P, Q and R Were Partners in a Firm Sharing Profit in the Ratio of 7 : 2: 1. on 1st April, 2013 Their Balance Sheet Was as Follows: - Accountancy

Question

P, Q and R were partners in a firm sharing profit in the ratio of 7 : 2: 1. On 1^st April, 2013 their Balance Sheet was as follows:

Balance Sheet of P, Q and R as on 1^st April, 2013
Liabilities		Amount Rs	Assets		Amount Rs
Capitals:			Land		12,00,000
P	9,00,000		Building		9,00,000
Q	8,40,000		Furniture		3,60,000
R	9,00,000	26,40,000	Stock		6,60,000
General Reserve		3,60,000	Debtors	6,00,000
Workmen’s Compensation Fund		5,40,000	Less provision	–30,000	5,70,000
Creditors		3,60,000	Cash		2,10,000
		39,00,000			39,00,000

On the above data Q retired.
The following were agreed:
(i) Goodwill of the firm was valued at Rs 12,00,000.
(ii) Land was to be appreciated by 30% and Building was to depreciated by 3,00,000.
(iii) Value of furniture was to be reduced by Rs 60,000.
(iv) The liabilities for Workmen's Compensation Fund were determined at Rs 1,40,000.
(v) Amount Payable to Q was transferred to his loan account.
(vi) Capitals of P and R were to be adjusted in their new profit sharing ratio, For this purpose current accounts of the partners will be opened.

Prepare Revaluation Account, Partner's Capital Accounts and the Balance Sheet of the new firm.

Solution

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Building	3,00,000	Land	3,60,000
Furniture	60,000

	3,60,000		3,60,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	P	Q	R	Particulars	P	Q	R

Q’s Capital A/c	2,10,000		30,000	Balance b/d	9,00,000	8,40,000	9,00,000
R Current A/c			6,75,000	General Reserve	2,52,000	72,000	36,000
				P’s Capital A/c		2,10,000
Q’s Loan A/c		12,32,000		R’s Capital A/c		30,000
Balance c/d	18,97,000		2,71,000	Workmen Compensation Fund	2,80,000	80,000	40,000
				P's Current A/c	6,75,000


	21,07,000	12,32,000	9,76,000		21,07,000	12,32,000	9,76,000

Balance Sheet as on April 01, 2012 after Q’s retirement
Liabilities	Amount Rs	Assets		Amount Rs
P’s Capital A/c	18,97,000	Land		15,60,000
Q’s Capital A/c	2,71,000	Building		6,00,000
Liability for workmen compensation	1,40,000	Furniture		3,00,000
Creditors	3,60,000	Stock		6,60,000
Q’s Loan A/c	12,32,000	Cash		2,10,000
P’s Current A/c	6,75,000	Debtors	6,00,000
		Less: Provision	30,000	5,70,000
		R’s Current A/c		6,75,000
	45,75,000			45,75,000

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Notes

Total Capital of P = 14,32,000 – 2,10,000 = 12,22,000
Total Capital of R = 9,76,000 – 30,000 =9,46,000
Total Capital of new firm = 12,22,000 + 9,46,000 = 21,68,000
The new Capital has to be in the new profit sharing ratio = 7 : 1

Therefore, P's new capital=`21,68,000xx7/8=18,97,000`

R's new capital=`21,68,000xx1/8=2,71,000` $= 21, 68, 000 \times \frac{1}{8} = 2, 71, 000$

Preparation of Revaluation Account and Balance Sheet

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2013-2014 (March) Foreign Set 1 (with solutions)

Q 17.2 | 8 marks

RELATED QUESTIONS

J, H and K 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 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

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.

(v) The new profit sharing ratio between J and K will be 3:2 and their capitals will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.

Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new 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:

1) Fixed assets will be depreciated by 10% and the claim against Workmen Compensation Reserve will be estimated at Rs 70,000.

