Page No 6.60:
Question 31:
Kanika, Disha and Kabir were partners sharing profits in the ratio of 2
: 1 : 1. On 31st March, 2016, their Balance Sheet was as under:
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Liabilities |
Amount |
Assets |
Amount |
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Trade creditors |
53,000 |
Bank |
60,000 |
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Employees' Provident Fund |
47,000 |
Debtors |
60,000 |
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Kanika's Capital |
2,00,000 |
Stock |
1,00,000 |
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Disha's Capital |
1,00,000 |
Fixed assets |
2,40,000 |
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Kabir's Capital |
80,000 |
Profit and Loss A/c |
20,000 |
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4,80,000 |
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4,80,000 |
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Kanika retired on 1st April, 2016. For this purpose, the
following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of
three completed years preceding the date of retirement. The profits for the
year:
2013-14 were ` 1,00,000 and for 2014-15 were ` 1,30,000.
(b) Fixed Assets were to be increased to ` 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
Prepare Revaluation Account, Capital
Accounts of the partners and the Balance Sheet of the reconstituted
firm.
(AI 2017 C)
Answer:
Revaluation Account |
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Dr. |
Cr. |
||||
Particulars |
Amount ` |
Particulars |
Amount ` |
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Revaluation Profit |
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Fixed Assets |
60,000 |
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Kanika’s Capital |
40,000 |
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Stock |
20,000 |
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Disha’s Capital |
20,000 |
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Kabir’s Capital |
20,000 |
80,000 |
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80,000 |
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80,000 |
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Partners’ Capital Account |
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Dr. |
Cr. |
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Particulars |
Kanika |
Disha |
Kabir |
Particulars |
Kanika |
Disha |
Kabir |
|
Profit & Loss A/c |
10,000 |
5,000 |
5,000 |
Balance b/d |
2,00,000 |
1,00,000 |
80,000 |
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Kanika’s Capital A/c |
|
35,000 |
35,000 |
Disha’s Capital A/c |
35,000 |
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Kanika’s Loan A/c |
3,00,000 |
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Kabir’s Capital A/c |
35,000 |
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Balance c/d |
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80,000 |
60,000 |
Revaluation |
40,000 |
20,000 |
20,000 |
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3,10,000 |
1,20,000 |
1,00,000 |
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3,10,000 |
1,20,000 |
1,00,000 |
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Balance
Sheet as on
March 31, 2016 |
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Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
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Employees’ Provident Fund |
47,000 |
Bank |
60,000 |
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Trade Creditors |
53,000 |
Sundry Debtors |
60,000 |
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Kanika’s Loan A/c |
3,00,000 |
Stock |
1,20,000 |
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Capitals |
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Fixed Assets |
3,00,000 |
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Disha |
80,000 |
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Kabir |
60,000 |
1,40,000 |
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5,40,000 |
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5,40,000 |
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Working Notes:
WN1: Calculation of Goodwill
Goodwill=Average Profits×Number of Years' Purchase
Average Profits=Total ProfitsNumber of Years=1,00,000+1,30,000−20,000/3=2,10,000/3=` 70,000
Goodwill=70,000×2=` 1,40,000
Kanika's share=1,40,000×2/4=70,000 (to be borne by gaining partners in gaining ratio)
Note: Since no information is given about the share of gain,
it is assumed that the old partners are gaining in their old profit sharing
ratio.
Page No 6.60:
Question 32:
N, S and G were partners in a
firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016
their Balance Sheet was as under:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
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Creditors |
1,65,000 |
Cash |
1,20,000 |
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General Reserve |
90,000 |
Debtors |
1,35,000 |
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Capitals: |
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Less: Provision |
15,000 |
1,20,000 |
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N |
2,25,000 |
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Stock |
1,50,000 |
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S |
3,75,000 |
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Machinery |
4,50,000 |
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G |
4,50,000 |
10,50,000 |
Patents |
90,000 |
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Building |
3,00,000 |
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Profit and Loss Account |
75,000 |
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13,05,000 |
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13,05,000 |
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G retired on the above date and it was agreed that:
(a) Debtors of `
6,000 will be written off as bad debts and a provision of 5% on debtors for bad
and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building
will be depreciated by 5%.
