Advertisements
Advertisements
Question
Raj and Rashmi shared profits and losses in the ratio of 3: 2 respectively. Their Balance Sheet as on 31st March 2020 was as under:
Balance sheet as on 31st March, 2020
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Sundry Creditors | 90,000 | Cash at Bank | 1,500 |
| General Reserve | 60,000 | Sundry Debtors | 1,33,500 |
| Capital: |
51,000 |
||
| Raj | 2,16,000 | Investment | 72,000 |
| Rashmi | 1,44,000 | Plant | 1,80,000 |
| Building | 72,000 | ||
| 5,10,000 | 5,10,000 |
They admit Hiren into partnership on 1-4-2020. The terms being that:
(1) He shall have to bring in ₹ 1,20,000 as his Capital for 1/4 share in future profits.
(2) Value of Goodwill of the firm is to be fixed at the average profits for the last three years.
The Profit were:
| 2016 - 17 | ₹ 96,000 |
| 2017 - 18 | ₹ 1,62,000 |
| 2018 - 19 | ₹ 1,47,000 |
Hiren is unable to bring the value of the Goodwill in cash. It is decided to raise the Goodwill in the books of accounts.
(3) Reserve for doubtful debts is to be created at ₹ 3,000.
(4) Closing stock is valued at ₹ 45,000.
(5) Plant and Building is to be depreciated by 5%.
Prepare Profit and Loss Adjustment A/c, Capital Accounts of Partners and Balance Sheet of the new firm.
Solution
In the books of the Partnership firm
| Dr. | Profit and Loss Adjustment Account | Cr. | |||||
| Particulars |
Amount (₹) | Particulars |
Amount (₹) | ||||
| To R.D.D. (New) A/c |
3,000 | By Loss on Revaluation Transferred to Partner's Capital A/cs: | |||||
| To Stock A/c |
6,000 | Raj | 12,960 | ||||
| To Depreciation A/cs: |
Rashmi |
8,640 | 21,600 | ||||
| Plant | 9,000 | ||||||
| Building | 3,600 | 12,600 | |||||
| 21,600 | 21,600 | ||||||
| Dr. | Partner's Capital Accounts | Cr. | |||||
| Particulars | Raj (₹) |
Rashmi (₹) |
Hiren |
Particulars | Raj (₹) |
Rashmi (₹) |
Hiren |
| To Profit and Loss Adjustment A/c (Loss) | 12,960 | 8,640 | - | By Balance b/d | 2,16,000 | 1,44,000 | - |
| To Balance c/d | 3,20,040 | 2,13,360 | 1,20,000 | By Cash/Bank A/c | - | - | 1,20,000 |
| By Goodwill A/c | 81,000 | 54,000 | - | ||||
| By General Reserve A/c | 36,000 | 24,000 | - | ||||
| 3,33,000 | 2,22,000 | 1,20,000 | 3,33,000 | 2,22,000 | 1,20,000 | ||
| Balance Sheet as on 1st April, 2020 | |||||
| Liabilities | Amount (₹) |
Amount (₹) |
Assets | Amount (₹) |
Amount (₹) |
| Capital A/c: | Cash | 1,21,500 | |||
| Raj | 3,20,040 | Sundry Debtors | 1,33,500 | ||
| Rashmi | 2,13,360 | Less: R.D.D. (New) | 3,000 | 1,30,500 | |
| Hiren | 1,20,000 |
6,53,400 |
Stock | 51,000 | |
| Sundry Creditors | 90,000 | Less: Value decreases | 6,000 | 45,000 | |
| Investments | 72,000 | ||||
| Plant | 1,80,000 | ||||
| Less: Depreciation | 9,000 | 1,71,000 | |||
| Building | 72,000 | ||||
| Less: Depreciation | 3,600 | 68,400 | |||
| Goodwill | 1,35,000 | ||||
| 7,43,400 | 7,43,400 | ||||
Working Notes:
(1) Average Profit = `"Total Profit"/"No. of years"`
`= (96000 + 162000 + 147000)/3`
= ₹ 1,35,000
∴ Goodwill value = ₹ 1,35,000
Raj's share in Goodwill = ₹ 81,000 (1,35,000 × `3/5`)
Rashmi's share in Goodwill = ₹ 54,000 (1,35,000 × `2/5`)
(2) Hiren is not able to bring share in goodwill and it is decided to raise the goodwill in the book.
Therefore, Goodwill is recorded in the Asset side ₹ 1,35,000.
APPEARS IN
RELATED QUESTIONS
Answer in one sentence only.
What is meant by admission of partner?
Answer in one sentence only.
