Double Entry Book Keeping Ts Grewal Volume I 2021-2022 Solutions for Class 12

Commerce Accountancy Chapter 5 - Admission Of A Partner

Page No 5.92:

Question 51:

Ashok and Bhaskar are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Chaman as a partner for 1/4th share of profits. At the time of admission of Chaman, Debtors and Provision for Doubtful Debts appeared at ` 76,000 and ` 8,000 respectively. ` 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	Bad Debts A/c	Dr.		6,000
	To Debtors A/c				6,000
	(Bad debts incurred)

	Provision for Doubtful Debts A/c	Dr		6,000
	To Bad Debts A/c				6,000
	(Bad debts adjusted)

	Revaluation A/c (WN 1)	Dr.		1,500
	To Provision for Doubtful Debts A/c				1,500
	(Provision created)

	Ashok’s Capital A/c	Dr.		900
	Bhaskar’s Capital A/c	Dr.		600
	To Revaluation A/c				1,500
	(Loss on revaluation transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Provision for Doubtful Debts
Provision to be created = (76,000 - 6,000)×5/100= ` 3,500

Old Provision = ` 2,000

New Provision to be created = 3,500 - 2,000 = 1,500

Page No 5.92:

Question 52:

At the time of admission of a partner Suresh, assets and liabilities of Ramesh and Naresh were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors ` 50,000).
(b) Creditors were written back by `5,000.
(c) Building was appreciated by 20% (Book Value of Building `2,00,000).
(d) Unrecorded Investments were valued at `15,000.
(e) A Provision of `2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was `3,000.
Pass necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities, decrease in assets and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Old Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Page No 5.92:

Question 53:

Ram and Shyam were partners in a firm sharing profits and losses in the ratio of 2 : 1. Mohan was admitted for 1/3rd share in the profits. On the date of Mohan's admission, the Balance Sheet of Ram and Shyam showed General Reserve of ` 2,50,000 and a credit balance of ` 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Mohan's admission.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
	General Reserve A/c	Dr.		2,50,000
	Profit and Loss A/c	Dr.		50,000
	To Ram’s Capital A/c				2,00,000
	To Shyam’s Capital A/c				1,00,000
	(Adjustment of balance in General Reserve A/c and P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve & P&L A/c

Ram 's share=3,00,000×2/3=2,00,000, Shyam 's share=3,00,000×1/3=1,00,000

Page No 5.92:

Question 54:

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2021, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of ` 1,50,000 in General Reserve and a debit balance of ` 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
2019 April 1	General Reserve A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Adjustment of balance in General Reserve A/c in old ratio)

	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		8,000
	To Profit and Loss A/c				20,000
	(Adjustment of debit balance in P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve

X's share=1,50,000×3/5=90,000 , Y's share=1,50,000×2/5=60,000

WN2 Calculation of Share of Debit Balance in P&L A/c

X's share=20,000×3/5=12,000, Y's share=20,000×2/5=8,000

Page No 5.93:

Question 55:

(a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for 1/6th share. Following is the extract of the Balance Sheet on the date of admission:

Liabilities

Assets

General Reserve
Contingency Reserve
Profit and Loss A/c

36,000

6,000

18,000

Advertisement Suspense A/c

24,000

  Pass necessary Journal entries.
(b) Give the Journal entry to distribute 'Workmen Compensation Reserve' of   ` 72,000 at the time of admission of Z, when there is no claim against it. The firm has two partners X and Y.
(c) Give the Journal entry to distribute 'Workmen Compensation Reserve' of   ` 72,000 at the time of admission of Z, when there is claim of   ` 48,000 against it. The firm has two partners X and Y .
(d) Give the Journal entry to distribute 'Investment Fluctuation Reserve' of   ` 24,000 at the time of admission of Z, when Investment (Market Value   ` 1,10,000) appears at   ` 1,20,000. The firm has two partners X and Y.
(e) Give the Journal entry to distribute 'General Reserve' of   ` 4,800 at the time of admission of Z, when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two partners X and Y .
(f) A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1. They decide to take D into partnership with effect from 1st April, 2019. The new profit-sharing ratio between A, B, C and D will be 3 : 3 : 3 : 1. They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:

	Book Values `
General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
Advertisement Suspense A/c (Dr.)	1,20,000

Pass the necessary single adjustment entry through the Partner's Current Account.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount `	Credit Amount `
(A)
(i)	General Reserve A/c	Dr.		36,000
	Contingency Reserve A/c	Dr.		6,000
	Profit & Loss A/c	Dr.		18,000
	To X’s Capital A/c				30,000
	To Y’s Capital A/c				18,000
	To Z’s Capital A/c				12,000
	(Reserves distributed)

(ii)	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		7,200
	Z’s Capital A/c	Dr.		4,800
	To Advertisement Suspense A/c				24,000
	(Advertisement Suspense distributed)

(B)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To X’s Capital A/c				36,000
	To Y’s Capital A/c				36,000
	(Workmen Compensation Reserve distributed)
(C)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To Workmen Compensation Claim A/c				48,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				12,000
	(Surplus Workmen Compensation Reserve distributed)
(D)
April 1	Investment Fluctuation Reserve A/c	Dr.		24,000
	To Investment A/c				10,000
	To X’s Capital A/c				7,000
	To Y’s Capital A/c				7,000
	(Surplus Investment Fluctuation Reserve distributed)
(E)
April 1	General Reserve A/c	Dr.		4,800
	To Investment Fluctuation Reserve A/c				960
	To X’s Capital A/c				1,920
	To Y’s Capital A/c				1,920
	(Surplus General Reserve distributed)
(F)
April 1	C’s Current A/c	Dr.		36,000
	D’s Current A/c	Dr.		18,000
	To A’s Current A/c				54,000
	(Adjustment entry made)

Working Notes:

WN1: Calculation of Sacrifice or Gain

A :B :C=6:3:1 (Old Ratio)

A :B :C :D:=3:3:3:1 (New Ratio)

Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio

A's share=6/10−3/10=6−3/10=3/10 (Sacrifice)

B's share=3/10−3/10=0

C's share=1/10−3/10=1−3/10=−2/10 (Gain)

D's share=0−1/10=−1/10 (Gain)

WN2: Calculation of Net Effect

General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
	3,00,000
Less: Advertisement Suspense A/c (Dr.)	1,20,000
	1,80,000