2) The Capitals of the partners will be adjusted according to their new profit sharing ratio. For this, Partners' Current Accounts will be opened

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

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

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of `1/2, 1/3 and 1/6`respectively. Chander retired on 1-4-2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:

Balance Sheet of Amit, Balan and Chander as on 1-4-2014
Liabilities	Amount Rs	Assets	Amount Rs
Sundry Creditors Provident Fund General Reserve Capitals Amit 40,000 Balan 36,500 Chander 2,000	12,600 3,000 9,000 96,500	Bank Debtors 30,000 Less: Provision 1,000 Stock Investments Patents Machinery	4,100 29,000 25,000 10,000 5,000 48,000
	1,21,100		1,21,100

It was agreed that:

(a) Goodwill will be valued at Rs 27,000.
(b) Depreciation of 10% was to be provided on machinery.
(c) Patents were to be reduced by 20%.
(d) Liability on account of Provident Fund was estimated at Rs 2,400.
(e) Chander took over investments for Rs 15,800.
(f) Amit and Balan decided to adjust their capitals in a proportion of their profit sharing ratio by
opening current accounts.

Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.

Under which major headings the following items will be presented in the Balance sheet of a company as per Schedule VI Part I of the Companies Act, 1956?

(1) Loans provided repayable on demand
(2) Goodwill
(3) Copyrights
(4) Loose tools
(5) Cheques
(6) General Reserve
(7) A stock of finished goods and
(8) 9% Debentures repayable after three years

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%.

6) Capital accounts of the partners will be adjusted on the basis of Hanuman's capital in their profit sharing ratio by opening current accounts.

Prepare Revaluation Account and Partner's Capital Accounts.

Xavier, Yusuf and Zaman were partners in a firm sharing profits in the ratio of 4:3: 2. On 1.4.2014 their Balance sheet was as follows:

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

Capital Accounts

Xavier 1,20,000

Yusuf 90,000

Zaman 60,000

41,400

2,70,000

Cash at Bank

Sundry Debtors 30,450

Less: Prov. For Bad debts 1,050

Stock

Plant and Machinery

Land and Building

33,000

29,400

48,000

51,000

1,50,000

3,11,400

Yusuf had been suffering from ill health and thus gave notice of retirement from the firm. An agreement was, therefore, entered into as on 1.4.2014, the terms of which were as follows:

1) That land and building be appreciated by 10%

2) The provision for bad debts is no longer necessary

3) That stock be appreciated by 20%

4) That goodwill of the firm be fixed at Rs 54,000. Yusuf share of the same be adjusted into Xavier's and Zamna's Capital Accounts, who are going to share future profits in the ratio of 2:1

5) The entire capital of the newly constituted firm be readjusted by bringing in or paying necessary cash so that the future capitals of Xavier and Zaman will be in their profit sharing ratio.

Prepare Revaluation Account and Partner's Capital Account

Manu, Hary, Ali and Reshma were partners in a firm sharing profits in the ratio of 2 : 2 : 1 : 5. On 1.4.2016 their Balance Sheet was as follows:

Balance Sheet of Manu, Hary, Ali and Reshma as on 1.4.2016
Liabilities		Amount (Rs)	Assets	Amount (Rs)
Capitals:			Fixed Assets	8,00,000
Manu	2,00,000		Current Assets	2,40,000
Hary	2,50,000
Ali	1,50,000
Reshma	3,50,000	9,50,000

Sundry Creditors		45,000
Workmen Compensation Reserve		45,000
		10,40,000		10,40,000

From the above date partners decided to share future profits equally. For this purpose the goodwill of the firm was valued at Rs 40,000. The partners also agreed for the following:

(i) Claims against Workmen Compensation Reserve was estimated at Rs 50,000. Fixed assets were to be depreciated by 10%.

(ii) Capitals of the partners were to be adjusted according to the new profit sharing ratio, for this necessary cash will be brought or paid.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Prepare a Cash Flow Statement on the basis of the information given in the Balance Sheet of Libra Ltd. as at 31.3.2013 and 31.3.2012.