(c) An unrecorded creditor of `
30,000 will be taken into account.
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at ` 90,000.
Pass necessary Journal entries for the above transactions in the books of the
firm on G's retirement.
(Foreign 2017)
Answer:
Journal |
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Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
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General Reserve A/c |
Dr. |
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90,000 |
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To N’s Capital A/c |
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18,000 |
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To S’s Capital A/c |
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27,000 |
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To G’s Capital A/c |
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45,000 |
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(Balance in reserve distributed among all partners in old
ratio) |
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N’s Capital A/c |
Dr. |
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15,000 |
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S’s Capital A/c |
Dr. |
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22,500 |
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G’s Capital A/c |
Dr. |
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37,500 |
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To Profit & Loss A/c |
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75,000 |
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(Debit balance P&L A/c written off among all partners
in old ratio) |
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N’s Capital A/c |
Dr. |
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18,000 |
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S’s Capital A/c |
Dr. |
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27,000 |
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To G’s Capital A/c |
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45,000 |
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(Goodwill adjusted in gaining ratio) |
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Revaluation A/c |
Dr. |
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1,65,000 |
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To Patent A/c |
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90,000 |
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To Stock A/c |
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7,500 |
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To Machinery A/c |
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22,500 |
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To Building A/c |
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15,000 |
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To Creditors A/c |
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30,000 |
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(Decrease in assets and increase in liabilities debited to
Revaluation A/c) |
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Provision for Doubtful Debts A/c |
Dr. |
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2,550 |
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To Revaluation A/c |
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2,550 |
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(Excess provision written back) |
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N’s Capital A/c |
Dr. |
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32,490 |
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S’s Capital A/c |
Dr. |
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48,735 |
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G’s Capital A/c |
Dr. |
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81,225 |
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To Revaluation A/c |
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1,62,450 |
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(Loss on revaluation debited to partners’ capital accounts
in old ratio) |
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G’s Capital A/c |
Dr. |
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4,21,275 |
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To G’s Loan A/c |
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4,21,275 |
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(Amount due to G transferred to his loan A/c) |
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Working Notes:
WN1: Calculation of G’s Share of Goodwill
G's share=Firm's Goodwill×G's Profit Share
G's share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)
WN2: Calculation of Gaining
Ratio
Gaining Ratio = New Ratio − Old Ratio
N's gain=2/5−2/10=2/10
S's gain=3/5−3/10=3/10Gaining Ratio=2:3
N's share=45,000×2/5=18,000
S's share=45,000×3/5=27,000
WN2: Calculation of Excess/Deficit
Provision for Doubtful Debts
Required Provision @5%=1,35,000−6,000×5100=6,450
Existing Provision after writing bad-debts= 9,000
Excess Provision to be written back=2,550 9,000−6,450
WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits
= 4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
= ` 4,21,275
Page No 6.61:
Question 33: Ashok, Bhaskar
and Chaman are partners in a firm, sharing profits and losses as Ashok 1/3,
Bhaskar 1/2, and Chaman 1/6 respectively. The Balance Sheet of the firm as at
31st March, 2021 was
Liabilities |
` |
Assets |
` |
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Capital A/cs: |
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|
Building |
|
5,00,000 |
Ashok |
3,00,000 |
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Plant and Machinery |
|
4,00,000 |
Bhaskar |
4,00,000 |
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Furniture |
|
1,00,000 |
Chaman |
2,50,000 |
9,50,000 |
Stock |
|
2,50,000 |
General Reserve |
|
2,20,000 |
Debtors |
1,80,000 |
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Sundry Creditors |
|
2,50,000 |
Less: Provision for Doubtful Debts |
5,000 |
1,75,000 |
Loan Payable |
|
1,50,000 |
Cash in Hand |
|
85,000 |
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Advertisement Suspense Account |
|
60,000 |
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|
15,70,000 |
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|
15,70,000 |
Chaman retired on 1st April, 2021 subject to the following adjustments:
(a) Goodwill of the firm be valued at `2,40,000.
