Question

1. The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 3 : 1:1 stood
as follows on 31-12-99.(i.e.) the date of dissolution.
Liabilities
Rs. Assets
Rs
Sundry Liabilities
1,05.000 Cash
1,000
X's Capital
15,000 Bills Receivable
4,000
Y's Capital
10,000 Debtors
25.000
Stock
40,000
Plant
30,000
Goodwill
10,000
Z's Capital
20,000
1,30,000
1,30,000
Assets realised Rs. 79,750. Realisation Expenses are Rs. 2,000. Prepare Realisation​

Answer 1

Answer:

Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2:1 as at 31

st

March,2018:

Liabilities (Rs.) Assets (Rs.)

Capital A/c:

A 15,000

B 10,000

Sundry Creditors

25,000

32,950 Building

Plant and Machinery

Stock

Sundry Debtors

Cash in Hand 25,000

17,500

10,000

4,850

600

57,950 57,950

They agree to admit C into the partnership on the following terms:

(a) C was to bring in Rs.7,500 as his capital and Rs.3,000 as goodwill for 1/4

th

share in the firm.

(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.

(c) A provision for Doubtful Debts was to be created in respect of Sundry Debtors Rs.375.

(d) Building Account was to be appreciated by 10%.

Pass necessary Journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Capital Accounts and Balance Sheet of the new firm.

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ANSWER

(i) JOURNAL

1. Cash a/c... Dr. 10500

To C's Capital a/c 7500

To Premium for goodwill a/c 3000

(Being capital and premium for goodwill brought in by C)

2. Premium for goodwill a/c... Dr. 3000

To A's Capital a/c 2000

To B's Capital a/c 1000

(Being premium for goodwill distributed among the partners in the ratio of 2:1)

3. Building a/c... Dr. 2500

To Revaluation a/c 2500

(Being increase in asset transferred to revaluation account)

4. Revaluation a/c.... Dr. 1750

To Plant and Machinery a/c 875

To Stock a/c 500

To Provision for doubtful debts a/c 375

(Being decrease in assets and increase in liabilities transferred to revaluation account)

5. Revaluation a/c... Dr. 750

To A's Capital a/c 500

To B's Capital a/c 250

(Being profit on revaluation transferred to the partner's capital accounts)

(ii) REVALUATION A/C

Dr. Cr.

Particulars Amount

(in Rs.) Particulars Amount

(in Rs.)

To Stock a/c 500 By Building a/c 2500

To Plant and Machinery a/c 875

To Provision for doubtful debts a/c 375

To Profit transferred to

- A's Capital a/c

- B's Capital a/c

500

250

TOTAL 2500 TOTAL 2500

(iii) PARTNER'S CAPITAL A/C

Particulars A B C Particulars A B C

By Balance b/d 15000 10000 -

By Cash a/c - - 7500

To Balance c/d 17500 11250 7500 By Premium for goodwill a/c 2000 1000 -

By Revaluation a/c 500 250 -

(iv) BALANCE SHEET

(after admission of C)

Liabilities Amount

(in Rs.) Assets Amount

(in Rs.)

Building (25000+2500) 27500

Capital

- A

- B

- C

17500

11250

7500 Plant and Machinery (17500-875) 16625

Sundry Creditors 32950 Stock (10000-500) 9500

Debtors 4850

-- Provision for Doubtful debts (375) 4475

Cash (600+10500) 11100

TOTAL 69200 TOTAL 69200

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