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Standard XII

Accountancy

Discount on Issue of Debentures

A liability o...

Question

A liability of Rs. 7,004 will be created against bills receivable discounted earlier but now dishonoured. What is the journal entry, effect in Revaluation Account, Partner's Capital Account and Balance Sheet?

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Solution

Dear Student,

The impact of the transaction 'A liability of Rs. 7,004 will be created against bills receivable discounted earlier but now dishonoured' will be on Revaluation A/c and Balance Sheet only.

(a) Debit Revaluation A/c with Rs 7,004
(b) Show 'Liability against bills Discounted' as Rs 7,004 on the Liabilities side of the New Balance Sheet

Journal entry will be as follows.

Journal

Date Particulars L.F. Debit
Amount
(Rs) Credit
Amount
(Rs)

Revaluation A/c Dr. 7,004

To Liability against Bill Discounted 7,004

(Liability against bill discounted debited to Revaluation A/c)

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Similar questions

Q. The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2019 is as follows:


Liabilities		₹	Assets	₹
Capital A/cs:			Y's Current Account	7,000
X	1,75,000		Land and Building	1,75,000
Y	1,50,000		Plant and Machinery	67,500
Z	1,25,000	4,50,000	Furniture	80,000
Current A/cs:			Investments	36,500
X	4,000		Bills Receivable	17,000
Z	6,000	10,000	Sundry Debtors	43,500

General Reserve		15,000	Stock	1,37,000
Profit and Loss A/c		7,000	Bank	43,500
Creditors		80,000
Bills Payable		45,000

		6,07,000		6,07,000

On the above date, W is admitted as a partner on the following terms:

(a) W will bring ₹ 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at ₹ 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of ₹ 7,004 will be created against bills receivable discounted earlier but now dishonoured.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W's Capital through their Current Accounts.
Prepare Revaluation Account, Partners' Current Accounts and Capital Accounts.

Q. A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as at 31st March, 2019 is as follows:


Liabilities		₹	Assets	₹
Capital A/cs:			Land and Building	50,000
A	60,000		Plant and Machinery	40,000
B	60,000		Furniture	30,000
C	40,000	1,60,000	Stock	20,000
Creditors		30,000	Debtors	30,000
Bills Payable		10,000	Bills Receivable	20,000
			Bank	10,000

		2,00,000		2,00,000

D is admitted as a partner on 1st April, 2019 for equal share. His capital is to be ₹ 50,000.
Following adjustments are agreed on D's admission:
(a) Out of the Creditors, a sum of ₹ 10,000 is due to D, it will be adjusted against his capital.
(b) Advertisement Expenses of ₹ 1,200 are to be carried forward as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of ₹ 2,000 paid for B's personal expenses.
(d) A Bill of Exchange of ₹ 4,000, which was previously discounted with the bank, was dishonoured on 31st March, 2019 but entry was not passed for dishonour.
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation amounted to ₹ 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.

Om, Ram and Shanti were partners in firm sharing profits in the ratio of 3:2:1. On 1st April, 2014 their Balance sheet are as follows:

$\begin{matrix} Liabilities & Amount & Assets & Amount (Rs) & (Rs) Capital Accounts : & Land and building & 3, 64, 000 Om & 3, 58, 000 & Plane and Machiery & 2, 95, 000 Ram & 3, 00, 000 & Furniture & 2, 33, 000 Shanti & 2, 62, 000 & 9, 20, 000 & Bills Receivable & 38, 000 General Reserve & 48, 000 & Sundry Debtors & 90, 000 Creditors & 1, 60, 000 & Stock & 1, 11, 000 Bills Payable & 90, 000 - ------ - & Bank & 87, 000 - ------ - 12, 18, 000 & 12, 18, 000 \end{matrix}$

On the above date, Hanuman was admitted on the following terms:

(i) He will bring Rs 1,00,000 for his capital and will get 1/10th share in the profits.

(ii) He will bring necessary amount in cash for his good will premium. The goodwill of the firm was valued at Rs 3,00,000.

(iii) A liability of Rs 18,000 will be created against Bill Receivable discountd.

