# Question 96 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question No.96 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

Question 96 Chapter 5 of +2-A

96. L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2015 was as follows:

 Liabilities Assets Creditors 1,68,000 Bank 34,000 General Reserve 42,000 Debtors 46,000 Capital’s A/c Stock 2,20,000 L 1,20,000 Investment 60,000 M 80,000 Furniture 20,000 N 40,000 2,40,00 Machinery 70,000 4,50,000 4,50,000

On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was 36,000.
(iv) Machinery will be reduced to 58,000.
(v) A creditor of 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.

## The solution of Question 96 Chapter 5 of +2-A: –

 Revaluation Account Particular Amount Particular Amount To Investments A/c 24,000 By Creditors A/c 6,000 To Machinery A/c 12,000 Loss on Revaluation L’s Capital 15,000 M’s Capital 10,000 N’s Capital 5,000 30,000 36,000 36,000

 Partners’ Capital Account Particulars L M N O To Loss on Revaluation A/c 15,000 10,000 5,000 To Balance c/d 1,56,000 84,000 42,000 56,400 1,71,000 94,000 47,000 56,400

 Particulars L M N O By Balance B/d 1,20,000 80,000 40,000 By Bank A/c (WN2) – – – 56,400 By Premium for Goodwill A/c 30,000 – – – By General Reserve A/c 21,000 14,000 7,000 – 1,71,000 94,000 47,000 56,400

 Balance Sheet Liabilities Amount Assets Amount Creditors 1,62,000 Bank (34,000+56,400+30,000) 1,20,400 Debtors 46,000 Stock 2,20,000 Capital A/cs: Investments 36,000 L 1,56,000 Furniture 20,000 M 84,000 Machinery 58,000 N 42,000 O 56,400 3,38,400 5,00,400 5,00,400

Working Note:-

Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio

 L’s Sacrificing Ratio = 3 – 2 6 6
 = 3 – 2 6
 = 1 6

 M’s Sacrificing Ratio = 2 – 2 6 6
 = 2 – 2 6
 = 0 6

 N’s Sacrificing Ratio = 1 – 1 6 6
 = 1 – 1 6
 = 0 6

 O’s Share of Goodwill = 1,80,000 X 1 6 = 30,000

30,000 will be credited to L’s Capital A/c, as he is the only sacrificing Partner

Calculation of O’s Proportionate Capital

 Adjustment of Old Capital of L = 1,20,000 + 21,000 + 30,000 – 15,000 = 1,56,000 Adjustment of Old Capital of M = 80,000 + 14,000 – 10,000 = 84,000 Adjustment of Old Capital of N = 40,000 + 7,000 – 5,000 = 72,000 Total Adjustment Capital = 1,56,000 + 84,000 + 72,000 = 2,82,000

O’s Proportionate Capital = Total Adjusted Capital X O’s Profit Share X Reciprocal of combined new Share of Old Partner

 O’s Share of Goodwill = 2,82,000 x 1 x 5 6 5 = 56,400

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. 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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