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Question
Charu and Harsha were partners in a firm sharing profits in the ratio of 3:2. On 1-4-2014 their Balance Sheet was as follows :
| Balance Sheet | |||
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors General Reserve Workmen Compensation Fund Investment Fluctuation Fund Provision for bad debts Capitals Charu 30,000 Harsha 20,000 |
17,000 4,000 9,000 11,000 2,000
50,000 |
Cash Debtors Investments Plant Land and building
|
6,000 15,000 20,000 14,000 38,000
|
| 93,000 | 93,000 | ||
On the above date, Vaishali was admitted for 1/4th share in the profits of the firm on the following terms:
(a) Vaishali will bring Rs 20,000 for her capital and Rs 4,000 for her share of goodwill premium.
(b) All debtors were considered good.
(c) The market value of investments was Rs 15,000.
(d) There was a liability of Rs 6,000 for workmen compensation.
(e) Capital accounts of Charu and Marsha are to be adjusted on the basis of Vaishali's capital by
opening current accounts.
Prepare Revaluation Account and Partners' Capital Accounts
Solution
| Revaluation Account | |||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
|
To Profit transferred to : Charu’s Capital A/c 1,200 Harsha’s Capital A/c 800 |
2,000 |
By Provision for Bad debts A/c
|
2,000
|
| 2,000 | 2,000 | ||
| Partner’s Capital Account | |||||||
| Dr | Cr. | ||||||
| Particulars | Charu | Harsha | Vaishali | Particulars | Charu | Harsha | Vaishali |
|
To Current A/c To Balance c/d
|
5,400 36,000
|
3,600 24,000
|
20,000
|
By Balance b/d By General Reserve A/c By Workmen Compensation Fund A/c By Investment Fluctuation Fund A/c By Revaluation A/c (Profit) By Cash A/c By Prem. for Goodwill A/c
|
30,000 2,400 1,800 3,600 1,200
2,400
|
20,000 1,600 1,200 2,400 800
1,600
|
20,000
|
| 41,400 | 27,600 | 20,000 | 41,400 | 27,600 | 20,000 | ||
Working Notes :
WN 1: Calculation of New Profit Sharing Ratio
Old Ratio = 3:2
Let the total profit of the firm = 1
Remaining profit share of the firm = `1 - 1/4 = 3/4`
So,
Charu's New Share =`3/5 xx 3/4 = 9/20`
Harsha's New Share = `2/3 xx 3/4 = 6/20`
∴ New Profit Sharing Ratio = `9/20 : 6/20 : 1/4 = 9:6:5`
WN 2 Calculation of Sacrificing Ratio
Old Ratio = 3:2
New Ratio = 9:6:5
Sacrificing Ratio = Old Ratio – New Rati
Charu = `3/5 - 9/20 = 3/20`
Harsha = `2/5 - 6/20 = 2/20`
∴ Sacrificing Ratio = 3:2
WN 3 Distribution of Goodwill
Charu will get =`4000 xx 3/5 = 2400`
Harsha will get = `4000 xx 2/5 = 1600`
WN 4 Adjustment of Capital
Total Capital of the firm = Vaishali Capital x Reciprocal of her share
`= 20000 xx 4/1 = 80000`
New Profit Sharing Ratio = 9:6:5
Charu's New Capital = `80000 xx 9/20 = 36000`
Harsha's New Capital = `80000 xx 6/20 = 24000`
Vaishali's New Capital = `80000 xx 5/25 = 20000`
APPEARS IN
RELATED QUESTIONS
A. B and C were partners in a firm sharing profits in the ratio of 5: 3: 2. On 31-3-2015 their Balance Sheet was as follows:
Balance Sheet of A,B and C as on 31-3-2015
| Liabilities | Amount(Rs) | Assets | Amount(Rs.) |
|
Creditors Investment Fluctuation Fund P & L Account Capitals A 1,50,000 B 1,20,000 C 60,000
|
63,000 30,000 1,20,000
3,30,000
|
Land & Building Motor Vans Investments Machinery Stock Debtors 1,20,000 Less : Provision 9,000 Cash
|
1,86,000 60,000 57,000 36,000 45,000
|
| 5,43,000 | 5,43,000 |
On the above date B retired and A and C agreed to continue the business on the following terms:
(1) Goodwill of the firm was valued at Rs.1, 53,000.
(2) Provision for bad debts was to be reduced by Rs.3,000.
