NCERT Solutions Class 12 Accountancy

NCERT Solutions for Class 12 Accountancy Part-1

The NCERT accountancy textbooks cover the entire CBSE-approved syllabus for 12th grade board exams. To separate the relevant topics and concepts, the curriculum has been divided into two halves. Thus, the NCERT books for class 12 accountancy are divided into two parts.

Part 1 of the NCERT accounting book covers Partnership accounts, while Part 2 covers Company Accounts and Financial Statement Analysis. Each section of the curriculum has been meticulously detailed in order to assist students in achieving the highest possible marks on board exams. The NCERT Solutions for Class 12 Accountancy Volume 1 include a variety of illustrative examples to assist students in quickly comprehending and learning.

NCERT Class 12 Accountancy Part I Chapter-wise Solutions

The syllabus focuses on improving fundamental understanding of the nature and purpose of accounting information, as well as its application in business operations. This improves students’ logical reasoning, analytical skills, and judgmental abilities. Students can download the chapter-wise NCERT Solutions for Class 12 Accountancy part 1 as given below.

NCERT Solutions For Class 12 Accountancy to Download

NCERT Solutions are regarded as an extremely useful resource for exam preparation. The solutions prepared by Extramarks are written by subject experts and are guaranteed to help students achieve high grades. The questions in NCERT Books are prepared in accordance with CBSE, and thus have a higher chance of appearing on CBSE question papers. These NCERT Solutions for Class 12 Accountancy not only strengthen students’ foundation in the subject, but also give them the ability to easily tackle different types of questions.

NCERT Solutions of Class 12 Accountancy

Extramarks’ NCERT class 12 accountancy part 1 solutions is highly beneficial when it comes to practical questions. Students can use these textbook solutions for exams as well as for their daily homework. The  solutions are simple to understand, and each step in the solution is described to correspond to the students’ understanding.

CBSE Class 12 Accountancy Solutions Weightage Marks

In the final examinations, NCERT Class 12 Accountancy Part 1 and 2 Solutions carry a total of 100 marks.

The topics included in 12th Accountancy NCERT Solutions for Part 1 are as follows:

This unit covers the fundamentals of partnership, such as business transactions and accounting.

  • Accounting for Non-Profit Organisation
  • Accounting for Partnership Firms: Basic Concepts
  • Reconstruction of a Partnership Firm: Admission of a Partner
  • Reconstruction of a Partnership Firm: Retirement or Death of a Partner
  • Dissolution of Partnership Firm

Part 2 of the NCERT Solutions for Class 12th Accounts covers the following topics:

This unit covers the basics of financial statements and how to read them. It delves into topics such as what a statement means to a company, its goals, and analysis.

  • Accounting for Share Capital
  • Issue and Redemption of Debentures
  • Financial Statements of a Company
  • Analysis of Financial Statements
  • Accounting Ratios
  • Cash Flow

Preparation Tips

  • The study should be planned in accordance with the CBSE syllabus and NCERT Books
  • After you’ve grasped the concept, find the logic behind the definitions so that you can write it down as clearly as possible rather than rote learning
  • Students should concentrate on the features, benefits, and drawbacks of various concept topics because these questions appear frequently on Board exams
  • Students should gain a thorough understanding of how a formula works, as memorising formulas will result in incomplete learning
  • Create your own chapter-by-chapter notes. Preparing a chapter-by-chapter formula sheet and revising it on a regular basis is the best way to remember formulas
  • Prepare neat and clean working notes for the calculations that will be entered into journals as well as accounts
  • When creating formats for journals, ledgers, and balance sheets, students should pay close attention. Practice drawing formats to help students’ complete solutions faster and finish papers on time
  • Mark the concepts that you don’t understand. Refer to the NCERT solutions for class 12 accountancy volume 1 to clear your doubts
  • Create a plan for revision. Divide your time between all of the chapters and begin working on the questions that you found difficult to answer while practising
  • Begin by solving old exam papers while keeping the time in mind. Set the clock to the exam time and try to solve as much as possible within the time limit to get exam practice. This will aid in better exam time management
  • Sample papers can be extremely useful in determining your current level of proficiency
  • When doing calculations, use extreme caution to avoid making silly mistakes

Benefits of NCERT Solutions for Class 12 Commerce Accounts

  • The chapters in the solutions are organised in the same order as they are in the textbook, making it easy for students to refer to the solutions when they have questions
  • All of the answers are written in a clear and simple manner, making the concepts very easy to understand
  • NCERT solutions for class 12 accountancy part 1 have been written by highly qualified teachers, which makes them highly reliable
  • Students will need no additional materials to use these solutions as they strictly adhere to the NCERT guidelines
  • These solutions also include worked-out numerical problems and real-life situations. These are extremely important in terms of the exam. Make sure you go through them from beginning to end so that the concepts are crystal clear
  • NCERT solutions for class 12 accountancy volume 1 are extremely simple to use. Students can download the solutions available at Extramarks and practice them offline. In a nutshell, you can get to everything quickly and easily
  • The solutions are entirely free of charge
  • These answers will create a strong foundational understanding of the subject matter, which helps to pave the way for future studies

Q.1 Define Partnership Deed.

Ans.

Partnership deed refers to a document which contains the terms of partnership as agreed among the partners.

Q.2 Why it is considered desirable to make the partnership agreement in writing?

Ans.

The agreement becomes the basis of relationship between the partners, it is not necessary that such agreement is in written form. An oral agreement is equally valid, but in order to avoid disputes, it is preferred that the partners have a written agreement.

Q.3 List the items which may be debited or credited in capital accounts of the partners when:

1. Capitals are fixed.
2. Capitals are fluctuating.

Ans.

Capitals are fixed:
1. Permanent drawings
2. Permanent capital introduced

Capitals are fluctuating:
1. Drawings
2. Salaries or commission
3. Interest on capital

Q.4 Why is profit and loss adjustment account prepared?

Ans.

Profit and loss adjustment account is prepared because before the division of net profits, it is subject to certain adjustments which are not charged and hence cannot be shown in profit and loss account so to show these an additional account is prepared known as profit and loss adjustment (or appropriation) account in which net profit/net loss and all adjustments are shown.

Q.5 Give two circumstances under which the fixed capitals of partners may change.

Ans.

Fixed capitals of partners may change under

  • Withdrawal of capital
  • Investing fresh capital

Q.6 If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?

Ans.

If a fixed amount is withdrawn on the first day of every quarter, the interest is calculated on the total money withdrawn during the year, for a period of seven and half months.

Q.7 In the absence of partnership deed, specify the rules relating to the following:

1. Sharing of profits and losses.
2. Interest on partner’s capital.
3, Interest on partner’s drawings.
4. Interest on partner’s loan.
5. Salary to a partner.

Ans.

1. Sharing of profits and losses: Profit and losses are to be shared equally among the partners.
2. Interest on partner’s capital: No interest on capital is to be allowed to the partners.
Interest on partner’s drawings: No interest is to be charged on the drawings.
Interest on partner’s loan: Interest at the rate of 6% p.a. is to be allowed on the loans advanced by partners to the firm.Salary to a partner: A partner is not entitled to any salary.

Q.8 What is meant by partnership? Explain its chief characteristics? Explain.

Ans.

Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. So when two or more persons join hands to set up a business and share its profits and losses they are said to be in partnership.

Characteristics of Partnership:

1. Number of Persons: There should be at least two persons for business. The maximum number is 100.
2. Agreement: Partnership is the result of an agreement. It can be oral or in writing.
3. Lawful business: Business of the partnership should be lawful, i.e., it should not do black marketing, smuggling or hoarding.
4. Profit motive: The object should be to earn profit because it cannot be formed for service motive.
5. Profit sharing: Partners should share the profits of the business in an agreed ratio.
6. Liability of partners: The liability of the partners is unlimited. This implies that their private assets can also be used for paying off the firm’s debts.Mutual Agency:
7. Partners are both an agent and principal, i.e., parties are bound by the act of other partners and other partners are bound by the act of parties.

Q.9 Discuss the main provisions of the Indian Partnership Act 1932 that are relevant to partnership accounts if there is no partnership deed.

Ans.

When the Partnership Deed is silent on a certain point the relations of partners are determined by the rules given in section 12 to 17 of the Indian Partnership Act, 1932.

Rules in the Absence of Partnership Deed:

Profit sharing ratio: Profit and losses are to be shared equally among the partners.

Interest on capital: No Interest on capital is to be allowed to the partners.

Interest on drawings: No interest is to be charged on the drawings.

Interest on loan: Interest at the rate of 6% p.a. is to be allowed on the loans advances by partners to the firm.

Remuneration to partners: No partner is entitled to any salary, remuneration or commission.

Admission of a partner: No new partner will be admitted without the mutual consent of all the existing partners.

Others: Partner has to pay to the firm any profit from any transaction of the firm or by use of property of the firm. Partners has to pay to the firm any profit earned from any business of the same nature of the firm and competing with that of the firm.

Q.10 Explain why it is considered better to make a partnership agreement in writing.

Ans.

A written agreement signed by all partners is called ‘Partnership Deed’. It is a very important legal document with regard to rights, duties and obligations. It helps in solving various matters in case of disputes among partners in future. It can be oral as well as in writing. It can be changed from time to time with the consent of all the partners. It is also known as ‘Articles of Partnership’.

It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan etc. Hence the document is helpful solving any future dispute.

Q.11 Illustrate how interest on drawings will be calculated under various situations.

Ans.

The following rules shall be followed while calculating interest on drawings:

  • Interest on drawings shall be charged from partners only when partnership deed authorises the firm to do so.
  • Generally, interest on drawings is to be calculated as per the date of withdrawal made by partners. In case no specific date of withdrawal of drawings is mentioned, then it is assumed that the drawings were made on an even scale throughout the year. In such case the interest will be changed at the given rate for six months on the whole amount of drawings.
  • When drawings are made by the partners in the beginning of each month on regular basis and the amount of drawings is the same, i.e., fixed interest on the whole amount of drawings will be charged for 6 ½ months.
  • When drawings are made by the partners on regular basis at the end of the month and the amount of drawings is same, the interest on the whole amount of drawings will be charged for 5 ½ months.
  • When fixed amount is withdrawn at the middle of the month then it calculated for 6 months.
  • If fixed amount is withdrawn at the beginning, middle and end of each quarter, then interest will be calculated for 7 ½ months, 4 ½ months and 6 months respectively.
  • When drawings are made at different dates (at irregular intervals) either at the beginning or at the end of the month interest on drawings as per given rate is calculated by product method, so for each withdrawal, the money withdrawn is multiplied by the period for which it remained withdrawn the product is totaled and interest for one month is calculated.

Interest on Drawing = Total of Product X Rate of Interest 100 x 1 12 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@750C@

  • When rate of interest is given without the words p.a. (per annum), it implies interest is to be calculated without any reference of time.

Q.12 Tripathi and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals were ₹ 60,000 and ₹40,000 as on January 01, 2015. During the year they earned a profit of ₹30,000. According to the partnership deed both the partners are entitled to ₹1,000 per month as salary and 5% interest on their capital. They are also be charged an interest of 5% on their drawings, irrespective of the period, which is ₹12,000 for Tripathi ₹8,000 for Chauhan. Prepare Partner’s Accounts when capitals are fixed.

Ans.

Profit and Loss Appropriation A/c

Particulars ₹ Particulars ₹
To profit t/fd to current account By P & L A/c 30,000
Tripathi 18,000
Chauhan 12,000
30,000 30,000

Partners’ Current Accounts

Particulars T C Particulars T C
₹ ₹ ₹ ₹
To drawings 12,000 8,000 By Int. on capital 3,000 2,000
To Int. on drawings 600 400 By Salary 12,000 12,000
To Bal. c/d 20,400 17,600 By P&L App. 18,000 12,000
33,000 26,000 33,000 26,000

Q.13 Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital, were ₹90,000 and ₹60,000. The profit during the year were ₹45,000. According to partnership deed, both partners are allowed salary, ₹700 per month to Anubha and ₹500 per month to Kajal. Interest allowed on capital @5% p.a. The drawings during the year were ₹8,500 for Anubha and ₹ 6,500 for Kajal. Interest is to be charged @5% p.a. on drawings. Prepare partners capital accounts assuming that the capital account are fluctuating.

Ans.

Partners’ Capital Accounts

Particulars Anubha Kajal Particulars Anubha Kajal
₹ ₹ ₹ ₹
To drawings 8,500 6,500 By Bal. b/d 90,000 60,000
To Int. on drawings 425 325 By Salary 8,400 6,000
To Bal. c/d 1,23,975 77,175 By P&L App. 18,000 12,000
1,32,900 84,000 1,32,900 84,000

Q.14 Rakhi and Sihkha are partners in a firm, with capitals of ₹2,00,000 and ₹3,00,000 respectively. The profit of the firm, for the year ended 2016-17 is ₹23,200. As per the partnership agreement, they share the profit in their capital ratio, after allowing a salary of ₹5,000 per month to Shikha and interest on partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew ₹7,000 and Shikha ₹10,000 for their personal use. As Per partnership deed salary and Interest on Capital Appropriation treated as charge on Profit. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.

Ans.

Profit and Loss Appropriation A/c

Particulars ₹ Particulars ₹
To Salary By P & L A/c 43,000
Shikha 60,000 By loss t/fd
To Int. on capital Rakhi 34,720
Rakhi 20,000 Shikha 52,080
Shikha 30,000
1,10,000 1,10,000

Partners’ Capital Accounts

Particulars Rakhi ₹ Shikha ₹ Particulars Rakhi ₹ Shikha ₹
To drawings 7,000 10,000 By Bal. b/d 2,00,000 3,00,000
To P & L App. 34,720 52,080 By Salary 60,000
To Bal. c/d 1,78,280 3,27,920 By Int. on capitals 20,000 30,000
2,20,000 3,90,000 2,20,000 3,90,000

Q.15 Lokesh and Azad are partners sharing profits in the ratio 3:2 with capitals of ₹50,000 and ₹30,000, respectively. Interest on capital is agreed to be paid @6% p.a. Azad is allowed a salary of ₹2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to ₹12,500. A provision of 5% of profits is to be made in respect of manager’s commission. Prepare Partner’s Capital Accounts and Profit and Loss Appropriation Account.

Ans.

Profit and Loss Appropriation A/c

Particulars ₹ Particulars ₹
To Salary By P & L A/c 15,000
Azad 2,500
To Int. on capital
Lokesh 3,000
Azad 1,800
To prov. Manager’s com. 750
To profit t/fd to capitals
Lokesh 4,170
Azad 2,780
15,000 15,000

Partners’ Capital Accounts

Particulars Lokesh Azad Particulars Lokesh Azad
₹ ₹ ₹ ₹
By Bal. b/d 50,000 30,000
By Salary 2,500
To Bal. c/d 57,170 37,080 By Int. on capitals 3,000 1,800
By P & L App. 4,170 2,780
57,170 37,080 57,170 37,080

Q.16 Ram, Raj and George are partners sharing profits in the ratio 5:3:2. According to the partnership agreement George is to get a minimum amount of ₹10,000 as his share of profits every year. The net profit for the year 2013 amounted to ₹40,000. Prepare the profit and loss appropriation account.

Ans.

Profit and Loss Appropriation A/c

for the year ended…..

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 40,000
Ram
(₹20,000 –₹1,250) 18,750
Raj
(₹12,000 – ₹750) 11,250
George
(₹8,000 + ₹1,250 +₹750) 10,000
40,000 40,000

George’s deficiency of ₹2,000 will be borne by Ram and Raj in the ratio 5:3.

Q.17 Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed an amount of ₹10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2016 and March 31, 2017 were ₹40,000 and ₹60,000, respectively. Prepare the profit and loss appropriation account for the two years.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st December 2016

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 40,000
Amann
(₹16,000) 16,000
Babita
(₹16,000 – ₹2,000) 14,000
Suresh
(₹8,000 + ₹2,000) 10,000
40,000 40,000

Profit and Loss Appropriation A/c

for the year ended 31st December 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 60,000
Amann 24,000
Babita 24,000
Suresh 12,000
60,000 60,000

Q.18 Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of ₹1,50,000. Prepare the Profit and Loss Appropriation account and Partner’s Current Account by taking into consideration the following information:

(i) Partners capital on April 1, 2016:
Simmi ₹30,000; Sonu ₹60,000;

(ii) Current accounts balances on April 1, 2016;
Simmi ₹30,000 (Cr.); Sonu, ₹15,000 (Cr.);

(iii) Partners drawings during the year amounted to
Simmi ₹20,000; Sonu ₹15,000;

(iv) Interest on capital was allowed @5% p.a.;

(v) Interest on drawings was to be charged @6% p.a. at an average of six months.

(vi) Partners salaries: Simmi ₹12,000 and Sonu ₹9,000. –

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To Salary By P & L A/c 1,50,000
Simmi 12,000 By Int. on
Sonu 9,000 drawings
To Int. on capital Simmi 600
Simmi 1,500 Sonu 450
Sonu 3,000
To profit t/fd to current accounts
Simmi 94,162
Sonu 31,388
1,51,050 1,51,050

Partners’ Current Accounts

Particulars Simmi Sonu Particulars Simmi Sonu
₹ ₹ ₹ ₹
To drawings 20,000 15,000 By Bal. b/d 30,000 15,000
To Int. on draw. 600 450 By Salary 12,000 9,000
To Bal. c/d 1,17,062 42,938 By Int. on capitals 1,500 3,000
By P & L App. 94,162 31,388
1,37,662 58,388 1,37,662 58,388

Q.19 Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were ₹80,000 and ₹60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹2,000 and ₹3,000 respectively.

The profits for year ended March 31, 2017 before making above appropriations was ₹1,00,300. The drawings of Ramesh and Suresh were ₹40,000 and ₹50,000, respectively. Interest on drawings amounted to ₹2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and Partner’s capital accounts, assuming that then capitals are fluctuating.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To Salary By P & L A/c 1,00,300
Ramesh 24,000 By Int. on
Suresh 36,000 drawings
To Int. on capital Ramesh 2,000
Ramesh 9,600 Suresh 2,500
Suresh 7,200
To profit t/fd to capital accounts
Ramesh 16,000
Suresh 12,000
1,04,800 1,04,800

Partners’ Current Accounts

Particulars Ramesh Suresh Particulars Ramesh Suresh
₹ ₹ ₹ ₹
To drawings 40,000 50,000 By Bank 80,000 60,000
To Int. on draw. 2,000 2,500 By Salary 24,000 36,000
To Bal. c/d 87,600 62,700 By Int. on capitals 9,600 7,200
By P & L App. 16,000 12,000
1,29,600 1,15,200 1,29,600 1,15,200

Q.20 Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

Profits would be shared by Sukesh and Vanita in the ratio of 3:2.

5% interest is to be allowed on capital.

Vanita should be paid a monthly salary of ₹600.

The following balances are extracted from the books of the firm, on March 31, 2017.

Sukesh ₹ Vanita ₹
Capital Accounts 40,000 40,000
Current Accounts (Cr.)7,200 (Cr.) 2,800
Drawings 10,850 8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary was ₹9,500. Prepare the profit and loss appropriation account and the partner’s current accounts.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To Salary By P & L A/c 16,700
Vanita 7,200 (₹9,500 + ₹7,200)
To Int. on capital
Sukesh 2,000
Vanita 2,000
To profit t/fd to capital accounts
Sukesh 3,300
Vanita 2,200
16,700 16,700

Partners’ Current Accounts

Particulars Sukesh Vanita Particulars Sukesh Vanita
₹ ₹ ₹ ₹
To drawings 10,850 8,150 By Bal. b/d 7,200 2,800
To Bal. c/d 1,650 6,050 By Salary 7,200
By Int. on cap. 2,000 2,000
By P & L App. 3,300 2,200
12,500 14,200 12,500 14,200

Q.21 Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’s share in profit has been guaranteed by Amit and Sumit to be a minimum sum of ₹8,000. Profits for the year ended March 31, 2017 was ₹36,000. Divide profit among the partners by Preparing Profit and Loss Appropriation Account.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 36,000
Amit
(₹18,000 – ₹1,200) 16,800
Sumit
(₹12,000 – ₹800) 11,200
Samiksha
(₹6,000 + ₹2,000) 8,000
36,000 36,000

Q.22 Pinki, Deepti and Kaku are partners sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than ₹ 5,000. Deficiency if any would be borne by Pinki and Deepti equally. Profits for the year amounted to ₹ 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.

Ans.

Profit and Loss Appropriation A/c

for the year ended……………

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 40,000
Pinki
(₹20,000 – ₹500) 19,500
Deepti
(₹16,000 – ₹500) 15,500
Kaku
(₹4,000 + ₹1,000) 5,000
40,000 40,000

Q.23 Abhay, Siddharth and Kusum are partners in a firm, sharing profit in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of ₹10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are ₹40,000 and ₹60,000 respectively. Prepare Profit and Loss Appropriation account.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2016

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 40,000
Abhay
(₹20,000) 20,000
Sidharth
(₹12,000 – ₹2,000) 10,000
Kusum
(₹8,000 + ₹2,000) 10,000
40,000 40,000

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 60,000
Abhay
(₹30,000) 30,000
Sidharth
(₹18,000) 18,000
Kusum
(₹12,000) 12,000
60,000 60,000

Q.24 Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than ₹5,000. The profits for the year ending March 31, 2017 amounts to ₹35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show distribution of profit among partner.

Ans.

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. P & L App. A/c Dr. 35,000
31 To Radha’s Capital A/c 17,500
To Mary’s Capital A/c 14,000
To Fatima ’s Capital A/c 3,500
(Being profits divided among partners in the ratio of 5:4:1)
Radha ’s Capital A/c Dr. 900
Mary’s Capital A/c Dr. 600
To Fatima ’s Capital A/c 1,500
(Being deficiency contributed by Radha and Mary in the ratio of 3:2)

Q.25 X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3:2:1 respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of ₹8,000. The net profit for the year ended March 31, 2017 was ₹30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 30,000
X
(₹15,000 – ₹1,800) 13,200
Y
(₹10,000 – ₹1,200) 8,800
Z
(₹5,000 + ₹3,000) 8,000
30,000 30,000

Q.26 Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of ₹60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are

(i) ₹2,50,000; (ii) ₹3,60,000.

Ans.

Case (i)

Profit and Loss Appropriation A/c
for the year ended 31st Dec. 2015

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 2,50,000
Arun
(₹1,00,000 – ₹10,000) 90,000
Bobby
(₹1,00,000) 1,00,000
Chintu
(₹50,000 + ₹10,000) 60,000
2,50,000 2,50,000

Case (ii)
Profit and Loss Appropriation A/c
for the year ended 31st Dec. 2015

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 3,60,000
Arun
(₹1,44,000) 1,44,000
Bobby
(₹1,44,000) 1,44,000
Chintu
(₹72,000) 72,000
3,60,000 3,60,000

Q.27 Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2:2:1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than ₹20,000. The net profit for the year ended March 31, 2017 amounted to ₹70,000. Prepare Profit and Loss Appropriation Account.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 70,000
Ashok
(₹28,000 – ₹3,000) 25,000
Brijesh
(₹28,000– ₹3,000) 25,000
Cheena
(₹14,000 +₹6,000) 20,000
70,000 70,000

Q.28 Ram, Mohan and Sohan are partners with capitals of ₹5,00,000, ₹2,50,000 and ₹2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as follows:

Ram 1/2, Mohan 1/3 and Sohan 1/6. But Ram and Mohan have guaranteed that Sohan’s share in the profit shall not be less than ₹25,000, in any year. The net profit for the year ended March 31, 2017 is ₹2,00,000, before charging interest on capital.

You are required to show distribution of profit by preparing profit and loss appropriation account.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To Int. on capitals By P & L A/c 2,00,000
Ram 50,000
Mohan 25,000
Sohan 20,000
To profit t/fd to
Ram
(₹52,500 – ₹4,500) 48,000
Mohan
(₹35,000– ₹3,000) 32,000
Sohan
(₹17,500 +₹7,500) 25,000
2,00,000 2,00,000

₹1,05,000 (₹2,00,000 – ₹95,000) will be divided among partners in the ratio of 3:2:1.

Q.29 Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3:2:1, subject to the following:

Sona’s share in the profits guaranteed to be not less than ₹15,000 in any year.

Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is ₹25,000). The net profit for the year ended March 31, 2017 is ₹75,000. The gross fee earned by Babita for the firm was ₹16,000.

You are required to prepare Profit and Loss Appropriation account.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars ₹ Particulars ₹
To profit t/fd to By P & L A/c 75,000
Ashok By Babita’s
(₹42,000 – ₹600) 41,400 Capital A/c 9,000
Brijesh (₹ 25000 – ₹ 16000)
(₹28,000– ₹400) 27,600
Cheena
(₹14,000 +₹1,000) 15,000
84,000 84,000

Q.30 The net profit of X, Y and Z for the year ended March 31, 2016 was ₹60,000 and the same was distributed among them in their agreed ratio of 3:1:1. It was subsequently discovered that the under mentioned transactions were not recorded in the books:

  1. Interest on Capital @ 5% p.a.
  2. Interest on drawings amounting to X ₹700, Y ₹500 and Z ₹300.
  3. Partner’s salary: X ₹1,000, Y ₹1,500 p.a.

The capital accounts of partners were fixed as: X ₹1,00,000, Y ₹80,000 and Z ₹60,000. Record the adjustment entry.

Ans.

Table Showing Adjustment

Particulars X Y Z
₹ ₹ ₹
Amount wrongly credited (A) 36,000 12,000 12,000
Amount to be credited
Interest on capital @ 5% 5,000 4,000 3,000
Interest on drawings (700) (500) (300)
Salary 1,000 1,500
Profit share (3:1:1) 28,200 9,400 9,400
Total (B) 33,500 14,400 12,100
Difference (2,500) 2,400 100
Debit Credit Credit

Profits to be distributed = ₹60,000 – ₹12,000 + ₹1,500 – ₹2,500 = ₹47,000

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2016
Mar. X’s Current A/c Dr. 2,500
31 To Y’s Current A/c 2,400
To Z’s Current A/c 100
(Being profit adjusted among all partners)

Q.31 The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2:2:1 have existed for some years. Ali wants that he should get equal share in the profits with Harry and porter and he further wishes that the change in the profit sharing ratio should come into effect retrospectively for the last three years. Harry and porter have agreement on this account.

The profits for the last three years were:

Date ₹
2014-15 22,000
2015-16 24,000
2016-17 29,000

Show adjustment of profits by means of a single adjustment journal entry.

Ans.

Total profits of last three years = ₹22,000 + ₹24,000 + ₹29,000 = ₹75,000.

Particulars Harry Porter Ali
₹ ₹ ₹
Amount wrongly credited (A) 30,000 30,000 15,000
(₹75,000 in 2:2:1)
Amount to be credited
Distribution as per new ratio
(₹75,000 in 1:1:1) (B) 25,000 25,000 25,000
Difference (B – A) (5,000) (5,000) 10,000
Debit Debit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Harry’s Capital A/c Dr. 5,000
31 Porter’s Capital A/c Dr. 5,000
To Ali’s Capital A/c 10,000
(Being profit adjusted among all partners)

Q.32 Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3:2. Following is the balance sheet of the firm as on March 31, 2017.

Balance Sheet as at March 31, 2017
Liabilities ₹ Assets ₹
Mannu’s Capital 30,000 Drawings:

Mannu 4,000

Shristhi 2,000

6,000
Shristhi’s Capital 10,000 40,000 Other Assets 34,000
40,000 40,000

Profit for the year ended March 31, 2017 was ₹5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was omitted. Adjust interest on drawing on an average basis for 6 months. Give the adjustment entry.

Ans.

Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mannu Shrishti
₹ ₹
Closing capital 30,000 10,000
Less: Profits already credited (3,000) (2,000)
27,000 8,000

Adjustment of Profits:

Particulars Mannu Shrishti
₹ ₹
Amount wrongly credited (A) 3,000 2,000
Amount to be credited
Interest on capital @ 5% 1,350 400
Interest on drawings @6% (120) (60)
Profit share (3:1:1) 2,058 1,372
Total (B) 3,288 1,712
Difference (B – A) 288 (288)
Credit Debit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Shrishti’s Capital A/c Dr. 288
31 To Mannu’s Capital A/c 288
(Being profit adjusted among all partners)

Q.33 On March 31, 2017 the balance in the capital accounts of Eluin. Monu and Ahmed after making adjustments for profits, drawings, etc. were ₹80,000, ₹60,000 and ₹40,000 respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted.