	Particulars	Note No.	31.3.2013 Rs	31.3.2012 Rs
I	Equity and Liabilities :
1.	Shareholder’s Funds :
	(a) Share Capital		8,00,000	6,00,000
	(b) Reserve and Surplus		4,00,000	3,00,000
2.	Non-Current Liabilities :
	Long Term Borrowings		1,00,000	1,50,000
3.	Current Liabilities :
	Trade Payables		40,000	48,000
	Total		13,40,000	10,98,000

II	Assets
1.	Non-Current Assets :
	(a) Fixed Assets :
	(i) Tangible Assets		8,50,000	5,60,000
	(b) Non-Current Investment		2,32,000	1,60,000
2.	Current Assets :
	(a) Current Investments (Marketable)		50,000	1,34,000
	(b) Inventories		76,000	82,000
	(c) Trade Receivables		38,000	92,000
	(d) Cash and Cash Equivalents		94,000	70,000
	Total		13,40,000	10,98,000

Verma and Sharma were partners sharing profits in the ratio of 3 : 1. On 31-3-2011 their Balance

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

The firm was dissolved on 1-4-2011 and the Assets and Liabilities were settled as follows:

(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.

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

Khanna, Seth and Mehta were partners in a firm sharing profit in the ratio of 3 : 2 : 5. On

31.12.2010 the Balance Sheet of Khana, Seth and Mehta was as follows:

Liabilities		Amount Rs	Assets	Amount Rs
Capitals:			Goodwill	3,00,000
Khanna:	3,00,000		Land and Building	5,00,000
Seth:	2,00,000		Machinery	1,70,000
Mehta:	5,00,000	10,00,000	Stock	30,000
General Reserve		1,00,0000	Debtors	1,20,000
Loan from Seth		50,000	Cash	45,000
Creditors		75,000	Profit and Loss Account	60,000
		12,25,000

On 14^th March 2011, Seth died.

The partnership deed provides that on the death of a partner the executor of the deceased partners

is entitled to:

(i) Balance in Capital Account;

(ii) Share in profits upto the date of death on the basis of last year’s profit;

(ii) His share in profit/loss in revaluation of assets and re-assessment of liabilities which were as follows:

(a) Land and Building was to be appreciated by Rs 1,20,000;

(b) Machinery was to be depreciated to Rs 1,35,000 and stock to Rs 25,000;

(c) A provision of `2 1/2%` for bad and doubtful debts was to created on debtors;

(iv) The net amount payable to Seth’s executors was transferred to his loan account which was to be paid later.

Prepare Revalution Account, Partners Capital Accounts, Seth’s Executors Account and the

Balance Sheet of Khanna and Mehta who decided to continue the business keeping their capital balances in their new profit sharing ratio. Any surplus of deficit to be transferred the current account of the partners.

A, B and C were partners sharing profits in the ratio of 3 : 1 : 1. Their Balance-Sheet as on March 31^st 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

The Balance Sheet of Ram and Shyam, who were sharing profits in the ratio of 3 : 1 on 31^st 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

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.

Gita, Radha, and Garv were partners in firm sharing profits and losses in the ratio of 3: 5: 2. On 31^st March 2019, their balance sheet was as follows:

Balance Sheet of Gita, Radha & Garv as on 31^st March 2019

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	60,000	Cash	50,000
General Reserve	40,000	Stock	80,000
Capitals :		Debtors	40,000
Gita - 3,00,000		Investments	30,000
Radha - 2,00,000		Buildings	5,00,000
Garv - 1,00,000	6,00,000
	7,00,000		7,00,000

Radha retired on the above date and it was agreed that:
(a) Goodwill of the firm be valued at ₹ 3,00,000 and Radha's share be adjusted through the capital accounts of Gita and Gary.
(b) Stock was to be appreciated by 20%.
(c) Buildings were found undervalued by ₹ 1,00,000.
(d) Investments were sold for ₹ 34,000.
(e) Capital of the new firm was fixed at ₹ 5,00,000 which will be in the new profit sharing ratio of the partners; the necessary adjustments for this purpose were to be made by opening current accounts of the partners.

Prepare Revaluation Account, Partner's Capital Accounts, and the Balance Sheet of the reconstituted firm on Radha's retirement.

Which of the following transactions is debited to Revaluation Account?

P, Q and R Were Partners in a Firm Sharing Profit in the Ratio of 7 : 2: 1. on 1st April, 2013 Their Balance Sheet Was as Follows: - Accountancy

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P, Q and R Were Partners in a Firm Sharing Profit in the Ratio of 7 : 2: 1. on 1st April, 2013 Their Balance Sheet Was as Follows: - Accountancy

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