Question 93 Chapter 5 of +2-A
93. Sarthak and Vansh are partners sharing profits in the ratio of 2 : 1. Since both of them are specially abled sometimes they find it difficult to run the business on their own. Mansi, a common friend, decides to help them. Therefore, they admit her into partnership for 1/3rd share in profits. She brings 60,000 for goodwill and proportionate capital. At the time of admission of Mansi, the Balance Sheet of Sarthak and Vansh was as under:
| Liabilities | Assets | ||||
| Capital A/cs: | Plant | 66,000 | |||
| Sarthak | 70,000 | Furniture | 30,000 | ||
| Vansh | 60,000 | 1,30,000 | Investments | 40,000 | |
| General Reserve | 18,000 | Stock | 46,000 | ||
| Bank Loan | 18,000 | Debtors | 38,000 | ||
| Creditors | 72,000 | Less: Provision for Bad Debts | 4,000 | 34,000 | |
| Cash | 22,000 | ||||
| 2,38,000 | 2,38,000 |
It was decided to:
(a) Reduce the value of Stock by 10,000.
(b) Plant is to be valued at 80,000.
(c) An amount of 3,000 included in Creditors was not payable.
(d) Half of the investments were taken over by Sarthak and remaining were valued at 25,000.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of reconstituted firm.
The solution of Question 93 Chapter 5 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| To Stock A/c | 10,000 | By Plant A/c | 14,000 | ||
| By Creditors A/c | 3,000 | ||||
| By Investments A/c | 5,000 | ||||
| Profit transferred to | |||||
| Sarthak’s Capital A/c | 8,000 | ||||
| Vansh’s Capital A/c | 4,000 | 12,000 | |||
| 22,000 | 22,000 | ||||
| Partners’ Capital Account |
|||||||
| Parti culars |
Sarthak | Vansh | Mansi |
Partic |
Sarthak | Vansh | Mansi |
| To Investments A/c | 20,000 | – | – | By Balance B/d | 70,000 | 60,000 | – |
| By Cash A/c | – | – | 1,00,000 | ||||
| By Premium for Goodwill | 40,000 | 20,000 | – | ||||
| By General Reserve A/c | 12,000 | 6,000 | – | ||||
| By Revaluation (Profit) | 8,000 | 4,000 | – | ||||
| To Balance c/d | 1,10,000 | 90,000 | 1,00,000 | ||||
| 1,30,000 | 90,000 | 1,00,000 | 1,30,000 | 90,000 | 1,00,000 | ||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Bank Loan | 18,000 | Plant | 80,000 | ||
| Creditors | 69,000 | Furniture | 30,000 | ||
| Debtors | 38,000 | ||||
| Capital A/cs: | Less: Provision for Bad debts | 4,000 | 34,000 | ||
| Sarthak | 1,10,000 | Investments | 25,000 | ||
| Vansh | 90,000 | Stock | 36,000 | ||
| Mansi | 1,00,000 | 3,00,000 | Cash | (22,000 + 60,000 + 1,00,000 | 1,82,000 |
| 3,87,000 | 3,87,000 | ||||
Working Note:-
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Calculation of New profit-sharing ratio
Mansi’s Share of Profits = 1/3
| Remaining share | = | 1 | – | 1 |
| 3 |
| = | 3 – 1 | |
| 3 |
| = | 2 | |
| 3 |
| Sarthak’s New Share of Profits | = | 2 | X | 2 |
| 3 | 2 |
| = | 4 | |
| 9 |
| Vansh’s New Share of Profits | = | 2 | X | 1 |
| 3 | 3 |
| = | 2 | |
| 9 | ||
Sarthak : Vansh : Mansi = 4 : 2 : 3
Calculation of Mansi’s Capital
| Total Adjusted Capital of the Old Partners | = | Sarthak’s Capital + Vansh’s Capital |
| = | (1,10,000 + 90,000) | |
| = | 2,00,000 | |
| Combined New Share of the Old Partners | = | (4/9 + 2/9) |
| = | 6/9 or 2/3 |
Total Capital of the new firm = (Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners)
| = | 2,00,000 | X | 3 | |
| 2 | ||||
| = | 3,00,000 |
Calculation of Mansi’s Capital
Mansi’s Capital = (Total Capital of the new firm × His Share of Profits)
| = | 3,00,000 | X | 1 | |
| 3 | ||||
| = | 1,00,000 |
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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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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