Adjustment of Reserves

Q. X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2018 was:

Liabilities		₹	Assets	₹
Creditors		49, 000	Cash	8, 000
Reserve		18, 500	Debtors	19, 000
Capital A/cs: X	82, 000		Stock	42, 000
Y	60, 000		Building	2, 07, 000
Z	75, 500	2, 17, 500	Patents	9, 000
		2, 85, 000		2, 85, 000

Y retired on 1st April, 2018 on the following terms:
(a) Goodwill of the firm was valued at ₹ 70, 000 and was not to appear in the books.
(b) Bad Debts amounted to ₹ 2, 000 were to be written off.
(c) Patents were considered as valueless.
Prepare Revaluation Account , Partners Capital Accounts and the Balance Sheet of X and Z after Ys retirement.

Q.

To transfer all the accumulated profits, the journal entry is -

1. Partner’s capital A/c Dr.

   To Accumulated Profits/ Reserves A/c

2. Accumulated Profits/ Reserves A/c Dr.

   To Partner’s capital A/c

3. Realisation A/c Dr.

   To Accumulated Profits/ Reserves A/c

4. Realisation A/c Dr.

   To Partner’s capital A/c

Q.

What is the collective noun of chocolates?

Q. The Balance Sheet of X , Y and Z who shared profits in the ratio of 5 : 3 : 2 , as on 31st March, 2018 was as follows:

Liabilities		₹	Assets	₹
Sundry Creditors		39, 750	Bank( Minimum Balance)	15, 000
Employees Provident Fund		5, 250	Debtors	97, 500
Workmen Compensation Reserve		22, 500	Stock	82, 500
Capital A/cs:			Fixed Assets	1, 87, 500
X	1, 65, 000
Y	84, 000
Z	66, 000	3, 15, 000
		3, 82, 500		3, 82, 500

Y retired on the above date and it was agreed that:
(i) Goodwill of the firm is valued at ₹ 1, 12, 500 and Y's share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20% .
(iii) Stock be reduced to ₹ 75, 000.
(iv) Y be paid amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio.
Prepare Revaluation Account , Capital Accounts of all partners and the Balance Sheet of the New Firm.

Q.

The accumulated profits reserves are transferred to ___

1. None of these

2. Partner`s capital account

3. Bank account

4. Realisation account

Q.

Provision for doubtful debts appearing at the time of dissolution of a firm is transferred to __________

1. Realisation A/c

2. Cash A/c

3. Debtors A/c

4. None of these

Q. X and Y were partners sharing profits and losses in the ratio of 3 : 2 . They decided to dissolve the firm on 31st March, 2018 . On that date , their Capitals were X$—$₹ 40, 000 and Y $—$₹ 30, 000. Creditors amounted to ₹ 24, 000.
Assets were realised for ₹ 88, 500. Creditors of ₹ 16, 000 were taken over by X at ₹ 14, 000. Remaining Creditors were paid at ₹ 76, 500. The cost of realisation came to ₹ 500.
Prepare necessary accounts.

Q. ​X and Y are partners in a firm sharing profits in the ratio of 3 : 2 . Their Balance Sheet as at 31st March , 2018 was as follows:

Liabilities		₹	Assets		₹
Outstanding Rent		13, 000	Cash		10, 000
Creditors		20, 000	Sundry Debtors	80, 000
			Less : Provision for D.D.	4, 000	76, 000
​Workmen Compensation Reserve		5, 600
Capital A/cs:
X	50, 000		Stock		20, 000
Y	60, 000	1, 10, 000	Profit and Loss A/c		4, 000
			Machinery		38, 600
		1, 48, 600			1, 48​, 600

On 1st April, 2018 , they admitted Z as a partner for 1/6th share on the following terms:

(i) Z brings in ₹ 40, 000 as his share of Capital but he is unable to bring any amount for Goodwill .
(ii) Claim on account of Workmen Compensation is ₹ 3, 000.
(iii) To write off Bad Debts amounted to ₹ 6, 000.
(iv) Creditors are to be paid ₹ 2, 000 more.
(v) There being a claim against the firm for damages , liabilities to the extent of ₹ 2, 000 should be created.
(vi) Outstanding rent be brought down to ₹ 11, 200.
(vii) Goodwill is valued at $1^{\raisebox{1ex}{$1$}\!\left/ \!\raisebox{-1ex}{$2$}\right.}$ years' purchase of the average profits of last 3 years, less ₹ 12, 000 . Profits for the last 3 years amounted to ₹ 10, 000 ; ₹ 20, 000 and ₹ 30, 000.
Pass journal entries , prepare Capital Accounts and opening Balance Sheet.

Q.

Do we transfer Investment Fluctuation Reserve to Realisation A/c?

1. Can't say

2. Yes

3. No

4. None of these

Q.

State which fo the following would result in inflow/outflow of Cash or Cash Equivalents:
(i) Issue of fully paid bonus shares.
(ii) Writing off bad debts against the provision for Doubtful Debts.
(iii) Declaration of Final dividend.
(iv) Declaration of interim dividend.
(v) Cash Deposited into Bank.
(vi) Cash withdrawn from Bank.
(vii) Purchase fo Marketable Securities for Cash.