The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin ₹20,000; Monu ₹15,000 and Ahmed ₹9,000. Interest on drawings chargeable to partners were Eluin ₹500, Monu ₹360 and Ahmed ₹200. The net profit during the year amounted to ₹1,20,000.

The profit sharing ratio was 3:2:1.

Record necessary adjustment entries.

Ans.

Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Eluin Monu Ahmed
₹ ₹ ₹
Closing capital 80,000 60,000 40,000
Add: Drawings 20,000 15,000 9,000
Less: Profits (60,000) (40,000) (20,000)
(₹1,20,000 in 3:2:1)
40,000 35,000 29,000

Table Showing Adjustment

Particulars Eluin Monu Ahmed
₹ ₹ ₹
Amount wrongly credited (A) 60,000 40,000 20,000
Amount to be credited
Interest on capital @ 5% 2,000 1,750 1,450
Interest on drawings (500) (360) (200)
Profit share (3:2:1) 57,930 38,620 19,310
Total (B) 59,430 40,010 20,560
Difference (B – A) (570) 10 560
Debit Credit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Eluin’s Capital A/c Dr. 570
31 To Monu’s Capital A/c 10
To Ahmed’s Capital A/c 560
(Being profit adjusted among all partners)

Q.34 Mohan, Vijay and Anil are partners the balance on their capital accounts being ₹30,000, ₹25,000 and ₹20,000 respectively. In arriving at these figures the profits for the year ended March 31, 2017 amounting to Rupees ₹24,000 had been credited to partners in the proportion in which they shared profits. During the year their drawings for Mohan, Vijay and Anil were ₹5,000, ₹4,000 and ₹3,000 respectively. Subsequently, the following omissions were noticed:

  1. Interest on Capital, at the rate of 10% p.a. was not charged.
  2. Interest on Drawings: Mohan ₹250, Vijay ₹200, Anil ₹ 150 was not recorded in the books.

Record necessary corrections through journal entries.

Ans.

Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mohan Vijay Anil
₹ ₹ ₹
Closing capital 30,000 25,000 20,000
Add: Drawings 5,000 4,000 3,000
Less: Profits (8,000) (8,000) (8,000)
(₹24,000 in 1:1:1)
27,000 21,000 15,000
Int. on capital @ 10% 2,700 2,100 1,500

Table Showing Adjustment

Particulars Mohan Vijay Anil
₹ ₹ ₹
Amount wrongly credited (A) 8,000 8,000 8,000
Amount to be credited
Interest on capital @ 10% 2,700 2,100 1,500
Interest on drawings (250) (200) (150)
Profit share (1:1:1) 6,100 6,100 6,100
Total (B) 8,550 8,000 7,450
Difference (B – A) 550 (550)
Credit Debit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Anil’s Capital A/c Dr. 550
31 To Mohan’s Capital A/c 550
(Being profit adjusted among all partners)

Q.35 Dinker, and Ravinder were partners sharing profits and losses in the ratio of 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2017.

Account Name Debit (₹) Credit (₹)
Capital:
Dinker 2,35,000
Ravinder 1,63,000
Drawings:
Dinker 6,000
Ravinder 5,000
Opening Stock 35,100
Purchases & Sales 2,85,000 3,75,000
Carriage inward 2,200
Returns 3,000 2,200
Stationery 1,200
Wages 12,500
Bills Receivables & Bills payables 45,000 32,000
Discount 900 400
Salaries 12,000
Rent & Taxes 18,000
Insurance Premium 2,400
Postage 300
Sundry expenses 1,100
Commission 3,200
Debtors and Creditors 95,000 40,000
Building 1,20,000
Plant & Machinery 80,000
Investments 1,00,000
Furniture & Fixture 26,000
Bad Debts 2,000
Bad debts provision 4,600
Loan 35,000
Legal Expenses 200
Audit fee 1,800
Cash in hand 13,500
Cash at Bank 23,000
8,91,200 8,91,200

Prepare final accounts for the year ended December 31, 2017 with following adjustment:

    1. Stock on December 31, 2017 was ₹42,500.
    2. A provision is to be made for bad debts at 5% on debtors.
    3. Rent outstanding was ₹1,600.
    4. Wages outstanding were ₹1,200.
    5. Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.
    6. Dinker and Ravinder are entitled to a salary of ₹2,000 per annum.
    7. Ravinder is entitled to a commission ₹1,500.
    8. Depreciation is to be charged on building @ 4%, Plant and machinery 6% and Furniture and Fixture @ 5%.
    9. Outstanding interest on loan amounted to ₹350.

Ans.

Trading A/c

For the year ending 31st December, 2017

Particulars ₹ Particulars ₹
To opening stock 35,100 By sales
To purchases 3,75,800
2,85,000 Less: ret. 3,000 3,72,800
Less: returns 2,200 2,82,800 By closing stock 42,500
To carriage inwards 2,200
To wages 12,500
Add. Out. 1,200 13,700
To gross profit 81,500
4,15,300 4,15,300

Profit and Loss A/c

for the year ending 31st December, 2017

Particulars ₹ Particulars ₹
To salaries 12,000 By gross profit 81,500
To disc. allowed 900 By prov. for b/d 4,600
To stationery 1,200 By disc. recd. 400
To postage 300 By commission 3,200
To sundry expenses 1,100
To rent and taxes
18,000
Add: Out. 1,600 19,600
To provision for B/Ds
4,750
Add: Bad debts 2,000 6,750
To insurance 2,400
To depreciation on
Building 4,800
Plant & mach. 4,800
Fix. & fitting 1,300 10,900
To o/s int. on loan 350
To audit fees 1,800
To legal expenses 200
To P & L Appropriation 32,200
89,700 89,700

Profit and Loss Appropriation A/c

for the year ended 31st December 2017

Particulars ₹ Particulars ₹
To interest on cap. By P & L A/c 32,200
Dinker 9,400 By Int. on drawing
Ravinder 6,520 15,920 Dinker 180
To salaries Ravinder 150 330
Dinker 2,000
Ravinder 2,000 4,000
To comm. (Ravinder) 1,500
To pro. t/f to capitals
Dinker 7,407
Ravinder 3,703 11,110
32,530 32,530

Partners’ Capital Accounts

Particulars Dinker Ravinder Particulars Dinker Ravinder
₹ ₹ ₹ ₹
To Drawings 6,000 5,000 By Bal. b/d 2,35,000 1,63,000
To Int. on draw. 180 150 By Salary 2,000 2,000
To Bal. c/d 2,47,627 1,71,573 By Int. on capitals 9,400 6,520
By P & L App. 7,407 3,703
By Commission 1,500
2,53,807 1,76,723 2,53,807 1,76,723

Balance Sheet

as on 31.12.2017

Liabilities ₹ Assets ₹
Capital Cash in hand 13,500
Dinker 2,47,627 Cash at bank 23,000
Ravinder 1,71,573 4,19,200 Closing stock 42,500
Loan 35,000 Bills receivable 45,000
Out. Interest 350 35,350 Debtors 95,000
Creditors 40,000 (-) Prov. 4,750 90,250
Bills payable 32,000 Investments 1,00,000
Rent outstanding 1,600 Furniture and fix. 24,700
Wages outstanding 1,200 Plant and mach. 75,200
Building 1,15,200
5,29,350 5,29,350

Q.36 Kajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following balances were extracted from the books of account for the year ended March 31, 2015.

Account Name Debit (₹) Credit (₹)
Capital:
Kajol 1,15,000
Sunny 91,000
Current accounts (01/04/2005)
Kajol 4,500
Sunny 3,200
Drawings:
Kajol 6,000
Sunny 3,000
Opening Stock 22,700
Purchases & Sales 1,65,000
Freight inward 1,200
Returns 2,000
Printing & Stationery 900
Wages 5,500
Bills Receivables & Bills payables 25,000
Discount 400
Salaries 6,000
Rent 7,200
Insurance Premium 2,000
Travelling Exp. 700
Sundry expenses 1,100
Commission 1,600
Debtors and Creditors 74,000 78,000
Building 85,000
Plant & Machinery 70,000
Motor car 60,000
Furniture & Fixture 15,000
Bad Debts 1,500
Provision for doubtful debts 2,200
Loan 25,000
Legal Expenses 300
Audit fee 900
Cash in hand 7,500
Cash at Bank 12,000
5,78,100 5,78,100

Prepare final accounts for the year ended March, 31 2015 with following adjustments:

1. Stock on March 31, 2015 was ₹37,500.
2. Bad debts ₹3,000; Provision for bad debts is to be made at 5% on debtors.
3. Rent prepaid were ₹1,200.
4. Wages outstanding were ₹2,200.
5. Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be charged @ 5% per annum.
6. Kajol is entitled to a salary of ₹1,500 per annum.
7. Prepaid insurance was ₹500.Depreciation was charged on building @ 4%; Plant and machinery @ 5%; motor car @ 10% and furniture and fixture @ 5%.
8. Goods worth ₹7,000 were destroyed by fire on January 20, 2015. The Insurance Company agreed to pay ₹5,000 in full settlement of the claim.

Ans.

Trading A/c

for the year ending 31st March, 2015

Particulars ₹ Particulars ₹
To opening stock 22,700 By sales
To purchases 2,35,800
1,65,000 Less: ret. 2,000 2,33,800
Less: returns 3,200 By closing stock 37,500
Less: loss fire 7,000 1,54,800
To carriage inwards 1,200
To wages 5,500
Add. Out. 2,200 7,700
To gross profit 84,900
2,71,300 2,71,300

Profit and Loss A/c

for the year ending 31st March, 2015

Particulars ₹ Particulars ₹
To salaries 6,000 By gross profit 84,900
To disc. allowed 400 By disc. recd. 800
To printing & stationery 900 By commission 1,600
To travelling exp. 700 By insurance co. 5,000
To sundry expenses 1,100
To rent 7,200
Less: prepaid 1,200 6,000
To bad debts 1,500
Add: Bad debts 3,000 4,500
To prov. for b/d 3,550
Less: existing 2,200 1,350
To insurance 2,000
Less: prepaid 500 1,500
To depreciation on
Building 3,400
Plant & mach. 3,500
Motor car 6,000
Fur. & fix 750 13,650
To goods lost by fire 7,000
To audit fees 900
To legal expenses 300
To P & L Appropriation 48,000
92,300 92,300

Profit and Loss Appropriation A/c

for the year ended 31st March 2015

Particulars ₹ Particulars ₹
To interest on cap. By P & L A/c 48,000
Kajol 6,900 By Int. on draw.
Sunny 5,460 12,360 Kajol 150
To salaries Sunny 75 225
Kajol 1,500
To pro. t/f to current
Kajol 20,619
Sunny 13,746 34,365
48,225 48,225

Partners’ Current Accounts

Particulars Kajol Sunny Particulars Kajol Sunny
₹ ₹ ₹ ₹
To Bal. b/d 3,200 By Bal. b/d 4,500
To drawings 6,000 3,000 By Salary 1,500
To Int. on draw. 150 75 By Int. on capitals 6,900 5,460
To Bal. c/d 27,369 12,931 By P & L App. 20,619 13,746
33,519 19,206 33,519 19,206

Balance Sheet

as on 31.03.2015

Liabilities ₹ Assets ₹
Capital Cash in hand 7,500
Kajol 1,15,000 Cash at bank 12,000
Sunny 91,000 2,06,000 Closing stock 37,500
Current Bills receivable 25,000
Kajol 27,369 Debtors 74,000
Sunny 12,931 40,300 (-) Fur. B/D3,000
Loan 25,000 (-) Pro. 3,550 67,450
Creditors 78,000 Furniture and fix. 14,250
Bills payable 21,000 Motor car 54,000
Wages outstanding 2,200 Plant and mach. 66,500
Building 81,600
Prepaid rent 1,200
Prepaid insurance 500
Insurance claim 5,000
3,72,500 3,72,500

Q.37 State the difference between dissolution of partnership and dissolution of partnership firm.

Ans.

Basis Dissolution of Partnership Dissolution of Partnership Firm
Termination of business The business is not terminated. The business of the firm is closed.
Settlement of assets and liabilities Assets and liabilities are revalued and new Balance Sheet is drawn. Assets are sold and liabilities are paid off.
Court’s intervention Court does not intervene because partnership is dissolved by mutual agreement. A firm can be dissolved by the court’s order.
Closure of Books of Accounts Books of accounts are not closed, as there is only change in the existing agreement between partners. Books of accounts are closed, as the business is discontinued.

Q.38 State the accounting treatment at the time of dissolution of a firm for:
(i) Unrecorded assets
(ii) Unrecorded liabilities

Ans.

(i) Unrecorded assets: These are the assets which exist but do not appear in the books of accounts.

When the unrecorded asset is sold for cash:
Particulars L.F. Dr. ₹ Cr. ₹
Cash A/c Dr. xxx
To Realisation A/c xxx
If amount is realised from sale of unrecorded assets, it is debited to cash/bank account and credited to realisation account.
When unrecorded asset is taken by one of the partners:
Particulars L.F. Dr. ₹ Cr. ₹
Partner’s capital A/c Dr. xxx
To Realisation A/c xxx
If unrecorded asset is taken by one of the partners, it is debited to Partner’s Capital Account and credited to realisation account.

(ii) Unrecorded liabilities: These are the liabilities which exist but do not appear in the books of accounts.

When the unrecorded liability is paid through Realisation A/c
Particulars L.F. Dr. ₹ Cr. ₹
Realisation A/c Dr. xxx
To Cash A/c xxx
If unrecorded liability is paid, realisation account is debited cash/bank account is credited with the amount paid.
When unrecorded liability is taken over by a partner
Particulars L.F. Dr. ₹ Cr. ₹
Realisation A/c Dr. xxx
To Partner’s Capital A/c xxx
If a partner agrees to pay unrecorded liability, realisation account is debited and concerned Partner’s Capital Account is credited.

Q.39 On dissolution, how will you deal with partner’s loan if it appears on the

(a) Assets side of the Balance Sheet (b) Liabilities side of the Balance Sheet

Ans.

(a) Assets side of the Balance Sheet: It means firm has given loan to the partner. It will be transferred to the debit side of the realisation account.

Particulars L.F. Dr. ₹ Cr. ₹
Partner’s Capital A/c Dr. xxx
To Partner’s Loan A/c xxx
Partner’s capital account will be debited, while realisation account will be credited for amount realised.

(b) Liabilities side of the Balance Sheet: It implies partner has given loan to the firm. It will not be transferred to the realisation account but paid through Partner’s loan account as it is an internal liability.

Partner’s loan paid in cash:
Particulars L.F. Dr. ₹ Cr. ₹
Partner’s Loan A/c Dr. xxx
To Cash/Bank A/c xxx

Q.40 Distinguish between firm’s debts and partner’s private debts.

Ans.

Basis Firm’s Debts Partner’s Private Debts
Meaning It means the debt owed by the firm to outsiders. It means debt owed by a partner in his personal capacity to any other person.
Liability All the partners are liable jointly and severally for firm’s debts. Concerned partner is liable personally for his private debt.
Application of Firm’s property Firm’s property is applied first towards payment of firm’s debts. Concerned partners’ share in excess of firm’s property over firm’s debts can be applied towards payment of his private debts.
Application of Private property Surplus of partner’s private property over his private debts can be applied towards payment of firm’s debts. Private property is applied first towards payment of private debts.

Q.41 State the order of settlement of accounts on dissolution.

Ans.

In case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. For this purpose, it disposes off all assets for satisfying all the claims against it.

The following rules as provided in Section 48 of the Partnership Act 1932 shall apply:

(a) Treatment of losses:

Losses including deficiencies of capital shall be paid:

  • First out of profits
  • Next out of capital of partners and
  • Lastly, if necessary, by the partners individually in their profit sharing ratio

(b) Application of Assets:

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital shall be applied in the following manner:

  • In paying the debts of the firm to third parties
  • In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (Partner’s loan)
  • In paying to each partner proportionately what is due to him on account of capital: and
  • The residue, if any, shall be divided among the partners in their profit sharing ratio.

Q.42 On what account realisation account differs from revaluation account.

Ans.

Basis Realisation Account Revaluation Account
Meaning It record the effect of revaluation of assets and reassessment of liabilities. It records the realisation of assets and settlement of liabilities.
Time It is prepared at the time of admission, retirement or death of a partner. It is prepared at the time of dissolution of a firm.
Object of Preparation This account is prepared to find out the profit or loss on the sale of assets and repayment of liabilities. This account is prepared to make necessary adjustments in the value of assets and liabilities.

Q.43 Explain the process of dissolution of partnership firm.

Ans.

According to the Section 39 of Partnership Act, dissolution of partnership between all the partners of a firm is called dissolution of partnership firm. Dissolution involves winding up of business, disposal of assets and paying off the liabilities. As per the Partnership Act 1932, a partnership firm may be dissolved in the following manners:

1. Dissolution by Agreement: A firm is dissolved:

(a) with the consent of all the partners or

(b) in accordance with a contract between the partners.

2. Compulsory Dissolution:

(a) the adjudication of all the partners or of all partners but one as insolvent

(b) happening of an event or change in government policies that make the business unlawful.

3. On the happening of certain contingencies: Subject to contract between the partners, a firm is dissolved:

(a) If constituted for a fixed term, by the expiry of that term;

(b) If constituted to carry out one or more ventures, by completion thereof;

(c) by the death of a partner;

(d) by the adjudication of a partner as an insolvent.

4. Dissolution by Notice: In case of partnership at will, the firm may be dissolved if any one of the partners gives a notice in writing to the other partners, signifying his intention of seeking dissolution of the firm.

5. Dissolution by Court: At the suit of a partner, the court may order a partnership firm to be dissolved on any of the following grounds:

(a) when a partner becomes insane.

(b) when a partner becomes permanently incapable of performing his duties as a partner.

(c) when a partner is guilty of misconduct which is likely to adversely affect the business of the firm.

(d) when a partner persistently commits breach of partnership agreement.

(e) when a partner has transferred the whole of his interest in the firm to a third party.

(f) when the business of the firm cannot be carried on except at a loss or

(g) when, on any ground, the court regards dissolution to be just and equitable.

Q.44 What is a Realisation Account?

Ans.

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed.

For this purpose, a realisation account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities.

Hence all assets (other than cash, bank or fictitious assets, if any) and all external liabilities are transferred to this account. It records the sale of assets, payment of liabilities and realisation expenses.

The balance in this account is termed as profit or loss on realisation which is transferred to partners’ capital accounts in their profit sharing ratio.

Q.45 Reproduce the format of Realisation Account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To Sundry debtors By Sundry creditors
To Stock By Bills payables
To B/R By Bank overdraft
To Machinery By Out. Expenses
To Land and building By Bank loan
To Furniture and fittings By Provision for D/Ds
To Bank – Payment of liabilities By Bank – Sale of assets
To Partner’s Capital a/c – liability agreed to pay By Partner’s Capital a/c assets taken by partner
To Bank – payment of unrecorded liabilities By Loss transferred to capitals
To Profit transferred to capitals
xxx xxx

Q.46 How deficiency of creditors is paid off, at the time dissolution of firm?

Ans.

At the time of dissolution of a firm, the amount received from the sale of firm’s assets are utilised to pay the creditors. If the sale receipts fall short, then partners’ private assets are used for settling the dues of the firm’s creditors. Even if some portion of the amount due to creditors is left unpaid, then there arises deficiency of creditors. There are generally two procedures to be followed to treat the deficiency of creditors.

1. Transferring deficiency to the Deficiency Account

2. Transferring deficiency to the Partner’s Capital Account

In the former procedure, a separate account is prepared for the firm’s creditors. Then in order to ascertain the firm’s cash balance accruing from the sale of the firm’s assets and partners’ private assets, Cash Account is prepared. After ascertaining the cash availability with the firm, the creditors and the external liabilities are paid proportionately (partially). The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account.

In the latter procedure, creditors are paid by the cash available with the firm including the partners’ individual contribution. The deficiency or unpaid creditors amount is transferred to the Partner’s Capital Account. Thus, the deficiency of the creditors is borne by all the partners in their profit sharing ratio. If any partner becomes insolvent and is unable to bear the deficiency, then this will be regarded as a capital loss to the firm. If the partnership deed is silent about such capital loss in the facet of insolvency of a partner, then according to the Garner v/s Murray case, such capital loss need to be borne by the solvent partners in their capital ratio.

Q.47 Journalise the following transactions regarding realisation expenses:

(a) Realisation expenses amounted to ₹2,500.

(b) Realisation expenses amounting to ₹3,000 were paid by Ashok, one of the partners.

(c) Realisation expenses ₹2,300 borne by Tarun personally.

(d) Amit, a partner was appointed to realise the assets, at a cost of ₹4,000. The actual amount of realisation amounted to ₹3,000.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
(a) Realisation A/c Dr. 2,500
To Bank A/c 2,500
(Being realisation expenses paid)
(b) Realisation A/c Dr. 3,000
To Ashok’s Capital A/c 3,000
(Being realisation expenses paid by Ashok)
(c) No entry will be passed as the expenses are borne personally by Tarun
(d) Realisation A/c Dr. 4,000
To Amit’s Capital A/c 4,000
(Being realisation expenses paid by Amit)

Q.48 Record necessary journal entries in the following cases:
(a) Creditors worth ₹85,000 accepted ₹40,000 as cash and investment worth ₹43,000, in full settlement of their claim.
(b) Creditors were ₹16,000. They accepted machinery valued at ₹18,000 in settlement of their claim.
(c) Creditors were ₹90,000. They accepted building valued at ₹1,20,000 and paid cash to the firm ₹30,000.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
(a) Realisation A/c Dr. 40,000
To Cash A/c 40,000
(Being creditors settled with cash)
(b) No entry will be passed as liability is settled against asset without any cash/bank transaction
(c) Cash A/c Dr. 30,000
To Realisation A/c 30,000
(Being cash paid to the firm by creditors against building taken)

Q.49 There was an old computer which was written off in the books of accounts in the previous year. The same has been taken over by a partner Nitin for ₹3,000. Journalise the transaction, when the firm has been dissolved.

Ans.

Journal Entries
Dt. Particulars (₹) Dr. (₹) Cr.
Nitin’s Capital A/c Dr. 3,000
To Realisation A/c 3,000
(Being unrecorded asset taken over by Nitin)

Q.50 What journal entries will be recorded for the following transactions on the dissolution of a firm?
a) Payment of unrecorded liabilities of ₹3,200.
b) Stock worth ₹7,500 is taken by a partner Rohit.
c) Profit on Realisation amounting to ₹18,000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7.
d) An unrecorded asset realised ₹5,500.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
(a) Realisation A/c Dr. 3,200
To Bank A/c 3,200
(Being unrecorded liabilities paid)
(b) Rohit’s Capital A/c Dr. 7,500
To Realisation A/c 7,500
(Being unrecorded asset taken over by Rohit)
(c) Realisation A/c Dr. 18,000
To Ashish’s Capital A/c 7,500
To Tarun’s Capital A/c 10,500
(Being profit on realisation transferred to capitals)
(d) Bank A/c Dr. 5,500
To Realisation A/c 5,500
(Being unrecorded assets sold)

Q.51 Give journal entries for the following transactions:

    1. To record the realisation of various assets and liabilities.
    2. A firm has a stock of ₹1,60,000. Aziz, a partner took over 50% of the stock at a discount of 20%.
    3. Remaining stock was sold at a profit of 30% on cost.
    4. Land & Building (book value ₹1,60,000) sold for ₹3,00,000 through a broker who charged 2%, commission on the deal.
    5. Plant & Machinery (book value ₹60,000) was handed over to a creditor at an agreed valuation of 10% less than the book value.
    6. Investment whose face value was ₹4,000 was realised at 50%.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
1.(i) For transfer of assets to realisation account
Realisation A/c Dr.
To Assets A/c
(Being assets transferred to realisation account)
(ii) For transfer of liabilities to realisation account
Liabilities A/c Dr.
To Realisation A/c
(Being liabilities transferred to realisation account)
(iii) For sale of assets
Bank A/c Dr.
To Realisation A/c
(Being sale of assets)
(iv) For liabilities paid
Realisation A/c Dr.
To Bank A/c
(Being payment of liabilities)
2. Aziz’s Capital A/c Dr. 64,000
To Realisation A/c 64,000
(Being 50% of stock taken over by Aziz at 20% discount)
3. Bank A/c Dr. 1,04,000
To Realisation A/c 1,04,000
(Being 50% of stock sold at 30% profit)
4. Bank A/c Dr. 2,94,000
To Realisation A/c 2,94,000
(Being land and building sold and paid commission for it)
5. No entry will be passed as Bank/Cash/Partners are not involved
6. Bank A/c Dr. 2,000
To Realisation A/c 2,000
(Being investment realised at 50% of book value)

Q.52 How will you deal with the realisation expenses of the firm of Rashim and Bindiya in the following cases:

    1. Realisation expenses amounts to ₹1,00,000.
    2. Realisation expenses amounting to ₹30,000 are paid by Rashim, a partner.
    3. Realisation expenses are to be borne by Rashim for which he will be paid ₹70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashim were ₹1,20,000.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
(1) Realisation A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Being realisation expenses paid)
(2) Realisation A/c Dr. 30,000
To Rashim’s Capital A/c 30,000
(Being realisation expenses paid by Rashim)
(3) Realisation A/c Dr. 70,000
To Rashim’s Capital A/c 70,000
(Being realisation expenses borne by Rashim and remuneration to him for dissolution ₹70,000)

Q.53

argin-bottom: 13px;”>The book value of assets (other than cash and bank) transferred to Realisation Account is ₹1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30% on cost: 5% of the balance being obsolete, realised nothing and remaining assets are handed over to a creditor, in full settlement of his claim.

You are required to record the journal entries for realisation of assets.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
Realisation A/c Dr. 1,00,000
To Sundry Assets A/c 1,00,000
(Being assets transferred to realisation account)
Atul’s Capital A/c Dr. 40,000
To Realisation A/c 40,000
(Being 50% of stock taken over by Atul at 20% discount)
Bank A/c Dr. 26,000
To Realisation A/c 26,000
(Being 40% of stock sold at 30% profit)
No entry will be passed for 5% of remaining asset being absolute and remaining asset handed over to creditors in full settlement

Q.54 Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:

    1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for ₹3,000.
    2. Ashish an old customer whose account for ₹1,000 was written-off as bad in the previous year, paid 60% of the amount.
    3. Paras agreed to takeover the firm’s goodwill (not recorded in the books of the firm) at a valuation of ₹30,000.
    4. There was an old typewriter which had been written-off completely from the books. It was estimated to realise ₹400. It was taken away be Priya at an estimated price less 25%.
    5. There were 100 shares of ₹10 each in Star Limited acquired at a cost of ₹2,000 which had been written-off completely from the books. These shares are valued @ ₹6 each and divided among the partners in their profit sharing ratio.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
1. Bank A/c Dr. 3,000
To Realisation A/c 3,000
(Being unrecorded furniture sold)
2. Bank A/c Dr. 600
To Realisation A/c 600
(Being bad debts recovered previously written off)
3. Paras’s Capital A/c Dr. 30,000
To Realisation A/c 30,000
(Being unrecorded goodwill taken over by Paras)
4. Priya’s Capital A/c Dr. 300
To Realisation A/c 300
(Being unrecorded typewriter taken over by Priya)
5. Paras’s Capital A/c Dr. 300
Priya’s Capital A/c Dr. 300
To Realisation A/c 600
(Being 100 shares of ₹10 each which were not recorded in the books taken @ ₹6 each by Paras and Priya and divided between them in their profit sharing ratio)

Q.55 All partners wishes to dissolve the firm. Yastin, a partner wants that her loan of ₹2,00,000 must be paid off before the payment of capitals to the partners. But Amart another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.

Ans.

Settlement of accounts in case of dissolution is dealt under section 48. There is a sequence of preferences given which tells the priority of payment at time of dissolution. In this case Yastin is correct, the partner’s loan is paid before payment of partners’ capital.

