Question 91 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 91 Chapter 5 of +2-A

Question 91 Chapter 5 of +2-A

91. Raghu and Rishu are partners sharing profits in the ratio 3 : 2. Their Balance Sheet as at 31st March, 2009 was as follows:

Liabilities     Assets    
Creditors   86,000 Cash in Hand   77,000
Employees’ Provident Fund   10,000 Debtors 42,000  
Investments Fluctuation Reserve   4,000 Less: Provision for Doubtful Debts 7,000 35,000
Capital A/cs:     Investments   21,000
Raghu 1,19,000   Buildings   98,000
Rishu 1,12,000 2,31,000 Plant and Machinery   1,00,000
    3,31,000     3,31,000

Rishabh was admitted on that date for 1/4th share of profit on the following terms:
(a) Rishabh will bring 50,000 as his share of capital.
(b) Goodwill of the firm is valued at 42,000 and Rishabh will bring his share of goodwill in cash.
(c) Buildings were appreciated by 20%.
(d) All Debtors were good.
(e) There was a liability of 10,800 included in Creditors which was not likely to arise.
(f) New profit-sharing ratio will be 2 : 1 : 1.
(g) Capital of Raghu and Rishu will be adjusted on the basis of Rishabh’s share of capital and any excess or deficiency will be made by withdrawing or bringing in cash by the concerned partners as the case may be. Prepare Revaluation Account,
Partners’ Capital Accounts and Balance Sheet of the new firm.

 

 

 

The solution of Question 91 Chapter 5 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
      Building   19,600
      Provision for Doubtful Debts (Old)   7,000
      Liability for Creditors   10,800
Profit transferred to          
Raghu’s Capital A/c 22,440        
Rishu’s Capital A/c 14,960 37,400      
    37,400     37,400

 

Partners’ Capital Account
Parti
culars
Raghu Rishu Rishabh

Partic
ulars

Raghu Rishu Rishabh
To Cash A/c 48,040 84,860 By Balance B/d 1,19,000 1,12,000
        By Cash A/c 50,000
        By Investment Fluctuation Fund 2,400 1,600
        By Premium for Goodwill 4,200 6,300
        By Revaluation (Profit) 22,440 14,960
To Balance c/d 1,00,000 50,000 50,000        
               
  1,48,040 1,34,860 50,000   1,48,040 1,34,860 50,000

 

Balance Sheet
Liabilities
Amount Assets Amount
Creditors 86,000   Cash (WN4)   4,600
Less: Liability (10,800) 75,200 Debtors   42,000
Employees Provident Fund   10,000 Investments   21,000
Capital A/cs:     Buildings (98,000 + 19,600) 1,17,600
Raghu 1,00,000   Plant and Machinery   1,00,000
Rishu 50,000        
Rishabh 50,000 2,00,000      
    2,85,200     2,85,200

 

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Raghu and Rishu = 3 : 2
New Ratio of Raghu , Rishu and Rishabh = 2 : 1 : 1

Raghu’s Sacrificing Ratio = 3 2
5 4
  = 12 – 10
20
  = 2
  20
Rishu’s Sacrificing Ratio = 2 1
5 4
  = 8 – 5
20
  = 3
  20
     

Sacrifice Ratio of Shikhar and Rohit =2 : 3

Share of Rishabh’s Share of Goodwill
Value of Firm’s Goodwill = 42,000

Rishabh’s Share of Goodwill = 42,000 X 1
4
  = 10,500    

Adjustment of Capital

Total Capital of Firm = Rishabh’s Capital × Reciprocal of Rishabh’s Share
Capital bought by Rishabh = 50,000
Total capital of Firm = 50,000 X 4
1
  = 2,00,000    

Distribution of General Reserve

Shikhar’s New Capital = 2,00,000 X 2
4
  = 1,00,000    
Rohit’s Share of Goodwill = 2,00,000 X 1
4
  = 50,000    

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)

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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2 Book 1 min - Question 91 Chapter 5 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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