Chaman's share of goodwill be adjusted into the Capital Accounts of Ashok and
Bhaskar who will share future profits in the ratio of 3:2.
(6) Plant and Machinery to be reduced by 10% and Furniture by 5%.
(c) Stock to be increased by 15% and Building by 10%.
(d) Provision for Doubtful Debts to be raised to `20,000.
Prepare Revaluation Account, Capital Account of Chaman and the Balance
Sheet of the firm after Chaman's retirement.
Answer:
Profit and loss adjustment a/c |
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Dr. |
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Cr. |
Particulars |
` |
Particulars |
` |
To Plan and machinery To Furniture To Prov. for doubtful debts To capital a/c (profit transferred to) Ashok =27,500×2/6= 9,167 Bhaskar=27,500×3/6=13,750 Chaman =27,500×1/6=4,583 |
40,000 5,000 15,000 27,500 |
By stock By factory building |
37,500 50,000 |
|
87,500 |
|
87,500 |
1
Partners’ Capital Account |
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Dr. |
Cr. |
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Particulars |
Ashok |
Bhaskar |
Chaman |
Particulars |
Ashok |
Bhaskar |
Chaman |
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B’s Capital A/c |
24,000 |
Balance b/d |
3,00,000 |
4,00,000 |
2,50,000 |
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C’s Capital A/c |
40,000 |
A’s Capital A/c |
24,000 |
40,000 |
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Advertisement sus. a/c C’s loan a/c |
20,000 |
30,000 |
10,000 3,21,250 |
Profit and loss adjustment a/c General reserve a/c |
9,167 73,333 |
13,750 1,10,000 |
4,583 36,667 |
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Balance c/d |
2,98,500 |
5,17,750 |
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3,82,500 |
5,47,750 |
3,31,250 |
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3,82,500 |
5,47,750 |
3,31,250 |
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Balance Sheet |
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as on April 01, 2021 (after C’s
Retirement) |
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Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
|||||||
|
Sundry Creditors |
2,50,000 |
Factory building |
5,50,000 |
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Loan Payable |
1,50,000 |
Plant and machinery |
3,60,000 |
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C’s Loan |
3,21,250 |
Furniture |
95,000 |
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Stock |
2,87,500 |
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Capital A/c |
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Debtors
1,80,000 |
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|
Ashok |
2,98,500 |
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Less; prov.
20,000 |
1,60,000 |
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Bhaskar |
5,17,750 |
3,54,000 |
Cash |
85,000 |
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|
15,37,500 |
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15,37,500 |
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
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Ashok’s Capital A/c |
Dr. |
|
64,000 |
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To Bhaskar’s Capital A/c |
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|
24,000 |
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To Chaman’s Capital A/c |
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40,000 |
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(Being
goodwill adjusted for compensating bhaskar, Chaman) |
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Profit and loss
adjustment a/c |
Dr. |
|
60,000 |
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To Plant and machinery A/c |
|
40,000 |
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To Furniture
A/c |
|
5,000 |
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To Prov. for
doubtful debts A/c |
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|
15,000 |
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(Decrease in assets and increase in liabilities debited to
Revaluation A/c) |
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N’s Capital A/c |
Dr. |
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18,000 |
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S’s Capital A/c |
Dr. |
|
27,000 |
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To G’s Capital A/c |
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45,000 |
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(Goodwill adjusted in gaining ratio) |
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Stock A/c |
Dr. |
|
37,500 |
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Factory building A/c |
Dr. |
|
50,000 |
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To P&L adjustment A/c |
|
87,500 |
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(Decrease in assets debited to Revaluation A/c) |
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Working notes;
Old ratio of Ashok : Bhaskar
: chaman=1/3:1/2:1/6
=1/3×2/2:1/2×3/3=1/6
=2/6:3/6:1/6
=2:3:1
New ratio of Ashok and
Bhaskar= 3:2
Gaining ratio= New ratio –
old ratio
Ashok = 3/5-2/6=18-10/30=8/30
Bhaskar= 2/5-3/6=12-15/30=
-3/30
Goodwill of firm= 2,40,000
Bhaskar will get
=2,40,000×3/30=24,000
Chaman’s share of goodwill =
2,40,000×1/6=40,000
Ashok will give Bhaskar
and chaman 24,000, 40,000 respectively.