Q.56 What journal entries would be recorded for the following transactions on the dissolution of a firm of Arti and Karim after various assets (other than cash) on the third party liabilities have been transferred to Realisation account.
1. Arti took over the stock worth ₹80,000 at ₹68,000.
2. There was unrecorded Bike of ₹40,000 which was taken over by Mr. Karim.
3. The firm paid ₹40,000 as compensation to employees.
4. Sundry creditors amounting to ₹36,000 were settled at a discount of 15%.
5. Loss on realisation ₹42,000 was to be distributed between Arti and Karim in the ratio of 3:4.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
1. Arti’s Capital A/c Dr. 68,000
To Realisation A/c 68,000
(Being assets taken over by Arti at ₹68,000)
2. Karim’s Capital A/c Dr. 40,000
To Realisation A/c 40,000
(Being unrecorded asset taken over by Karim)
3. Realisation A/c Dr. 40,000
To Bank A/c 40,000
(Being compensation paid to employees)
4. Realisation A/c Dr. 30,600
To Bank A/c 30,600
(Being creditors settled at the discount of 15%)
5. Arti’s Capital A/c Dr. 18,000
Karim’s Capital A/c Dr. 24,000
To Realisation A/c 42,000
(Being loss on realisation t/frd to partners’ capital accounts)

Q.57 Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2017 was as follows:

Balance Sheet of Rose and Lily

as on March 31, 2017

Liabilities Assets
Creditors 40,000 Cash 16,000
Lily’s loan 32,000 Debtors 80,000
Profit & Loss 50,000 Less:

Provision for

doubtful debts

3,600 76,400
Capitals: Inventory 1,09,600
Lily 1,60,000 Bills Receivable 40,000
Rose 2,40,000 Buildings 2,80,000
5,22,000 5,22,000

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised ₹4,84,000. Creditors agreed to take ₹38,000. Cost of realisation was ₹2,400. There was a Motor Cycle in the firm which was bought out of the firm’s money, was not shown in the books of the firm. It was now sold for ₹10,000. There was a contingent liability in respect of outstanding electric bill of ₹5,000 which was paid, Bill Receivable taken over by Rose at ₹33,000.

Show realisation account, Partners Capital Account, Loan Account and Cash Account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To Debtors 80,000 By prov. for
To Inventory 1,09,600 D/D 3,600
To B/R 40,000 By Creditors 40,000
To Buildings 2,80,000 By Cash
To Cash A/c Motor Cycle 10,000
Elec. Bill 5,000 Other Assets 4,84,000 4,94,000
Creditors 38,000 By Rose’s Capital 33,000
Expenses 2,400 45,400 (B/R taken)
To profit t/f capitals
Rose 6,240
Lily 9,360 15,600
5,70,600 5,70,600
Partners’ Capital Accounts
Particulars Rose Lily Particulars Rose Lily
To realisation 33,000 By bal. b/d 2,40,000 1,60,000
Loss (B/R) By P & L 20,000 30,000
To cash a/c 2,33,240 1,99,360 By realisation

(Profit)

6,240 9,360
2,66,240 1,99,360 2,66,240 1,99,360
Lily’s Loan Account
Particulars Particulars
To Cash a/c 32,000 By balance b/d 32,000
32,000 32,000
Cash Account
Particulars Particulars
To Balance b/d 16,000 By Realisation
To Realisation : Creditors 38,000
Motor Cycle 10,000 OS. Ele Bill 5,000
Other Assets 4,84,000 4,94,000 Expenses 2,400 45,400
By Lily’s loan 32,000
By Rose’s Capital 2,33,240
By Lily’s Capital 1,99,360
5,10,000 5,10,000

Q.58 Shilpa, Meena and Nanda decided to dissolve their partnership on March 31, 2017. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:

Balance Sheet of Shilpa, Meena & Nanda

as on March 31, 2017

Liabilities Assets
Capitals: Land 81,000
Shilpa 80,000 Stock 56,760
Meena 40,000 Debtors 18,600
Bank Loan 20,000 Nanda’s Capital 23,000
Creditors 37,000 Cash 10,840
Provision for doubtful debts 1,200
General Reserve 12,000
1,90,200 1,90,200

The stock of value of ₹41,660 are taken over by Shilpa for ₹35,000 and she agreed to discharge bank loan. The remaining stock was sold at ₹14,000 and debtors amounting to ₹10,000 realised ₹8,000. Land is sold for ₹1,10,000. The remaining debtors realised 50% at their book value. Cost of realisation amounted to ₹1,200. There was a typewriter not recorded in the books worth ₹6,000 which were taken over by one of the Creditors at this value. Prepare Realisation Account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To Debtors 18,600 By prov. for
To Stock 56,760 D/D 1,200
To Land 81,000 By Creditors 37,000
To Shilpa (B. Loan) 20,000 By Bank loan 20,000
To Cash A/c By Cash
Expenses 1,200 Stock 14,000
Creditors 31,000 32,200 Debtors 12,300
To Profit t/f Capitals land 1,10,000 1,36,300
Shilpa 10,470 By Shilpa

(stock taken)

35,000
Meena 6,980
Nanda 3,490 20,940
2,29,500 2,29,500
Partners’ Capital Accounts
Particulars ₹ Shilpa ₹ Meena Particulars ₹ Shilpa ₹ Meena
To realisation 35,000 By bal. b/d 80,000 40,000
stock By G/R 6,000 4,000
To cash a/c 81,470 50,980 By realisation 20,000
By real. Profit 10,470 6,980
1,16,470 50,980 1,16,470 50,980
Nanda’s Capital A/c
Particulars Particulars
To bal. b/d 23,000 By G/R 2,000
By real. Profit 3,490
By cash (BF) 17,510
23,000 23,000
Cash Account
Particulars Particulars
To balance b/d 10,840 By realisation 32,000
To realisation 1,36,300 By Shilpa’s cap. 81,470
To Nanda’s Cap. 17,510 By Meena’s cap. 50,980
1,64,650 1,64,650

Q.59 Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their balance sheet as on March 31, 2017 is as follows:

Balance Sheet of Surjit & Rahi as on March 31, 2017
Liabilities Assets
Creditors 38,000 Bank 11,500
Mrs. Surjit Loan 10,000 Stock 6,000
Reserve 15,000 Debtors 19,000
Rahi’s loan 5,000 Furniture 4,000
Capital’s Plant 28,000
Surjit 10,000 Investment 10,000
Rahi 8,000 Profit & Loss 7,500
86,000 86,000

The firm was dissolved on March 31, 2017 on the following terms:
Surjit agreed to take the investments at ₹8,000 and to pay Mrs. Surojit’s loan.
Other assets were realised as follows:

  • Stock : ₹5,000
  • Debtors: ₹18,500
  • Furniture: ₹4,500
  • Plant: ₹25,000

Expenses on realisation amounted to ₹1,600.
Creditors agreed to accept ₹37,000 as a final settlement.
You are required to prepare Realisation account, Partners Capital account and Bank account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To debtors 19,000 By Mrs. Surjit
To stock 6,000 Loan 10,000
To plant 28,000 By Creditors 38,000
To Investment 10,000 By Surjit (Investment) 8,000
To Furniture 4,000 By Bank 53,000
To Bank A/c : (Assets realised)
Expenses 1,600 By Loss t/frd to
Creditors 37,000 38,600 capitals
Surjit 3,960
To Surjit (Mrs. Loan) 10,000 Rahi 2,640 6,600
1,15,600 1,15,600
Partners’ Capital Accounts
Particulars ₹ Surjit ₹ Rahi Particulars ₹ Surjit ₹ Rahi
To realisation 8,000 By bal. b/d 10,000 8,000
stock By reserve 9,000 6,000
To real. Loss 3,960 2,640 By realisation 10,000
To P & L a/c 4,500 3,000
To bank a/c 12,540 8,360
(Bal. Figure)
29,000 14,000 29,000 14,000
Rahi’s Loan Account
Particulars Particulars
To bank a/c 5,000 By balance b/d 5,000
5,000 5,000
Bank Account
Particulars Particulars
To balance b/d 11,500 By realisation 38,600
To realisation 53,000 By Rahi’s loan 5,000
By Surjit’s capital 12,540
By Rahi’s capital 8,360
64,500 64,500

Q.60 Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2017 their balance sheet was as follows:

Balance Sheet of Rita, Geeta & Asish

as on March 31, 2017

Liabilities Assets
Capitals: Cash 22,500
Rita 80,000 Debtors 52,300
Geeta 50,000 Stock 36,000
Ashish 30,000 1,60,000 Investments 69,000
Creditors 65,000 Plant 91,200
Bills Payable 26,000
General Reserve 20,000
2,71,000 2,71,000

On the date of above mentioned date the firm was dissolved:

Rita was appointed to realise the assets. Rita was to receive 5% commission on the rate of assets (except cash) and was to bear all expenses of realisation.

Assets were realised as follows:

Debtors: ₹30,000

Stock: ₹26,000

Plant: ₹42,750

Investments were realised at 85% of the book value.

Expenses of realisation amounted to ₹4,100.

Firm had to pay ₹7,200 for outstanding salary not provided for earlier.

Contingent liability in respect of bills discounted with the bank was also materialized and paid off ₹9,800.

Prepare Realisation account, Capital accounts of Partners’ and Cash account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To Debtors A/c 52,300 By Creditors A/c 65,000
To Stock A/c 36,000 By Bills Payable A/c 26,000
To Plant A/c 91,200 By Cash:
To Investment A/c 69,000 Debtors 30,000
To Cash A/c Stock 26,000
Outstanding Salaries 7,200 Plant 42,750
Bill disc. 9,800 Investment 58,650 1,57,400
Bills Payable 26,000 By loss transferred to
Creditors 65,000 1,08,000 capitals
To Rita’s Capital A/c 7,870 Rita 57,985
(5% of ₹1,57,400) Geeta 38,657
Ashish 19,328 1,15,970
3,64,370 3,64,370
Partners’ Capital Accounts
Particulars Rita ₹ Geeta ₹ Ashish ₹ Particulars Rita ₹ Geeta ₹ Ashish ₹
To Realisation (Loss) 57,985 38,657 19,328 By Balance b/d 80,000 50,000 30,000
To Bank A/c 39,885 18,010 14,005 By General Reserve A/c 10,000 6,667 3,333
By Realisation A/c 7,870
97,870 56,667 33,333 97,870 56,667 33,333
Cash Account
Particulars Particulars
To balance b/d 22,500 By realisation 1,08,000
To realisation 1,57,400 By Capitals A/cs:
Rita’s Capital 39,885
Gita’s Capital 18,010
Ashish’s Capital 14,005
1,79,900 1,79,900

Note:
The answer given in the book shows: Loss on Realisation ₹1,15,970 and Total of Cash Account ₹1,65,705. As per the solution, The total of cash account is ₹1,79,900.

Q.61 Anup, Sumit are equal partners in a firm. They decided to dissolve the partnership on December 31, 2017. When the balance sheet is as under:

Balance Sheet of Anup & Sumit

as on December 31, 2017

Liabilities Assets
Sundry Creditors 27,000 Cash at Bank 11,000
Reserve Fund 10,000 Sundry Debtors 12,000
Loan 40,000 Plants 47,000
Capital Stock 42,000
Anup 60,000 Lease hold hand 60,000
Sumit 60,000 1,20,000 Furniture 25,000
1,97,000 1,97,000

The assets were realised as follows:

Lease hold land: ₹72,000

Furniture: ₹22,500

Stock: ₹40,500

Plant: ₹48,000

Sundry Debtors: ₹10,500.

The creditors were paid ₹25,500 in full settlement. Expenses of Realisation amount to ₹2,500.

Prepare Realisation account, Bank account, Partners Capital accounts to close the books of the firm.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To debtors 12,000 By creditors 27,000
To stock 42,000 By loan 40,000
To furniture 25,000 By Bank A/c
To plants 47,000 L. hold 72,000
To lease hold land 60,000 Debtors 10,500
To Bank A/c Stock 40,500
Loan 40,000 Plant 48,000
Expenses 2,500 Furni. 22,500 1,93,500
Creditors 25,500 68,000
To profit t/frd to
capitals
Anup 3,250
Sumit 3,250 6,500
2,60,500 2,60,500
Partners’ Capital Accounts
Particulars ₹ Anup ₹ Sumit Particulars ₹ Anup ₹ Sumit
To bank a/c 68,250 68,250 By bal. b/d 60,000 60,000
(Bal. Figure) By reserve 5,000 5,000
By realisation 3,250 3,250
Profit
68,250 68,250 68,250 68,250
Bank Account
Particulars Particulars
To Balance b/d 11,000 By Realisation (expenses and liabilities) 68,000
To Realisation (Assets) 1,93,500 By Anup’s capital 68,250
By Sumit’s capital 68,250
2,04,500 2,04,500

Q.62 Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on March 31, 2017. Their balance sheet on the above date was:

Balance Sheet of Ashu & Harish

as on March 31, 2017

Liabilities Assets
Capitals: Building 80,000
Ashu 1,08,000 Machinery 70,000
Harish 54,000 1,62,000 Furniture 14,000
Creditors 88,000 Stock 20,000
Bank overdraft 50,000 Investments 60,000
Debtors 48,000
Cash in hand 8,000
3,00,000 3,00,000

Ashu is to take over the building at ₹95,000 and machinery and furniture is taken over by Harish at value of ₹80,000. Ashu agreed to pay Creditors and Harish agreed to meet Bank overdraft. Stock and Investments are taken by both partner in profit sharing ratio.
Debtors realised for ₹46,000, expenses of realisation amounted to ₹3,000. Prepare necessary ledger account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To debtors 48,000 By creditors 88,000
To stock 20,000 By Bank O/D 50,000
To building 80,000 By Ashu’s cap. 1,43,000
To furniture 14,000 (Assets taken)
To machinery 70,000 By Hari’s cap. 1,12,000
To investment 60,000 (Assets taken)
To Cash A/c (exp.) 3,000 By Cash A/c 46,000
To Ashu’s cap. a/c 88,000 (Debtors)
To Hari’s cap. a/c 50,000
To profit t/frd to
capitals
Ashu 3,600
Harish 2,400 6,000
4,39,000 4,39,000
Partners’ Capital Accounts
Particulars Ashu Harish Particulars Ashu Harish
To realisation 1,43,000 1,12,000 By bal. b/d 1,08,000 54,000
(assets taken) By Realisation – liabilities 88,000 50,000
To cash a/c 56,600 By realisation 3,600 2,400
(Bal. Figure) Profit
By cash a/c 5,600
1,99,600 1,12,000 1,99,600 1,12,000
Cash Account
Particulars Particulars
To balance b/d 8,000 By realisation 3,000
To realisation 46,000 By Ashu’s cap. a/c 56,600
To Harish’s cap. 5,600
59,600 59,600

Working notes:

Assets taken Ashu Harish
Building 95,000
Machinery and furniture 80,000
Stock (3:2) 12,000 8,000
Investment (3:2) 36,000 24,000
1,43,000 1,12,000

Q.63 Sanjay, Tarun and Vineet shared profit in the ratio of 3:2:1. On December 31, 2017 their balance sheet was as follows:

Balance Sheet of Sanjay, Tarun & Vineet

as on December 31, 2017

Liabilities Assets
Capitals Plant 90,000
Sanjay 1,00,000 Debtors 60,000
Tarun 1,00,000 Furniture 32,000
Vineet 70,000 2,70,000 Stock 60,000
Creditors 80,000 Investments 70,000
Bills Payable 30,000 Bills Receivable 36,000
Cash in hand 32,000
3,80,000 3,80,000

On this date the firm was dissolved. Sanjay was appointed to realise the assets. Sanjay was to receive 6% commission on the sale of assets (except cash) and was to bear all expenses of realisation.

Sanjay realised the assets as follows:

Plant: ₹72,000

Debtors: ₹54,000

Furniture: ₹18,000

Stock: 90% of the book value.

Investments: ₹76,000

Bills Receivable: ₹31,000.

Expenses of Realisation amounted to ₹4,500.

Prepare Realisation account, Capital accounts and Cash account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To debtors 60,000 By creditors 80,000
To stock 60,000 By B/P 30,000
To B/R 36,000 By Cash
To furniture 32,000 Plant 72,000
To plant 90,000 Furniture 18,000
To Investment 70,000 Debtors 54,000
To Cash A/c Stock 54,000
B/P 30,000 Invest. 76,000
Creditors 80,000 1,10,000 B/R 31,000 3,05,000
To Sanjay’s cap. A/c 18,300 By loss t/frd to
(6% of ₹3,05,000) Capitals:
Sanjay 30,650
Tarun 20,433
Vineet 10,217 61,300
4,76,300 4,76,300
Partners’ Capital Accounts
Particulars ₹ Sanjay ₹ Tarun Particulars ₹ Sanjay ₹ Tarun
To real. Loss 30,650 20,433 By bal. b/d 1,00,000 1,00,000
To cash a/c 87,650 79,567 By realisation 18,300
(Bal. Figure) commission
1,18,300 1,00,000 1,18,300 1,00,000
Vineet’s Capital Account
Particulars Particulars
To Realisation (Loss) 10,217 By bal. b/d 70,000
To Cash a/c 59,783
(Bal. Figure)
70,000 70,000
Cash Account
Particulars Particulars
To Balance b/d 32,000 By Realisation 1,10,000
To Realisation 3,05,000 By Sanjay’s cap. 87,650
By Tarun’s cap. 79,567
By Vineeet’s cap. 59,783
3,37,000 3,37,000

Q.64 The following is the Balance Sheet of Gupta and Sharma as on March 31, 2017:

Balance Sheet of Gupta & Sharma

as on March 31, 2017

Liabilities Assets
Sundry Creditors 38,000 Cash at bank 12,500
Mrs. Gupta’s loan 20,000 Sundry Debtors 55,000
Mrs. Sharma’s loan 30,000 Stock 44,000
General Reserve 6,000 Bills Receivable 19,000
Provision of doubtful debts 4,000 Machinery 52,000
Capital: Investment 38,500
Gupta 90,000 Fixtures 27,000
Sharma 60,000 1,50,000
2,48,000 2,48,000

The firm was dissolved on December 31, 2017 and asset realised and settlements of liabilities as follows:

The realization of the assets were as follows:

  • Sundry Debtors: ₹52,000
  • Stock: ₹42,000
  • Bills Receivable: ₹16,000
  • Machinery: ₹49,000
  • Fixture ₹20,000

Investment was taken over by Gupta at agreed value of ₹36,000 and agreed to pay off Mrs Gupta’s loan.
The sundry creditors were paid off less 3% discount.
The realisation expenses incurred amounted to ₹1,200.
Journalise the entries to be made on the dissolution and prepare Realisation account, Bank account and Partners capital accounts.

Ans.

Journal Entries
Particulars (₹) Dr. (₹) Cr.
Realisation A/c Dr. 2,35,500
To S. debtors 55,000
To stock 44,000
To B/R 19,000
To Machinery 52,000
To Investment 38,500
To Fixtures 27,000
(Being assets transferred to realisation account)
Sundry creditors Dr. 38,000
Mrs. Gupta’s loan Dr. 20,000
Mrs. Sharma’s loan Dr. 30,000
Provision for D/D Dr. 4,000
To Realisation A/c 92,000
(Being liabilities transferred to realisation account)
Bank A/c Dr. 1,59,000
To Realisation A/c 1,59,000
(Being assets sold)
Realisation A/c Dr. 66,860
To Bank A/c 66,860
(Being liabilities paid)
Realisation A/c Dr. 20,000
To Gupta’s Capital A/c 20,000
(Being Gupta took over Mrs. Gupta’s loan)
Gupta’s Capital A/c Dr. 36,000
To Realisation A/c 36,000
(Being investment taken over by Gupta)
Realisation A/c Dr. 1,200
To Bank A/c 1,200
(Being realisation exp. paid)
Gupta’s Capital A/c Dr. 18,280
Sharma’s Capital A/c Dr. 18,280
To Realisation A/c 36,560
(Being loss on realisation transferred to capital accounts)
General Reserve Dr. 6,000
To Gupta’s Capital A/c 3,000
To Sharma’s Capital A/c 3,000
(Being reserve fund distributed among partners)
Gupta’s Capital A/c Dr. 58,720
Sharma’s Capital A/c Dr. 44,720
To Bank A/c 1,03,440
(Being final payment made to partners)
Realisation A/c
Particulars (₹) Particulars (₹)
To S. debtors 55,000 By S. creditors 38,000
To stock 44,000 By Mrs. G’s loan 20,000
To B/R 19,000 By Mrs. S’s loan 30,000
To Machinery 52,000 By Pro. for D/D 4,000
To Investment 38,500 By Bank
To Fixtures 27,000 Debtors 52,000
To Bank A/c Stock 42,000
Exp. 1,200 Mach. 49,000
Creditors 36,860 B/R 16,000 1,59,000
Mrs. Sharma’s 30,000 68,060 By Gupta’s cap. a/c 36,000
By Bank (fix. Sale) 20,000
To Gupta’s cap. A/c 20,000 By loss t/frd to
(Mrs. loan) capitals
Gupta 8,280
Sharma 8,280 16,560
3,23,560 3,23,560
Partners’ Capital Accounts
Particulars Gupta Sharma Particulars Gupta Sharma
To real. Loss 8,280 8,280 By bal. b/d 90,000 60,000
To real. Invt. 36,000 By real. 20,000
To bank a/c 68,720 54,720 (Mrs. Loan)
(Bal. Figure) By G. Reserve 3,000 3,000
1,13,000 63,000 1,13,000 63,000
Bank Account
Particulars Particulars
To balance b/d 12,500 By realisation 68,060
To realisation 1,79,000 By Gupta’s cap. 68,720
(Assets real.) By Sharma’s cap. 54,720
1,91,500 1,91,500

Q.65 Ashok, Babu and Chetan are in a partnership sharing profit in the proportion of 1/2,1/3,1/6 respectively. They dissolve the partnership of the December 31, 2017. When the balance sheet of the firm as under:

Balance Sheet of Ashok, Babu and Chetan

as on December 31, 2017

Liabilities Assets
Sundry Creditors 20,000 Bank 7,500
Bills Payable 25,500 Sundry Debtors 58,000
Chetan’s Loan 30,000 Stock 39,500
Capitals: Machinery 48,000
Ashok 70,000 Investment 42,000
Babu 55,000 Freehold Property 50,500
Chetan 27,000 1,52,000
Current Accounts:
Ashok 10,000
Babu 5,000
Chetan 3,000 18,000
2,45,500 2,45,500

The machinery was taken over by Babu for ₹45,000. Ashok took over the Investment for ₹40,000 and freehold property took over by Chetan at ₹55,000. The remaining assets realised as follows:
Sundry Debtors: ₹56,500
Stock: ₹36,500
Sundry Creditors were settled at discount of 7%.
A office computer, not shown in the books of accounts realised ₹9,000. Realisation expenses amounted to ₹3,000.
Prepare realisation account, Partners Capital account, Bank Account.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To S. debtors 58,000 By S. creditors 20,000
To stock 39,500 By B/P 25,500
To freehold property 50,500 By Ashok’s current
To Machinery 48,000 a/c (Investment) 40,000
To Investment 42,000 By Babu’s current
To Bank A/c a/c (Machinery) 45,000
Expenses 3,000 By Chetan’s current
B/P 25,500 a/c (F. property) 55,000
S. creditors 18,600 47,100 By Bank A/c
To profit t/frd to Debtors 56,500
current accounts Stock 36,500
Ashok 1,200 Computer 9,000 1,02,000
Babu 800
Chetan 400 2,400
2,87,500 2,87,500
Partners’ Current Accounts
Particulars

Ashok

Babu

Chetan

Particulars

Ashok

Babu

Chetan

To real. 40,000 45,000 55,000 By bal. b/d 10,000 5,000 3,000
(assets By real. profit 1,200 800 400
Taken) By capital
accounts 28,800 39,200 51,600
40,000 45,000 55,000 40,000 45,000 55,000
Partners’ Capital Accounts
Particulars

Ashok

Babu

Chetan

Particulars

Ashok

Babu

Chetan

To current 28,800 39,200 51,600 By bal. b/d 70,000 55,000 27,000
accounts By Bank 24,600
To Bank 41,200 15,800 (Bal. Figure)
(Bal. Figure)
70,000 55,000 51,600 70,000 55,000 51,600
Babu’s Loan Account
Particulars Particulars
To Cash a/c 30,000 By balance b/d 30,000
30,000 30,000
Bank Account
Particulars Particulars
To balance b/d 7,500 By realisation 47,100
To realisation 1,02,000 By Ashok 41,200
(Assets real.) By Babu 15,800
To Chetan 24,600 By Chetan’s loan a/c 30,000
1,34,100 1,34,100

No information is given regarding payment of bills payable so they are paid at book value.

Q.66 The following is the Balance Sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3 on March 31, 2017.

Balance Sheet of Tanu & Manu

as on March 31, 2017

Liabilities Assets
Sundry Creditors 62,000 Cash at bank 16,000
Bills Payable 32,000 Sundry Debtors 55,000
Bank Loan 50,000 Stock 75,000
General Reserve 16,000 Motor Car 90,000
Capital Machinery 45,000
Tanu 1,10,000 Investment 70,000
Manu 90,000 2,00,000 Fixtures 9,000
3,60,000 3,60,000

On the above date the firm is dissolved and the following agreement was made:
Tanu agree to pay the bank loan and took away the sundry debtors. Sundry Creditors accepts stock and paid ₹10,000 to the firm. Machinery is taken over by Manu for ₹40,000 and agreed to pay off bills payable at a discount of 5%. Motor car was taken over by Tanu for ₹60,000. Investment realised ₹76,000 and fixtures ₹4,000.
The expenses of dissolution amounted to ₹2,200.
Prepare Realisation account, Bank account and Partners Capital Accounts.

Ans.

Realisation A/c
Particulars (₹) Particulars (₹)
To S. debtors 55,000 By S. creditors 62,000
To stock 75,000 By B/P 32,000
To motor car 90,000 By Bank loan 50,000
To machinery 45,000 By Tanu’s cap. a/c 1,15,000
To Investment 70,000 (55,000+60,000)
To fixtures 9,000 By Bank a/c
To Bank A/c (exp.) 2,200 Stock (Crs.) 10,000
To Manu’s cap. a/c 30,400 Investment 76,000
(B/P) Fixtures 4,000 90,000
To Tanu’s cap. a/c 50,000 By Manu’s cap. a/c 40,000
(Bank loan) By loss t/frd to
capitals
Tanu 23,500
Manu 14,100 37,600
4,26,600 4,26,600
Partners’ Capital Accounts
Particulars ₹ Tanu ₹ Manu Particulars ₹ Tanu ₹ Manu
To real. Loss 23,500 14,100 By bal. b/d 1,10,000 90,000
To realisation 1,15,000 40,000 By real. 50,000 30,400
(assets taken) (Liabilities)
To bank a/c 31,500 72,300 By G. res. 10,000 6,000
(Bal. Figure)
1,70,000 1,26,400 1,70,000 1,26,400
Bank Account
Particulars Particulars
To Balance b/d 16,000 By Realisation 2,200
To Realisation 90,000 By Tanu’s capital 31,500
(Assets real.) By Manu’s capital 72,300
1,06,000 1,06,000

Q.67 Identify various matters that need adjustments at the time of admission of a new partner.

Ans.

Following are the problems that may arise at the time of admission of a partner:

  • New profit sharing ratio.
  • Sacrificing ratio.
  • Valuation and adjustment of goodwill.
  • Revaluation of assets and reassessment of liabilities.
  • Distribution of accumulated profits or losses and reserves.
  • Adjustment of partners’ capital.

Q.68 Why it is necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted?

Ans.

When a new partner is admitted, he acquires his share in profits from the old partners and thus reduces the old partners share in profit. Hence the problem of determining the new profit sharing ratio simply involves the determination of old partners’ new share in the profits of the reconstituted firm.

Q.69 What is sacrificing ratio? Why is it calculated?

Ans.

Sacrificing ratio is the ratio in which the old partners have surrendered a part of their profit sharing ratio in favour of the incoming partner. This ratio is calculated as given below:

Sacrifice = Old Share – New Share

This ratio is calculated to facilitate the sharing of premium brought in by the new partner. This premium is shared by the old partners is sacrificing ratio.

Q.70 On what occasions sacrificing ratio is used?

Ans.

Following are the occasions sacrificing ratio is used:

  • For disturbing amount of goodwill among old partners.
  • For calculating new profit sharing ratio.

Q.71 If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill?

Ans.

