Question 90 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 90 Chapter 5 of +2-A

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

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.

 

 

 

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 ulars	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

 

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

	=	4 – 1
		4

	=	3
		4

To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’

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

	=	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

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

 

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

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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