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Properties of Set Operation

1. Providing ...

Question

$1.$ Providing only for the holding company's share of unrealised profit is more popular.
$2.$ The holding company's share of the unrealised profit should be reduced from the stock on the asset's side of the consolidated Balance Sheet
$3.$ The holding company's share of unrealised profit should be reduced from the profit and loss account on the liabilities side of the consolidated Balance Sheet.
$4.$ The approach of making a provision for the entire profit included in the stock is preferred by the American Institute of Certified Public Accountants (AICPA)
Of these.

1

and

3

are correct

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2

and

4

are correct

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1

and

4

are correct

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All are correct

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Solution

The correct option is D All are correct
Because
1. In order words, for you to realize profits from an investment you've made, you Popular Stocks . Because you would still be holding on to all of your 1,000 shares, you .To learn more about profit realization and its implications for ... This unrealized gain would become realized only if you sell the security.
2.In short, holding company's share of unrealized profit should be deducted from the Consolidated Stock in the assets side of the Consolidated Balance Sheet ... of Goodwill will be reduced by the amount of increased value of paid-up shares.
3.In short, holding company's share of unrealized profit should be deducted from the Consolidated Stock in the assets side of the Consolidated Balance Sheet and the same amount should also be deducted from the Profit and Loss Account in the Consolidated Balance Sheet.
4.The American Institute of CPAs (AICPA) is a non-profit organization of Certified Public Accountants. Learn which job is right for you: salary, personality, skills, certifications etc. in the United States. It was established in 1887, and its role is to create and grade the Certified Public Accountant (CPA) examinations.

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PRACTICAL PROBLEM

Raj and Dev are partners sharing profits and losses 3:2 respectively. Their position on 31^st March, 2011

Balance Sheet as on 31^st March, 2011
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/c’s	Raj	1,00,000	Buildings		1,00,000
	Dev	75,000	Furniture		10,000
Creditors		10,000	Stock		31,000
Bills Payable		5,000	Debtors	50,000
General Reserve		15,000	(-) R.D.D.	1,000	49,000
			Bank Balance		15,000
		2,05,000			2,05,000

On 1^st April, 2011 they admitted Manoj on following terms:

1) Manoj should bring in cash Rs 1,00,000 as a capital for 1/5^th share in future profit and Rs 25,000 as goodwill.

2) Building should be revalued for Rs 1,25,000.

3) Depreciate furniture at 12 ½ % p.a. and stock at 10% p.a.

4) R.D.D. should be maintained as it is.

5) The Capital accounts of partners should be adjusted in their new profit sharing ratio through bank account.

Prepare, Profit and Loss Adjustment Account, Capital Accounts, Balance Sheet of new firm and show how you have calculated new ratio and new capital.

Q. Rani and Geeta are partners sharing profits and losses 3 : 2 respectively. Their position on

31^{s t}

March, 2013 was as follows:
On

1^{s t}

April, 2013 they admitted Suvarna on the following terms:
(1) Suvarna should bring in cash Rs. 1,00,000 as capital for

{\frac{1}{5}}^{s t}

share in future profit and Rs. 25,000 as goodwill.
(2) Building should be revalued at Rs. 1,25,000.
(3) Depreciated furniture @ 12

\frac{1}{2}

% p.a. and stock @ 10% p.a.
(4) R.D.D. should be maintained as it is.
(5) The capital Accounts of partners should be adjusted in their new profit sharing ratio through bank account.
Prepare:
profit and loss adjustment account, capital accounts and balance sheet of the new firm.

Q. X and Y are partners sharing profits and losses in the ratio of 3/4 and 1/4 . Their Balance Sheet as at 31st March, 2018 is:


Liabilities		₹	Assets	₹
Capital A/cs:			Land and Building	1,25,000
X	1,50,000		Furniture	5,000
Y	80,000	2,30,000	Stock	1,00,000
Workmen Compensation Reserve		20,000	Sundry Debtors	80,000
Sundry Creditors		1,50,000	Bills Receivable	15,000
Bills Payable		37,500	Cash at Bank	1,00,000
			Cash in Hand	12,500
		4,37,500		4,37,500

They admit Z into partnership on 1st April, 2018 on the following terms:
(a) Goodwill is to be valued at ₹ 1,00,000.
(b) Stock and Furniture to be reduced by 10%.
(c) A Provision for Doubtful Debts is to be created @ 5% on Sundry Debtors .
(d) The value of Land and Building is to be appreciated by 20%.
(e) Z pays ₹ 50,000 as his capital for 1/5th share in the future profits.
You are required to show Revaluation Account , Partners' Capital Accounts and Balance Sheet of the new firm.

Note: Z's Share of Goodwill ₹ 20,000 (i.e, ₹ 1,00,000

\times

1/5 ) can be adjusted through Z's Current A/c. In that situation, Partners' Capital A/cs: X

—

₹ 1,87,875; Y

—

₹ 92,625; Z

—

₹ 50,000; Z's Current A/c (Dr.)

—

₹ 20,000; Balance Sheet Total

—

₹ 5,18,000.

Q. Consider the following statements:
Redeemable preference shares of a company can be redeemed out of
1. Profits of the company which would otherwise be available for dividend.
2. Company's share premium account.
3.Fresh issue of shares made for the purpose of redemption.
Which of the above statements are correct?

A and B are partners sharing profits and losses in the ratio of 2:1. From April 1, 2017, they decided to share the profits in the ratio of 3:2. On that date, profit and loss account showed a debit balance or Rs 60,000. Record the necessary journal entry for the distribution of the balance in the Profit and Loss Account.

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