The existing amount of goodwill will be written off by debiting old partner capital accounts in old ratio and creating goodwill /Premium account as shown below:

Date Particulars L.F. Dr. ₹ Cr. ₹
Old Partner’s Capital A/c Dr.
To Goodwill A/c
(Existing goodwill written off by transferring it to old partners capitals in old ratio)

Q.72 Why there is need for the revaluation of assets and liabilities on the admission of a partner?

Ans.

Assets and liabilities should be revalued so that these are shown at the proper value and the resulting profit or loss on such revaluation is transferred to old partners in old ratio. Further the new partner acquires a right to share the assets of the partnership firm. So also they should be shown in the Balance Sheet as the present value and any gain or loss because of revaluation should belong to the old partners.

Q.73 Do you advise that assets and liabilities must be revalued at the time of admission of a partner? If so, Why? Also describe how is this treated in the book of account?

Ans.

Assets and Liabilities should be revalued so that these are shown at the proper value and the resulting profit or loss on such revaluation is transferred to old partners in the old ratio. At times there may also be some unrecorded assets and liabilities of the firm. These also have to be brought into the books of the firm. Further the new partner acquires a right to share the assets of the partnership firm. So also assets and liabilities should be shown in the Balance Sheet at the present value and any gain or loss because of revaluation should not borne by the new partner.

Revaluation account is a nominal account. Revaluation account is credited with the increase in value of each asset and decrease in liabilities because it is a gain. It is debited with the decrease in value of each asset and increase in liabilities because it is a loss. Similarly, unrecorded assets are credited and unrecorded liabilities are debited to the revaluation account. If revaluation account finally shows credit balance, then it indicates profit and if revaluation account shows debit balance, then it indicates loss.

Q.74 What is goodwill? What factors affect goodwill?

Ans.

Goodwill is the money value of reputation of a firm in respect of the profits expected in future over and above the normal profits.

The factors that affect the value of goodwill:

Nature of Business: A firm that produces high value added products or having a stable demand is able to earn more profits and therefore has more goodwill.

Favourable location: If the business is centrally located or is at a place having customer traffic, the goodwill will have high than those businesses which are not so located.

Efficiency of management: If the management of a firm is more efficient and reputed, the value of goodwill in such business will be more as compared to be business whose management is not efficient.

Time Factor: The business which is running for the last several years on profitable lines will have more goodwill than a business which has been established only recently.

Patent: If the firm has its own patent, highly in demand than its value of goodwill will be high.

Capital Requirements: If a business requires more capital than its value of goodwill will be less as compared to a business where the capital requirement is less.

Q.75 Explain how will you deal with goodwill when new partner is not in a position to bring his share of goodwill in cash?

Ans.

If new partner does not bring his share of goodwill in cash, new partner’s Capital or Current account is debited for his share of goodwill and the sacrificing partners’ capital accounts are credited in their sacrificing ratio.

Following journal entry will be:

Dt. Particulars L.F. Dr. ₹ Cr. ₹
New partner’s Capital/ Current A/c Dr.
To Sacrificing partner’s Capital/Current A/c

For example, M and N who share profits in the ratio of 3:2 had capitals of ₹2,00,000 and ₹1,50,000 respectively. They agreed to admit P into partnership from 1st April, 2013 on the following terms in return for 1/3rd share in future profits:

That P should bring in ₹2,00,000 as capital.
That as P is unable to bring in his share of goodwill in cash, goodwill of the firm is valued at ₹1,50,000.

Here,
Necessary journal entries in the books of the firm are

Dt.

2013

Particulars L.F. Dr. ₹ Cr. ₹
Apr 1 Bank A/c Dr. 2,00,000
To P’s Capital 2,00,000
(Being the amount of capital brought in by P in the firm)
Apr 1 P’s Capital

(₹1,50,000 x 1/3)

Dr. 50,000
To M’s Capital 30,000
To N’s Capital 20,000
(Being the capital accounts of M and N credited in their sacrificing ratio, i.e, 3:2 for P’s share of goodwill on his admission)

Q.76 Explain various methods for the treatment of goodwill on the admission of a new partner?

Ans.

Goodwill can be treated in two ways:

  • By Premium Method and By Revaluation Method.

Premium Method:

This method is used when new partner brings his share of goodwill in cash, which is shared by the old partners in sacrificing ratio. There may be different situations when this method may be used, shown below:

Situation 1: When goodwill is paid privately.

In this situation goodwill is not recorded in the books of accounts. i.e., no journal entry is passed.

Situation 2: When goodwill is brought in cash by the new partner and retained in the business. Following are the journal entries required to record the fact.

On bringing Goodwill in Cash
Dt. Particulars L.F. Dr. ₹ Cr. ₹
Cash/Bank A/c Dr.
To Premium for goodwill A/c
(Goodwill brought in cash by the new partner)
For sharing premium for goodwill by sacrificing partners
Premium for goodwill A/c Dr.
To Partners’ Capital/Current a/c
(Individually)
(Goodwill credited to sacrificing partners in sacrificing ratio)
For withdrawal of the amount of premium
Partners Capital/Current Dr.
To Cash/Bank A/c
(old partners individually)
(Amount of goodwill withdrawn by the partners)

Revaluation Method:

This method is followed, when the new partner is unable to bring his share of goodwill in cash. The following journal entries are passed.

New Partner’s Capital A/c Dr.
To old partners’ Capital A/c
(individually)
(New partner’s share of goodwill distributed among old partners in sacrificing ratio)

Q.77 How will you deal with the accumulated profits and losses and reserves on the admission of a new partner?

Ans.

Accumulated profits and losses and reserve on the admission of a new partner may exist because these might have not yet transferred to capital accounts of the partners. These belong to old partners and the new partner is not entitled to have any share in such accumulated profits/losses, reserve.

Hence these are distributed among old partner by transferring them to their capital accounts in old profit sharing ratio. Following are the journal entries for the same.

For Distribution of reserve among the partners
Dt. L.F. Dr. Cr.
Reserve A/c Dr.
To Partners’ Capital/Current a/c
(Individually)
(Amount of reserve distributed among old partners in the old ratio)
For Distribution of credit balance in P& L among the partners
Dt. L.F. Dr. Cr.
P & L A/c Dr.
To Partners’ Capital/Current a/c
(Individually)
(Amount of accumulated profits distributed among old partners in the old ratio)
For debit balance in P& L
Dt. L.F. Dr. Cr.
Partners’ Capital/Current a/c Dr.
To P & L A/c
(Losses debited to old partners in the old ratio)

 

 

 

 

 

 

 

 

 

 

 

Let us understand it with the help of example; Sam and Dev are partners in a firm sharing profits in the ratio of 11:5 admit Stu as a new partner for ¼ share in the profits. On the date of admission there was a debit balance of ₹80,000 in the profit and loss account.

The necessary journal entries for the treatment of Profit and Loss account balance on Stu’s admission:

Dt. Particulars L.F. Dr. ₹ Cr. ₹
Sam’s Capital Dr. 55,000
Dev’s Capital Dr. 25,000
To Profit & Loss 80,000
(Accumulated loss transferred to Sam and Div capital accounts on Stu’s admission)

 

 

Q.78 At what figures the value of assets and liabilities appear in the books of the firm after revaluation has been due. Show with the help of an imaginary balance sheet.

Ans.

The assets and liabilities after revaluation will appear at new figures as in the given example:

A and G were carrying on business in partnership sharing profits in the ratio of 2:1. Their Balance Sheet as on March 31, 2018 stood as follows:

Liabilities Assets
Capitals: Cash in hand 5,000
A 30,000 Cash at Bank 5,000
G 36,000 66,000 Sundry Debtors 12,000
Sundry Creditors 10,000 Stock 8,000
Bills Payable 3,600 Plant & Machinery 20,000
Rent Outstanding 400 Building 30,000
80,000 80,000

S is admitted as a partner on the date of the Balance sheet on the following terms:

  1. She will bring in ₹20,000 as her capital and ₹12,000 as her share of goodwill for ¼ share in profits.
  2. Plant is to be appreciated to ₹24,000 and the value of building is to be appreciated by 10%.
  3. Stock is found over valued by ₹800.
  4. A provision for doubtful debt is to maintain ₹600.
  5. Creditors were unrecorded to the extent of ₹200.

In this case the journal entries are:

Dt. Particulars L.F. Dr. ₹ Cr. ₹
Cash A/c Dr. 32,000
To S’s Capital 20,000
To Premium 12,000
(Cash brought in by S for her capital and share of goodwill)
Premium A/c Dr. 12,000
To Premium A/c 8,000
To A’s Capital 4,000
To G’s Capital
(Premium brought in by S transferred to A and G Capital in the sacrificing ratio)
Revaluation A/c Dr. 1,400
To Stock A/c 800
To Provision for bad & doubtful debts 600
(Stock depreciated and provision for bad and doubtful debts created on sundry debtors)
Revaluation A/c Dr. 200
To Creditors 200
(Increase in the value of creditors)
Plant & Machinery A/c Dr. 4,000
Building A/c Dr. 3,000
To Revaluation A/c 7,000
(Increase in the value of assets on revaluaton)
Revaluation A/c Dr. 5,400
To A’s Capital 3,600
To G’s Capital 1,800
(Transfer of gain on revaluation to A and G Capital in old ratio)
Revaluation Account
Particulars Particulars
To Stock 800 By Plant & Machinery 4,000
Provision for bad & doubtful debts 600 Building 3,000
Creditors 200
Profit on Revaluation
Trfd. To Capitals
A 3,600
G 1,800 5,400
7,000 7,000
Partner’s Capital A/c (₹ in ‘00’ (hundreds)
Dt. Particulars L.f. A

G

S

Dt. Particulars L.f. A

G

S

To Bal. c/d 416 418 200 By Bal. b/d 300 360
Cash 200
Premium 80 40
Profit on Revaluation 36 18
416 418 200 416 418 200
Bal. b/d 416 418 200
Balance Sheet as at 31st March 2018
Liabilities Assets
Capitals: Cash in hand 37,000
A 41,600 Cash at Bank 5,000
G 41,800 Sundry Debtors 12000
S 20,000 1,03,000 Less:
Sundry Creditors 10,200 Provision 600 11,400
Bills Payable 3,600 Stock 7,200
Rent Outstanding 400 Plant & Machinery 24,000
Building 33,000
1,17,600 1,17,600

Q.79 Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3, They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in ₹20,000 as capital and ₹4,000 as his share of goodwill premium. Give the necessary journal entries:

1. When the amount of goodwill is retained in the business.
2. When the amount of goodwill is fully withdrawn.
3. When 50% of the amount of goodwill is withdrawn.
4. When goodwill is paid privately.

Ans.

Case (a)

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 24,000
To Ghosh’s Capital A/c 20,000
To Premium for goodwill A/c 4,000
(Being capital and goodwill brought by Ghosh)
ii Premium for goodwill A/c Dr. 4,000
To Verma’s Capital A/c 2,500
To Sharma’s Capital A/c 1,500
(Being goodwill distributed in sacrificing ratio)

Case (b)

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 24,000
To Ghosh’s Capital A/c 20,000
To Premium for goodwill A/c 4,000
(Being capital and goodwill brought by Ghosh)
ii Premium for goodwill A/c Dr. 4,000
To Verma’s Capital A/c 2,500
To Sharma’s Capital A/c 1,500
(Being goodwill distributed in sacrificing ratio)
iii Verma’s Capital A/c Dr. 2,500
Sharma’s Capital A/c Dr. 1,500
To Cash A/c 4,000
(Being amount of goodwill withdrawn)

Case (c)

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 24,000
To Ghosh’s Capital A/c 20,000
To Premium for goodwill A/c 4,000
(Being capital and goodwill brought by Ghosh)
ii Premium for goodwill A/c Dr. 4,000
To Verma’s Capital A/c 2,500
To Sharma’s Capital A/c 1,500
(Being goodwill distributed in sacrificing ratio)
iii Verma’s Capital A/c Dr. 1,250
Sharma’s Capital A/c Dr. 750
To Cash A/c 2,000
(Being half amount of goodwill withdrawn)

Case (d)

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 20,000
To Ghosh’s Capital A/c 20,000
(Being capital brought by Ghosh)

No entry for goodwill will be passed in this case, as the amount of goodwill is paid outside the business i.e. privately.

Q.80 X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought ₹20,000 for his capital and ₹7,000 for his 1/8 share of goodwill. Goodwill already appears in the books at Rs. 40,000. Show necessary journal entries in the books of X, Y and Z.

Ans.

Particulars Dr. (₹) Cr. (₹)
1 X’s Capital A/c Dr. 22,857
Y’s Capital A/c Dr. 17,143
To Goodwill A/c 40,000
(Being goodwill in the books of account written off in the old ratio)
2 Cash A/c Dr. 27,000
To Z’s Capital A/c 20,000
To Premium for goodwill A/c 7,000
(Being capital and goodwill brought by Z)
3 Premium for goodwill A/c Dr. 7,000
To X’s Capital A/c 4,000
To Y’s Capital A/c 3,000
(Being goodwill distributed in sacrificing ratio)

Q.81 Amar and Samar were partners in a firm sharing profits and losses in 3:1 ratio. They admitted Kanwar for ¼ share of profits. Kanwar could not bring his share of goodwill premium in cash. The goodwill of the firm was valued at ₹80,000 on Kanwar’s admission.

Record necessary journal entry for goodwill on Kanwar’s admission.

Ans.

Particulars Dr. (₹) Cr. (₹)
i Kanwar’s Capital A/c Dr. 20,000
To Amar’s Capital A/c 15,000
To Sarmar’s Capital A/c 5,000
(Being goodwill distributed in sacrificing ratio)

Kanwar’s share of goodwill = ₹80,000 x ¼ = ₹20,000.

In this case old ratio itself will be considered as the sacrificing ratio.

Q.82 Give below is the Balance Sheet of A and B, who are carrying on partnership business on 31/12/2016. A and B share profits and losses in the ratio of 2:1.

Balance Sheet of A and B as on 31st Dec, 2016
Liabilities Assets
Bills Payable 10,000 Cash in Hand 10,000
Creditors 58,000 Cash at Bank 40,000
Outstanding Expenses 2,000 Sundry Debtors 60,000
Capital: Stock 40,000
A 1,80,000 Plant 1,00,000
B 1,50,000 3,30,000 Buildings 1,50,000
4,00,000 4,00,000

C is admitted as a partner on the balance sheet on the following terms:

1. C will bring in ₹1,00,000 as his capital and ₹60,000 as his share of goodwill for ¼ share in the profits.
2. Plant is to be appreciated to ₹1,20,000 and the value of buildings is to be appreciated by 10%.
3. Stock is found, over valued by ₹4,000.
4. A provision for bad and doubtful debts is to be created at 5% of debtors.
5. Creditors were unrecorded to the extent of ₹1,000.

Pass the necessary journal entries, prepare the revaluation account and partners capital accounts and show the Balance Sheet after the admission of C.

Ans.

Revaluation A/c

Particulars Particulars
To Stock 4,000 By Plant 20,000
To Sundry debtors 3,000 By Building 15,000
To Creditors 1,000
To Profit t/f to
capitals
A 18,000
B 9,000 27,000
35,000 35,000

Partners’ Capital Accounts

Particulars ₹ A ₹ B Particulars ₹ A ₹ B
To balance c/d 2,38,000 1,79,000 By balance b/d 1,80,000 1,50,000
By revaluation
Profit 18,000 9,000
By premium 40,000 20,000
2,38,000 1,79,000 2,38,000 1,79,000

C’s Capital Account

Particulars Particulars
To balance c/d 1,00,000 By cash a/c 1,00,000
1,00,000 1,00,000

Balance Sheet

as on 1st Jan 2017

Liabilities Assets
Bills payable 10,000 Cash in hand 10,000
Creditors 59,000 Cash at bank 2,00,000
O/s expenses 2,000 S. debtors 60,000
Capitals (-) Provision 3,000 57,000
A 2,38,000 Stock 36,000
B 1,79,000 Plant 1,20,000
C 1,00,000 5,17,000 Buildings 1,65,000
5,88,000 5,88,000

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2016 Plant A/c Dr. 20,000
Dec Building A/c Dr. 15,000
31 To Revaluation A/c 35,000
(Being increase in the value of plant and building)
Revaluation A/c Dr. 8,000
To stock 4,000
To s. debtors 3,000
To creditors 1,000
(Being decrease in the value of assets debited to revaluation)
Revaluation A/c Dr. 27,000
To A’s Capital A/c 18,000
To B’s Capital A/c 9,000
(Being profit on revaluation distributed among old partners)
Cash A/c Dr. 1,60,000
To C’s Capital A/c 1,00,000
To Premium for goodwill A/c 60,000
(Being capital and goodwill brought by C)
Premium for goodwill A/c Dr. 60,000
To A’s Capital A/c 40,000
To B’s Capital A/c 20,000
(Being goodwill distributed in sacrificing ratio)

Q.83 Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. On 1st April, 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of ₹16,000 in general reserve and ₹24,000 (Cr) in Profit and Loss account. Record necessary journal entries for the treatment of these items on Om’s admission.

The new profit sharing ratio between Leela, Meeta and Om was 5:3:2.

Ans.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2017 General reserve Dr. 16,000
April To Leela’s Capital A/c 10,000
01 To Meeta’s Capital A/c 6,000
(Being general reserve distributed among old partners in old ratio)
Profit and loss A/c Dr. 24,000
To Leela’s Capital A/c 15,000
To Meeta’s Capital A/c 9,000
(Being balance in P&L distributed among old partners in old ratio)

Q.84 Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio. On 01/01/2017 they admitted Ranjan as a partner. On Ranjan’s admission the profit and loss account of Amit and Viney showed a debit balance of ₹40,000.

Record necessary journal entry for the treatment of the same.

Ans.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2017 Amit’s Capital A/c Dr. 30,000
Jan 01 Vinay’s Capital A/c Dr. 10,000
To Profit and loss A/c 40,000
(Being debit balance in P&L debited to old partners in old ratio)

Q.85 A and B share profits in the proportion of ¾ and ¼. Their Balance Sheet on March. 31, 2016 was as follows:

Balance Sheet of A and B as at March 31 2016
Liabilities Assets
Sundry Creditors 41,500 Cash at Bank 26,500
Reserve fund 4,000 Bills Receivable 3,000
Capital: Debtors 16,000
A 30,000 Stock 20,000
B 16,000 Fixtures 1,000
Land & Building 25,000
91,500 91,500

On 1st January, 2017, C was admitted into partnership on the following terms:

  1. That C pays ₹10,000 as his capital.
  2. That C pays ₹5,000 for goodwill. Half of this sum is to be withdrawn by A and B.
  3. That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable.
  4. That the value of land and buildings be appreciated by 20%.
  5. There being a claim against the firm for damages, a liability to the extent of ₹1,000 should be created.
  6. An item of ₹650 included in sundry creditors is not likely to be claimed and hence should be written back.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.

Ans.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2017 Reserve fund Dr. 4,000
Jan 01 To A’s Capital A/c 3,000
To B’s Capital A/c 1,000
(Being reserve fund distributed among old partners in old ratio)
Land and building A/c Dr. 5,000
Sundry creditors A/c Dr. 650
To Revaluation A/c 5,650
(Being increase in the value of building and decrease in creditors)
Revaluation A/c Dr. 4,050
To stock 2,000
To s. debtors 800
To fixtures 100
To bills receivable 150
To liability for damages 1,000
(Being decrease in the value of assets and increase in liabilities)
Revaluation A/c Dr. 1,600
To A’s Capital A/c 1,200
To B’s Capital A/c 400
(Being profit on revaluation distributed among old partners)
Bank A/c Dr. 15,000
To C’s Capital A/c 10,000
To Premium for goodwill A/c 5,000
(Being capital and goodwill brought by C)
Premium for goodwill A/c Dr. 5,000
To A’s Capital A/c 3,750
To B’s Capital A/c 1,250
(Being goodwill distributed in sacrificing ratio)
A’s Capital A/c Dr. 1,875
B’s Capital A/c Dr. 625
To Bank A/c 2,500
(Being half the amount of goodwill withdrawn)

Revaluation A/c

Particulars Particulars
To stock 2,000 By Building 5,000
To s. debtors 800 By s. creditors 650
To fixtures 100
To bills receivable 150
To liab. damages 1,000
To profit t/f to
capitals
A 1,200
B 400 1,600
5,650 5,650

Partners’ Capital Accounts

Particulars ₹ A ₹ B Particulars ₹ A ₹ B
To cash 1,875 625 By balance b/d 30,000 16,000
To balance c/d 36,075 18,025 By revaluation
Profit 1,200 400
By premium 3,750 1,250
By res. fund 3,000 1,000
37,950 18,650 37,950 18,650

C’s Capital Account

Particulars Particulars
To Balance c/d 10,000 By Bank a/c 10,000
10,000 10,000

Balance Sheet

as on 1st Jan 2017

Liabilities Assets
S. Creditors 40,850 Cash at bank 39,000
Liability for 1,000 Bills receivable 2,850
damages S. debtors 16,000
Capitals (-) Provision 800 15,200
A 36,075 Stock 18,000
B 18,025 Fixtures 900
C 10,000 64,100 Land & buildings 30,000
1,05,950 1,05,950

Q.86 The following was the balance sheet of Arun, Bablu and Chetan profits and losses in the ratio of 6/14:5/14:3/14 respectively.

Liabilities Assets
Creditors 9,000 Land & Building 24,000
Bills Payable 3,000 Furniture 3,500
Capital Stock 14,000
Arun 19,000 Debtors 12,600
Bablu 16,000 Cash 900
Chetan 8,000 43,000
55,000 55,000

They agreed to take Deepak into partnership and give him a share of 1/8 on the following terms:

a) that Deepak should bring in ₹4,200 as goodwill and ₹7,000 as his capital;

b) that furniture be depreciated by 12%;

c) that stock can be depreciated by 10%;

d) that a reserve of 5% be created for doubtful debts;

e) that the value of land and buildings having appreciated be brought up to ₹31,000;

f) that after making the adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of Deepak’s Capital to his share in the business, i.e., actual cash to be paid off to, or brought in by the old partners as the case may be.

Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance sheet of the new firm.

Ans.

Revaluation A/c

Particulars Particulars
To stock 1,400 By land
To res. for b/d 630 and building 7,000
To furniture 420
To profit t/f to
capitals
Arun 1,950
Bablu 1,625
Chetan 975 4,550
7,000 7,000

Partners’ Capital Accounts

Particulars Arun Bablu Particulars Arun Bablu
To cash 1,750 1,625 By balance b/d 19,000 16,000
(Bal. figure) By revaluation
To balance c/d 21,000 17,500 Profit 1,950 1,625
By premium 1,800 1,500
22,750 19,125 22,750 19,125

Partners’ Capital Accounts

Particulars Chetan Deepak Particulars Chetan Deepak
By bal. b/d 8,000
To balance c/d 10,500 7,000 By cash 7,000
By revaluation
Profit 975
By premium 900
By cash (B.F.) 625
10,500 7,000 10,500 7,000

Cash A/c

Particulars Particulars
To balance b/d 900 By Arun’s cap. 1,750
To Deepak’s cap. 7,000 By Bablu’s cap. 1,625
To Premium 4,200 By balance c/d 9,350
To Chetan’s cap. 625
12,725 12,725

Balance Sheet

as on …..

Liabilities Assets
Creditors 9,000 Cash in hand 9,350
Bills payable 3,000 Stock 12,600
Capitals S. debtors 12,600
Arun 21,000 (-) Provision 630 11,970
Bablu 17,500 Furniture 3,080
Chetan 10,500 Land & buildings 31,000
Deepak 7,000 56,000
68,000 68,000

Q.87 Azad and Babli are partners in a firm sharing profits and losses in the ratio of 2:1. Chintan is admitted into the firm with ¼ share in profits. Chintan will bring in ₹30,000 as his capital and the capitals of Azad and Babli are to be adjusted in the profit sharing ratio.

The Balance Sheet of Azad and Babli as on December 31, 2016 (before Chintan’s admission) was as follows:

Balance Sheet of A and B as on 31/12/2016
Liabilities Assets
Creditors 8,000 Cash in hand 2,000
Bills payable 4,000 Cash at Bank 10,000
General Reserve 6,000 Sundry Debtors 8,000
Capital: Stock 10,000
Azad 50,000 Furniture 5,000
Babli 32,000 82,000 Machinery 25,000
Buildings 40,000
1,00,000 1,00,000

It was agreed that:

  1. Chintan will bring in ₹12,000 as his share of goodwill premium.
  2. Buildings were valued at ₹45,000 and Machinery at ₹23,000.
  3. A provision for doubtful debts is to be created @ 6% on debtors.
  4. The capital accounts of Azad and Babli are to be adjusted by opening current accounts.

Record necessary journal entries, show necessary ledger account at prepare the Balance Sheet after admission.

Ans.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2016 General reserve Dr. 6,000
31 Dec. To Azad’s Capital A/c 4,000
To Babli’s Capital A/c 2,000
(Being general reserve distributed among old partners in old ratio)
Building A/c Dr. 5,000
To Revaluation A/c 5,000
(Being increase in the value of building)
Revaluation A/c Dr. 2,480
To machinery 2,000
To pro. for D/D 480
(Being decrease in the value of assets)
Revaluation A/c Dr. 2,520
To Azad’s Capital A/c 1,680
To Babli’s Capital A/c 840
(Being profit on revaluation distributed among old partners)
Bank A/c Dr. 42,000
To Chintan’s Capital A/c 30,000
To Premium for goodwill A/c 12,000
(Being capital and goodwill brought by Chintan)
Premium for goodwill A/c Dr. 12,000
To Azad’s Capital A/c 8,000
To Babli’s Capital A/c 4,000
(Being goodwill distributed in sacrificing ratio)
Azad’s Capital A/c Dr. 3,680
To Azad’s Current A/c 3,680
(Being excess of capital transferred to current account)
Babli’s’s Capital A/c Dr. 8,840
To Babli’s Current A/c 8,840
(Being excess of capital transferred to current account)

Revaluation A/c

Particulars Particulars
To machinery 2,000 By Building 5,000
To provision for
doubtful debts 480
To profit t/f to
capitals
Azad 1,680
Babli 840 2,520
5,000 5,000

Partners’ Capital Accounts

Particulars Azad Babli Particulars Azad Babli
To current a/c 3,680 8,840 By balance b/d 50,000 32,000
(Bal. figure) By revaluation
To balance c/d 60,000 30,000 Profit 1,680 840
By premium 8,000 4,000
By general res. 4,000 2,000
63,680 38,840 63,680 38,840

Chintan’s Capital Account

Particulars Particulars
To balance c/d 30,000 By Bank a/c 30,000
30,000 30,000

Balance Sheet

as on 1st Jan 2017

Liabilities Assets
Creditors 8,000 Cash at bank 54,000
Bills payable 4,000 Stock 10,000
Current Accounts S. debtors 8,000
Azad 3,680 (-) Provision 840 7,520
Babli 8,840 12,520 Furniture 5,000
Capitals Building 45,000
Azad 60,000 Machinery 23,000
Babli 30,000
Chintan 30,000 1,20,000
1,44,520 1,44,520

Q.88 Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On April 01, 2016 they admitted Vimal for 1/5 share in the profits. The Balance Sheet Ashish and Dutta as on March 31, 2016 was as follows:

Balance Sheet of A and B as on 31/03/2016
Liabilities Assets
Creditors 15,000 Land & Building 35,000
Bills Payable 10,000 Plant 45,000
Capital: Debtors 22,000
Ashish 80,000 Less:
Dutta 35,000 Provision 2,000 20,000
Stock 35,000
Cash 5,000
1,40,000 1,40,000

It was agreed that:

1. The value of Land & Building be increased by ₹ 15,000.
2. The value of plant be increased by ₹ 10,000.
3. Goodwill of the firm be valued at ₹ 20,000.
4. Vimal to bring in capital to the extent of 1/5th of the capital of the new firm.

Record the necessary journal entries and prepare the Balance Sheet of the firm after Vimal’s admission.