(iv) The value of stock and furniture will be reduced by 20%.

(v) The value of land and buildings will be increased by 10%.

(vi) Capital accounts of the partners will be adjusted on the basis of Hanuman's capital in their profit sharing ratio by opening curent accounts. Prepare Revaluation Account and Partner's Capital Accounts.

Xavier, Yusuf and Zaman were parners in a firm sharing profits in the ratio of 4:3:2. On 1-4-2014, their Balance Sheet was as follows:

$\begin{matrix} Liabilities & Amount & Assets & Amout (Rs) & (Rs) Sundry Creditors & 41, 400 & Cash at Bank & 33, 000 Capital Accounts: & Sundry Debtors & 30, 450 Xavier & 1, 20, 000 & Less : Provision for Bad Yusuf & 90, 000 & Debts & 1050 - --- - & 29, 400 Zaman & 60, 000 - ------ - & 2, 70, 000 & Stock & 48, 000 Plant and Machinery & 51, 000 Land and Building & 1, 50, 000 - -------- - ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 3, 11, 400 & 3, 11, 000 \end{matrix}$

Yusuf had been suffering from ill health and thus gave notice of retirement from the firm, An agreement was, therefore, entered into as on 1-4-2014, the terms of which were as follows.

(i) That land and building be appreciated by 10%.

(ii) That provision for bad debts in no longer necessary.

(iii) That stock be appreciated by 20%

(iv) That good will of the firm be fixed, at Rs 54,000. Yusuf's share of the same is adjustes from Xavier's and Zaman's capital accounts, who are going to share future profits in the ratio of 2:1.

(v) The entire capital of the newly constituted firm be redjusted by bringing in or paying necessary cash so that future capital of Xavier and Zaman will be in their profit sharing ratio. Prepare Revaluation Account and Partner's Capital Accounts.

Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.

Books of Jain, Gupta and Malik Balance Sheet as on March 31, 2016
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		19,800	Land and Building	26,000
Telephone Bills Outstanding		300	Bonds	14,370
Accounts Payable		8,950	Cash	5,500
Accumulated Profits		16,750	Bills Receivable	23,450
			Sundry Debtors	26,700
Capitals :			Stock	18,100
Jain	40,000		Office Furniture	18,250
Gupta	60,000		Plants and Machinery	20,230
Malik	20,000	1,20,000	Computers	13,200
		1,65,800		1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.

A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.

The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.

Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

A, B

and

C

are partners sharing profits and losses in the ratio of

3 : 2 : 1

respectively. Their Balance Sheet as at

31^{s t}

March,2018 is as follows:

Liabilities	(Rs.)	Assets	(Rs.)
Capital A/cs: A 60,000 B 60,000 C 40,000 Creditors Bills Payable	1,60,000 30,000 10,000	Land and Building Plant and Machinery Furniture Stock Debtors Bills Receivable Bank	50,000 40,000 30,000 20,000 30,000 20,000 10,000
	2,00,000		2,00,000

D

is admitted as a new partners on

1^{s t}

April,2018 for an equal share and is to pay

R s . 50, 000

as capital. Following are the adjustment required on

D^{'} s

admission:
(a) Out of the Creditors, a sum of

R s . 10, 000

is due to

D

which will be transferred to his capital Account.
(b) Advertisement Expenses of

R s . 1, 200

are to be carried forward to next accounting period as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of

R s . 2, 000

paid for

B^{'} s

personal expenses.
(d) A Bill of Exchange of

R s . 4, 000

which was previously discounted with the banker, was dishonoured on

31^{s t}

March,2018 but no entry has been passed for that.
(e) A Provision for Doubtful Debts @

5 %

is to be created against Debtors.
(f) Expenses on Revaluation amounted to

R s . 2, 100

is paid by

A

.
Prepare necessary Ledger Accounts and Balance Sheet after

D^{'} s

admission.

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Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)


	Revaluation A/c	Dr.		7,004
	To Liability against Bill Discounted				7,004
	(Liability against bill discounted debited to Revaluation A/c)