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Question
Achla and Bobby were partners in a firm sharing profits and losses in the ratio of 3: 1. On 31st March 2019, their balance sheet was as follows:
Balance Sheet of Achla and Bobby as on 31st March 2019
| Liabilities |
Amount(₹) |
Assets |
Amount(₹) |
| Creditors |
1,10,000 |
Cash at bank |
60,000 |
| General Reserve |
40,000 |
Debtors |
40,000 |
| Workmen's compensation reserve |
50,000 |
Stock |
45,000 |
| Capitals : |
|
Furniture |
1,55,000 |
| Achla - 4,00,000 |
|
Land & Building |
5,00,000 |
| Bobby - 2,00,000 |
6,00,000 |
|
|
|
8,00,000 |
8,00,000 |
On 1st April 2019, they admitted Vihaan as a new partner for 1/5th share in the profits of the firm on the following terms:
(a) Vihaan brought ₹ 1,00,000 as his capital and the capitals of Achla and Bobby were to be adjusted on the basis of Vihaan's capital; any surplus or deficiency was to be adjusted by opening current accounts.
(b) Goodwill of the firm was valued at ₹ 4,00,000. Vihaan brought the necessary amount in cash for his share of goodwill premium, half of which was withdrawn by the old partners.
(c) Liability on account of workmen's compensation amounted to ₹ 80,000.
(d) Achla took overstock at ₹ 35,000.
(e) Land and building was to be appreciated by 20%.
Prepare Revaluation Account, Partner's Capital Accounts, and the Balance Sheet of the reconstituted firm on Vihaan's admission.
Solution
In the books of Achla, Bobby and Vihaan
| Dr. | Revaluation A/c | Cr. | |
| Particulars |
Amount(₹) |
Particulars |
Amount(₹) |
| To Liability on workmen compensation |
30,000 |
By Land & Building |
1,00,000 |
| To Stock A/c |
10,000 |
|
|
| To Profit on revaluation trsnf. to: |
|
|
|
| Achla’s Capital A/c - 45,000 |
|
|
|
| Bobby’s Capital A/c - 15,000 |
60,000 |
|
|
|
1,00,000 |
1,00,000 |
||
| Dr. | Partner’s Capital A/c | Cr. | |||||
| Particulars |
Achla(₹) |
Bobby(₹) |
Vihaan(₹) |
Particulars |
Achla(₹) |
Bobby(₹) |
Vihaan(₹) |
| To Bank A/c (withdrawn) |
30,000 |
10,000 |
|
By balance b/d |
4,00,000 |
2,00,000 |
|
| To Stock A/c |
35,000 |
|
|
By Bank A/c |
|
|
1,00,000 |
| To Current A/c |
1,70,000 |
1,35,000 |
|
By Premium for Goodwill A/c |
60,000 |
20,000 |
|
| To balance c/d |
3,00,000 |
1,00,000 |
1,00,000 |
By General Reserve A/c |
30,000 |
10,000 |
|
|
|
|
|
By Revaluation A/c |
45,000 |
15,000 |
|
|
|
5.35,000 |
2,45,000 |
1,00,000 |
5,35,000 |
2,45,000 |
1,00,000 |
||
Working Notes:
1) Calculation of New Profit-Sharing Ratio
| Old Profit-sharing ratio | = 3 : 1 |
| Vihaan’s Share | = 1/5 |
| Remaining Profits of the firm | = (1 – 1/5) = 4/5 |
| Achla’s New Share | = (4/5 × 3/4) = 3/5 |
| Bobby’s New share | = (4/5 × ¼) = 1/5 |
| New Profit-sharing ratio | = 3 : 1 : 1 |
| Sacrificing ratio is same as old ratio | = 3 : 1 |
2) Calculation of Vihan’s Share of Goodwill
Vihaan’s Share of Goodwill = ₹ (4,00,000 × 1/5) = ₹ 80,000
3) Adjustment of Capital:
| Vihaan’s Capital for 1/5th share | = ₹ 1,00,000 |
| For 1 whole share, capital of the firm | = ₹ (1,00,000 × 5) = ₹ 5,00,000 |
| New Capital of Achla | = ₹ (5,00,000 × 3/5) = ₹ 3,00,000 |
| New Capital of Bobby | = ₹ (5,00,000 × 1/5) = ₹ 1,00,000 |
| Existing Capital of Achla and Bobby is ₹ 4,70,000 and ₹ 2,35,000 | |
| Amount to be credited to Achla’s Current A/c | = Old Capital – New Capital |
| = ₹ (4,70,000 – 3,00,000) = ₹ 1,70,000 | |