Q. Following is the Balance Sheet of X and Y as at 31st March, 2018 . Z is admitted as a partner on that date when the position of X and Y was:

Liabilities		₹	Assets			₹
Xs Capital	10, 000		Cash in Hand			9, 000
Ys Capital	8, 000	18, 000	Debtors			11, 000
Creditors		12, 000	Stock			12, 000
General Reserve		16, 000	Building			8, 000
Workmen Compensation Reserve		4, 000	Machinery			10, 000
		50, 000				50, 000

X and Y share profits in the proportion of 3 : 2 . The following terms of admission are agreed upon :
(a) Revaluation of assets : Building ₹ 18, 000; Stock ₹ 16, 000.
(b) The liability on Workmen Compensation Reserve is determined at ₹ 2, 000.
(c) Z brought as his share of goodwill ₹ 10, 000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and after above revaluation and adjustments are carried out .
(e) The further profit-sharing proportions were: X$—$2/5th, Y$—$2/5th and Z$—$1/5th.
Prepare new Balance Sheet of the firm and Capital Accounts of the Partners

Q. The account will be debited and the account will be credited when partners distributes general reserves at the time of dissolution.

1. capital reserves
2. goodwill
3. general reserve
4. partner's capital

Q. X, Y and Z carrying on business as merchants and sharing profits and losses in the ratio of 2 : 2 : 1 , dissolved their firm as at 31st March, 2018 on which date their Balance Sheet was as follows:

Liabilities				₹	Assets			₹
Sundry Creditors				41, 500	Cash at Bank			22, 500
Bills Payable				20, 000	Stock			80, 000
Bank Loan				40, 000	Debtors		50, 000
General Reserve				50, 000	Less: Provision for Doubtful Debts		2, 500	47, 500
Investments Fluctuation Reserve				40, 000	Investments			55, 000
Capital A/cs:					Premises			1, 51, 500
X		75, 000
Y		75, 000
Z		15, 000		1, 65, 000
				3, 56, 500				3, 56, 500

A bill for ₹ 5, 000 received from Mohan discounted from bank is not met on maturity.
The assets except Cash at Bank and Investments were sold to a company which paid ₹ 3, 25, 000 in cash.The Investments were sold and ₹ 56, 500 were received. Mohan proved insolvent and a dividend of 50% was received from his estate . Sundry Creditors (including Bills Payable) were paid ₹ 57, 500 in full settlement. Realisation Expenses amounted to ₹ 15, 000.
Prepare Realisation Account , Partners' Capital Accounts and Bank Account .

Q. The balance sheet shows a general reserve of Rs. 50, 000 which is to be shared between the partners in ratio at the time of dissolution.

1. gaining
2. sacrificing
3. profit sharing
4. capital

Q. State whether the following statements are true or false :

The capital account of a retiring partner always shows a debit balance.

Q. The workmen compensation reserve has a balance of Rs.70, 000 and a claim of Rs.10, 000. So, rupees can be transferred to partner's capital account

1. 60000
2. 70000
3. 80000
4. 10000

Q. Balance Sheet of a firm as at 31st March, 2018 , when it was decided to dissolve the same , was:

Liabilities				₹	Assets			₹
Sundry Creditors				14, 000	Cash at Bank			640
Reserve for Contingencies				500	Stock			4, 740
Capital A/cs:					Debtors			5, 540
X		4, 000			Machinery			10, 580
Y		3, 000		7, 000
				21, 500				21, 500

₹19, 500 were realised from all assets except Cash at Bank . The cost of winding up came to ₹ 440. X and Y shared profits in the ratio of 2 : 1 respectively.
Prepare Realisation Account and Capital Accounts of Partners.

Q.

What is the journal entry for outstanding expense?

Q.

The accumulated surpluses and reserves are shared between partners in which ratio?

1. Capital ratio

2. Equally

3. Profit sharing ratio

4. None of these

Q.

While distributing accumulated surplus and reserves-

1. we can't distribute

2. credit the general reserve account and debit the partners' capital account

3. debit the general reserve account and credit the partners' capital account

4. None of these

Q. When the General Reserve is distributed, is the partner's Capital Account debited or credited?

Q.

Do we share accumulated surpluses and reserves?

1. Can't say

2. None of these

3. No

4. Yes

Q. While adjusting the capital accounts of partners excess cash is withdrawn and deficit is added. This adjustment should be done by current accounts of the partners or by cash?

Q. From the following information calculate to owner fund ratio :-
Share capital. -- ? 5, 00, 000
Non-Current assets. --. ? 22, 00, 000
Reserve & Surplus. --. ? 3, 00, 000
Current Assets. --. ? 1, 00, 000

Q. Short answer type question:
Give the Journal entry to distribute 'Workmen Compensation Reserve' of Rs. 60, 000 at the time of retirement of Sajjan, when there is no claim against it. The firm have three partners Rajat, Sajjan and Kavita.

Q. Objective Type Questions :
Answer in one sentence only.

In what proportion is general reserve distributed amongst the old partners?

Q. Question

Q. Capital redemption reserve is created out of __________.

1. Dividend equilisation fund
2. P/L Account
3. General reserve account
4. All of the above

Q. Question

Q. Write the word / term / phrase, which can substitute each of the following statements.

Debit balance of an insolvent Partner’s Capital Account.