Ans.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2016 Land and building A/c Dr. 15,000
Apr Plant A/c Dr. 10,000
1 To Revaluation A/c 25,000
(Being increase in the value of building and plant)
ii Revaluation A/c Dr. 25,000
To Ashish’s Capital A/c 15,000
To Dutta’s Capital A/c 10,000
(Being profit on revaluation distributed among old partners)
iii Cash A/c Dr. 36,000
To Vimal’s Capital A/c 36,000
(Being 1/5th capital brought by Vimal)
iv Vimal’s Current A/c Dr. 4,000
To Ashish’s Capital A/c 2,400
To Dutta’s Capital A/c 1,600
(Being goodwill distributed in sacrificing ratio)

Balance Sheet (after admission)

Liabilities Assets
Creditors 15,000 Cash 41,000
Bills payable 10,000 Stock 35,000
Capitals S. Debrs. 22,000
Ashish 97,400 (-) Pro. 2000 20,000
Dutta 46,600 Plant 55,000
Vimal 36,000 1,80,000 Land & building 50,000
Vimal’s current a/c 4,000
2,05,000 2,05,000

Working Note:

Partners’ Capital Accounts

Particulars Ashish ₹ Dutta ₹ Vimal ₹ Particulars Ashish ₹ Dutta ₹ Vimal ₹
To Balance c/d 97,400 46,600 36,000 By Balanceb/d 80,000 35,000
By Revaluation 15,000 10,000
By Cash 36,000
By Vimal Current 2,400 1,600
97,400 46,600 36,000 97,400 46,600 36,000

Vimal Current Account

Particulars Particulars
To Ashish’s Capital A/c 2,400 By Balance c/d 4,000
To Dutta’s Capital A/c 1,600
4,000 4,000

Total adjusted capital of old partners = ₹97,400 + ₹46,600 = ₹ 1,44,000

4/5th capital = ₹1,44,000

Total capital = ₹1,44,000 × 5/4 = ₹1,80,000

Vimal’s share = ₹1,80,000 × 1/5 = ₹36,000

Q.89 What are the different ways in which a partner can retire from the firm?

Ans.

A partner can retire from the firm as per agreement of the partnership. So if the agreement is for a fixed period or for a particular venture then a partner can retire after the expiry of the fixed period or on completion of the venture. Likewise if partnership is at will, then a partner can retire at any time by giving due notice. Further a partner can retire on ground of health, old age etc.

Q.90 Write the various matters that need adjustments at the time of retirement of a partner.

Ans.

Following are the matters that need adjustments at the time of retirement of a partner:

1. Ascertainment of new profit sharing ratio and gaining ratio.
2. Treatment of goodwill
3. Revaluation of assets and liabilities
4. Distribution of accumulated profits and losses
5. Adjustment of capital if required.
6. Settlement of amount due to retiring partner

Q.91 Distinguish between sacrificing ratio and gaining ratio.

Ans.

Basis Sacrificing ratio Gaining ratio
Meaning It is the ratio in which the old partners’ have agreed to surrender their share in favour of a new partner. It is the ratio in which the retired or deceased partner’s share is acquired by the remaining partners.
Formula Old ratio – new ratio New ratio – old ratio
Time It is computed at the time of admission of a new partner. It is computed at the time of retirement or death of a partner.

Q.92 Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?

Ans.

At the time of retirement or death of a partner, assets of the firm are revalued and liabilities are reassessed with a purpose that the outgoing partner is not at an advantage or disadvantage because of the change in values. Hence profit or loss on revaluation is distributed among all partners in their profit sharing ratio.

Q.93 Why a retiring/deceased partner is entitled to a share of goodwill of the firm?

Ans.

At the time of retirement or death of a partner, adjustment is necessary for goodwill. When a partner retires or dies his share in profits is taken by the continuing partners for which they should compensate the outgoing partner. This compensation paid is known as goodwill.

Q.94 Explain the modes of payment to a retiring partner.

Ans.

The retiring partner’s account is settled as per the terms of the partnership deed. It can settle in the following ways:

  1. Lump sum immediately
  2. Payment in installments
  3. Partly in cash immediately and partly in installments at an agreed interval

In the absence of any agreement, section 37 of the Indian Partnership Act, 1932 is applicable, which states that the outgoing partner has an option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his or her money. Hence total amount due to the retiring partner which is ascertained after all adjustments have been made is to be paid immediately to the retiring partner. In case the firm is not in a position to make payment immediately, the amount due is transferred to the retiring partner’s loan account and as and when the amount is paid it is debited to his account.

Q.95 How will you compute the amount payable to a deceased partner?

Ans.

The sum due to the legal representative/ executors includes:

1. Credit balance of his capital account
2. Credit balance of his current account, if any
3. His share of goodwill
4. His share of accumulated profits and reserves
5. His share in the gain of revaluation of assets and liabilities
6. His share of profits up to the date of death
7. Interest on capital, up to the date of death
9. Salary commission due up to the date of death

The following deductions if any may have to be made from his share:
1. Debit balance of his current account,
2. His share of goodwill to be written off, if necessary
3. His share of accumulated losses
4. His share of loss on revaluation of assets and liabilities
5. His share of loss up to the date of death
6. His drawings and interest thereon up to the date of death

Q.96 Explain the treatment of goodwill at the time of retirement or on the event of death of a partner.

Ans.

The retiring or deceased partner is entitled to his share of goodwill at the time of retirement/death because the goodwill has been earned by the firm with the efforts of all the existing partners. Hence at the time of retirement/death of a partner, goodwill is valued as per agreement among the partners; the retiring/deceased partner is compensated for his share of goodwill by the continuing partners in their gaining ratio. As such in case of retirement or death of a partner, the adjustment of goodwill will be made through partner’s capital accounts. The retiring or deceased partner’s capital account will be credited with his share of goodwill and continuing partners’ capital accounts will be debited in their gaining ratio. The following journal entry will be recorded:

Journal Entry

Particulars L.F. Dr. (₹) Cr. (₹)
i Continuing partners’ cap. a/c Dr.
To Retiring/deceased partner’s a/c
(Outgoing partner’s share of goodwill credited to his account and debited to continuing partners in their gaining ratio)

If goodwill already appears in the books, it will be written off among all partners in their old profit sharing ratio by means of the following entry:

Journal Entry

Particulars L.F. Dr. (₹) Cr. (₹)
i All partners’ capital a/c Dr.
To Goodwill a/c
(Goodwill written off among all partners in their old profit sharing ratio)

Q.97 Discuss the various methods of computing the share in profits in the event of death of a partner.

Ans.

Deceased partner’s share of profit from the last Balance Sheet to the date of death can be computed by the following two methods:

On the basis of last year’s profit (or average profit of last few years)

On the basis of sales

1. On the basis of last year’s profit: It is also called Time Basis. In this case, profits are assumed to have arisen uniformly over the year. Suppose, the profit for the previous year is ₹60,000 and a partner dies after 3 months of the Balance Sheet. The profits of the 3 months will be ₹15,000 i.e. ₹60,000 x 3/12. If the deceased partners share of profit is 1/5, his share of profit till the date of death will be ₹3,000. It may be calculated on the basis of previous year profit alone or on the basis of average profits of certain years.

2. On the basis of sales: If the profit till the date of death is to be ascertained on the basis of sales or turnover, we should know (a) sales for the previous accounting year (b) sales up to the date of death and (c) profit of the previous year. Suppose the rate of profit on sales is 20% for previous year. Sales up to the date of death is ₹5,00,000, then profits up to the date of death will be ₹1,00,000 i.e. 20% of ₹5,00,000. Then deceased partner’s share of profit is computed.

Q.98 Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3:2:1. On March 31, 2017, Naman retires.

The various assets and liabilities of the firm on the date were as follows:

Cash ₹10,000, Building ₹1,00,000, Plant and Machinery ₹40,000, Stock ₹20,000, Debtors ₹20,000 and Investments ₹30,000.

The following was agreed upon between the partners on Naman’s retirement:

1. Building to be appreciated by 20%.
2. Plant and Machinery to be depreciated by 10%.
3. A provision of 5% on debtors to be created for bed and doubtful debts.
4. Stock was to be valued at ₹18,000 and Investment at ₹35,000.

Record the necessary journal entries to the above effect and prepare the revaluation account.

Ans.

Revaluation A/c

Particulars Particulars
To plant and mach. 4,000 By building 20,000
To stock 2,000 By investment 5,000
To prov. for D/D 1,000
To profit t/fd to
capitals
Himanshu 9,000
Gagan 6,000
Naman 3,000 18,000
25,000 25,000

Journal Entries

Particulars L.F. Dr. (₹) Cr. (₹)
i Building A/c Dr. 20,000
Investment A/c Dr. 5,000
To Revaluation A/c 25,000
(Being increase in the value of investment and building)
ii Revaluation A/c Dr. 7,000
To plant and machinery 4,000
To stock A/c 2,000
To pro. for D/D A/c 1,000
(Being decrease in the value of assets debited to revaluation)
iii Revaluation A/c Dr. 18,000
To Himanshu’s Capital A/c 9,000
To Gagan Capital A/c 6,000
To Naman Capital A/c 3,000
(Being profit on revaluation distributed among old partners)

Q.99 Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserve ₹36,000 and Profit and Loss Account (Dr.) ₹15,000.

Pass the necessary journal entries to the above effect.

Ans.

Journal Entries

Particulars L.F. Dr. (₹) Cr. (₹)
i General reserve Dr. 36,000
To Naresh’s Capital A/c 12,000
To Rajkumar’s Capital A/c 12,000
To Bishwajeet’s Capital A/c 12,000
(Being general reserve distributed among all partners in old ratio)
ii Naresh’s Capital A/c 5,000
Rajkumar’s Capital A/c 5,000
Bishwajeet’s Capital A/c 5,000
To Profit and loss A/c 15,000
(Being debit balance in P&L debited to all partners)

Q.100 What is meant by Not-For-Profit Organisations?

Ans.

Not- for-Profit organisations refer to the organisations that are used for the welfare of the society and are set up as charitable institutions which function without any profit motive. Normally they do not manufacture, purchase or sell of goods and may not have credit transactions.

Q.101 State the meaning of Receipt and Payment account.

Ans.

A Receipt and payment account is a summary of bank and cash transactions. All Receipts are shown both revenue and capital on the left hand side. Similarly all payments both revenue and capital are shown on the right hand side.

Q.102 State the meaning of Income and Expenditure account.

Ans.

Income and Expenditure account is an account prepared on accrual basis by Not-profit organisations, to find out the excess of income over expenditure (surplus) or exceeds of expenditure over income (deficit). It is just like a profit and loss account and it’s a nominal account. Expenditures are recorded at the debit side and income at the credit side for the current period only and the balance is either surplus or deficit.

Q.103 State the features of Receipt and Payment account.

Ans.

Features of Receipt and Payment account:

  • It is a real account and the opening cash or bank balance is written in the beginning.
  • All the receipts both of capital and revenue nature are recorded on receipts side.
  • It includes all payments of capital and revenue nature on the payment side.
  • It shows the balance of cash and bank at the close of the year.
  • It is a summary of the cash book and does not show net income or net loss.

Q.104 What steps are taken to prepare Income and Expenditure account from a Receipt and Payment account?

Ans.

Steps:

  1. Exclude opening and closing cash or bank balances.
  2. Eliminate all receipts and payments having capital nature and take revenue receipts and payments.
  3. Exclude revenue receipts and payments which pertain to either the previous year or subsequent year.
  4. Include revenue income which has not been received during the period and include revenue expenditure which has not been paid during that period.
  5. Include amount received or paid in the previous year but pertaining to the year in the revenue items for the current year.
  6. Show all adjusted figures of income in the credit side of income and expenditure account and also show all adjusted figures of expenditure in the debit side of income and expenditure account.
  7. Non cash items such as provision for bad and doubtful debts, depreciation profit and loss on sale of fixed assets which affect to profit should be brought into account.

Q.105 What is subscription? How is it calculated?

Ans.

It is the main source of income of the not-profit organisation. It is a contribution by member for meeting expenses of the organisation and shown in the Receipt and payment account.

The subscription received during the year will be shown in the receipts and payments account. The actual amount of subscription due during the year will be shown as income in the income and expenditure account. It is computed by multiplying total number of members by subscription per member.

Q.106 What is Capital Fund? How is it calculated?

Ans.

Capital fund is the name used for capital in case of not-for-profit organisations, which is also known as general fund. It is the difference between assets and outside liabilities. Surplus or deficit as per income and expenditure account is added or deducted to (or from) this fund. If capital fund is not given then it is computed by preparing Balance Sheet at the beginning of the year.

Q.107 Explain the statement: “Receipt and Payment account is a summarised version of Cash Book”.

Ans.

This account is a merely a summary of the transaction appearing in the cash book. According to William Pickles, Receipts and Payments account is nothing more than a summary of the cash book over a certain period, analyse and classified under suitable headings. Receipts and Payments account is prepared at the end of the year from cash book.

All receipts and payments which are entered in the cash book are also entered in the receipts and payments account, or course in a summary from like cash book. Receipts and payment account starts with the opening balance of cash in hand and cash at bank. Cash in hand always has a debit balance and therefore appears on the debit side. Like cash book, this account also records only actual receipt of cash and payment of cash.

Q.108 “Income and Expenditure account of a Not-for-Profit organisation is akin to profit to loss account of a business concern”. Explain the statement.

Ans.

Income and expenditure account is similar to the Profit and loss account of a profit-seeking entity and is prepared to ascertain the surplus or deficit of the current year. It is prepared in the same manner in which a trading and profit and loss account is prepared in case of trading organisation. All revenue items relating to current period are shown in the income and expenditure account.

The Income and Expenditure Account is prepared on accrual basis with the help of Receipts and Payments Account along with additional information regarding outstanding and prepaid expenses and depreciation etc. Hence many items appearing in Receipts and Payments Account are adjusted.

Q.109 Distinguish between Receipts and Payments account and Income and expenditure account.

Ans.

Basis Receipts & Payments A/c Income & Expenditure A/c
Nature It is a real account like a cash a/c which shows summary of cash transactions. It is a nominal account like profit and loss account.
Opening balance It starts with the opening balance of cash and bank. It has no opening balance.
Revenue and capital items It records receipts and payments of both revenue and capital nature. It records income and expenditure of only revenue nature.
Recording Receipts are recorded on the debit side and payments on the credit side. Expenditures are recorded on the debit side and income on the credit side.
Accounting system It is based on the cash system of accounting. It is based on the mercantile system of accounting.
Credit transactions Credit sales and purchases are not recorded in this account. Credit sales and purchases are recorded.
Closing balance Closing balance of this account shows cash in hand and at bank or bank overdraft. Closing balance of this account shows surplus or deficiency.
Transfer of closing balance Closing balance of this account is transferred to the next year’s Receipt and Payments A/c. Closing balance of this account is transferred to the capital fund in the Balance Sheet.

Q.110 Explain the basic features of Income and Expenditure account and of Receipt and Payment account.

Ans.

Features of Income and Expenditure Account:

  • There are no opening and closing balances in this account.
  • It is a nominal account.
  • Debit side of the account records expenditure, while credit side records income.
  • It records only revenue receipts and capital receipts are not recorded in it.
  • Revenue expenditure of current year are recorded in this account. All items of previous year or next year are adjusted.
  • Income and expenditure account is prepared on accrual basis, outstanding expenses and accrued incomes are adjusted in this account.
  • Balance sheet is prepared on the basis of this account.
  • It shows surplus or deficit.

Features of Receipts and Payment account:

  • It is a real account and the opening cash or bank balance is written in the beginning.
  • Debit side of the account records receipts, while credit side records payments.
  • All the receipts both of capital and revenue nature are recorded on Receipts side.
  • It includes all payments of capital and revenue nature on the payment side.
  • All the receipts and payments concerning current year, previous year and advance of next year are shown in this account.
  • It shows the balance of cash and bank at the close of the year.
  • It is a summary of cash book.
  • This account does not show net income or net loss.

Q.111 Show the treatment of the following items by a not-for-profit organisation:

    1. Annual subscription
    2. Specific donation
    3. Sale of Fixed assets
    4. Sale of old periodicals
    5. Sale of sports materials
    6. Life membership fee

Ans.

1) Annual subscriptions: Subscription is a membership fee paid by the member on annual basis. This is the main source of income of such organisations. Subscription paid by the members is shown as receipt in the Receipt and Payment account and as income in the Income and Expenditure account.

2) Specific donation: If donation received is to be utilised to achieve specified purpose, it is called specific donation. The specific purpose can be an extension of the existing building, construction of new computer laboratory, creation of a book bank, etc. Such donation is to be capitalised and shown on the liabilities side of the Balance Sheet.

3) Sale of fixed assets: Receipts from the sale of an old asset will appear in the Receipts and Payments account of the year in which it is sold. But any gain or loss on the sale of asset is taken to the Income and Expenditure account of the year. Book value of the asset sold is deducted in the Balance Sheet.

4) Sale of old Periodicals: It is an item of recurring nature and shown as the income side of the Income and Expenditure account. It is also shown in the Receipts and Payments Account as receipt.

5) Sale of sports material: Sale of sports materials (used materials like old balls, bats, nets, etc) is the regular feature with any sports club. It is usually shown as an income in the Income and Expenditure account. It is also shown in the Receipts and Payments Account as receipt. Book value of the material sold is deducted in the Balance Sheet.

6) Life membership fees: Some members prefer to pay lump sum amount as life membership fee instead of paying periodic subscription, such amount is treated as capital receipt and credited directly to the capital/general fund.

Q.112 Show the treatment of items of Income and Expenditure account when there is a specific fund for those items.

Ans.

The not-for-profit organisations create special funds for certain purposes such as ‘prize funds’, ‘match fund’ and ‘sports fund’. Such funds are invested in securities and the income earned on such investments is added to the respective fund, not credited to Income and Expenditure account. Similarly, the expenses incurred on such specific purposes are also deducted from the special fund and not shown in the Income and Expenditure account.

The special funds are shown in balance sheet, however if after adjustment of income and expenses the balance in specific or special fund is negative, it is transferred to the debit side of the Income and Expenditure account.

Q.113 What is Receipt and Payment account? How is it different from Income and Expenditure account?

Ans.

The Receipts and payment account is the summary of cash and bank transactions which helps in the preparation of Income and Expenditure account and the Balance Sheet. Besides it is a legal requirement as the Receipts and payments account has also to be submitted to the Registrar of societies along with the Income and Expenditure account and the Balance Sheet.

Following are the important points of distinction between the two:

Basis Receipts & Payments A/c Income & Expenditure A/c
Nature It is a real account like a cash a/c which shows summary of cash transactions. It is a nominal account like profit and loss account.
Revenue and capital items It records receipts and payments of both revenue and capital nature. It records income and expenditure of only revenue nature.
Recording Receipts are recorded on the debit side and payments on the credit side. Expenditures are recorded on the debit side and income on the credit side.
Accounting system It is based on the cash system of accounting. It is based on the mercantile system of accounting.
Closing balance Closing balance of this account shows cash in hand and at bank or bank overdraft. Closing balance of this account shows surplus or deficiency.

Q.114 From the following particulars taken from the Cash Book of a health club. Prepare a Receipts and Payments Account.

Particulars
Opening balance:
Cash in Hand 5,000
Cash at Bank 25,000
Subscriptions 1,65,000
Donations 35,000
Investment Purchased 80,000
Rent Paid 20,000
General expenses 21,500
Postage and stationery 2,000
Courier charges 1,000
Sundry Expenses 2,500
Closing cash in hand 12,000

Ans.

Books of Health Club

Receipts and Payments Account

for the year ending….

Receipts Payments
To Balance b/d By Investment 80,000
Cash 5,000 By General exp. 21,500
Bank 25,000 By Rent 20,000
To Subscription 1,65,000 By Postage and
To Donation 35,000 Stationery 2,000
By Courier exp. 1,000
By Sundry exp. 2,500
By Balance c/d
Cash 12,000
Bank 91,000
2,30,000 2,30,000

Q.115 The Receipt and payment account of Harimohan Charitable institution is given:

Receipt and Payment account

for the year ending March 31, 2015

Receipts Payments
Balance b/d Furniture 3,000
Cash at Bank 22,000 Investments 55,000
Cash in Hand 8,800 Advance for building 20,000
Donations 16,000 Charities 60,000
Subscriptions 50,200 Salaries 10,400
Endowment fund 60,000 Rent and Taxes 4,000
Legacies 12,000 Printing 1,000
Interest on Investment 3,800 Postage 300
Interest on Deposits 800 Advertisements 1,100
Sale of old newspapers 500 Insurance 4,800
Donation for Building 16,000 Balance c/d:
Legacy for 12,000 Cash at Bank 32,000
Building Cash in hand 10,500
2,02,100 2,02,100

Prepare the Income and Expenditure account for the year ended on March 31, 2015 after considering the following:
1.Liabilities to be provided for are:
Rent ` 800, Salaries ₹ 1,200, advertisement ₹ 200.
2. ₹ 2000 due for the interest on investment was not actually received.

Ans.

Harimohan Charitable Institution

Income and Expenditure Account

for the year ending 31st March, 2015

Expenditure Income
To Charities 60,000 By Subscriptions 50,200
To Salaries 10,400 By Donation 16,000
Add: Out. 1,200 11,600 By Int. on invest.
To Rent and taxes 3,800
4,000 Add: O/s 2,000 5,800
Add: out. 800 4,800 By Legacies 12,000
To Printing 1,000 By Int. on deposits 800
To Postage 300 By Old newspapers 500
To Advertisement
1,100
Add: out. 200 1,300
To Insurance 4,800
To Surplus 1,500
85,300 85,300

Q.116 From the following particulars, prepare Income and Expenditure account.

Details
Fees collected, including ₹80,000 on account of the previous year 5,20,000
Fees for the year outstanding 30,000
Salary paid, including ₹5,000 on account of the previous year 68,000
Salary outstanding at the end of the year 3,000
Entertainment expenses 8,000
Tournament expenses 25,000
Meeting expenses 18,000
Travelling expenses 7,000
Purchase of Books and Periodicals, including ₹31,000 for purchase of books 40,000
Rent 15,000
Postage, telegrams and telephones 6,000
Printing and Stationery 18,000
Donations received 25,000

Ans.

Income and Expenditure Account
Expenditure Income
To Entertainment 8,000 By fees
To Salaries 68,000 5,20,000
(-): Prepaid 5,000 Less: for last year
(+):O/s 3,000 66,000
To Tournament exp. 25,000 (80,000)
To Meeting exp. 18,000 Add: O/s 30,000 4,70,000
To Travelling exp. 7,000
To Rent 15,000
To Postage etc. 6,000
To Printing and st. 18,000
To Surplus 3,07,000
4,70,000 4,70,000

Q.117 Following is the information given in respect of certain items of a Sports Club. Show these items in the Income and Expenditure account and the Balance Sheet of the Club:

Details
Sports fund as on 01/04/2015 35,000
Sports fund investments 35,000
Interest on sports fund 4,000
Donations for sports fund Investment 15,000
Sports prizes awarded 10,000
Expenses on sports events 4,000
General fund 80,000
General fund investments 80,000
Interest on general fund investments 8,000

Ans.

Income and Expenditure Account
Expenditure Income
To Surplus 8,000 By Int. on GF
Investment 8,000
8,000 8,000

Sports Fund Account

Particulars Particulars
To prizes awarded 10,000 By Balance b/d 35,000
To exp. on sports 4,000 By int. on S. fund 4,000
To balance c/d 40,000 By donation S. fund 15,000
54,000 54,000

Balance Sheet

Liabilities Assets
Sports fund 40,000 Sports fund invest. 35,000
General fund G. Fund investment 80,000
80,000 Cash in hand 13,000
(+): Surplus 8,000 88,000
1,28,000 1,28,000

Cash Account

Particulars Particulars
To int. on S. fund 4,000 By prizes awarded 10,000
To donation S. fund 15,000 By exp. on sports 4,000
To int. on GF invt. 8,000 By Balance c/d 13,000
27,000 27,000

Q.118 How will you deal with the following items while preparing for the Bombay Women Cricket Club its income and expenditure account for the year ending 31/03/2017 and its Balance Sheet as on 31/03/2017?

Details
Donation received during the year for the construction of a permanent pavilion 12,25,000
Expenditure incurred up to 31/03/2017 on its construction 10,80,000
The total estimated expenditure on construction of Pavilion 25,00,000
Tournament Fund:

Balance as on 01/04/2016

10,700
Subscriptions for tournament received during the year 65,800
Expenditure incurred during the year on conducting tournaments 72,400
Life Membership Fee received during the year 28,000

Give reasons for your answer.

Ans.

(a)

Particulars
Donation received during the year for the construction of a permanent pavilion. 12,25,000
Less: Expenditure incurred on construction 10,80,000
Balance of pavilion fund 1,45,000

₹1,45,000 will be shown on the liability side of Balance Sheet and ₹10,80,000 will be shown in the assets side of the balance sheet.

(b)

Particulars
Tournament fund (in the beginning) 10,700
Add: Subscription for tournament received during the year 65,800
Less: Expenditure incurred for conducting tournament 72,400
Balance in tournament fund 4,100

₹4,100 will be shown on the liability side of Balance Sheet.

(c) Life membership fees will be capitalised and shown on the liabilities side of the Balance Sheet.

Q.119 From the following receipts and payments and information given below, prepare income and expenditure account and opening Balance sheet of Adult Literacy organisation as on December 31, 2017.

Receipts and Payment account for the year ending as on December 31, 2017:

Receipts Payments
Balance b/d: General exp. 3,200
Cash in hand 4,000 News paper 1,850
Cash at Bank 15,550 Electricity 3,000
Subscriptions Fixed deposit with bank (on 31/06/2017) @ 10% p.a. 18,000
2016 1,200 Books 7,000
2017 26,500 Salary 3,600
2018 500 28,200 Rent 6,500
Sale of old newspapers 1,250 Postage charges 300
Govt. grant 12,000 Furniture (Purchased) 10,500
Sale of old furniture (book value ₹5,000) 3,700 Balance c/d:
Interest received on FD 450 Cash in hand 3,000
Cash at bank 8,200
65,150 65,150

Information:

Subscription outstanding as on 31/12/2016: ₹2,000 and on December 31, 2017: ₹1,500.

On December, 31, 2017 Salary outstanding: ₹600 and one month rent paid in advance.

On Jan, 01, 2016 organisation owned furniture ₹12,000, Books ₹5,000.

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To general exp. 3,200 By subscription
To rent 6,500 28,200
(-): prepaid 590 5,910 Less: for
To salary 3,600 2016 1,200
(+) O/s 600 4,200 2018 500
To electricity 3,000 Add: Out. 1,500 28,000
To postage charges 300 By old newspaper 1,250
To Loss on fur. sold 1,300 By Govt. grant 12,000
To newspaper 1,850 By Int. on FD 450
To surplus 22,390 Add: accrued 450 900
42,150 42,150

Balance Sheet

as at 31st December, 2017

Liabilities Assets
Capital fund 38,550 Cash in hand 4,000
(Balancing figure) Cash at bank 15,550
Subscription o/s 2,000
Furniture 12,000
Books 5,000
38,550 38,550

Q.120 The following is the Receipts and Payments account of the Nari Kalayan Samittee for the year ended December 31, 2017:

Receipts Payments
Balance from last year b/d 2,270 Rent 6,600
Subscriptions 32,500 Electric charges 3,200
Life membership fee 3,250 Lecturer’s fees 730
Donation 2,500 Office expenses 1,480
Profit from entertainment 7,250 Printing and Stationery 1,050
Sale of old books (books value ₹ 1,000) 750 Legal fee 1,870
Interest 350 Books 6,500
Furniture purchased 8,600
Expenses on nukar drama 1,300
Balance c/d:
Cash in hand 8,040
Cash at bank 9,500
48,870 48,870

You are required to prepare an income and expenditure account after the following adjustments:

(a)Subscription still to be received are ₹ 750, but subscription include ₹ 500 for the year 2018.

(b)In the beginning of the year the Sangh owned building ₹ 20,000 and furniture ₹ 3,000 and books ₹ 2,000.

(c)Provide depreciation on furniture @5% (including purchase) books @ 10% and building @ 5%.