| Amount to be credited to Bobby’s Current A/c | = Old Capital – New Capital |
| = ₹ (2,35,000 – 1,00,000) = ₹ 1,35,000 |
Balance Sheet as at 31st March 2019
| Liabilities |
Amount(₹) |
Assets |
Amount(₹) |
| Creditors |
1,10,000 |
Land and Building |
6,00,000 |
| Liability for workmen compensation |
80,000 |
Debtors |
40,000 |
| Capitals: |
|
Furniture |
1,55,000 |
| Achla - 3,00,000 |
|
Cash at Bank |
2,00,000 |
| Bobby - 1,00,000 |
|
(60,000 + 1,00,000 + 80,000 − 40,000) |
|
| Vihaan - 1,00,000 |
5,00,000 |
|
|
| Current A/cs: |
|
|
|
| Achla - 1,70,000 |
|
|
|
| Bobby - 1,35,000 |
3,05,000 |
|
|
|
9,95,000 |
9,95,000 |
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|||
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|
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|||
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|
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Sheet was as follows:
|
Balance Sheet of Verma and Sharma as on 31-3-2011 |
||||
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
|
Capitals: |
|
Land and Building |
70,000 |
|
|
Verma |
1,20,000 |
|
Machinery |
60,000 |
|
Sharma |
80,000 |
2,00,000 |
Debtors |
80,000 |
|
Creditors |
70,000 |
Bank |
60,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,70,000 |
|
2,70,000 |
|
|
|
|
|
||
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(i) Creditors of Rs 50,000 took over Land and Building in full settlement of their claim.
(ii) Remaining Creditors were paid in cash.
(iii) Machinery was sold at a depreciation of 30%.
(iv) Debtors were collected at a cost of Rs 500.
(v) Expenses of realisation were Rs 1,700.
Pass necessary Journal Entries for dissolution of the firm.
From the following items of Receipts and Payments A/c of South India Club, prepare an Income and Expenditure Account for the year ended 31.3.2010:
|
Particulars |
Rs |
|
Salaries Paid |
55,000 |
|
Lighting expenses |
5,500 |
|
Stationery (Including Rs 400 for the previous year) |
4,000 |
|
Subscription received (including 1,000 received in advance |
44,000 |
|
and Rs 750 for the previous year) |
|
|
Net Proceeds of Refreshment Room |
30,000 |
|
Miscellaneous Expenses |
3,000 |
|
Interest paid on loan for three months |
1,200 |
|
Rent and Rates (Including Rs 500 pre-paid) |
4,500 |
|
Lockers Rent received |
Additional Information:
Subscriptions in arrears on 31.3.2010 were Rs 4,700 and nine months interest on loan was also outstanding.
X, Y and Z were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31.3.2010 their Balance Sheet was as follows:
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
|
Capital Accounts: |
|
Building |
50,000 |
|
|
X |
75,000 |
|
Patents |
15,000 |
|
Y |
62,000 |
|
Machinery |
75,000 |
|
Z |
37,500 |
1,75,000 |
Stock |
37,500 |
|
Sundry Creditors |
42,500 |
Debtors |
20,000 |
|
|
|
|
Cash at Bank |
20,000 |
|
|
|
2,17,500 |
|
2,17,500 |
|
|
|
|
|
|
|
Z died on 31.7.2010. It was agreed that:
(a) Goodwill be valued at 2½ year’s purchased of the average profits of the last four year which were as follows:
|
Years |
Profit Rs |
|
2006 – 2007 |
32,500 |
|
2007 – 2008 |
30,000 |
|
2008 – 2009 |
40,000 |
|
2009 – 2010 |
37,500 |
(b) Machinery be valued at Rs 70,000; Patents at Rs 20,000 and Building at Rs 62,500.
(c) For the purpose of calculating Z’s share of profits on the year of his death the profit in 2010 − 2011 should be taken to have been accrued on the same scale as in 2009 − 2010.
