32. Harsh, Anand and Alay partner's in a firm sharing profits and losses in the ratio 2:3 2. Their
journal entries and prepare a Revaluation account to record the above.
balance sheet on 31st
March 2019 stood as follows:
Balance Sheet of Wand R
As at 31st December, 2019
amount
Assets
amount
5,10,000
Liabilities
Sundry Creditors
Capitals:
Harsh
Anand
Ajay
Workmen Compensation Fund
10,00,000
15,00,000
10,00,000
Land & Buildings
Machinery
Furniture
Sundry Debtors
Closing Stock
Cash in hand
19,00,000
5.00.000
7.70,000
5,00,000
7,00.000
4,80,000
35,00,000
8,40,000
48,50,000
48,50,000
On 31st March 2019, Anand retired from the firm and the remaining partners decided to carry on the
business. It was agreed to reevaluate the Assets and liabilities are as follows:
1. Land and Building be appreciated by 20%.
2. Machinery will be depreciated by 20%
3. Closing stock is valued at Rs. 450000
Provision for doubtful debts bo made at 5% on debtors.
5. Sundry Creditor of Rs. 65000 be written off
6. Goodwill of the firm will be valued at Rs. 5,60,000 and Anand share of goodwill will be adjusted in
the accounts of Harsh and Ajay who will share future profits and losses in the ratio of 3:2.
Prepare Revaluation A/C, Partner's Capital A/C and Balance Sheet of the new partnership firm.
Answers
Answer:
and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2019 was:
Liabilities ₹ Assets ₹
Sundry Creditors 25,000 Cash/Bank 5,000
General Reserve 18,000 Sundry Debtors 15,000
Capital A/cs: Stock 10,000
X 75,000 Investments 8,000
Y 62,000 1,37,000 Printer 5,000
Fixed Assets 1,37,000
1,80,000 1,80,000
They admit Z into partnership on the same date on the following terms:
(a) Z brings in ₹ 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at ₹ 10,000. X takes over Investments at this value.
(d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March, 2019 is ₹ 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.
Solution
Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2019
April 1
Revaluation A/c
Dr.
14,700
To Typewriter A/c
1,000
To Fixed Assets A/c
13,700
(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)
April 1
Stationery A/c
Dr.
1,000
Investment A/c
Dr.
2,000
To Revaluation A/c
3,000
(Increase in stationery and investment transferred to Revaluation Account)
April 1
X’s Capital A/c
Dr.
7,800
Y’s Capital A/c
Dr.
3,900
To Revaluation A/c
11,700
(Revaluation loss transferred to X and Y’s
Capital Account in their old ratio)
April 1
Reserve Fund A/c
Dr.
18,000
To X’s Capital A/c
12,000
To Y’s Capital A/c
6,000
(Reserve Fund distributed)
April 1
Cash A/c
Dr.
55,000
To Z’s Capital A/c
40,000
To Premium for Goodwill A/c
15,000
(Z brought capital and share of goodwill)
April 1
Premium for Goodwill A/c
Dr.
15,000
To X’s Capital A/c
10,000
To Y’s Capital A/c
5,000
(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)
April 1
X’s Capital A/c
Dr.
5,000
Y’s Capital A/c
Dr.
2,500
To Cash
7,500
(Half of the Premium for Goodwill withdrawn by X and Y)
April 1
X’s Capital A/c
Dr.
10,000
To Investments A/c
10,000
(X took over the Investment)
April 1
Cash A/c
Dr.
4,800
To X’s Capital A/c
4,800
(X’ brought cash to make up deficiency in capital)
April 1
Y’s Capital A/c
Dr.
26,600
To Cash A/c
26,600
(Y withdrew excess capital after all adjustments)
Cash/Bank Account
Dr.
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Balance b/d
5,000
X’s Capital (Goodwill)
5,000
Z’s Capital
40,000
Y’s Capital (Goodwill)
2,500
Premium for Goodwill
15,000
Y’s Capital
26,600
X’s Capital
5,800
Balance c/d
31,700
65,800
65,800
Revaluation Account
Dr.
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Typewriter (5,000 × 20%)
1,000
Investment
2,000
Fixed Assets (1,37,000 × 10%)
13,700
Stationery
1,000
Loss transferred to
X Capital
7,800
Y Capital
3,900
14,700
14,700
Partners’ Capital Accounts
Dr.
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Revaluation
7,800
3,900
Balance b/d
75,000
62,000
Investment
10,000
Reserve Fund
12,000
6,000
Cash (withdraw of goodwill)
5,000
2,500
Cash
40,000
Balance c/d
74,200
66,600
40,000
Premium for Goodwill
10,000
5,000
97,000
73,000
40,000
97,000
73,000
40,000
Cash
26,600
Balance b/d
74,200
66,600
40,000
Balance c/d adjusted
80,000
40,000
40,000
Cash
5,800
80,000
66,600
40,000
80,000
66,600
40,000
Balance Sheet
as on March 31, 2019 after Z’s admission
Liabilities
Amount
(₹)
Assets
Amount
(₹)
Sundry Creditors
25,000
Cash
31,700
Capital A/cs:
Sundry Debtors
15,000
X
80,000
Stock
10,000
Y
40,000
Typewriter (5,000 – 1,000)
4,000
Z
40,000
1,60,000
Fixed Assets (1,37,000 – 13,700)
1,23,300
Stationery
1,000
1,85,000
1,85,000
Working Notes:
WN1: Sacrificing Ratio
WN2: Distribution of Revaluation Loss
WN3: Distribution of Premium for Goodwill
WN4: Adjustment of Capital
Total Capital of the firm on the basis of Z’s share
Total Capital of the firm
=
1,60,000
Less: Z’s Capital
=
40,000
Combined Capital of X and Y
=
1,20,000
AccountancyTS Grewal Vol. I (2019)All
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