Question 93 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 93 Chapter 5 of +2-A

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
ulars

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:-

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    

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 93 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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