(d) A sum of Rs 17,500 was paid immediately to the executors of Z the balance was paid in four half yearly installments together with interest at 12% p.a. starting from 31.1.2011.
Given necessary journal entries to record the above transaction and Z’s executor’s account till the payment of installments due on
31.1.2011
The Balance Sheet of Ram and Shyam, who were sharing profits in the ratio of 3 : 1 on 31st March, 2009 was as follows:
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
|
Creditors |
2,800 |
Cash at bank |
2,000 |
||
|
Employees’ provident fund |
1,200 |
Debtors |
6,500 |
|
|
|
General Reserve |
2,000 |
Less: Reserve for bad debts |
(500) |
6,000 |
|
|
Capitals |
|
Stock |
3,000 |
||
|
Ram |
6,000 |
|
Investments |
5,000 |
|
|
Shyam |
4,000 |
10,000 |
|
|
|
|
|
16,000 |
|
16,000 |
||
|
|
|
|
|||
Answer briefly of the following question:
Give any two differences between Revaluation Account and Realisation Account.
Annie and Bonnie are partners in a firm, sharing profits and losses equally. Their Balance Sheet as at 31st March,
2017, was as follows:
Balance Sheet of Annie and Bonnie
As at 31st March, 2017
| Liabilities | Amount Rs. | Assets | AmountRs. |
| Sundry Creditors | 21,000 | Cash at Bank | 20,000 |
| General Reserve | 15,000 |
Sundry Debtors 22,000 Less Provision for Doubtful Debts (1,000) |
21,000 |
|
Capital A/c Annie 45,000 Bonnie40,000 |
85,000 |
Stock | 10,000 |
| Plant & Machinery | 60,000 | ||
| Goodwill | 10,000 | ||
| 1,21,000 | 1,21,000 |
Carl was to be taken as a partner for 1/4 share in the profits of the firm, with effect from 1st April, 2017, on the
following terms:
(a) Bad debts amounting to Rs. 1,500 to be written off.
(b) Stock to be taken over by Annie at Rs.12,000.
(c) Plant and Machinery to be valued at Rs. 50,000.
(d) Goodwill of the firm to be valued at Rs. 20,000.
(e) Carl to bring in Rs. 50,000 as his capital. He was unable to bring his share of goodwill in cash.
(f) General Reserve not to be distributed. For this, it was decided that Carl would compensate the old partners
through his current account.
You are required to:
(i) Pass journal entries on the date of Carl's admission.
(ii) Prepare the Balance Sheet of the reconstituted firm
Akul, Bakul, and Chandan were partners in a firm sharing profits in the ratio of 2 : 2: 1. On 31st March 2018 their Balance Sheet was as follows:
Balance Sheet of Akul, Bakul and Chandan as on 31.3.2018
| Liabilities |
Amount (₹) |
Assets | Amount (₹) |
| Sundry Creditors | 45,000 | Cash at Bank | 42,000 |
| Employees Provident Fund | 13,000 | Debtors 60,000 | |
| General Reserve | 20,000 | Less: Provision for doubtful debts 2000 | 58,000 |
| Capitals: | |||
| Akul 1,60,000 | Stock | 80,000 | |
| Bakul 1,20,000 | Furniture | 90,000 | |
| Chandan 92,000 | 3,72,000 | Plant and Machinery | 1,80,000 |
| 4,50,000 | 4,50,000 |
Bakul retired on the above date and it was agreed that:
(i) Plant and Machinery were undervalued by 10%.
(ii) Provision for doubtful debts was to be increased to 15% on debtors.
(iii) Furniture was to be decreased to ₹ 87,000.
(iv) Goodwill of the firm was valued at ₹ 3,00,000 and Bakul's share was to be adjusted through the capital accounts of Akul and Chandan.
(v) Capital of the new firm was to be in the new profit sharing ratio of the continuing partners.
Prepare Revaluation account, Partners' Capital accounts, and the Balance Sheet of the reconstituted firm.
On the date of admission of Ajay as a partner, the Balance Sheet of the firm of Nita and Rita showed a balance of ₹ 80,000 in the Workmen Compensation Reserve.
Choose the correct option to record the effect of a workmen compensation claim of ₹ 90,000 on the accounts of the partnership firm.
