Question

In case of fixed capitals, undistributed profits, general reserve, etc., are transferred to (a) Partner's capital accounts (b) Partner's current accounts (c) Revaluation account (d) Profit and loss adjustment account

Answer 1

Explanation:

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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Answer 2

In this question, we are asked to tell if the capital of the partners is fixed then reserves and profits are distributed where.

• Option B is the correct answer i.e. Partner's Current Account.
• There are two types of capital i.e. Fixed Capital and Fluctuating Capital.
• In fixed capital two accounts are prepared i.e. Partners Current Account and Partners Capital Account.
• In the case of fluctuating capital only the Partners Capital Account is prepared.
• As in the case of fixed capital is fixed and only introduction or withdrawal of capital takes place in this account.
• In Current Account all the reserves, and profits are distributed.
• In the case of fluctuating as capital fluctuates all the reserves and profit everything is done in this account only.

PROJECT CODE #SPJ3