Page No 6.62:
Question 34: Chintan, Ayush and Sudha were partners in a firm sharing profits and
losses in the ratio of 5: 3:2. On 31st March, 2019, their Balance Sheet was as
follows:
BALANCE SHEET OF CHINTAN,
AYUSH AND SUDHA as at 31st March, 2019 |
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Liabilities |
` |
Assets |
` |
||
Capitals: |
|
Plant and Machinery |
|
90,000 |
|
Chintan |
90,000 |
|
Furniture |
|
60,000 |
Ayush |
60,000 |
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Stock |
|
30,000 |
Sudha |
40,000 |
1,90,000 |
Debtors |
60,000 |
|
Provident Fund |
|
30,000 |
Less: Provision for Doubtful Debts |
5,000 |
55,000 |
General Reserve |
|
20,000 |
Cash at Bank |
|
15,000 |
Creditors |
|
10,000 |
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|
|
|
2,50,000 |
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|
2,50,000 |
Chintan retired on the above date and it was agreed that:
(a) Debtors of `5,000 were to be written off
as bad debts and a provision of 5% on debtors for bad and doubtful debts was to
be created.
(b) Goodwill of the firm on Chintan's retirement was valued at `1,00,000 and
Chintan's share of the same will be adjusted by debiting the Capital Accounts
of Ayush and Sudha.
(c) Stock was revalued at `36,000.
(d) Furniture was undervalued by `9,000.
(e) Liability for Workmen's Compensation of `2,000 was to be
created.
(f) Chintan was to be paid `20,000 by cheque
and the balance was to be transferred to his loan account.
Pass the necessary Journal entries in the books of the firm on
Chintan's retirement.
(CBSE 2020)
Answer:
Date |
Particulars |
L.F. |
Dr. (`) |
Cr. (`) |
|
|
Stock A/c Furniture A/c Provision A/c To Revolution A/c (Being Decrease in the Value of Liabilities and increase in the value
of Assets) |
Dr. Dr. Dr. |
|
6,000 9,000 2,250 |
17,250 |
|
Revaluation A/c To Bad debts A/c To Liabilities for Worker
compensation A/c (Being Decrease in the Value of Assets and increase in the value of
Liabilities) |
Dr. |
|
7,000 |
5,000 2,000 |
|
Revaluation A/c To Chintan’s Capital A/c To Ayush’s Capital A/c To Sudha’s Capital A/c (being gain of revaluation Account transferred to Capital accounts) |
Dr. |
|
10,250 |
5,125 3,075 2,050 |
|
General Reserve A/c To Chintan’s Capital A/c To Ayush’s Capital A/c To Sudha’s Capital A/c (being gain of General Reserves transferred to Capital accounts) |
Dr. |
|
20,000 |
10,000 6,000 4,000 |
|
Ayush’s Capital A/c Sudha’s Capital A/c To Chintan’s Capital A/c (Being Retiring Partner compensated) |
Dr. Dr. |
|
30,000 20,000 |
50,000 |
|
Chintan’s Capital A/c To Bank A/c (Being Chintan was paid `20,000 through cheque) |
Dr. |
|
20,000 |
20,000 |
|
Chintan’s Capital A/c To Chintan’s
Loan A/c (Being balance of Capital transferred to His loan Account) |
Dr. |
|
1,35,125 |
1,35,125 |
Page No 6.62:
Question 35:
Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of
3 : 2 : 1. On 1st April, 2021, Naresh retired on that date, Balance Sheet of
the firm was as follows:
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
General Reserve |
12,000 |
Bank |
7,600 |
||
Sundry Creditors |
15,000 |
Debtors |
6,000 |
|
|
Bills Payable |
12,000 |
Less: Provision for Doubtful Debts |
400 |
5,600 |
|
Outstanding Salary |
2,200 |
Stock |
|
9,000 |
|
Provision for Legal Damages |
6,000 |
Furniture |
|
41,000 |
|
Capital A/cs: |
|
Premises |
|
80,000 |
|
Pankaj |
46,000 |
|
|
|
|
Naresh |
30,000 |
|
|
|
|
Saurabh |
20,000 |
96,000 |
|
|
|
|
|
|
|
|
|
|
1,43,200 |
|
1,43,200 |
||
|
|
|
|
Additional Information:
(a) Premises have appreciated by 20%, stock depreciated by 10% and provision
for doubtful debts was to be made 5% on debtors. Further, provision for legal
damages is to be made for `
1,200 and furniture to be brought up to ` 45,000.