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To Rent 6,600 By Subscription
To Elec. charges 3,200 32,500
To Lecturer’s fees 730 Less: for
To Office expenses 1,480 2018 500
To Printing & st. 1,050 Add: Out. 750 32,750
To Legal fees 1,870 By Donation 2,500
To Exp. on drama 1,300 By Profit from
To Depreciation on entertainment 7,250
Furniture 580 By Interest 350
Books 750
Building 1,000
To loss on sale of
books 250
To Surplus 24,040
42,850 42,850

Q.121 Following is the receipt and payment account of Indian Sports Club, prepare Income and Expenditure account, Balance Sheet as on December 31, 2017:

Receipt and Payment account for the year ending December 31, 2017:

Receipts Payments
Balance b/d: 7,890 Salary 11,000
Subscriptions 52,000 Electric charges 5,500
Life membership fee 2,200 Billiard Table 17,500
Entrance fee 3,200 Office expenses 4,100
Tournament fund 26,000 Printing & Stationery 2,300
Locker rent 1,250 Tournament expenses 18,500
Sale of old sports goods (costing ₹2,200) 2,500 Repair of ground 2,000
Sale of old newspaper 750 Furniture purchased 7,700
Legacy 37,500 Sports equipments 12,000
Cash in hand 12,690
Cash at bank 10,000
Fixed deposit (on 01/10/2017 for 10% p.a) 30,000
1,33,290 1,33,290

Other information:

Subscription outstanding was on December 31, 2016 ₹1,200 and ₹3,200 on December 31, 2017. Locker rent outstanding on December 31, 2017 ₹250. Salary outstanding on December 31, 2017 ₹1,000.

On January 01, 2017 club has building ₹36,000, furniture ₹12,000. Sports equipment ₹17,500. Depreciation charged on these items @ 10% (including purchase).

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To salary 11,000 By subscription
Add: out. 1,000 12,000 52,000
To electric charge 5,500 Less: P.Yr. 1,200
To office expenses 4,100 Add: C.Yr. 3,200 54,000
To P & St. 2,300 By entrance fees 3,200
To Rep. of ground 2,000 By locker rent
To depreciation 1,250
Building 3,600 Add: o/s 250 1,500
Furniture 1,970 By profit on sale
Sports eq. 2,730 8,300 of sports mat. 300
To surplus 26,300 By sale of old
newspaper 750
By int. on FD 750
60,500 60,500

Balance Sheet

as at 1st Jan 2017

Liabilities Assets
Capital fund 74,590 Cash in hand 7,890
(Balancing figure) Subscription o/s 1,200
Building 36,000
Furniture 12,000
Sports equipment 17,500
74,590 74,590

Balance Sheet

as at 31st December, 2017

Liabilities Assets
Capital fund Cash in hand 12,690
74,590 Cash at bank 10,000
(+) Legacy 37,500 Subscription o/s 3,200
(+) Surplus26,300 1,38,390 Fixed deposit 10% 30,000
Life mem. Fees 2,200 Accrued interest 750
Salary out. 1,000 Building 32,400
Tourna. Fund Furniture 17,730
26,000 Sports equipment 24,570
(-) Exp. 18,500 7,500 Billiards table 17,500
Out. Locker rent 250
1,49,090 1,49,090

Furniture = ₹12,000 + ₹7,700 – ₹1,970 = ₹17,730.

Sports equipment = ₹17,500 – ₹2,200 + ₹12,000 – ₹2,750 = ₹24,570.

Q.122 From the following receipt and payment account of Jan Kalyan Club, prepare income and expenditure account and balance sheet for the year ending March 31, 2017.

Receipt and Payment Account

For the year ending March 31, 2017

Receipts Payments
Cash in hand as on 01/04/16 6,800 Salaries 24,000
Subscription 60,200 Travelling expenses 6,000
Donation 3,000 Stationery 2,300
Sale of furniture (book value ₹6,000) 4,000 Rent 16,000
Entrance fee 800 Repair 700
Life membership fee 7,000 Books purchased 6,000
Interest on Investment (@ 5% for full year) 5,000 Building purchased 30,000
Cash in hand as 31/03/2017 1,800
86,800 86,800

Additional Information:

01/04/2016 31/03/2017
Subscription received in advance 1,000 3,200
Outstanding subscription 2,000 3,700
Stock of stationery 1,200 800
Books 13,500 16,500
Furniture 16,000 8,000
Outstanding rent 1,000 2,000

Ans.

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To rent 16,000 By subscription
(-) P Yr. 1,000 60,200
(+) Out. 2,000 17,000 (-) P Yr. 2,000
To stationery 2,700 (-)N Yr. 3,200
To loss on sale of (+) O/s 3,700 59,700
furniture 2,000 By donation 3,000
To salaries 24,000 By int. on invt. 5,000
To travelling exp. 6,000 By entrance
To repairs 700 fees 800
To depreciation on
Books 3,000
Furniture 2,000
To surplus 11,100
68,500 68,500

Balance Sheet

as on 1st April 2016

Liabilities Assets
Rent outstanding 1,000 Cash in hand 6,800
Subs in advance 1,000 Subscription o/s 2,000
Capital fund 1,37,500 5% Investments 1,00,000
(Balancing figure) Stationery 1,200
Books 13,500
Furniture 16,000
1,39,500 1,39,500

Balance Sheet

as on 31st March, 2017

Liabilities Assets
Rent outstanding 2,000 Cash in hand 1,800
Subs in advance 3,200 Subscription o/s 3,700
Life mem. fees 7,000 5% Investments 1,00,000
Capital fund Stationery 800
1,37,500 Books 16,500
(+)Surplus 11,100 1,48,600 Furniture 8,000
Building 30,000
1,60,800 1,60,800

Q.123 Receipt and Payment account of Shankar Sports club is given below, for the year ended March 31, 2017:

Receipt and Payment Account

for the year ending March 31, 2017

Receipts Payments
Opening cash in hand 2,600 Rent 18,000
Entrance fees 3,200 Wages 7,000
Donation for building 23,000 Billiard table 14,000
Locker rent 1,200 Furniture 10,000
Life membership fee 7,000 Interest 2,000
Profit from entertainment 3,000 Postage 1,000
subscription 40,000 Salary 24,000
Cash in hand 4,000
80,000 80,000

Prepare Income and expenditure account and Balance Sheet with help of following information:

Subscription outstanding on March 31, 2016 is ₹1,200 and ₹2,300 on March 31, 2017, Opening stock of postage stamps is ₹300 and closing stock is ₹200, Rent ₹1,500 related to 2015 and ₹1,500 is still unpaid.

On April 01, 2016 the club owned furniture ₹15,000. Furniture valued at ₹22,500.

On March 31, 2017 the club took a loan of ₹20,000 (@ 10% p.a) in 2016.

Ans.

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To rent 18,000 By subscription
(-) 1,500 40,000
(+) Out. 1,500 18,000 (-)O/s P. Yr.1,200
To wages 7,000 (+)O/s C.Y. 2,300 41,100
To Dep. on fur. 2,500 By entrance fee 3,200
To salary 24,000 By locker rent 1,200
To int. on loan 2,000 By profit from
To postage 300 entertainment 3,000
(+) Pur. 1,000 By deficit 6,100
(-) stock 200 1,100
54,600 54,600

Balance Sheet

as at 1st Apr. 2016

Liabilities Assets
Rent outstanding 1,500 Cash in hand 2,600
Loan @ 10% 20,000 Subscription o/s 1,200
Postage stamps 300
Furniture 15,000
Deficit 2,400
(Balancing figure)
21,500 21,500

Balance Sheet

as at 31st March, 2017

Liabilities Assets
Capital fund Cash in hand 4,000
(2,400) Postage stamps 200
(+) Life mem. 7,000 Subscription o/s 2,300
(-) Deficit 6,100 Furniture 22,500
Rent out. 1,500 Billiards table 14,000
Donation for Capital deficit 1,500
building 23,000
10% Loan 20,000
44,500 44,500

Q.124 Prepare Income and Expenditure account and Balance Sheet for the year ended March 31, 2016 from the following Receipt and Payment account and Balance Sheet of culture club:

Receipt and Payment Account

For the year ending March 31, 2016

Receipts Payments
Opening cash balance 12,000 Furniture 4,000
Subscription Telephone expenses 800
2014-15 2000 Salary
2015-16 22000 24,000 2014-15 1,000
Entrance fees 2,800 2015-16 4,000
Locker rent 1,000 Newspaper 700
Life membership fee 1,200 Sundry expenses 1,000
Government grant 11,000 Defence bonds 18,000
Land 20,000
Closing cash balance 2,500
52,000 52,000
Balance Sheet

For the year ending March 31, 2015

Liabilities Assets
Advance locker rent 200 Cash in hand 12,000
Subscription received in advance 1,000 Outstanding Subscription 3,000
Outstanding salary 2,000 Building 35,000
Loan 10,000
Capital fund 36,800
50,000 50,000

Ans.

Income and Expenditure Account

for the year ending 31st March, 2016

Expenditure Income
To salary 5,000 By subscription
(-) P. Yr. 1,000 4,000 24,000
To tel. exp. 800 (-)O/s P. Yr.2,000
To newspaper 700 (+)O/s C.Y. 1,000 23,000
To sundry exp. 1,000 By entrance fees 2,800
To surplus 31,500 By locker rent
1,000
Add: recd. P. Yr.
200 1,200
By government
grant 11,000
38,000 38,000

Balance Sheet

as at 31st March, 2016

Liabilities Assets
Capital fund Cash in hand 2,500
36,800 Furniture 4,000
(+) Surplus31,500 68,300 Building 35,000
Life mem. fees 1,200 Defence bonds 18,000
Loan 10,000 Land 20,000
Out. salary 1,000 Outstanding income 1,000
80,500 80,500

Q.125 From the following Receipt and payment account prepare final accounts of a Unity Club for the year ended March 31, 2017:

Receipt and Payment Account

For the year ending March 31, 2017

Receipts Payments
Balance b/d: 15,000 Furniture 18,000
Sale of old furniture(costing ₹ 6,000) 4,000 Library books 10,000
Subscriptions: Salaries 72,000
2015-16 18000 General expenses 18,000
2016-17 60000 Electric charges 12,000
2017-18 12000 90,000 Newspapers 33,800
Sale of old newspapers 10,800 Postage 3,000
Profit from entertainment 44,000 Stationery 40,000
Rent 84,000 Audit fee 8,000
Balance c/d 33,000
2,47,800 2,47,800
Balance Sheet

As on March 31, 2017

Liabilities Assets
Outstanding Salary 6,000 Cash 15,000
Capital Fund 6,94,000 Outstanding subscription 18,000
Library Books 30,000
Furniture 37,000
Land and building 6,00,000
7,00,000 7,00,000

Additional Information:
1. The club had 500 members each paying an annual subscription of ₹ 150.
2. On 31/03/2017 salaries outstanding amounted to ₹ 1,200 and salaries paid included ₹ 6,000 for the year 2015-16.
3. Provide 5% depreciation on land and building.

Ans.

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To Salary 72,000 By Subscription
(-) P. Yr. 6,000 90,000
(+) O/s 1,200 67,200 (+)O/s 15,000 75,000
To Loss on sale fur. 2,000 By Rent 84,000
To General exp. 18,000 By Sale of old
To Electric charges 12,000 newspapers 10,800
To Postage 3,000 By Profit from
To Newspaper 33,800 entertainment 44,000
To Stationery 40,000 By Deficit 200
To Audit fees 8,000
To Dep. L & B 30,000
2,14,000 2,14,000

Balance Sheet

as at 31st March, 2017

Liabilities Assets
Capital fund Cash in hand 33,000
6,94,000 O/s subscription 15,000
(-) Deficit 200 6,93,800 Land and building 5,70,000
Subs. in advance 12,000 Furniture 49,000
Out. salary 1,200 Books 40,000
7,07,000 7,07,000

Q.126 Following is the information in respect of certain items of a Sports Club. You are required to show them in the Income and Expenditure account and the Balance Sheet.

Details
Sports fund as on April 1, 2016 80,000
Sports fund investments 80,000
Interest on Sports fund investments 8,000
Donations for sports fund 30,000
Sports prizes awarded 16,000
Expenses on sports events 7,000
General fund 2,00,000
General fund investments 2,00,000
Interest on general fund investments 20,000

Ans.

Income and Expenditure Account

Expenditure Income
To Surplus 20,000 By Int. on GF
Investment 20,000
20,000 20,000

Sports Fund Account

Particulars Particulars
To prizes awarded 16,000 By Balance b/d 80,000
To exp. on sports 7,000 By int. on S. fund 8,000
To balance c/d 95,000 By donation S. fund 30,000
1,18,000 1,18,000

Balance Sheet

Liabilities Assets
Sports fund 95,000 Sports fund invest. 80,000
General fund G. Fund investment 2,00,000
2,00,000 Cash in hand 35,000
(+)Surplus 20,000 2,20,000
3,15,000 3,15,000

Cash Account

Particulars Particulars
To int. on S. fund 8,000 By prizes awarded 16,000
To donation S. fund 30,000 By exp. on sports 7,000
To int. on GF invt. 20,000 By Balance c/d 35,000
58,000 58,000

Q.127 Receipt and payment account of Maitrey sports club showed that ₹68,500 were received by way of subscriptions for the year ended on March 31, 2017.

The additional information was as under:

Subscription outstanding as on March 31, 2016 were ₹6,500.

Subscription received in advance as on March 31, 2016 were ₹4,100.

Subscription outstanding as on March 31, 2017 were ₹5,400.

Subscription received in advance as on March 31, 2017 were ₹2,500.

Show how that above information would appear in the final accounts for the year ended on March 31, 2016 of Maitrey Club.

Ans.

Computation of subscription due during the year:

Details
Subscription received as per R & P a/c 68,500
Add: Outstanding end (March 31 2017) 5,400
Advance beginning (March 31 2016) 4,100
Less: Outstanding beg. (March 31 2016) 6,500
Advance end (March 31 2017) 2,500
Income from subscription for the year 69,000

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To Surplus 69,000 By Subscription 69,000
69,000 69,000

Balance Sheet

as on 31st March, 2016

Liabilities Assets
Subscription recd. Subscription
in advance 4,100 outstanding 6,500

Balance Sheet

as on 31st March, 2017

Liabilities Assets
Subscription recd. Subscription
in advance 2,500 outstanding 5,400

Q.128 Following is the Receipt and Payment account of Rohatgi Trust:

Receipt and Payment Account

for the year ending December 31, 2017

Receipts Payments
Cash in hand 14,000 Rent 6,000
Cash at bank 60,000 Salary 12,000
Subscription: Postage 300
2016 5,000 Electricity Charges 6,000
2017 83,000 Purchase of furniture 20,000
2018 3,000 91,000 Books 3,000
Sale of investment 90,000 Defence bonds 1,50,000
Interest on investment 2,000 Help to needy students 22,000
Sale of furniture (book value ₹ 3,000) 3,200 Cash in hand 10,900
Cash at bank 30,000
2,60,200 2,60,200

Prepare Income and expenditure account for the year ended December 31, 2017 and a balance sheet as on that date after the following adjustments:

Subscription for 2017, still owing were ₹7,000. Interest due on defence bonds was ₹7,000, Rent still owing was ₹1,000. The book value of investment sold was ₹80,000, ₹30,000 of the investment were still in hand. Subscription received in 2017 included ₹400 from a life member. The total furniture on January 1, 2017 was worth ₹12,000. Salary paid for the year 2018 is ₹2,000.

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To elect. charges 6,000 By subscription
To rent 6,000 91,000
(+): O/s 1,000 7,000 Less: for
To salary 12,000 2016 5,000
(-) advance 2,000 10,000 2018 3,000
To help of students 22,000 Add: Out. 7,000 90,000
To postage 300 By int. on invest. 2,000
To surplus 63,900 By profit on sale
furniture 200
By profit on
Investment 10,000
By int. on bonds 7,000
1,09,200 1,09,200

Balance Sheet

as at 1st Jan 2017

Liabilities Assets
Capital fund 2,01,000 Cash in hand 14,000
(Balancing figure) Cash at bank 60,000
Subscription o/s 5,000
Furniture 12,000
Investment 1,10,000
2,01,000 2,01,000

Balance Sheet

as on 31st December, 2017

Liabilities Assets
Capital fund Cash in hand 10,900
2,01,000 Cash at bank 30,000
(+)Surplus 63,900 2,64,900 Subscription o/s 7,000
Subs. in advance 3,000 Furniture 29,000
Rent outstanding 1,000 Investment 30,000
Prepaid salaries 2,000
Books 3,000
Defence bonds 1,50,000
Int. due 7,000
2,68,900 2,68,900

Q.129 Following Receipt and Payment account was prepared from the cash book of Delhi Charitable Trust for the year ending December 31, 2017.

Receipt and Payment Account

For the year ending December 31, 2017

Receipts Payments
Balance b/d Charity 11,500
Cash in hand 11,500 Rent and taxes 3,200
Cash at bank 12,600 Salary 6,000
Donation 9,000 Printing 600
Subscription: 42,800 Postage 300
Legacies 18,000 Advertisements 4,500
Interest on Investment 4,500 Insurance 2,000
Sale of old newspapers 200 Furniture 21,600
Investment 23,000
Balance c/d:
Cash in hand 9,900
Cash at bank 16,000
98,600 98,600

Prepare income and expenditure account for the year ended December 31, 2017 and a balance sheet as on that date after the following adjustments:

It was decided a treat one-third of the amount received on account of donation as income.

Insurance premium was paid in advance for three months.

Interest on investment ₹1,100 accrued was not received.

Rent ₹600: Salary ₹900 and advertisement expenses ₹1,000 outstanding as on December 31, 2018.

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To salary 6,000 By subscription 42,800
(+) O/s 900 6,900 By donation 3,000
To charity 11,500 By int. on invest.
To rent and taxes 4,500
3,200 Add: Accr. 1,100 5,600
(+) O/s 600 3,800 By sale of old
To advertisement newspapers 200
4,500
(+) O/s 1,000 5,500
To insurance 2,000
(-) prepaid 500 1,500
To printing 600
To postage 300
To surplus 21,500
51,600 51,600

Balance Sheet

as on 1.1.2017

Liabilities Assets
Capital fund 24,100 Cash in hand 11,500
(Bal. figure) Cash at bank 12,600
24,100 24,100

Balance Sheet

as at 31st December, 2017

Liabilities Assets
Capital fund Cash in hand 9,900
24,100 Cash at bank 16,000
(+) Surplus21,500 45,600 Int. on investment 1,100
Legacies 18,000 Prepaid insurance 500
Donation 6,000 Furniture 21,600
Outstanding exp. Investment 23,000
Rent 600
Salary 900
Advertisement 1,000
72,100 72,100

Q.130 From the following Receipt and payment account of a club, prepare Income and Expenditure account for the year ended March 31, 2017 and the Balance Sheet as on that date.

Receipt and Payment Account

For the year ending March 31, 2017

Receipts Payments
Balance b/d: 3,500 General expenses 900
Subscription: Salary 16,000
2015-2016 2000 Postage 1,300
2016-2017 70000 Electricity charges 7,800
2017-2018 3000 75,000 Furniture 26,500
Sale of old books(costing ₹ 3,200) 2,000 books 13,000
Rent from use of hall 17,000 Newspapers 600
Sale of newspapers 400 Meeting expenses 7,200
Profit from entertainment 7,300 T.V.set 16,000
Balance c/d 15,900
1,05,200 1,05,200

Additional Information:

The club has 100 members each paying an annual subscription of ₹900. Subscriptions outstanding on March 31, 2016 were ₹3,600.

On March 31, 2017, salary outstanding amounted to ₹1,000, salary paid included ₹1,000 for the year 2016.

On April 1, 2017 the club owned land and building ₹25,000, furniture ₹2,600 and books ₹6,200.

Ans.

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To salary 16,000 By subscription
(-) 2016 1,000 75,000
(+) Out. 1,000 16,000 (-) 2015-2016 2,000
To general expense 900 (-)2017-2018 3,000
To elect. charges 7,800 (+) O/s 20,000 90,000
To newspaper 600 By rent from hall 17,000
To meeting exp. 7,200 By sale of
To loss on sale of newspaper 400
books 1,200 By profit from
To postage 1,300 entertainment 7,300
To surplus 79,700
1,14,700 1,14,700

Balance Sheet

as on 1st April 2017

Liabilities Assets
Salary outstanding 1,000 Cash in hand 3,500
Capital fund 39,900 Subscription o/s 3,600
(Balancing figure) Land and building 25,000
Furniture 2,600
Books 6,200
40,900 40,900

Balance Sheet

as on 31st December, 2017

Liabilities Assets
Capital fund Cash in hand 15,900
39,900 Subscription o/s 21,600
(+) Surplus79,700 1,19,600 Land and building 25,000
Subs in advance 3,000 Furniture 29,100
Salary out. 1,000 Books 16,000
TV Set 16,000
1,23,600 1,23,600

Q.131 Following is the Receipt and Payment account of Women’s Welfare Club for the year ended December 31, 2017:

Receipt and Payment Account

for the year ending December 31, 2017

Receipts Payments
Balance b/d 7,250 Salary 12,500
Subscriptions 81,750 Stationery 1,700
Donations 3,000 Electricity charges 9,550
Grant from Govt. 15,000 Insurance 7,500
Sale of newspapers 300 Equipments 30,000
Proceeds of charity show 16,500 Petty expenses 500
Interest on investments @ 10% for full year 7,000 Expenses on charity show 12,900
Sundries income 400 Newspapers 1,000
Lectures fee 16,500
Honorarium to Secretary 12,000
Balance c/d 27,050
1,31,200 1,31,200

Additional Information:

Details 01/01/17 31/12/17
Outstanding salaries 1,200 1,800
Insurance prepaid 700 300
Subscription outstanding 3,750 2,500
Subscription received in advanced 1,750 1,000
Electricity charges outstanding 1,250
Stock of stationery 2,250 700
Equipments 25,600 50,200
Building 1,20,000 1,14,000

Prepare Income and Expenditure account for the year ended December 31, 2017 and Balance Sheet as on date.

Ans.

Income and Expenditure Account

for the year ending 31st December, 2017

Expenditure Income
To salary 12,500 By subscription
(-) 2016 1,200 81,750
(+) Out. 1,800 13,100 (-) 2016 3,750
To stationery 2,250 (-) 2018 1,000
(+) Purchase 1,700 (+) O/s 1,750 81,250
(-) stock 700 3,250 By donation 3,000
To electric charges By grant (govt.) 15,000
9,550 By sale of old
(+) O/s 1,250 10,800 newspaper 300
To insurance 7,500 By charity show
(+) Prepaid 2014 proceeds 16,500
700 By int. on invt. 7,000
(-) Prepaid 2015 300 7,900 By S. income 400
To petty expenses 12,000
To charity show exp. 6,000
To newspaper 500
To lecturer fees 12,900
To secretary honora. 1,000
To dep. on build. 16,500
To surplus 39,500
1,23,450 1,23,450

Balance Sheet

as on 1st Jan 2017

Liabilities Assets
Salary outstanding 1,200 Cash in hand 7,250
Subs in advance 1,750 Subscription o/s 3,750
Capital fund 2,26,600 Investments 70,000
(Balancing figure) Stationery 2,250
Equipment 25,600
Building 1,20,000
Insurance prepaid 700
2,29,550 2,29,550

Balance Sheet

as on 31st December, 2017

Liabilities Assets
Salary outstanding 1,800 Cash in hand 27,050
O/s electric exp. 1,250 Subscription o/s 2,500
Subs in advance 1,000 Investments 70,000
Capital fund Stationery 700
2,26,600 Equipment 55,600
(+)Surplus 39,500 2,66,100 Building 1,14,000
Insurance prepaid 300
2,70,150 2,70,150

Q.132 As at March 31, 2015 the following balances have been extracted from the books of the Indian Chartered Accountants Recreation Club and you are asked to prepare Income and Expenditure Account for the Year ended March 31, 2017 and a Balance Sheet as at that date.

Debit Balance Credit Balance
Stock in hand 1,170
Purchases 24,660 Subscriptions 97,110
Dining room 32,370 Billiard’s Receipts 7,300
Rent 10,470 Sundry Receipts 410
Wages 18,690 Interest on fixed deposit 270
Repairs and Renewals 5,400 Sundry creditors 5,370
Fuel and Light 5,280 Grant from institute (permanent) 42,000
Misc. expenses 4,050 Income and Exp. a/c (2016) 1,380
Cash in hand 560
Cast at bank 2,760
Fixed deposit 8,500
Sundry debtors 2,250
Stationary 600
Billiard table 2,070
Fixtures and fittings 870
Furniture 4,140
Club premises 30,000
1,53,840 1,53,840

On March 31, 2016 stock of stationery consisted of ₹ 900 and ₹ 600 respectively. Provide depreciations ` 60 on fixtures and fittings ₹ 390 on billiard table and ₹ 560 on furniture.

Ans.

Income and Expenditure Account

for the year ending 31st March, 2017

Expenditure Income
To rent 10,470 By subscription 97,110
To wages 18,690 By S. receipts 410
To repairs and re. 5,400 By int. on FD 270
To fuel and light 5,280 By billiards
To Misc. exp. 4,050 receipts 7,300
To Depreciation on
Furniture 560
Fixtures and fittings 60
Billiards table 390
To stationery consumed 900
To trading loss 56,340
To surplus 2,950
1,05,090 1,05,090

Balance Sheet

as on 31st Mar 2017

Liabilities Assets
Capital fund Cash in hand 560
1,380 Cash at bank 2,760
(+) Surplus 2,950 4,330 Fixed deposit 8,500
Sundry creditors 5,370 Sundry debtors 2,250
Grant from Stationery 600
Institute 42,000 Billiards table 1,680
Fixture and fittings 810
Furniture 3,580
Club premises 30,000
Stock of restaurant 960
51,700 51,700

Consumption of stationery = 600 + 900 – 600 = Rs. 900

Q.133 How will you deal with a change in profit sharing ratio among existing partners? Take imaginary figures to illustrate your answer?

Ans.

Change in the profit sharing ratio among the existing partners means it is reconstitution of the firm without admission of a new partners or retirement or death of a partner. A change in the profit-sharing ratio in a partnership means, one (or more) partners acquires share of profit in the business from another partners.

Therefore the aggregate amount of gain by one (or more) partners is equal to the aggregate amount of sacrifice made by the other partners.

If share of profit of one or more partners increase then share of profit of one or more partners decreases.

For Example, Sam and Rey are partners in a firm sharing profits in the ratio of 3:2. They have decided to share profits equally in future. It means Sam sacrifices and Rey gains. The sacrifice or gain is calculated as follows:

Sacrificing/ Gaining share = Old share – New Share

Sam = 3 5 1 2 = 6-5 10 = 1 10 (sacrifice made) Rey = 2 5 1 2 = 4-5 10 = ( 1 10 ) (Being nagative, it’s a gain) MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8D9F@

It is clear from the above that Sam is forgoing (sacrificing) 1/10th of his share of profit in favour of Rey. Rey being the gaining partner should compensate Sam, the sacrificing partner by paying goodwill, i.e., by paying an amount equal to 1/10th of the value of goodwill.

Q.134 Harshad and Dhiman are in partnership since April 01, 2016. No partnership agreement was made. They contributed ₹4,00,000 and ₹1,00,000 respectively as capital. In addition, Harshad advanced an amount of ₹1,00,000 to the firm on October 01, 2016. Due to long illness, Harshad could not participate in business activities from August 1 to September 30, 2016. The profits for the year ended March 31, 2017 amounted to ₹1,80,000.

Dispute has arisen between Harshad and Dhiman.

Harshad Claims:
1. He should be given interest @10% per annum on capital and loan;
2. Profit should be distributed in proportion of capital;

Dhiman Claims:
1. Profits should be distributed equally;
2. He should be allowed ₹2,000 per month as remuneration for the period he managed the business. In the absence of Harshad;
3. Interest on capital and loan should be allowed @6% p.a.

You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.

Ans.

In the absence of any agreement among partners, provisions of Partnership Act, 1932 will apply.

Decision on Harshad’s claim:

  1. Interest on capital will not be allowed to partners.
  2. Profits should be distributed equally among the partners.

Decision on Dhiman’s claim:

  1. Profits should be distributed equally among the partners.
  2. Salary will not be allowed to partners.
  3. Interest on capital will not be allowed to partners.

Profit and Loss Appropriation A/c

Particulars Particulars
To interest on loan By P & L A/c 1,80,000
Harshad 3,000
To Profit t/fd to
Harshad 88,500
Dhiman 88,500
1,80,000 1,80,000

Interest on loan = ₹1,00,000 x 6 100 x 6 12 = ₹3,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@6FF1@

Q.135

argin-bottom: 13px;”>Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of ₹5,00,000 and ₹3,00,000 respectively on October 01, 2016. Aakriti advanced ₹20,000 by way of loan to the firm without any agreement as to interest. Profit and loss account for the year ended March 31, 2017 showed profit of ₹43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them by preparing profit and loss Appropriation Account. Also give reason in support of your answer.

