as his capital and 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:
| Liabilities | Assets | ||||
| Capital A/cs: | Land and Building | 3,50,000 | |||
| Shikhar | 8,00,000 | Machinery | 4,50,000 | ||
| Rohit | 3,50,000 | 11,50,000 | Debtors | 2,20,000 | |
| General Reserve | 1,00,000 | Less: Provision | 20,000 | 2,00,000 | |
| Workmen’s Compensation Fund | 1,00,000 | Stock | 3,50,000 | ||
| Creditors | 1,50,000 | Cash | 1,50,000 | ||
| 15,00,000 | 15,00,000 |
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It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of Machinery will be depreciated by 10%.
(c) the liabilities of Workmen’s Compensation Fund were determined at 50,000.
(d) capitals of Shikhar and Rohit will be adjusted on the basis of Kavi’s capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm.
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The solution of Question 90 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| Machinery | 45,000 | Land and Building | 70,000 | ||
| Profit transferred to | |||||
| Shikhar’s Capital A/c | 17,500 | ||||
| Rohit’s Capital A/c | 7,500 | 25,000 | |||
| 70,000 | 70,000 | ||||
| Partners’ Capital Account |
|||||||
| Parti culars |
Shikhar | Rohit | Kavi |
Partic |
Shikhar | Rohit | Kavi |
| – | By Balance B/d | 8,00,000 | 3,50,000 | – | |||
| By General Reserve | 70,000 | 30,000 | – | ||||
| By Workmen’s Compensation Fund | 35,000 | 15,000 | – | ||||
| By Cash A/c | – | – | 4,30,000 | ||||
| By Premium for Goodwill | 17,500 | 7,500 | – | ||||
| To Balance c/d | 9,40,000 | 4,10,000 | 4,30,000 | By Premium for Goodwill | 17,500 | 7,500 | – |
| 9,40,000 | 4,10,000 | 4,30,000 | 9,40,000 | 4,10,000 | 4,30,000 | ||
| To Cash A/c | 37,000 | 23,000 | – | By Balance B/d | 9,40,000 | 4,10,000 | 4,30,000 |
| By A’s Current A/c | 60,550 | – | – | ||||
| To Balance c/d |
9,03,000 |
3,87,000 |
4,30,000 |
||||
| 9,40,000 | 4,10,000 | 4,30,000 | 9,40,000 | 4,10,000 | 4,30,000 | ||
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| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Liability for Workmen’s | (70,000 – 1,200) | 50,000 | Land and Building | 4,20,000 | |
| Compensation Creditors | 1,50,000 | Machinery | 35,000 | ||
| Capital A/cs: | Less: Depreciation @10% | 600 | 34,400 | ||
| Shikhar | 9,03,000 | Debtors | 2,20,000 | ||
| Rohit | 3,87,000 | Less: Prov. for Bad Debts | 20,000 | 2,00,000 | |
| Kavi | 4,30,000 | 17,20,000 | Stock | 3,50,000 | |
| Cash | 5,45,000 | ||||
| 19,20,000 | 19,20,000 | ||||
Working Note:-
Old Ratio of Shikhar and Rohit = 3 : 2
Kavi’s = 1/4
Let the total share of the business = 1
| Remaining share | = | 1 | – | 1 |
| 4 |
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| = | 4 – 1 | |
| 4 |
| = | 3 | |
| 4 |
To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’
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New Ratio = Combined share of A and B x Old Ratio
| Shikhar’s New Ratio | = | 7 | X | 3 |
| 10 | 4 |
| = | 12 | |
| 40 |
| Rohit’s New Ratio | = | 3 | X | 3 |
| 10 | 4 |
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| = | 9 | |
| 10 |
| Kavi’s New Ratio | = | 1 | X | 10 |
| 4 | 10 |
| = | 10 | |
| 40 |
New Profit sharing Ratio between Shikhar , Rohit and Kavi = 21 : 9 : 10
Sacrificing Ratio = old Ratio – New Ratio
| Shikhar’s Sacrificing Ratio | = | 7 | – | 21 |
| 10 | 40 |
| = | 28 – 2 1 | |
| 40 |
| = | 7 | ||
| 40 |
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| Rohit’s Sacrificing Ratio | = | 3 | – | 9 |
| 10 | 40 |
| = | 12 – 9 | |
| 40 |
| = | 3 | |
| 40 |
Sacrifice Ratio of Shikhar and Rohit = 7 : 3
Distribution of Workmen’s Compensation Fund
| Shikhar’s Share of Goodwill | = | 50,000 | X | 7 |
| 10 | ||||
| = | 35,000 |
| Rohit’s Share of Goodwill | = | 50,000 | X | 3 |
| 10 | ||||
| = | 15,000 |
Distribution of General Reserve
| Shikhar’s Share of Goodwill | = | 1,00,000 | X | 7 |
| 10 | ||||
| = | 70,000 |
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| Rohit’s Share of Goodwill | = | 1,00,000 | X | 3 |
| 10 | ||||
| = | 30,000 |
Adjustment of Capital
| Total Capital of Firm | = | Capital Brought in by Kavi X Reciprocal of his Share |
| Capital bought by Kavi | = | 4,30,000 |
| Total capital of Firm | = | 4,30,000 | X | 4 |
| 1 | ||||
| = | 17,20,000 |
Distribution of General Reserve
| Shikhar’s New Capital | = | 17,20,000 | X | 21 |
| 40 | ||||
| = | 9,03,000 |
| Rohit’s Share of Goodwill | = | 17,20,000 | X | 9 |
| 40 | ||||
| = | 3,87,000 |
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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
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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
