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Question
State whether the following would result in inflow, outflow or no flow of cash:
(i) Bill Receivable endorsed to Creditors.
(ii) Old vehicle written off.
Solution
(i) No Flow [1]
(ii) No Flow
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RELATED QUESTIONS
The capital accounts of Amar and Harsh stood at 20,000 and 30,000 respectively after the necessary
adjustments in respect of drawings and net profit for the year ended 31st March, 2017. lt was subsequently
ascertained that interest on capital @ 12% per annum was not taken into account while arriving at the
divisible profits for the year.
During the year 2016-17, Amar had withdrawn 2,000 and Harsh's drawings were ` 1,000.
The net profit for the year amounted to 15,000.
The partners shared profits and losses in the ratio of 3:2.
You are required to pass the necessary journal entries to rectify the error in accounting.
Mitu and Ritu are partners sharing profits and losses in the ratio of 2 : 3. An extract of their Balance Sheet as at 31st March, 2023, is given below:
| Balance Sheet of Mitu and Ritu (an extract) As at 31st March, 2023 |
|||
| Liabilities | (₹) | Assets | (₹) |
| Workmen Compensation Reserve | 30,000 | Investments (Market Value ₹ 76,000) | 80,000 |
| General Reserve | 40,000 | Sundry Debtors | 1,00,000 |
| Investment Fluctuation Reserve | 10,000 | Profit & Loss A/c | 55,000 |
On 1st April, 2023, they admit Nitu as a new partner for 1/5 share in the profits on the following terms regarding the treatment of the reserves and the accumulated losses:
- Accumulated losses, if any, to be written off.
- A workmen compensation claim of ₹ 10,000 to be adjusted against the Workmen Compensation Reserve. The balance of the reserve is not to be distributed.
- Any loss in the value of investments to be adjusted against the Investment Fluctuation Reserve. The balance of the Investment Fluctuation Reserve is to be distributed.
- Provision for doubtful debts to be created to the extent of 10% of the debtors from the General Reserve. The remaining amount in the General Reserve is to be distributed.
You are required to pass the necessary journal entries to record the above adjustments at the time of Nitu's admission.
