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Standard XI

Accountancy

Liability

If there is a...

Question

If there is a provision for creditors 2000 and it is increased by 500. How will this be shown in balance sheet and revaluation account?

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Solution

Dear Student,
If we expect that some amount of creditors in near future is no longer payable, we create a provision on creditors. In the present situation provision for creditors is to be increased by Rs. 500, so it will be credited in revaluation A/c(being a profit) and deducted from creditors(being no longer payable) in balance sheet.

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Q. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:


Liabilities		Amount (₹)	Assets	Amount (₹)
Creditors		50,000	Land	50,000
Bills Payable		20,000	Building	50,000
General Reserve		30,000	Plant	1,00,000
Capital A/cs:			Stock	40,000
A	1,00,000		Debtors	30,000
B	50,000		Bank	5,000
C	25,000	1,75,000
		2,75,000		2,75,000

From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

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.

X

and

Y

share profits in the ratio of

5 : 3

. Their Balance Sheet as at

31^{s t}

March,2018 was:

Liabilities	(Rs.)	Assets	(Rs.)
Creditors Employees Provident Fund Workmen Compensation Reserve Capital A/cs: X 70,000 Y 31,000	15,000 10,000 5,800 1,01,000	Cash at Bank Sundry Debtors 20,000 Less: Provision for Doubtful Debts 600 Stock Fixed Assets Profit and Loss A/c	5,000 19,400 25,000 80,000 2,400
	1,31,800		1,31,800

They admit

Z

into partnership with

1 / 8^{t h}

share in profits on this date.

Z

brings

R s . 20, 000

as his capital.

R s . 12, 000

for goodwill in cash.

Z

acquires share entirely from

X

. Following revaluation are also made.
(a) Employees Provident Fund liability is to be increased by

R s . 5, 000

.
(b) All Debtors are good. Therefore, no provision is required on Debtors.
(c) Stock includes

R s . 3, 000

for obsolete items.
(d) Creditors are to be paid

R s . 1, 000

more.
(e) Fixed Assets are to be revalued at

R s . 70, 000

.
Prepare Journal entries, necessary account and new Balance Sheet. Also calculate new profit-sharing ratio.

Following is the Balance Sheet of A, B and C as at 31st March, 2011. They shared profits in the ratio of 2 : 2 : 1.

$\begin{matrix} Capital and Liabilities & Rs & Assets & Rs Sundry Creditors & 5, 00, 000 & Cash at Bank & 10, 000 General Reserve & 2, 50, 000 & Debtors & 6, 00, 000 Partners Loan A/cs : & Less : Provision for B & 1, 80, 000 & Doubtful Debts & (25, 000) - -------- - & 5, 75, 000 C & 1, 20, 000 - -------- - & 3, 00, 000 & Stock & 3, 40, 000 Capital A/cs : & Land & Buildings & 10, 00, 000 A & 5, 00, 000 & Advertisement Suspense A/c & 60, 000 B & 3, 00, 000 & Profit and Loss A/c & 15, 000 C & 1, 50, 000 - -------- - & 9, 50, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 20, 00, 000 - --------- - - --------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 20, 00, 000 - --------- - - --------- - \end{matrix}$

B retires on 1st April, 2011 on the following terms :

(i) Stock is overvalued by Rs 20,000 and land & buildings are undervalued by Rs 1,00,000.

(ii) Provision for doubtful debts is to be increased to Rs 30,000.

(iii) Old credit balances of Sundry Creditors Rs 40,000 be written off.

(iv) A computer purchased on 1st October, 2010 for Rs 50,000 debited to Office Expenses Account is to be brought into account charging depreciation @ 20% p.a.

(v) Goodwill of the firm is valued at Rs 1,50,000 and the amount due to B be adjusted in the capital accounts of A and C.

Prepare the Revaluation Account, Capital Accounts and the new Balance Sheet.

Q. Ajay, Aman and Anand were partner's in a firm sharing profit in the ratio of