Ans.

Profit and Loss Appropriation A/c

Particulars Particulars
To interest on loan By P & L A/c 43,000
Aakriti 600
To Profit t/fd to
Harshad 21,200
Dhiman 21,200
43,000 43,000

Interest on loan = ₹20,000 × 6 100 × 6 12 = ₹600 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@6D31@

Q.136 The partnership agreement between Maneesh and Girish provides that:
1. Profits will be shared equally;
2. Maneesh will be allowed a salary of ₹400 p.m;
3. Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
4. 7% p.a. interest will be allowed on partner’s fixed capital;
5. 5% p.a. interest will be charged on partner’s annual drawings;
6. The fixed capitals of Maneesh and Girish are ₹1,00,000 and ₹80,000, respectively. Their annual drawings were ₹16,000 and ₹14,000 respectively. The net profit for the year ending March 31, 2015 amounted to ₹40,000;

Prepare firm’s Profit and Loss Appropriation Account.

Ans.

Calculation of interest on capital: Rahul = 20,00,000 x 5 100 = ₹1,00,000 Rohit = 18,00,000 x 5 100 = ₹90,000 karan = 16,00,000 x 5 100 = ₹80,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A8F8@

Q.137 Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of ₹2,50,000 and Rs. 1,50,000 respectively. On October 01, 2016 they decided that their capitals should be ₹2,00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @10% p.a. Calculate interest on capital as on March 31, 2017.

Ans.

Calculation of interest on capital: Sunflower = (₹2,50,000 × 10 100 × 6 12 ) + (₹2,00,000 × 10 100 × 6 12 ) = (₹12,500) + (₹10,000) = ₹22,500 Pink = (₹1,50,000 × 10 100 × 6 12 ) + (₹2,00,000 × 10 100 × 6 12 ) = (₹7,500) + (₹10,000) = ₹17,500 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGdbGaaeyyaiaabYgacaqGJbGaaeyDaiaabYgacaqGHbGaaeiDaiaabMgacaqGVbGaaeOBaiaabccacaqGVbGaaeOzaiaabccacaqGPbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGJbGaaeyyaiaabchacaqGPbGaaeiDaiaabggacaqGSbGaaeOoaiaabccaaeaacaqGtbGaaeyDaiaab6gacaqGMbGaaeiBaiaab+gacaqG3bGaaeyzaiaabkhacaqGGaGaaeiiaiaab2dacaqGGaGaaeikaiaabcgacaqGYaGaaeilaiaabwdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaiaabccacaqG4bWaaSaaaeaacaqGXaGaaeimaaqaaiaabgdacaqGWaGaaeimaaaacaqG4bWaaSaaaeaacaqG2aaabaGaaeymaiaabkdaaaGaaeykaiaabccacaqGRaGaaeiiaiaabIcacaqGGbGaaeOmaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeymaiaabcdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiEamaalaaabaGaaeOnaaqaaiaabgdacaqGYaaaaiaabMcaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeypaiaabccacaqGOaGaaeiyaiaabgdacaqGYaGaaeilaiaabwdacaqGWaGaaeimaiaabMcacaqGGaGaae4kaiaabccacaqGOaGaaeiyaiaabgdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaiaabMcaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeypaiaabccacaqGGbGaaeOmaiaabkdacaqGSaGaaeynaiaabcdacaqGWaaabaGaaeiuaiaabMgacaqGUbGaae4AaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqG9aGaaeiiaiaabIcacaqGGbGaaeymaiaabYcacaqG1aGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeymaiaabcdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiEamaalaaabaGaaeOnaaqaaiaabgdacaqGYaaaaiaabMcacaqGGaGaae4kaiaabccacaqGOaGaaeOmaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeymaiaabcdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiEamaalaaabaGaaeOnaaqaaiaabgdacaqGYaaaaiaabMcaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeypaiaabccacaqGOaGaaeiyaiaabEdacaqGSaGaaeynaiaabcdacaqGWaGaaeykaiaabccacaqGRaGaaeiiaiaabIcacaqGGbGaaeymaiaabcdacaqGSaGaaeimaiaabcdacaqGWaGaaeykaaqaaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqG9aGaaeiiaiaabcgacaqGXaGaae4naiaabYcacaqG1aGaaeimaiaabcdaaaaa@0C58@

Q.138 On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹4,00,000 and ₹3,00,000 and ₹2,00,000, respectively. Subsequently it was discovered that the interest on capital @10% p.a. had been omitted. The profit for the year amounted to ₹1,50,000 and the partner’s drawings had been Mountain ₹20,000, Hill ₹15,000 and Rock ₹10,000.
Calculate interest on capital.

Ans.

Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mountain Hill Rock
Closing capital 4,00,000 3,00,000 2,00,000
Add: Drawings 20,000 15,000 10,000
Less: Profits (50,000) (50,000) (50,000)
3,70,000 2,65,000 1,60,000

Calculation of interest on capital: Mountain = ₹3,70,000 × 10 100 = ₹37,000 Hill = ₹2,65,000 × 10 100 = ₹26,500 Rock = ₹1,60,000 × 10 100 = ₹16,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGdbGaaeyyaiaabYgacaqGJbGaaeyDaiaabYgacaqGHbGaaeiDaiaabMgacaqGVbGaaeOBaiaabccacaqGVbGaaeOzaiaabccacaqGPbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGJbGaaeyyaiaabchacaqGPbGaaeiDaiaabggacaqGSbGaaeOoaiaabccaaeaacaqGnbGaae4BaiaabwhacaqGUbGaaeiDaiaabggacaqGPbGaaeOBaiaabccacaqG9aGaaeiiaiaabcgacaqGZaGaaeilaiaabEdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaiaabccacaqG4bWaaSaaaeaacaqGXaGaaeimaaqaaiaabgdacaqGWaGaaeimaaaacaqGGaGaaeypaiaabccacaqGGbGaae4maiaabEdacaqGSaGaaeimaiaabcdacaqGWaaabaGaaeisaiaabMgacaqGSbGaaeiBaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqG9aGaaeiiaiaabcgacaqGYaGaaeilaiaabAdacaqG1aGaaeilaiaabcdacaqGWaGaaeimaiaabccacaqG4bWaaSaaaeaacaqGXaGaaeimaaqaaiaabgdacaqGWaGaaeimaaaacaqGGaGaaeypaiaabccacaqGGbGaaeOmaiaabAdacaqGSaGaaeynaiaabcdacaqGWaaabaGaaeOuaiaab+gacaqGJbGaae4AaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaabccacaqG9aGaaeiiaiaabcgacaqGXaGaaeilaiaabAdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaiaabccacaqG4bWaaSaaaeaacaqGXaGaaeimaaqaaiaabgdacaqGWaGaaeimaaaacaqGGaGaaeypaiaabccacaqGGbGaaeymaiaabAdacaqGSaGaaeimaiaabcdacaqGWaGaaeiiaaaaaa@B40C@

Q.139 Following is the extract of the Balance Sheet of Neelkant and Mahdev as on March 31, 2017:

Balance Sheet as at March 31, 2017
Liabilities Assets
Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000
Mahadev’s Capital 10,00,000
Neelkant’s Current A/c 1,00,000
Mahadev’s Current A/c 1,00,000
P & L Appropriation

(March 2017)

8,00,000
30,00,000 30,00,000

During the year Mahadev’s drawings were ₹30,000. Profits during 2016-2017 is ₹10,00,000.

Calculate interest on capital @ 5% p.a. for the year ending March 31, 2017.

Ans.

Calculation of interest on Capital: Neelkant = ₹10,00,000 × 5 100 = ₹50,000 Mahadev = ₹10,00,000 × 5 100 = ₹50,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLnhiov2DGi1BTfMBaeXafv3ySLgzGmvETj2BSbqefm0B1jxALjhiov2Daebbfv3ySLgzGueE0jxyaibaieYlf9irVeeu0dXdh9vqqj=hEeeu0xXdbba9frFj0=OqFfea0dXdd9vqaq=JfrVkFHe9pgea0dXdar=Jb9hs0dXdbPYxe9vr0=vr0=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@9182@

Q.140 Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2017.

Date
May 01, 2017 12,000
July 31, 2017 6,000
September 30, 2017 9,000
November 30, 2017 12,000
January 01, 2018 8,000
March 31, 2018 7,000

Interest on drawings is charged @ 9% p.a.

Calculate interest on drawings.

Ans.

Date Amount (₹) Period (months) Product (₹)
May 01, 2017 12,000 11 1,32,000
July 31, 2017 6,000 8 48,000
Sept. 30, 2017 9,000 6 54,000
Nov. 30, 2017 12,000 4 48,000
Jan 01, 2018 8,000 3 24,000
Mar. 31, 2018 7,000 0
3,06,000

Interest on Rishi’s drawings: = Sum of the products × rate × 1 12 =₹3,06,000 × 9 100 × 1 12 = ₹2,295 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8CE6@

Q.141 The capital accounts of Moli and Golu showed balances of ₹40,000 and ₹20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @12% p.a. Golu advanced a loan of ₹10,000 to the firm on August 01, 2016.

During the year, Moli withdrew ₹1,000 per month at the beginning of every month whereas Golu withdrew ₹1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was ₹20,950. Calculate interest on drawings show distribution of profits and prepare partner’s capital accounts.

Ans.

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Int. on capital By P & L A/c 20,950
Moli 4,000 By Int. on
Golu 2,000 drawings
To Int. on loan Moli 780
Golu 400 Golu 660
To profit t/fd to capital accounts
Moli 9,594
Golu 6,396
22,390 22,390

Partners’ Capital Accounts

Particulars Moli ₹ Golu ₹ Particulars Moli ₹ Golu ₹
To drawings 12,000 12,000 By Bal. b/d 40,000 20,000
To Int. on draw. 780 660 By Int. on
To Bal. c/d 40,814 15,736 capitals 4,000 2,000
By P & L App. 9,594 6,396
53,594 28,396 53,594 28,396

Interest on Golu’s loan: = ₹10,000 × 6 100 × 8 12 Interest on drawings: = Total drawings × rate × average period × 12 Moli = ₹12,000 × 12 100 × 6 1 2 12 = ₹780 Golu = ₹12,000 × 12 100 × 5 1 2 12 = ₹660 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@D269@

Q.142 Rakesh, and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of ₹40,000 and ₹30,000, respectively. They withdrew from the firm the following amounts for their personal use:

Rakesh Month
May 31, 2016 600
June 30, 2016 500
August 31, 2016 1,000
November 1, 2016 400
December 31, 2016 1,500
January 31, 2017 300
March 01, 2017 700
Rohan At the beginning of each month 400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts are closed on March 31, 2017 every year.

Ans.

Date Amount (₹) Period (months) Product (₹)
May 31, 2016 600 10 6,000
June 30, 2016 500 9 4,500
Aug. 31, 2016 1,000 7 7,000
Nov. 01, 2016 400 5 2,000
Dec. 31, 2016 1,500 3 4,500
Jan 31, 2017 300 2 600
March 01, 2017 700 1 700
25,300

Interest on drawings: = Sum of the products × rate × 1 12 Interest on Rakesh’s drawings: = ₹25,300 × 6 100 × 1 12 = ₹126.50 Interest on Rohan’s drawings: = ₹4,800 × 6 100 × 6 1 2 12 = ₹156 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGKbGaaeOCaiaabggacaqG3bGaaeyAaiaab6gacaqGNbGaae4CaiaabQdaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaab2dacaqGGaGaae4uaiaabwhacaqGTbGaaeiiaiaab+gacaqGMbGaaeiiaiaabshacaqGObGaaeyzaiaabccacaqGWbGaaeOCaiaab+gacaqGKbGaaeyDaiaabogacaqG0bGaae4CaiaabccacaqG4bGaaeiiaiaabkhacaqGHbGaaeiDaiaabwgacaqGGaGaaeiEaiaabccadaWcaaqaaiaabgdaaeaacaqGXaGaaeOmaaaaaeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGsbGaaeyyaiaabUgacaqGLbGaae4CaiaabIgacaqGNaGaae4CaiaabccacaqGKbGaaeOCaiaabggacaqG3bGaaeyAaiaab6gacaqGNbGaae4CaiaabQdaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaab2dacaqGGaGaaeOmaiaabwdacaqGSaGaae4maiaabcdacaqGWaGaaeiiaiaabIhadaWcaaqaaiaabAdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiEamaalaaabaGaaeymaaqaaiaabgdacaqGYaaaaiaab2dacaqGGaGaaeiyaiaabccacaqGXaGaaeOmaiaabAdacaqGUaGaaeynaiaabcdaaeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGsbGaae4BaiaabIgacaqGHbGaaeOBaiaabEcacaqGZbGaaeiiaiaabsgacaqGYbGaaeyyaiaabEhacaqGPbGaaeOBaiaabEgacaqGZbGaaeOoaaqaaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeypaiaabccacaqG0aGaaeilaiaabIdacaqGWaGaaeimaiaabccacaqG4bWaaSaaaeaacaqG2aaabaGaaeymaiaabcdacaqGWaaaaiaabIhadaWcaaqaaiaabAdadaWcaaqaaiaabgdaaeaacaqGYaaaaaqaaiaabgdacaqGYaaaaiaab2dacaqGGaGaaeiyaiaabccacaqGXaGaaeynaiaabAdaaaaa@D19E@

Q.143 Himanshu withdrew ₹2,500 at the end Month of each month. The partnership deed provides for charging the interest on drawings @ 12% p.a. Calculate interest on Himanshu’s drawings for the year ending 31st March, 2017.

Ans.

Interest on drawings: = total drawings × rate × Averageperiod 12 Interest on Himanshu’s drawings: = ₹30,000 × 12 100 × 5.5 12 = ₹1650 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@AD09@

Q.144 Bharam is a partner in a firm. He withdrew ₹3,000 at the starting of each month for 12 months. The books of the firm close on March 31 every year. Calculate interest on drawings if the rate of interest is 10% p.a.

Ans.

Interest on drawings: = total drawings × rate × Averageperiod 12 Interest on Bharam’s drawings: = ₹36,000 × 10 100 × 6.5 12 = ₹1950 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@AB19@

Q.145 Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were ₹2,50,000 and ₹1,50,000, respectively. They share profits equally. On July 01, 2017 they decided that their capitals should be ₹1,00,000 each. The necessary adjustments in the capitals were made by introducing or withdrawing cash by the partner’s. Interest on capital is allowed @ 8% p.a.
Compute interest on capital for both the partners for the year ending on March 31, 2018.

Ans.

Calculation of interest on capital: Raj = (₹2,50,000 × 8 100 × 3 12 ) + (₹1,00,000 × 8 100 × 9 12 ) = (₹5,000) + (₹6,000) = ₹11,000 Neeraj = (₹1,50,000 × 8 100 × 3 12 ) + (₹1,00,000 × 8 100 × 9 12 ) = (₹3,000) + (₹6,000) = ₹9,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@FEFB@

Q.146 Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during 2017 were ₹24,000 and ₹16,000, respectively.

Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly, throughout the year.

Ans.

Interest on drawings: Amit = ₹24,000 × 10 100 × 6 12 = ₹1,200 Bhola = ₹16,000 × 10 100 × 6 12 == ₹800 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8A9B@

Q.147 Harish is a partner in a firm. He withdrew the following amounts during the year 2017:

Date
February 01 4,000
May 01 12,000
June 30 4,000
October 31 12,000
December 31 4,000

Interest on drawings is to be charged @ 7½ % p.a.

Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.

Ans.

Date Amount (₹) Period (months) Product (₹)
Feb 01, 2017 4,000 11 44,000
May 01, 2017 10,000 8 80,000
June 30, 2017 4,000 6 24,000
Oct. 31, 2017 12,000 2 24,000
Dec. 31, 2017 4,000 0
1,72,000

Interest on drawings: = Sum of the products × rate × 1 12 Interest on Harish’s drawings: = ₹1,72,000 × 7.5 100 × 1 12 = ₹1,075 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A3D9@

Q.148 Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are ₹2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn:

1. In the beginning of every month.
2. In the middle of every month and
3. At the end of every month.

Ans.

Interest on Menon’s drawings: Beginning = ₹24,000 × 10 100 × 6.5 12 = ₹1,300 Middle = ₹24,000 × 10 100 × 6 12 == ₹1,200 End = ₹24,000 × 10 100 × 5.5 12 = ₹1,100 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B33A@

Q.149 On March 31, 2017 after the close of books of accounts the capital accounts of Ram, Shyam and Mohan showed balance of ₹24,000, ₹18,000 and ₹12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017 amounted to ₹36,000 and the partner’s drawings had been Ram ₹3,600; Shyam ₹4,500 and Mohan ₹2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1.

Calculate interest on capital.

Ans.

Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Ram Shyam Mohan
Closing capital 24,000 18,000 12,000
Add: Drawings 3,600 4,500 2,700
Less: Profits (18,000) (12,000) (6,000)
(3:2:1)
9,600 10,500 8,700

Calculation of interest on capital: Ram = ₹9,600 × 5 100 = ₹480 Shyam = ₹10,500 × 5 100 = ₹525 Mohan = ₹8,700 × 5 100 = ₹435 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@991C@

Q.150 Azad and Benny are equal partners. Their capitals are ₹40,000 and ₹80,000, respectively. After the accounts for the year have been prepared it is discovered that interest at 5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. It is decided to make an adjustment entry at the beginning of the next year. Record the necessary journal entry.

Ans.

Calculation of interest on capital: Azad = ₹40,000 × 5 100 = ₹2,000 Benny = ₹80,000 × 5 100 = ₹4,000 Total interest on capital = ₹6,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A5B1@

Table for Adjustment:

Particulars Azad Benny
Amount wrongly credited (A) 3,000 3,000
Amount to be credited
Interest on capital @ 5% (B) 2,000 4,000
Difference (B – A) (1,000) 1,000
Debit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
Azad’s Capital A/c Dr. 1,000
To Benny’s Capital A/c 1,000
(Being profit adjusted among all partners)

Q.151 Anju, Manju and Mamta are partners whose fixed capitals were ₹10,000, ₹8,000 and ₹6,000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during three years remained as follows:

Year Anju Manju Mamta
2014 4 3 5
2015 3 2 1
2016 1 1 1

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan 2015.

Ans.

Calculation of interest on capital: Anju = ₹10,000 × 5 100 = ₹500 Manju = ₹8,000 × 5 100 = ₹400 Mamta = ₹6,000 × 5 100 = ₹300 Total interest on capital = ₹1,200 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B696@

Table Showing Adjustment:

Particulars Anju Manju Mamta
Amount wrongly credited by way of profits
2013 (₹1,200 in 4:3:5) 400 300 500
2014 (₹1,200 in 3:2:1) 600 400 200
2015 (₹1,200 in 1:1:1) 400 400 400
Total amount credited (A) 1,400 1,100 1,100
Amount to be credited
Int. on capital for 3 years (B) 1,500 1,200 900
Difference (B – A) 100 100 (200)
Credit Credit Debit

Journal Entries:

Date Particulars LF Dr. (₹) Cr. (₹)
Mamta’s Capital A/c Dr. 200
To Anuj’s Capital A/c 100
To Manju’s Capital A/c 100
(Being entry for interest on capital not made, now provided)

Q.152 If it is agreed that the capital of all the partners should be proportionate to the new profit sharing ratio, how will you work out the new capital of each partner? Give examples and state how necessary adjustments will be made.

Ans.

Sometime, at the time of admission, the partners agree that their capitals should also be adjusted so as to be proportionate to their profit sharing ratio.

In such a situation, if the capital of the new partner is given, the same can be used as a base for calculating the new capitals of the old partners. The capitals thus ascertained should be compared with their old capitals after all adjustments relating to goodwill reserves and revaluation of assets and liabilities, etc. have been made and then the partner whose capital falls short, will bring in the necessary amount to cover the shortage and the partner who has a surplus, will withdraw the excess amount of capital.

Let’s take an example for better understanding:

P and Q are partners sharing profits in the ratio of 2:1. R is admitted into the firm for ¼ share of profits. R brings in ₹20,000 in respect of his capital. The capitals of old partners P and Q, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc are ₹45,000 and ₹15,000 respectively. It is agreed that partner’s capitals should be according to the new profit sharing ratio.

Let us determine the new capitals of P and Q and record the necessary journal entries assuming that the partner whose capital falls short, brings in the amount of deficiency and the partner who has an excess, withdraws the excess amount.

Here,

Calculation of new profit sharing ratio. Assuming the new partner R acquires his share from P and Q in their old profit sharing ratio, i.e., 2:1.

Total share = 1 R’s Share = 1 4 Remaining shares = 1- 1 4 = 3 4 P’s New Share = 3 4 x 2 3 = 6 12 Q’s New Share = 3 4 x 1 3 = 3 12 R’s New Share = 1 4 x 3 3 = 3 12 Thus new profit sharing ratio between P, Q and R: = 6:3:3 or 2:1:1 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@E4EC@

Required capital of P and Q, R’s Capital (who has ¼ share in profits) is ₹20,000. P’s new share is 2/4 which is double of R’s share. Hence the capital will be ₹40,000.

Alternatively based on R’s Capital the total capital of the firm works out at ₹80,000. Hence based on their share in profits, the capital of P and Q will be:

Ps Capital = 2 4 of 80,000 = 40,000 Qs Capital = 1 4 of 80,000 = 20,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@77AF@

The capital of P and Q after all adjustments have been made, are ₹45,000 and ₹15,000 respectively. Hence P will withdraw ₹5,000 (₹45,000 – ₹40,000) from the firm where Q will contribute additional amount of ₹5,000 (₹20,000 – ₹15,000).

The journal entries will be:

Dt. Particulars L.F. Dr. ₹ Cr. ₹
P’s Capital Dr. 5,000
To Cash 5,000
(Excess capital withdrawn by P)
Cash A/c Dr. 5,000
To Q’s Capital 5,000
(Deficiency made good by additional amount brought in by Q)

Sometimes, the total capital of the firm may clearly specified and it is agreed that the capital of each partner should be proportionate to his share in profits. In such a situation each partner’s capital (including the new partner’s capital to be brought by him) is calculated on the basis of new capital.

Q.153 Explain various methods of valuation of goodwill.

Ans.

The methods for valuing goodwill are:

  • Average profit method.
  • Super Profit method.
  • Capitalisation method.

(1) Average Profit Method:
Goodwill under Average profit method can be calculated using Simple Average Profit Method or Weighted Average Profit Method.
Simple Average Profit Method: Under the Simple Average Profit Method, average profits earned by the business for the specified number of years are considered. Profits earned are totaled and average is determined. Average profit as calculated is multiplied by a number of year’s purchase to arrive at the value of goodwill.

Calculate Average profit as follows:

Calculate Average profit as follows: Average profit = Total profits Number of years Calculate goodwill applying the formula: Goodwill = Average profit x No. of years purchase MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGdbGaaeyyaiaabYgacaqGJbGaaeyDaiaabYgacaqGHbGaaeiDaiaabwgacaqGGaGaaeyqaiaabAhacaqGLbGaaeOCaiaabggacaqGNbGaaeyzaiaabccacaqGWbGaaeOCaiaab+gacaqGMbGaaeyAaiaabshacaqGGaGaaeyyaiaabohacaqGGaGaaeOzaiaab+gacaqGSbGaaeiBaiaab+gacaqG3bGaae4CaiaabQdaaeaacaqGbbGaaeODaiaabwgacaqGYbGaaeyyaiaabEgacaqGLbGaaeiiaiaabchacaqGYbGaae4BaiaabAgacaqGPbGaaeiDaiaabccacaqG9aGaaeiiamaalaaabaGaaeivaiaab+gacaqG0bGaaeyyaiaabYgacaqGGaGaaeiCaiaabkhacaqGVbGaaeOzaiaabMgacaqG0bGaae4Caaqaaiaab6eacaqG1bGaaeyBaiaabkgacaqGLbGaaeOCaiaabccacaqGVbGaaeOzaiaabccacaqG5bGaaeyzaiaabggacaqGYbGaae4CaaaaaeaacaqGdbGaaeyyaiaabYgacaqGJbGaaeyDaiaabYgacaqGHbGaaeiDaiaabwgacaqGGaGaae4zaiaab+gacaqGVbGaaeizaiaabEhacaqGPbGaaeiBaiaabYgacaqGGaGaaeyyaiaabchacaqGWbGaaeiBaiaabMhacaqGPbGaaeOBaiaabEgacaqGGaGaaeiDaiaabIgacaqGLbGaaeiiaiaabAgacaqGVbGaaeOCaiaab2gacaqG1bGaaeiBaiaabggacaqG6aaabaGaae4raiaab+gacaqGVbGaaeizaiaabEhacaqGPbGaaeiBaiaabYgacaqGGaGaaeypaiaabccacaqGbbGaaeODaiaabwgacaqGYbGaaeyyaiaabEgacaqGLbGaaeiiaiaabchacaqGYbGaae4BaiaabAgacaqGPbGaaeiDaiaabccacaqG4bGaaeiiaiaab6eacaqGVbGaaeOlaiaabccacaqGVbGaaeOzaiaabccacaqG5bGaaeyzaiaabggacaqGYbGaae4CaiaabccacaqGWbGaaeyDaiaabkhacaqGJbGaaeiAaiaabggacaqGZbGaaeyzaaaaaa@D33D@

Weighted Average method: Under this method, each year’s profit is multiplied by the number of assigned weights and the value is ascertained. The products are added and divided by the total of weights to arrive at the average profit. The weighted average profit so arrived at are multiplied by the agreed ‘Number of years’ ‘Purchase’ to arrive at the value of goodwill.

Calculate Weighted Average profit as follows:

Calculate Weighted Average profit as follows: Weighted Average profit = Total purchase of profits Total of weights Goodwill = Weighted Average profit x Agreed No. of years purchase MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@D8CA@

(2) Super Profit Method:
The excess of actual profit over the normal profit is called super profit. Goodwill under this method is calculated by multiplying the super profits with the agreed number of years purchase. Normal rate of return is considered while calculating the super profit. Average capital employed is taken into account while calculating the super profit.

Calculating goodwill under this method: Calculate Average Capital Employed as: = Opening Capital Employed + Closing Capital Employed 2 Capital Employed = Capital + Free Reserves – Fictitious Assets (if any) Or All assets (other than goodwill, fictitious assets & non-trade investments) – Outsider’s Liabilities. Calculate actual expected profits, i.e., average profit. Calculate normal profit on avearge capital employed by applying : Average Capital Employed x Normal Rate of Return 100 Calculate Super Profit, i.e., Actual – Normal (Profit) Calculate value of goodwill as follows: Goodwill = Super Profit x Number of Year’s Purchase MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@5BBF@

(3) Capitalisation Method:
Under this method, Goodwill can be valued in two ways:

Capitalisation of Average Profit: Under this, goodwill is calculated by deducting capital employed (net assets as on the date of valuation) in the business from the capitalised value of average profit on the basis of normal rate of return.

Capitalised value of the business is ascertained as follows:

= Average profit x 100 Normal rate of Return (Profit) MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGcbaGaaeypaiaabccadaWcaaqaaiaabgeacaqG2bGaaeyzaiaabkhacaqGHbGaae4zaiaabwgacaqGGaGaaeiCaiaabkhacaqGVbGaaeOzaiaabMgacaqG0bGaaeiiaiaabIhacaqGGaGaaeymaiaabcdacaqGWaaabaGaaeOtaiaab+gacaqGYbGaaeyBaiaabggacaqGSbGaaeiiaiaabkhacaqGHbGaaeiDaiaabwgacaqGGaGaae4BaiaabAgacaqGGaGaaeOuaiaabwgacaqG0bGaaeyDaiaabkhacaqGUbGaaeiiaiaabIcacaqGqbGaaeOCaiaab+gacaqGMbGaaeyAaiaabshacaqGPaaaaaaa@69A4@

For calculating goodwill under this method, the steps are:

Calculate average normal profit earned.

Calculate capitalised value of the firm by using the above formula.

Net Assets = All assets (other than goodwill, fictitious assets and non-trade investments at their current values) – outsiders liabilities.

Goodwill = Capitalised value – Net assets.

Capitalisation of Super Profit: Under this method, goodwill is calculated by capitalisation of super profit.