(3) There was a claim of Rs.12,000 for workmen compensation.
(4) B will be paid Rs.24,600 in cash and the balance will be transferred to his loan account which will be paid in four equal yearly instalments together with interest 10% p.a.
(5) The new profit sharing ratio between A and C will be 3:2 and their capital will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C.
Ashok, Bhim and Chetan were partners in a firm sharing profits in the ratio of 3:2:1.
Their Balance Sheet as on 31-3-2015 was as follows:
Balance Sheet of Ashok, Bhim and Chetan
as on 31-3-2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Bills Payable General Reserve Capitals Ashok 2,00,000 Bhim 1,00,000 Chetan 50,000 |
1,00,000 40,000 60,000
3,50,000 |
Land Building Plant Stock Debtors Bank
|
1,00,000 1,00,000 2,00,000 80,000 60,000 10,000
|
| 5,50,000 | 5,50,000 |
Ashok, Bhim and Chetan decided to share the future profits equally, w.e.f. April 1, 2015. For this it was agreed that:
(i) Goodwill of the firm be valued at 3,00,000
(ii) Land be revalued at 1, 60,000 and building be depreciated by 6%.
(iii) Creditors of 12,000 were not likely to be claimed and hence be written off
Prepare Revaluation Account Partners’ Capital Accounts and Balance Sheet of the reconstituted firm
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Balance sheet of X,Y and Z as on 31st march,2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Investment Fluctuation Fund P & L Account Capital: X 50,000 Y 40,000 Z 20,000
|
21,000 10,000 40,000
1,10,000
|
Land and Building Motor Vans Investments Machinery Stock Debtors 40,000 Less: 3,000 Cash |
62,000 20,000 19,000 12,000 15,000
37,000 16,000 |
| 1,81,000 | 1,81,000 |
On the above date Y retired and X and Z agreed to continue the business on the following terms:
(1) Goodwill of the firm was valued at Rs.51,000
(2) There was a claim of 4,000 for Workmen’s Compensation.
(3) Provision for bad debts was to be reduced by 1,000
(4) Y will be paid 8,200 in cash and the balance will be transferred in his loan account which will be paid in four equally yearly instalments together with interest @ 10% p.a.
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Balance Sheet of J,H and K as on 31-3-2015
| LIabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Investment Fluctuation Fund P & L Account Capital: J 1,00,000 H 80,000 K 40,000
|
42,000 20,000 80,000
2,20,000
|
Land and Building Motor Vans Investments Machinery Stock Debtors 80,000 Less: 6,000 Cash |
2,24,000 40,000 38,000 24,000 30,000
74,000 32,000 |
| 3,62,000 | 3,62,000 |
On the above data H retires and J and K agreed to continue the business on the following terms:
(i) Goodwill of the firm was valued at Rs.1,02,000.
(ii) There was a claim of Rs.8,000 for workmen's compensation.
(iii) Provision for bad debts was to be reduced by Rs.2,000.
(iv) H will be paid Rs.14,000 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly installments together with interest @ 10% p.a.
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Balance Sheet of A,B and C as on 31-3-2015
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors Bills Payable
Capitals A 1,00,000 B 50,000 C 25,000 General Reserve |
50,000 20,000
1,75,000 30,000 |
Land Building Plant Stock Debtors Bank
|
50,000 50,000 1,00,000 40,000 30,000 5,000
|
| 2,75,000 | 2,75,000 |
On the above date D was admitted as new partner and it was decided that:
(i) Goodwill of the firm will be valued at 1,50,000
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(iii) Creditors of 6,000 were not likely to be claimed and hence should be written off
Prepare Revaluations Account, Partner’s Capital Accounts and Balance Sheet of the reconstitute firm.
Kapil, Mohit, Roshan and Rakesh were partners in firm sharing profits in the ratio of 5:2:2:1. On 1.4.2016 their Balance Sheet was as follows :
| Balance Sheet of Kapil, Mohit, Roshan and Rakesh as on 1.4.2016 |
|||
| Liabilities | Rs | Assets | Rs |
|
Capitals : Kapil 3,50,000 Mohit 3,00,000 Roshan 2,50,000 Rakesh 2,00,000 Sundry Creditors Workmen Compensation Reserve |
11,00,000 50,000 50,000 |
Fixed Assets Current Assets
|
8,00,000 4,00,000
|
| 12,00,000 | 12,00,000 | ||
From the above date, the partners decided to share the future profits equally. For this purpose, the goodwill of the firm was valued at Rs 72,000. It was also agreed that:
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Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.
