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Reassessment of Liabilities (Retirement)

Which of the ...

Question

Which of the following is not contingent liability?

A

Claims against the company not acknowledged as debts

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B

Debts included on debtors which are doubtful in nature

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C

Uncalled liability on partly paid shares

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D

Estimated amount of contracts remaining to be executed on capital amount and not provided for

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Solution

The correct option is C Debts included on debtors which are doubtful in nature
Debts included on debtors which are doubtful in nature has a certain level of estimation and hence it cannot be a contingent liability.
It is booked in Profit and loss account as 'Reserve for Doubtful Debts' (RDD) based on the percentage of Debtors balance.

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Q. Assertion :Contingent Liabilities is included in the total of the liability side of the balance sheet of a company. Reason: Contingent liabilities are those which may or may not arise in future.

Q. X and Y are partners sharing profits and losses equally. Their Balance Sheet as on 31st March, 2018 is given below:


Liabilities		₹	Assets		₹
Capital A/cs:			Land and Building		1,50,000
X	1,50,000		Plant and Machinery		1,00,000
Y	1,00,000	2,50,000	Furniture and Fittings		25,000
Current A/cs:			Stock		75,000
X	40,000		Debtors	75,000
Y	30,000	70,000	Less: 5% Reserve for D. Debts	5,000	70,000
Creditors		1,30,000	Bill Receivalbe		30,000
Bill Payable		50,000	Bank		50,000

		5,00,000			5,00,000

Z is admitted as a new partner for 1/4th share under the following terms :
(a) Z is to introduce ₹ 1,25,000 as capital .
(b) Goodwill of the firm was valued at nil.
(c) It is found that the creditors included a sum of ₹ 7,500 which was not to be paid . But it was also found that there was a liability for compensation to Workmen amounting to ₹ 10,000.
(d) Provision for Doubtful Debts is to be created @ 10% on debtors.
(e) In regard to the Partners' Capital Accounts present fixed capital method is to be converted into fluctuating capital method .
(f) Bills of ₹ 20,000 accepted from creditors were not recorded in the books.
(g) X provides ₹ 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account , Partners' Capital Accounts, Bank Account and the Balance Sheet of the new firm.

Q. X and Y are partners sharing profits equally. Their Balance Sheet as on 31st March, 2019 is given below:


Liabilities		Amount (₹)	Assets		Amount (₹)
Capital A/cs:			Land and Building		1,50,000
X	1,50,000		Plant and Machinery		1,00,000
Y	1,00,000	2,50,000	Furniture and Fittings		25,000
Current A/cs:			Stock		75,000
X	40,000		Debtors	75,000
Y	30,000	70,000	Less: Provision for Doubtful Debts	5,000	70,000
Creditors		1,30,000	Bills Receivable		30,000
Bills Payable		50,000	Bank		50,000

		5,00,000			5,00,000

Z is admitted as a new partner for 1/4th share under the following terms:
(a) Z is to introduce ₹ 1,25,000 as capital.
(b) Goodwill of the firm was valued at nil.
(c) It is found that the creditors included a sum of ₹ 7,500 which was not to be paid. But it was also found that there was a liability for Compensation to Workmen amounting to ₹ 10,000.
(d) Provision for doubtful debts is to be created @ 10% on debtors.
(e) In regard to the Partners' Capital Accounts, present Fixed Capital Account Method is to be converted into Fluctuating Capital Account Method.
(f) Bills of ₹ 20,000 accepted from creditors were not recorded in the books.
(g) X provides ₹ 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account, Partners' Capital Accounts, Bank Account and the Balance Sheet of the new firm.

Q. Mrs. Meena of Bilaspur has not kept proper books of accounts, following information is provided to you:

Particulars	31.03.2012 Amount (Rs.)	31.03.2013 Amount (Rs.)
Machinery	50,000	50,000
Furniture	50,000	30,000
Debtors	18,000	25,000
Creditors	18,000	20,000
Stock	30,000	42,000
Outstanding Expenses	1,500	42,000
Pre-paid expenses	-	-
Cash at bank	28,000	40,000

Further information:
(1) Mrs. Meena introduced additional capital as on

1^{s t}

October, 2012 by selling her personal car is Rs. 10,000
(2) She paid her daughter's college fees from business bank account Rs. 3,000.
(3) Depreciate 2% on debtors for Bad and Doubtful debts.
(3) Interest on capital is to be provided @ 5% p.a. and on drawings @5% p.a.
Prepare: Opening and closing statement of affairs and statement of profit or loss for the year ended

31^{s t}

Q. X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Balance Sheet of the firm as at 31st March, 2019 was as follows:

Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		21,000	Cash at Bank		5,750
Workmen Compensation Reserve		12,000	Debtors	40,000
Investments Fluctuation Reserve		6,000	Less: Provision for Doubtful Debts	2,000	38,000
Capital A/cs:			Stock		30,000
X	68,000		Investment (Market Value ₹ 17,600)		15,000
Y	32,000		Patents		10,000
Z	21,000	1,21,000	Machinery		50,000
			Goodwill		6,000
			Advertisement Expenditure		5,250

		1,60,000			1,60,000

Z retired on 1st April, 2019 on the following terms:
(a) Goodwill of the firm is to be valued at ₹ 34,800.
(b) Value of Patents is to be reduced by 20% and that of machinery to 90%.
(c) Provision for doubtful debts is to be created @ 6% on debtors.
(d) Z took over the investment at market value.
(e) Liability for Workmen Compensation to the extent of ₹ 750 is to be created.
(f) A liability of ₹ 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be paid as follows: ₹ 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3 Months.
Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.

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