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Standard XII

Accountancy

Past Adjustments

Narang, Suri ...

Question

Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 12,16 and 13 respectively. The Balance Sheet on April 1, 2007 was as follows
Balance SheetDr as on March 31, 2007 CrCapital and LiabilitiesAmt.(Rs)AssetsAmt.(Rs)Bills Payable12,000Freehold Premises40,000Sundry Creditors18,000Machinery30,000Reserves12,000Furniture12,000Capital Account12,000Stock22,000Narang30,000Sundry Debtors20,000Suri30,000(-)Reserve for Bad(1,000)––––––––19,000Bajaj28,000––––––––88,000DebtCash7,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,30,000––––––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,30,000––––––––––––––––––––
Bajaj retires from the business and the partners agree to the following
(a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and furniture are to be depreciated by 10% and 7% respectively.
(c) Bad Debts reserve is to be increased to Rs.1,500.
(d) Goodwill is valued at Rs. 21,000 on Bajaj's retirement.
(e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj, Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts.
Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

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Solution

Dr Revaluation Account CrParticularsAmt.(Rs)ParticularsAmt.(Rs)Machinery A/c3,000Freehold Properties A/c8,000Furniture A/c840Stock A/c3,300Reserve for Bad Debts A/c500Capital A/cs Narang3,480 Suri1,160 Bajaj2,320––––––6,960¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯11,300––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯11,300–––––––––––––––– Dr Partners' Capital Account CrParticularsNarangSuriBajajParticularsNarangSuriBajajBajaj's Capital A/c5,2501,750Balance b/d30,00030,00028,000Bajaj's Loan A/c41,320Reserves A/c6,0002,0004,000(Bal fig)Revaluation A/c3,4801,1602,320(Profit)Narang's5,250Capital A/cSuri's Capital1,750A/c¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯39,480––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯33,160––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯41,320––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯39,480––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯33,160––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯41,320––––––––––––––––To Suri's Current15,000Balance b/d34,23031,410A/c (Bal fig)To Balance c/d49,23016,410Narang'sCurrent A/c (Bal fig)15,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯49,230––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯31,410––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯49,230––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯31,410––––––––––––––––
Balance Sheet as on April 1, 2007 Capital and LiabilitiesAmt.(Rs)AssetsAmt.(Rs)Bills Payable12,000Freehold Premises48,000Sundry Creditors18,000Machinery27,000Bajaj's Loan41,320Furniture11,160Suri's Current A/c15,000Capital A/csStock25,300 Narang49,230Sundry Debtors20,000 Suri16,410––––––––65,640(-)Reserve for Bad(1,500)––––––––18,500Cash7,000Narang's Current Account15,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,51,960––––––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,51,960––––––––––––––––––––
Working Note
(i) Bajaj's share in goodwill = Frim goodwill × His share
= 21,000×26= Rs. 7,000
(ii) Gaining ratio = 3:1 (same as old ratio because no information is given).
(iii) Contribution of remaining partners in retiring partners goodwill
Share of Narang =7,000×34 = Rs. 5,250
Share of Suri = 7,000×14= Rs. 1,750
(iv) Calculation of New Capital of remaining partners.
Capital after adjustments
Narang=34,230Suri=31,410Capital of New firm=¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯65,640––––––––
(v) Share of Capital in New ratio of remaining partner
Narang's New capital = 65,640×34= Rs. 49,230
Suri's New capital = 65,640×14= Rs. 16,410
(vi) Profit sharing ratio of old partners
=12:16:13=3:1:26=3:1:2

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Similar questions

Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2007 was as follows:

Books of Suri, Narang and Bajaj Balance Sheet as on April 1, 2007
Liabilities		Amount Rs	Assets		Amount Rs
Bills Payable		12,000	Freehold Premises		40,000
Sundry Creditors		18,000	Machinery		30,000
Reserves		12,000	Furniture		12,000
Capital Accounts:			Stock		22,000
Narang	30,000		Sundry Debtors	20,000
Suri	30,000*		Less: Reserve	1,000	19,000
Bajaj	28,000	88,000	for Bad Debt
			Cash		7,000
		1,30,000			1,30,000

Bajaj retires from the business and the partners agree to the following:

a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.

b) Machinery and furniture are to be depreciated by 10% and 7% respectively.

c) Bad Debts reserve is to be increased to Rs 1,500.

d) Goodwill is valued at Rs 21,000 on Bajaj’s retirement.

e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts.

Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

*In the given Question Suri’s Capital is Rs 30,000 instead of Rs 20,000.

Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2015 was as follows:

Books of Suri, Narang and Bajaj Balance Sheet as on April 1, 2015
Liabilities		Amount Rs	Assets		Amount Rs
Bills Payable		12,000	Freehold Premises		40,000
Sundry Creditors		18,000	Machinery		30,000
Reserves		12,000	Furniture		12,000
Capital Accounts:			Stock		22,000
Narang	30,000		Sundry Debtors	20,000
Suri	20,000		Less: Reserve	1,000	19,000
Bajaj	28,000	88,000	for Bad Debt
			Cash		7,000
		1,30,000			1,30,000

Bajaj retires from the business and the partners agree to the following:

a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.

b) Machinery and furniture are to be depreciated by 10% and 7% respectively.

c) Bad Debts reserve is to be increased to Rs 1,500.

d) Goodwill is valued at Rs 21,000 on Bajaj’s retirement.

Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

Q. X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 1 : 2 . On 31st March, 2018, their Balance Sheet was :

Liabilities		Amount (₹)	Assets		Amount (₹)
Bills Payable		12,000	Freehold Premises		40,000
Sundry Creditors		28,000	Machinery		30,000
General Reserve		12,000	Furniture		12,000
Capital A/cs:			Stock		22,000
X	30,000		Sundry Debtors	20,000
Y	20,000		Less: Provision for D. Debts	1,000	19,000
Z	28,000	78,000	Cash		7,000

		1,30,000			1,30,000

Z retires from the business and the partners agree to the following :
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be depreciated by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ₹ 1,500.
(d) Goodwill of the firm is valued at ₹ 21,000 on Z's retirement.
(e) The continuing partners have decided to adjust their capitals in their new profit-sharing ratio after retirement of Z . Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.

Q. Kushal Kumar and Kavita were partners in a firm sharing profit in the ratio of

3 : 1 : 1

1 s t A p r i l, 2012

their Balance Sheet was as follows:
On the above date Kavita retired and the following was agreed :
(i) Goodwill of the firm was valued at Rs 40,000.
(ii) Land was to be appreciated by 30% and building was to be depreciated by Rs 1,00,000.
(iii) Value of furniture was to be reduced by Rs 20,000. (iv) Bad debts reserve is to be increased to Rs 15,000. (v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her Loan Account.
(vi) Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.
Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita's retirement.

PRACTICAL PROBLEM

Suresh and Ramesh are partners in a business sharing Balance sheet as on 31^st March, 2013 is as follows:

Balance Sheet as on 31^st March, 2013
Liabilities		Amount Rs	Amount Rs	Assets	Amount Rs	Amount Rs
Capital A/c’s				Building		30,000
	Suresh	50,000		Machinery		10,000
	Ramesh	24,000	74,000	Furniture		9,500
Creditors			57,000	Debtors	40,000
Bills Payable			20,000	(-) R.D.D.	1,000	39,000
Reserve fund			9,000	Stock		30,000
				Bills Receivable		7,600
				Cash at Bank		33,900
			1,60,000			1,60,000

They admitted Kailash on 1^st April, 2013 as a partner on the following terms:

1) Kailash will bring Rs 30,000 as his capital for 1/4^th share in future profit and Rs 12,000 as goodwill which will be withdrawn by old partners.

2) Stock and Machinery to be depreciated by 10%.

3) R.D.D. is to be maintained at 5% on debtors.

4) Building to be appreciated by 20% and furniture is revalued at Rs 10,000.

Prepare Profit and Loss Adjustment Account, Partner’s Capital Accounts and Balance Sheet of the New firm.

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