(b) Goodwill of the firm be valued at ` 42,000.
(c) ` 26,000 from
Naresh's Capital Account be transferred to his Loan Account and balance be paid
through bank: if required, necessary loan may be obtained from bank.
(d) New profit-sharing ratio of Pankaj and Saurabh is decided to be 5 : 1.
Give the necessary Ledger Accounts and Balance Sheet of the firm after Naresh's
retirement.
Answer:
Revaluation
Account |
|||||
Dr. |
Cr. |
||||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
||
Stock |
900 |
Premises |
16,000 |
||
Provision for Legal Damages |
1,200 |
Provision for Doubtful Debts |
100 |
||
Revaluation Profit |
|
Furniture |
4,000 |
||
Pankaj’s Capital A/c |
9,000 |
|
|
|
|
Naresh’s Capital A/c |
6,000 |
|
|
|
|
Saurabh’s Capital A/c |
3,000 |
18,000 |
|
|
|
|
20,100 |
|
20,100 |
||
|
|
|
|
||
Partners’
Capital Accounts |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
Pankaj |
Naresh |
Saurabh |
Particulars |
Pankaj |
Naresh |
Saurabh |
|
Naresh’s Capital A/c |
14,000 |
|
|
Balance b/d |
46,000 |
30,000 |
20,000 |
|
Naresh’s Loan A/c |
|
26,000 |
|
General Reserve |
6,000 |
4,000 |
2,000 |
|
Bank |
|
28,000 |
|
Revaluation (Profit) |
9,000 |
6,000 |
3,000 |
|
Balance c/d |
47,000 |
|
25,000 |
Pankaj’s Capital A/c |
|
14,000 |
|
|
|
61,000 |
54,000 |
25,000 |
|
61,000 |
54,000 |
25,000 |
|
|
|
|
|
|
|
|
|
|
Bank
Account |
||||
Dr. |
Cr. |
|||
Particulars |
Amount ( `) |
Particulars |
Amount ( `) |
|
Balance b/d |
7,600 |
Naresh’s Capital A/c |
28,000 |
|
Bank Loan (Balancing Figure) |
20,400 |
|
|
|
|
28,000 |
|
28,000 |
|
|
|
|
|
|
Balance
Sheet as on March 31, 2021 |
|||||
Liabilities |
Amount ( `) |
Assets |
Amount ( `) |
||
Sundry Creditors |
15,000 |
Debtors |
6,000 |
|
|
Bills Payable |
12,000 |
Less: Provision for Doubtful
Debts |
300 |
5,700 |
|
Bank Loan |
20,400 |
Stock |
8,100 |
||
Outstanding Salaries |
2,200 |
Furniture |
45,000 |
||
Provision for Legal Damages |
7,200 |
Premises |
96,000 |
||
Naresh’s Loan |
26,000 |
|
|
||
Capitals: |
|
|
|
||
Pankaj |
47,000 |
|
|
|
|
Saurabh |
25,000 |
72,000 |
|
|
|
|
1,54,800 |
|
1,54,800 |
||
|
|
|
|
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Chapter-6: Retirement of a partner | 2021-2022
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