Om, Ram and Shanti were partners in a firm sharing profits in the ratio of 3:2:1. On 1st April 2014 their Balance Sheet was as follows:
| Balance Sheet | |||
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Capital Accounts Om 3,58,000 Ram 3,00,000 Shanti 2,62,000 General Reserve Creditors Bills payable |
9,20,000 48,000 1,60,000 90,000 |
Land and Building Plant and Machinery Furniture Bills Receivables Sundry Debtors Stock Bank |
3,64,000 2,95,000 2,33,000 38,000 90,000 1,11,000 87,000 |
| 12,18,000 | 12,18,000 | ||
On the above date Hanuman was admitted on the following terms:
1) He will bring Rs 1,00,000 for his capital and will get the 1/10th share in the profits.
2) He will bring necessary cash for his share of goodwill premium. The goodwill of the firm was valued at Rs 3,00,000
3) A liability of Rs 18,000 will be created against bills receivables discount
4) The value of stock and furniture will be reduced by 20%.
]5) The value of land and building will be increased by 10%.
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Prepare Revaluation Account and Partner's Capital Accounts.
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| Liabilities |
Amount RS |
Assets |
Amount Rs |
|
Capital Accounts O 1,75,000 R 1,50,000 S 1,25,000 Current Accounts O 4,000 S 6,000 General Reserve Profit and Loss Accounts Creditors Bills Payable |
4,50,000
10,000 15,000 7,000 80,000 45,000 |
R’s Current Accounts Land and Building Plant and Machinery Furniture Investment Bills Receivables Sundry Debtors Stock Bank
|
7,000 1,75,000 67,500 80,000 36,500 17,000 43,500 1,37,000 43,500
|
| 6,07,000 | 6,07,000 |
On the above date, H was admitted on the following terms:
(i) H will bring Rs 50,000 as his capital and will get 116 th share in the profits.
(ii) He will bring necessary cash for his share of goodwill premium. The goodwill of the firm was
valued at Rs 90,000.
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(iv) A liability of Rs 7,004 will be created against bills receivables discounted.
(v) The value of stock, furniture and investments is reduced by 20% whereas the value of land and building and plant and machinery will be appreciated by 20% and 10% respectively.
(vi) The Capital accounts of the partners will be adjusted on the basis of H's Capital through their
current accounts.
Prepare Revaluation Account and Partner's Current Accounts and Capital Accounts.
Shikhar and Rohit were partners in a firm sharing profit in the ratio 7:3. On 1st April 2013, they admitted Kavi as a new partner for a ¼ share in the profit of the firm. Kavi brought Rs 4,30,000 as his capital and Rs 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April 2013 was as follows:
| Balance Sheet of Shikhar and Rohit as on 1st April 2013 | |||
| Liabilities | Rs | Assets | Rs |
|
Capital: Shikhar 8,00,000 Rohit 3,50,000 General Reserve Workman’s Compensation Fund Creditors |
11,50,000 1,00,000 1,00,000 1,50,000 |
Land and Building Machinery Debtors 2,20,000 Less: Provision 20,000 Stock Cash |
3,50,000 4,50,000
2,00,000 3,50,000 1,50,000 |
| 15,00,000 | 15,00,000 | ||
It was agreed that:
1. The value of Land and Building will be appreciated by 20%.
2. The value of Machinery will be depreciated by 10%.
3. The liabilities of Workmen's Compensation Fund was determined at Rs 50,000.
4. Capitals of Shikhar and Rohit will be adjusted on the basis of Kavi's capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
Sahaj and Nimish are partners in a firm. They share profits and losses 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. Gauri, a common friend decides to help them. Therefore, they admitted her into a partnership for a 1/3rd share. She brought her share of goodwill in cash and proportionate capital. At the time of Gauri's admission, the Balance sheet of Sahaj and Nimish was as under:
| Liabilities | Rs | Assets | Rs |
|
Capital Accounts: Sahaj 1,20,000 Nimish 80,000 General Reserve Creditors Employee's Provident Fund |
2,00,000 30,000 30,000 40,000 |
Machinery Furniture Stock Sundry Debtors Cash
|
1,20,000 80,000 50,000 30,000 20,000
|
| 3,00,000 | 3,00,000 |
It was decided to:
a. Reduce the value of a stock by `5,000.
b. Depreciate furniture by 10% and appreciate machinery by 5%.
c. Rs 3,000 of the debtors proved bad. A provision of 5% was to be created on Sundry Debtors for doubtful debts.
d. Goodwill of the firm was valued at Rs 45,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm. Identify the value being conveyed in the question.