What does the excess of debits over credits in profit and loss adjustment account indicate?
Answer in one sentence only.
In what proportion is general reserve distributed amongst the old partners?
Write the word/term or phrase which can substitute the following statement.
Excess actual capital over proportionate capital.
Write the word/term or phrase which can substitute the following statement.
Profit and Loss Account appearing on the asset side of a balance sheet.
Write the word/term or phrase which can substitute the following statement.
Change in the relationship between the partners.
Write a word/phrase/term which can substitute the following statement.
The ratio in which general reserve is distributed to the old partners.
Write a word/phrase/term which can substitute the following statement.
The proportion in which old partners make a sacrifice.
Write a word/phrase/term which can substitute the following statement.
Capital employed × NRR/100 =
Write a word/phrase/term which can substitute the following statement.
Old ratio - New ratio =
State True or False with reason.
The gain ratio is calculated at the time of admission of a partner.
State True or False with reason.
The new ratio minus old ratio is equal to the sacrifice ratio.
What is the sacrifice ratio?
What do you mean by raising the goodwill at the time of admission of a new partner?
Excess of proportionate capital over actual capital represents _________.
The profit or loss on revaluation of assets and liabilities is transferred to the capital account of ___________.
Which of the following statements is not true in relation to the admission of a partner?
Write a word/term/phrase as a substitute for the following statement:
Old Ratio less New Ratio.
Apte and Bhate are sharing profits and losses in the ratio 3 : 2, if Kate is admitted at `1/4` share then calculate new profit sharing ratio.
Answer in one sentence.
What is sacrifice ratio?
Answer in one sentence.
What is the sacrifice ratio?
Answer in one sentence.
What is the sacrifice ratio?
Do you agree or disagree with the following statements:
Gain ratio means profit share given up by the retiring partner.
Moksh and Aarav share profits and losses in the ratio 3 : 2 in partnership firm. Their Balance Sheet as on 31st March, 2023 was as under:
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Creditors | 75,000 | Bank | 45,000 | ||
| Bills payable | 60,000 | Bills receivable | 22,800 | ||
| Bank loans | 96,000 | Debtors | 1,24,800 | 1,20,000 | |
| General reserve | 15,000 | Less : R.D.D | 4,800 | ||
| Capitals: | Stock | 72,000 | |||
| Moksh | 90,000 | 1,62,000 | Furniture | 28,200 | |
| Aarav | 72,000 | Machinery | 30,000 | ||
| Building | 90,000 | ||||
| 4,08,000 | 4,08,000 | ||||
On 1-04-2023, they admitted Tithi on the following terms:
(1) For 112 shares in profits in future, Tithi should bring ₹ 60,000 for capital and ₹ 30,000 for goodwill in cash.
(2) Half of amount of goodwill is withdrawn by old partners.
(3) The Stock is to be depreciated by 10% and Machinery by 5%.
(4) R.D.D. is to be maintained at ₹ 6,000.
(5) Furniture should be appreciated to ₹ 32,100 and Building be appreciated by 20%.
Pass the necessary journal entries in the books of the firm.
Jainam and Moksh are equal partners in the business. Their Balance Sheet as on 31st March, 2023 stood as under:
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Sundry Creditor | 1,35,000 | Cash in Bank | 93,000 | ||
| Capitals: | Debtors | 46,500 | 45,000 | ||
| Jain am | 67,500 | 1,12,500 | Less: R.D.D | 1,500 | |
| Moksh | 45,000 | Building | 82,500 | ||
| General Reserve | 27,000 | Machinery | 36,000 | ||
| Bills Receivable | 18,000 | ||||
| 2,74,500 | 2,74,500 | ||||
They decided to admit Prem on 1st April, 2023 on the following terms:
(1) The Machinery and Building be depreciated by 10%. Reserve for Doubtful debts to be increased by ₹ 7,500.
(2) Bills receivable are taken over by Jainam at the discount of 10%.
(3) Prem should bring ₹ 90,000 as capital for his I/4th share in future profits.
(4) The capital accounts of all the partners be adjusted in proportioning in the new profit sharing ratio by opening current accounts of the partners.
Prepare Profit and Loss Adjustment A/c, Partners' Capital A/c and Balance Sheet of new firm.
Sacrifice ratio = ______ - ______
Answer in one sentence.
What is sacrifice ratio?
Answer in one sentence.
What is sacrifice ratio?
What is the sacrifice ratio?
Answer in one sentence.
What is sacrifice ratio?
Answer in one sentence.
What is sacrifice ratio?
Answer in one sentence.
What is sacrifice ratio?
Answer in one sentence.
What is sacrifice ratio?
