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Question

Given below is the Balance Sheet of A and B, who axe carrying on partnership business on 31.12.2006. A and B share profits and losses in the ratio of 2 :1.
Balance Sheet of A and B
as on December 31, 2016
Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Bills payable10,000Cash in hand10,000Creditors58,000Cash at bank40,000Outstanding2,000Sundry Debtors60,000ExpensesStock40,000CapitalsPlant1,00,000-Building1,50,000A 1,80,000B 1,50,000––––––––3,30,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯4,00,000––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯4,00,000––––––––––––––––

C is admitted as a partner on the date of the balance sheet on the following terms.

(i) C will bring Rs. 1,00,000 as his capital and Rs. 60, 000 as his share of goodwill for 14 share in the profits.

(ii) Plant is to be appreciated to Rs. 1,20,000 and the value of buildings is to be appreciated by 10%.

(iii) Stock is found over valued by Rs. 4,000.

(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.

(v) Creditors were unrecorded to the extent of Rs.1,000.

Pass the necessary, journal entries, prepare the Revaluation account, and Partners Capital account and show the balance sheet after the admission of C.

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Solution

Journal Entries
DateParticularsL.FAmt.(Cr)Amt.(Cr)(i)Revaluation A/cDr8,000 To Stock A/c4,000 To Provision for Doubtful Debts A/c3,000 To Creditor's A/c1,000(Decrease in stock provision for doubtful debts created and creditors increased) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(ii)Plant A/cDr20,000Building A/cDr15,000 To Revaluation A/c35,000(Plant and building increased in value) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(iii)Revaluation A/cDr27,000 To A's Capital A/c A/c18,000 To B's Capital A/c9,000(Gain on revaluation distributed among old partners in old ratio) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(iv)Cash A/cDr1,60,000 To C's Capital A/c1,60,000(New partner paid capital and his share of goodwill in cash) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(v)C's Capital A/cDr60,000 To A's Capital A/c40,000 To B's Capital A/c20,000(Premium distributed among old partners is sacrificing ratio)

Dr Revaluation Account Cr
ParticularsAmt. (Rs)ParticularsAmt. (Rs)Stock A/c4,000Plant A/c20,000Provision for Doutful Debts A/c3,000Building A/c15,000Creditors A/c ( Unrecorded)1,000A's Capital A/c 18,000B's Capital A/c 9,000––––27,000––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯35,000––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯35,000––––––––––––

Dr Partner's Capital Account Cr
ParticularsABCParticularsABCA's Capital A/c40,000Balance b/d1,80,0001,50,000B's Capital A/c20,000Gain in Revaluation18,0009,000Cash A/c1,60,000C's Capital A/c40,00020,000Balance c/d2,38,0001,79,0001,00,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,38,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,79,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,60,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,38,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,79,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,60,000––––––––

~ Balance Sheet .
Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Bills payable10,000Cash in hand1,70,000Creditors 58,000Cash at bank40,000+ Unrecorded 1,000––––59,000Sundry debtors 60,000Outstanding Expenses2,000(-) Provision for Doubtful Debts (3,000)––––––57,000CapitalStock 40,000A 2,38,000(-)Depreciation (4,000)––––––36,000B 1,79,000Plant 1,00,000C 1,00,000––––––––5,17,000(+)Appreciation 20,000––––––1,20,000Building 1,50,000(+)Appreciation 15,000––––––1,65,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯5,88,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯5,88,000––––––––


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Q.

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.

Balance Sheet of A and B as on December 31, 2016

Liabilites

Amount

(Rs)

Assets

Amount

(Rs)

Bills Payable

10,000

Cash in Hand

10,000

Creditors

58,000

Cash at Bank

40,000

Outstanding

2,000

Sundry Debtors

60,000

Expenses

Stock

40,000

Capitals:

Plant

1,00,000

A

1,80,000

Buildings

1,50,000

B

1,50,000

3,30,000

4,00,000

4,00,000

C is admitted as a partner on the date of the balance sheet on the following terms:

(i) C will bring in Rs 1,00,000 as his capital and Rs 60,000 as his share of goodwill for 1/4 share in the profits.

(ii) Plant is to be appreciated to Rs 1,20,000 and the value of buildings is to be appreciated by 10%.

(iii) Stock is found over valued by Rs 4,000.

(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.

(v) Creditors were unrecorded to the extent of Rs 1,000.

Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.

Q.

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31-12-2017. A and B share profits and losses in the ratio of 2 : 1.

BALANCE SHEET OF A AND B
as on 31st December, 2017
LiabilitiesAmount AssetsAmount(Rs) (Rs) Bills Payable10,000Cash in Hand10,000Creditors58,000Cash at Bank40,000Outstanding Expenses2,000Sundry Debtors60,000Capitals :Stock40,000A1,80,000Plant1,00,000B1,50,000––––––––3,30,000––––––––Buildings1,50,000––––––––4,00,0004,00,000

C is admitted as a partner on the date of the Balance Sheet on the following terms:

(i) C will bring Rs 1,00,000 for his capital and Rs 60,000 as his share of goodwill for 1/4th share in the profits.

(ii) Plant is to be appreciated to Rs 1,20,000 and the value of buildings is to be appreciated by 10%.

(iii) Stock is found over valued by Rs 4,000.

(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.

(v) Creditors were unrecorded to the extent of Rs 1,000.

Pass the necessary Journal entries at the time of admission of C. Also prepare a Balance Sheet.

OR

Pankaj, Naresh and Somesh are partners sharing profits in the ratio of 3 : 2 : 1. Naresh retired from the firm due to his illness. On that date the Balance Sheet of the firm was as follows:

BALANCE SHEET
as on 31st March, 2017
LiabilitiesAmount AssetsAmount(Rs) (Rs) General Reserve12,000Bank7,600Sundry Creditors15,000Debtors6,000Bills Payable12,000Less: Provision forOutstanding Salary2,200 Doubtful Debt(400)––––5,600Provision for Legal Damages6,000Stock9,000Capitals :Furniture41,000 Pankaj46,000Premises80,000 Naresh30,000 Somesh20,000––––––96,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,43,200¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,43,200

Additional Information :

(i) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for Rs 1,200 and furniture to be brought up to Rs 45,000.

(ii) Goodwill of the firm be valued at Rs 42,000.

(iii) Rs 26,000 from Naresh's capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.

(iv) New profit sharing ratio of Pankaj and Somesh is decided to be 5 : 1.

Give the necessary Ledger Accounts at the time of Naresh's retirement.

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