For calculating goodwill under this method, the steps are: Calculate Capital Employed (Net assets as on date of valuation of firm) Calculate Normal Profit on capital employed by using the following formula: Normal profit = Capital employed x Required rate of return 100 Calculate Average profit of past years, i.e 3 to 5 years Calculate Super Profit, i.e., Actual Average profit – Normal Profit Goodwill = Super profit x 100 Normal rate of return MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@BACF@

Q.154 A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?

Ans.

Let total share = 1 C’s share = 1 6 Remaining share of A and B = 1- 1 6 = 5 6 Profit/loss sharing ratio of A and B = 3:2 New share of A = 5 6 x 3 5 = 15 30 New share of B = 5 6 x 2 5 = 10 30 New profit sharing ratio of A, B and C: = 15 30 : 10 30 : 1 6 = 15 30 : 10 30 : 5 30 = 3:2:1 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@04B0@

Q.155 A, B, C were partners in a firm sharing profits in 3:2:1 ratio. They admitted D for 10% profits. Calculate the new profit sharing ratio.

Ans.

Let the total share = 1 D’s Share = 1 10 Remaining share of A, B and C 1 – 1 10 = 9 10 New share A = 9 10 x 3 6 = 27 60 B = 9 10 x 2 6 = 18 60 C = 9 10 x 1 6 = 9 60 New share = old share – sacrifice Hence new profit sharing ratio of A, B, C and D = 27 60 : 18 60 : 9 60 : 1 10 = 27 60 : 18 60 : 9 60 : 6 60 = 9:6:3:2 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@1370@

Q.156 X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally from X and Y. Calculate new profit sharing ratio.

Ans.

First calculating the sacrifice: Z’s Share = 1 10 Acquired from X = 1 10 x 1 2 = 1 20 Acquired from Y = 1 10 x 1 2 = 1 20 New share = old share – sacrifice New share = X = 5 8 1 20 = 23 40 Y = 3 8 1 20 = 13 40 Hence new profit sharing ratio of X, Y and Z = 23 40 : 13 40 : 1 10 = 23:13:4 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@04A9@

Q.157 A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely from A. Calculate new profit sharing ratio.

Ans.

D’s Share = 1 8 A’s Sacrifice = 1 8 A’s new share = 2 5 1 8 = 11 40 BandC’s share remian same New profit sharing ratio of A:B:C:D = 11 40 : 16 40 : 8 40 : 5 40 = 11:16:8:5 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@C1F1@

Q.158 P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio.

Ans.

First calculating the sacrifice: R’s Share = 1 5 Acquired from P = 1 5 x 1 3 = 1 15 Acquired from Q = 1 5 x 2 3 = 2 15 New share = old share – sacrifice New share = P = 2 3 1 15 = 9 15 Q = 1 3 2 15 = 3 15 Hence new profit sharing ratio of P, Q and R = 9 15 : 3 15 : 3 15 = 3:1:1 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@FE3D@

Q.159 A, B and C are partners sharing profits in 3:2:2 ratio. They admitted D as a new partner for 1/5 share which he acquired from A, B and C in 2:2:1 ratio respectively. Calculate new profit sharing ratio.

Ans.

First calculating the sacrifice: D’s Share = 1 5 Acquired from A = 1 5 x 2 5 = 2 25 Acquired from B = 1 5 x 2 5 = 2 25 Acquired from C = 1 5 x 1 5 = 1 25 New share = old share – sacrifice New share = A = 3 7 2 25 = 61 175 B = 2 7 2 25 = 36 175 C = 2 7 1 25 = 43 175 Hence new profit sharing ratio of A, B, C and D = 61 175 : 36 175 : 43 175 : 35 175 = 61:36:43:35 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@3165@

Q.160 A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C for 3/7 share which he took 2/7 from A and 1/7 from B. Calculate new profit sharing ratio.

Ans.

First calculating the sacrifice: C’s Share = 3 7 Acquired from A = 2 7 Acquired from B = 1 7 New share = old share – sacrifice New share = A = 3 5 2 7 = 11 35 B = 2 5 1 7 = 9 35 Hence new profit sharing ratio of A, B and C = 11 35 : 9 35 : 15 35 = 11:9:15 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@F53A@

Q.161 A, B and C were partners in a firm sharing profits in 3:3:2 ratio. They admitted D as a new partner for 4/7 profit. D acquired his share 2/7 from A. 1/7 from B and 1/7 from C. Calculate new profit sharing ratio.

Ans.

First calculating the sacrifice: D’s Share = 4 7 Acquired from A = 2 7 Acquired from B = 1 7 Acquired from C = 1 7 New share = old share – sacrifice New share = A = 3 8 2 7 = 5 56 B = 3 8 1 7 = 13 56 C = 2 8 1 7 = 6 56 Hence new profit sharing ratio of A, B, C and D = 5 56 : 13 56 : 6 56 : 32 56 = 5:13:6:32 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@15DC@

Q.162 Radha and Rukmani are partners in a firm sharing profits in 3:2 ratio. They admitted Gopi as a new partner. Radha surrendered 1/3 of her share in favour of Gopi and Rukmani surrendered ¼ of her share in favour of Gopi. Calculate new profit sharing ratio.

Ans.

Old ratio = 3:2 Acquired from Radha = 1 3 x 3 5 = 3 15 Acquired from Rukmani = 1 4 x 2 5 = 2 20 New share = old share – sacrifice New share = Radha = 3 5 3 15 = 9 15 Rukmani = 2 5 2 20 = 6 20 Gopi= 3 15 + 2 20 = 18 60 Hence new profit sharing ratio of Radha, Rukmani and Gopi = 6 15 : 6 20 : 18 60 = 4:3:3 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@1592@

Q.163 Singh, Gupta and khan are partners in a firm sharing profits in 3:2:3 ratio. They admitted Jain as a new partner. Singh surrendered 1/3 of his share in favour of Jain; Gupta surrendered ¼ of his share in favour of Jain and Khan surrendered 1/5 in favour of Jain. Calculate new profit sharing ratio.

Ans.

Old ratio = 3:2:3 Singh’s sacrifice = 1 3 x 3 8 = 3 24 Gupta’s sacrifice = 1 4 x 2 8 = 2 32 Khan’s sacrifice = 1 5 x 3 8 = 3 40 New share = old share – sacrifice New share = Singh = 3 8 3 24 = 6 24 Gupta = 2 8 2 32 = 6 32 Khan= 3 8 3 40 = 12 40 Jain= 3 24 + 2 32 + 3 40 = 126 480 Hence new profit sharing ratio of Singh, Gupta, Khanand Jain = 6 24 : 6 32 : 12 40 : 126 480 = 120:90:144:126 =20:15:24:21 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@6063@

Q.164 Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They admit C into the firm and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio.

Ans.

Sacrificing ratio = Old ratio – New ratio New ratio = 4:2:1 Old ratio = 5:3 Sacrificing ratio Sandeep = 5 8 4 7 = 3 56 Navdeep = 3 8 2 7 = 5 56 = 3 56 : 5 56 = 3:5 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B27E@

Q.165 Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio. They admit Ravi as a new partner for 1/8 share in the profits. The new profit sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing ratio and sacrificing ratio.

Ans.

Let the total share = 1 Ravi’s Share = 1 8 Remaining Rao and Swami 1 – 1 8 = 7 8 New ratio Rao = 7 8 x 4 7 = 28 56 Swami = 7 8 x 3 7 = 21 56 Hence new profit sharing ratio of Rao, Swami and Ravi = 28 56 : 21 56 : 1 8 = 28:21:7 = 4:3:1 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@E7B9@ Sacrificing ratio = Old ratio – New ratio New ratio = 4:3:1 Old ratio = 3:2 Sacrificing ratio Rao = 3 5 4 8 = 4 40 Swami = 2 5 3 8 = 1 40 = 4 40 : 1 40 = 4:1 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@ACDF@

Q.166 Compute the value of goodwill on the basis of four year’s purchase of the average profits based on the last five years. The profits for the last five years were as follows:

Year
2013 40,000
2014 50,000
2015 60,000
2016 50,000
2017 60,000

Ans.

Goodwill = Average profits x number of years purchase

= ₹52,000 x 4 = ₹2,08,000

Average profit of last 5 years = ₹40,000+₹50,000+₹60,000+₹50,000+₹60,000 5 =52,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@7ADB@

Q.167 Firm’s Capital in a business is ₹2,00,000. The normal rate of return on Firm’s capital is 15%. During the year 2015 the firm earned a profit of ₹48,000. Calculate goodwill on the basis of 3 years purchase of super profit.

Ans.

Super profit=Actual profitNormal profit Goodwill=Super profit×Number of years purchase Normal profit = 2,00,000 × 15 100 =₹30,000 Super profit =₹48,000 – ₹30,000 =₹18,000 = ₹54,000. MathType@MTEF@5@5@+= feaahqart1ev3aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKf MBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2C G4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC 0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yq aqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabe qaamaaeaqbaaGceaqabeaaqaaaaaaaaaWdbiaabofacaqG1bGaaeiC aiaabwgacaqGYbGaaeiiaiaabchacaqGYbGaae4BaiaabAgacaqGPb GaaeiDaiaaysW7caqG9aGaaGjbVlaabgeacaqGJbGaaeiDaiaabwha caqGHbGaaeiBaiaabccacaqGWbGaaeOCaiaab+gacaqGMbGaaeyAai aabshacaaMe8Uaae4eGiaaysW7caqGobGaae4BaiaabkhacaqGTbGa aeyyaiaabYgacaqGGaGaaeiCaiaabkhacaqGVbGaaeOzaiaabMgaca qG0baabaGaae4raiaab+gacaqGVbGaaeizaiaabEhacaqGPbGaaeiB aiaabYgacaaMe8UaaeypaiaaysW7caqGtbGaaeyDaiaabchacaqGLb GaaeOCaiaabccacaqGWbGaaeOCaiaab+gacaqGMbGaaeyAaiaabsha caaMe8Uaae41aiaaysW7caqGobGaaeyDaiaab2gacaqGIbGaaeyzai aabkhacaqGGaGaae4BaiaabAgacaqGGaGaaeyEaiaabwgacaqGHbGa aeOCaiaabohacaqGGaGaaeiCaiaabwhacaqGYbGaae4yaiaabIgaca qGHbGaae4Caiaabwgaaeaapaqbaeaabeqaaaqaa8qacaqGobGaae4B aiaabkhacaqGTbGaaeyyaiaabYgacaqGGcGaaeiCaiaabkhacaqGVb GaaeOzaiaabMgacaqG0bGaaeiOaiaab2dacaqGGcGaaeOmaiaabYca caqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGcGaae41ai aaysW7daWcaaWdaeaapeGaaeymaiaabwdaa8aabaWdbiaabgdacaqG WaGaaeimaaaacaaMe8UaaeypaiaaysW7caqGYbGaaeyyaiaab2gaca qGZaGaaeimaiaabYcacaqGWaGaaeimaiaabcdaaaaapaqaa8qacaqG tbGaaeyDaiaabchacaqGLbGaaeOCaiaabccacaqGWbGaaeOCaiaab+ gacaqGMbGaaeyAaiaabshacaqGGaGaaeypaiaaysW7caqGYbGaaeyy aiaab2gacaqG0aGaaeioaiaabYcacaqGWaGaaeimaiaabcdacaqGGa Gaae4eGiaabccacaqGYbGaaeyyaiaab2gacaqGZaGaaeimaiaabYca caqGWaGaaeimaiaabcdacaqGGaGaaeypaiaaysW7caqGYbGaaeyyai aab2gacaqGXaGaaeioaiaabYcacaqGWaGaaeimaiaabcdaaeaacaaM e8UaaGjbVlaaysW7caaMe8UaaGjbVlaaysW7caaMe8UaaGjbVlaays W7caaMe8UaaGjbVlaaysW7caaMe8UaaGjbVlaaysW7caaMe8UaaGjb VlaaysW7caqG9aGaaeiiaiaabkhacaqGHbGaaeyBaiaabwdacaqG0a GaaeilaiaabcdacaqGWaGaaeimaiaab6caaaaa@0BD0@

Q.168 The books of Ram and Bharat showed that the Firm’s capital on 31/12/2016 was ₹5,00,000 and the profits for the last 5 years: 2015 ₹40,000; 2014 ₹50,000; 2013 ₹55,000; 2012 ₹70,000 and 2011 ₹85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profits of the last 5 years assuming that the normal rate of return is 10%.

Ans.

Average profit of last 5 years = 40,000+50,000+55,000+70,000+85,000 5 =60,000 Normal profit = 5,00,000 × 10 100 =50,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A01B@

Super profit = 60,000 – 50,000 = ₹10,000

Goodwill = ₹10,000 × 3 = ₹30,000

Q.169 Rajan and Rajani are partners in a firm. Their capitals were Rajan ₹3,00,000; Rajani ₹2,00,000. During the year 2015 the firm earned a profit of ₹1,50,000. Calculate the value of goodwill of the firm by capitalization method assuming that the normal rate of return is 20%.

Ans.

Total capital of the firm = (₹3,00,000 +₹2,00,000) =₹5,00,000 Capitalised value = Actual value × 100 Normal rate of return = 1,50,000 × 100 20 =7,50,000 Goodwill=Capitalised valueActual capital =₹7,50,000 –₹5,00,000 =₹2,50,000 MathType@MTEF@5@5@+= feaahqart1ev3aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKf MBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2C G4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC 0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yq aqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabe qaamaaeaqbaaGceaqabeaaqaaaaaaaaaWdbiaabsfacaqGVbGaaeiD aiaabggacaqGSbGaaeiiaiaabogacaqGHbGaaeiCaiaabMgacaqG0b GaaeyyaiaabYgacaqGGaGaae4BaiaabAgacaqGGaGaaeiDaiaabIga caqGLbGaaeiiaiaabAgacaqGPbGaaeOCaiaab2gacaqGGaGaaeypaa qaa8aacaqGOaGaae4sa8qacaqGZaGaaeilaiaabcdacaqGWaGaaeil aiaabcdacaqGWaGaaeimaiaabccacaqGRaGaaGjbV=aacaqGlbWdbi aabkdacaqGSaGaaeimaiaabcdacaqGSaGaaeimaiaabcdacaqGWaWd aiaabMcapeGaaeiiaiaab2dacaaMe8Uaae4saiaabwdacaqGSaGaae imaiaabcdacaqGSaGaaeimaiaabcdacaqGWaaapaqaaiaaboeacaqG HbGaaeiCaiaabMgacaqG0bGaaeyyaiaabYgacaqGPbGaae4Caiaabw gacaqGKbGaaeiiaiaabAhacaqGHbGaaeiBaiaabwhacaqGLbGaaeii aiaabccacaqGGaaabaGaaeypamaalaaabaGaaeyqaiaabogacaqG0b GaaeyDaiaabggacaqGSbGaaeiiaiaabAhacaqGHbGaaeiBaiaabwha caqGLbGaaeiiaiaabIhacaqGGaGaaeymaiaabcdacaqGWaGaaeiiai aabccaaeaacaqGobGaae4BaiaabkhacaqGTbGaaeyyaiaabYgacaqG GaGaaeOCaiaabggacaqG0bGaaeyzaiaabccacaqGVbGaaeOzaiaabc cacaqGYbGaaeyzaiaabshacaqG1bGaaeOCaiaab6gacaqGGaGaaeii aiaabccaaaaabaGaaeypaiaabccacaqGXaGaaeilaiaabwdacaqGWa GaaeilaiaabcdacaqGWaGaaeimaiaabccacaqG4bGaaeiiamaalaaa baGaaeymaiaabcdacaqGWaaabaGaaeOmaiaabcdaaaGaaGPaVlaayk W7caqG9aGaaGjbVlaabUeacaaMc8Uaae4naiaabYcacaqG1aGaaeim aiaabYcacaqGWaGaaeimaiaabcdaaeaapeGaae4raiaab+gacaqGVb GaaeizaiaabEhacaqGPbGaaeiBaiaabYgacaaMe8UaaeypaiaaysW7 caqGdbGaaeyyaiaabchacaqGPbGaaeiDaiaabggacaqGSbGaaeyAai aabohacaqGLbGaaeizaiaabccacaqG2bGaaeyyaiaabYgacaqG1bGa aeyzaiaaysW7cqGHsislcaaMe8UaaeyqaiaabogacaqG0bGaaeyDai aabggacaqGSbGaaeiiaiaabogacaqGHbGaaeiCaiaabMgacaqG0bGa aeyyaiaabYgaaeaacaqG9aGaaGjbVlaabUeacaqG3aGaaeilaiaabw dacaqGWaGaaeilaiaabcdacaqGWaGaaeimaiaabccacaqGtaIaaGjb VlaabUeacaqG1aGaaeilaiaabcdacaqGWaGaaeilaiaabcdacaqGWa GaaeimaiaabccacaqG9aGaaGjbVlaabUeacaqGYaGaaeilaiaabwda caqGWaGaaeilaiaabcdacaqGWaGaaeimaaaaaa@06FC@

Q.170 A business has earned average profits of ₹1,00,000 during the last few years , find out the value of goodwill by capitalization method, given that the assets of the business are ₹10,00,000 and its external liabilities are ₹1,80,000. The normal rate of return is 10%?

Ans.

Capital employed = Assets – External liabilities

= ₹10,00,000 – ₹1,80,000 = ₹8,20,000

Estimated capital required to earn average profit ₹1,00,000 @ normal return 10%.

Normal profit = 1,00,000 x 100 10 =10,00,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGobGaae4BaiaabkhacaqGTbGaaeyyaiaabYgacaqGGaGaaeiCaiaabkhacaqGVbGaaeOzaiaabMgacaqG0bGaaeiiaiaab2dacaqGGaGaaeymaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEaiaabccadaWcaaqaaiaabgdacaqGWaGaaeimaaqaaiaabgdacaqGWaaaaiaaykW7caaMc8UaaeypaiaaykW7caqGGbGaaGPaVlaabgdacaqGWaGaaeilaiaabcdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaaqaaaaaaa@647B@

Goodwill = Estimated capital – Actual capital

= ₹10,00,000 – ₹8,20,000 = ₹1,80,000

Q.171 A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership with ¼ share in profits. C will bring in ₹30,000 for capital and the requisite amount of goodwill premium in cash.

The goodwill of the firm is valued at ₹20,000. The new profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give necessary journal entries.

Ans.

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 35,000
To C’s Capital A/c 30,000
To Premium for goodwill A/c 5,000
(Being capital and goodwill brought by C)
ii Premium for goodwill A/c Dr. 5,000
To A’s Capital A/c 2,000
To B’s Capital A/c 3,000
(Being goodwill distributed in sacrificing ratio)
iii A’s Capital A/c Dr. 2,000
B’s Capital A/c Dr. 3,000
To Cash A/c 5,000
(Being amount of goodwill withdrawn)

Sacrificing Ratio = Old Ratio – New Ratio A = 3 5 2 4 = 12-10 20 = 2 20 A = 2 5 1 4 = 8-5 20 = 3 20 Sacrificing Ratio = A = 2 20 Sacrificing Ratio = B = 3 20 = 2:3 Goodwill of the firm =₹ 20,000 C’s share of Goodwill = ₹20,000 × 1 4 =₹5,000 A will receive =₹5,000 × 2 5 = ₹2,000 B will receive=₹5,000× 3 5 = ₹3,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLnhiov2DGi1BTfMBaeXafv3ySLgzGmvETj2BSbqefm0B1jxALjhiov2Daebbfv3ySLgzGueE0jxyaibaieYBf9irVeeu0dXdh9vqqj=hEeeu0xXdbba9frFj0=OqFfea0dXdd9vqaq=JfrVkFHe9pgea0dXdar=Jb9hs0dXdbPYxe9vr0=vr0=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@19B3@

Q.172 Arti and Bharti are partners in a firm sharing profits in 3:2 ratio. They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings ₹50,000 for his capital and ₹10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at ₹5,000 the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm.

Ans.

Particulars Dr. (₹) Cr. (₹)
i Arti’s Capital A/c Dr. 3,000
Bharti’s Capital A/c Dr. 2,000
To Goodwill A/c 5,000
(Being amount of goodwill written off)
ii Cash A/c Dr. 60,000
To Sarthi’s Capital A/c 50,000
To Premium for goodwill A/c 10,000
(Being capital and goodwill brought by Sarthi)
iii Premium for goodwill A/c Dr. 10,000
To Arti’s Capital A/c A/c 4,000
To Bharti’s Capital A/c 6,000
(Being goodwill distributed in sacrificing ratio)

Arti : Bharti Old Ratio = 3:2 Sarthi admitted for 1 4 share in new firm. Arti : Bharti: Sarthi New Ratio = 2:1:1 Sacrificing Ratio = Old Ratio – New Ratio Arti = 3 5 2 4 = 2 20 Bharti = 2 5 1 4 = 3 20 Arti will receive =₹10,000 × 2 5 = ₹4,000 Bharti will receive =₹10,000 × 3 5 = ₹6,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLnhiov2DGi1BTfMBaeXafv3ySLgzGmvETj2BSbqefm0B1jxALjhiov2Daebbfv3ySLgzGueE0jxyaibaieYBf9irVeeu0dXdh9vqqj=hEeeu0xXdbba9frFj0=OqFfea0dXdd9vqaq=JfrVkFHe9pgea0dXdar=Jb9hs0dXdbPYxe9vr0=vr0=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@2404@

Q.173 Aditya and Balan are partners sharing profits and losses in 3:2 ratio. They admitted Christopher for ¼ share in the profits. The new profit sharing ratio agreed was 2:1:1. Christopher brought ₹50,000 for his capital. His share of goodwill was agreed to at ₹15,000. Christopher could bring only ₹10,000 out of his share of goodwill. Record necessary journal entries in the books of the firm.

Ans.

Particulars Dr. (₹) Cr. (₹)
i Cash A/c Dr. 60,000
To Christopher’s Capital A/c 50,000
To Premium for goodwill A/c 10,000
(Being capital and goodwill brought by Christopher)
ii Premium for goodwill A/c Dr. 10,000
Christopher’s Current A/c Dr. 5,000
To Aditya’s Capital A/c 6,000
To Balan’s Capital A/c 9,000
(Being goodwill distributed in sacrificing ratio)

Sacrificing Ratio = Old Ratio – New Ratio Aditya = 3 5 2 4 = 2 20 Balam = 2 5 1 4 = 3 20 Sacrificing Ratio = 2:3 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLnhiov2DGi1BTfMBaeXafv3ySLgzGmvETj2BSbqefm0B1jxALjhiov2Daebbfv3ySLgzGueE0jxyaibaieYBf9irVeeu0dXdh9vqqj=hEeeu0xXdbba9frFj0=OqFfea0dXdd9vqaq=JfrVkFHe9pgea0dXdar=Jb9hs0dXdbPYxe9vr0=vr0=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@8BC8@

Q.174 Mohan Lal and Sohan Lal were partners in a firm sharing profits and losses in 3:2 ratio. They admitted Ram Lal for 1/4 share on 01/01/2013. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of last 4 years which were ₹50,000 for 2013; ₹60,000 for 2014; ₹90,000 for 2015; and ₹70,000 for 2016. Ram Lal did not bring his share of goodwill premium in cash.

Record the necessary journal entries in the books of the firm on Ram Lal’s admission when:
a. Goodwill already appears in the books at ₹2,02,500.
b. Goodwill appears in the books at ₹2,500.
c. Goodwill appears in the books at ₹2,05,000.

Ans.

Particulars Dr. (₹) Cr. (₹)
i. Mohan Lal’s Capital A/c Dr. 1,21,500
Sohan Lal’s Capital A/c Dr. 81,000
To Goodwill A/c 2,02,500
(Being existing goodwill written off)
ii. Ram Lal’s Current A/c Dr. 50,625
To Mohan Lal’s Capital A/c 30,375
To Sohan Lal’s Capital A/c 20,250
(Being share of goodwill of new partner not paid in cash adjusted from his current account and distributed among sacrificing partners)

Case (b)

Particulars Dr. (₹) Cr. (₹)
i. Mohan Lal’s Capital A/c Dr. 1,500
Sohan Lal’s Capital A/c Dr. 1,000
To Goodwill A/c 2,500
(Being existing goodwill written off)
ii. Ram Lal’s Current A/c Dr. 50,625
To Mohan Lal’s Capital A/c 30,375
To Sohan Lal’s Capital A/c 20,250
(Being share of goodwill of new partner not paid in cash adjusted from his current account and distributed among sacrificing partners)

Case (c)

Particulars Dr. (₹) Cr. (₹)
i. Mohan Lal’s Capital A/c Dr. 1,23,000
Sohan Lal’s Capital A/c Dr. 82,000
To Goodwill A/c 2,05,000
(Being existing goodwill written off)
ii. Ram Lal’s Current A/c Dr. 50,625
To Mohan Lal’s Capital A/c 30,375
To Sohan Lal’s Capital A/c 20,250
(Being share of goodwill of new partner not paid in cash adjusted from his current account and distributed among sacrificing partners)

Working Notes: Average profit of last 4 years = 50,000+60,000+90,000+70,000 4 =67,500 Goodwill = 67,500×3=2,02,500 Ram Lal’s share = 2,02,500 × 1 4 =50,625 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@C728@

Q.175 Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at ₹36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet.

Record necessary journal entries for the treatment of goodwill on Hari’s admission.

Ans.

Books of Rajesh, Mukesh and Hari

Journal

Particulars Dr. (₹) Cr. (₹)
i. Hari’s Current A/c Dr. 8,000
To Rajesh’s Capital A/c 2,000
To Mukesh’s Capital A/c 6,000
(Being share of goodwill of new partner not paid in cash adjusted from his current account and distributed among sacrificing partners)

Hari’s share of goodwill = ₹36,000 x 2 9 =8,000 Sacrificing ratio = Old ratio – New ratio Sacrificing ratio Rajesh = 1 2 4 9 = 1 18 Mukesh = 1 2 3 9 = 3 18 = 1:3 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@BB89@

Q.176 Amar and Akbar are equal partners in a firm. They admitted Anthony as a new partner and the new profit sharing ratio is 4:3:2. Anthony could not bring this share of goodwill ₹45,000 in cash. It is decided to do adjustment for goodwill without opening goodwill account.

Pass the necessary journal entry for the treatment of goodwill.

Ans.

Particulars Dr. (₹) Cr. (₹)
i. Anthony’s Current A/c Dr. 45,000
To Amar’s Capital A/c 11,250
To Akbar’s Capital A/c 33,750
(Being share of goodwill of new partner not paid in cash adjusted from his current account and distributed among sacrificing partners)

Working Notes:

Sacrificing ratio = Old ratio – New ratio Sacrificing ratio Amar = 1 2 4 9 = 1 18 Akbar = 1 2 3 9 = 3 18 = 1:3 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8D54@

Q.177 A and B are partners sharing profits and losses in the ratio of 3:1. On 1st January, 2017 they admitted C as a new partner for ¼ share in the profits of the firm.

C brings ₹20,000 as for his ¼ share in the profits of the firm. The capitals of A and B after all adjustments in respect of goodwill, revlauation of assets and liabilities etc. has been worked out at ₹50,000 for A and ₹12,000 for

B. It is agreed that partner’s capitals will be according to new profit sharing ratio.

Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio.

Ans.

Let total share = 1 C’s share = 1 4 Remaining share of A and B = 1- 1 4 = 3 4 Profit/loss sharing ratio of A and B = 3:1 New share of A = 3 4 x 3 4 = 9 16 New share of B = 3 4 x 1 4 = 3 16 New profit sharing ratio of A, B and C: = 9 16 : 3 16 : 1 4 = 9 16 : 3 16 : 4 16 = 9:3:4 Total capital on the basis of C = 20,000 x 4 = ₹ 80,000 Required capitals in new firm A = 80,000 x 9 16 =₹ 45,000 B = 80,000 x 3 16 =₹ 15,000 C = 80,000 x 4 16 =₹ 20,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqiVv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@85C8@

However, actual capitals of A and B are ₹ 50,000 and ₹12,000 respectively. Hence A will withdraw ₹ 5,000 and B will introduce ₹ 3,000 to make up the required capital.

Journal Entries

Particulars Dr. (₹) Cr. (₹)
2017

Jan 01

A’s Capital A/c Dr. 5,000
To Bank A/c 5,000