A and Z are partners in a firm sharing profits in the ratio of 7 : 3. Their Balance Sheet as on 31.3.2016 was as follows was as follows:
|
Balance Sheet of A and Z as on 31.3.2016 |
||||
|
Liabilities |
Amount (Rs) |
Assets |
Amount (Rs) |
|
|
Sundry Creditors |
60,000 |
Cash |
36,000 | |
|
Provision for Bad Debts |
6,000 |
Debtors |
54,000 | |
|
Outstanding Wages |
9,000 |
Stock |
60,000 | |
|
General Reserve |
15,000 |
Furniture |
1,20,000 | |
|
|
|
Plant & Machinery |
120,000 | |
|
Capitals: |
|
|
||
|
A |
1,20,000 |
|
|
|
|
Z |
1,80,000 |
3,00,000 |
|
|
|
|
3,90,000 |
|
3,90,000 |
|
|
|
|
|
||
On the above date B was admitted for `1/4` share in the profits on the following terms:
(i) B will bring Rs 90,000 as his capital and Rs 30,000 as his share of goodwill premium, half of which will be withdrawn by A and Z.
(ii) Debtors Rs 4,500 will be written off and a provision of 5% will be created on debtors for bad and doubtful debts.
(iii) Outstanding wages will be paid off.
(iv) Stock will be depreciated by 10%, furniture by Rs 1,500 and Machinery by 8%.
Pass necessary journal entries for the above transactions in the books of the firm on B’s admission.
N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31.3.2016 their Balance Sheet was as under:
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
A, B and C were partners sharing profits in the ratio of 3 : 1 : 1. Their Balance-Sheet as on March 31st 2009, the date on which they dissolve their firm, was as follows:
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
|
Capitals: |
|
Sundry Assets |
17,000 |
||
|
A |
27,500 |
|
Stock |
7,800 |
|
|
B |
10,000 |
|
Debtors |
24,200 |
|
|
C |
7,000 |
44,500 |
Less: Provision for doubtful debts |
1,200 |
23,000 |
|
Loan |
1,500 |
Bills Receivable |
1,000 |
||
|
Creditors |
6,000 |
Cash |
3,200 |
||
|
|
52,000 |
|
52,000 |
||
|
|
|
|
|||
It was agreed that:
(a) A to take over Bills Receivable at Rs 800, debtors amounting to Rs 20,000 at 17,200 and the creditors of Rs 6,000 were to be paid by him at this figure.
(b) B is to take over all stock for Rs 7,000 and some sundry assets at Rs 7,200 (being 10% less than the book value)
(c) C to take over remaining sundry assets at 90% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs 300.
(d) The expenses of realization were Rs 270
The remaining debtors were sold to a debt collecting agency at 50% of the book value. Prepare Realisation A/c, Partners Capital A/c and Cash A/c
Answer briefly of the following question:
Give any two differences between Revaluation Account and Realisation Account.
Susan, Geeta and Rashi are partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as at 31st March, 2017, is as under:
Balance Sheet of Susan, Geeta and Rashi As at 31st March, 2017
| Liabilities | Amount | Assets | Amount |
| Sundry Creditors | 50,000 | Cash at Bank | 70,000 |
| Workmen Compensation Reserve | 25,000 |
Sundry Debtor 65,000 Less Provision for Doubtful Debts (5,000 |
60,000 |
| Employees Provident Fund | 5,000 | Goodwill | 50,000 |
| Bank Loan | 55,000 | Furniture | 1,00,000 |
|
Capital A/C Susan 2,20,000 Geeta 1,70,000 Rashi 1,35,000 |
5,25,000 |
Building | 3,80,000 |
| 6,60,000 | 6,60,000 |
The partners decided to dissolve their partnership on 31st March, 2017. The following transactions took place at the time of dissolution :
(a) Realization expenses of 2,000 were paid by Susan on behalf of the firm.
(b) Geeta took over the goodwill for her own business at 40,000.
(c) Building was taken over by Rashi at 3,00,000.
(d) Only 80% of the debtors paid their dues.
(e) Furniture was sold for 97,000.
(f) Bank Loan was settled along with interest of 5,000. You are required to prepare the Realization Account.
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.
