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Salary/Commission

X and Y share...

Question

X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2019 was:

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors
15,000
Cash at Bank 5,000

Employees' Provident Fund
10,000
Sundry Debtors
20,000

Workmen Compensation Reserve
5,800
Less: Provision for Doubtful Debts
600

19,400

Capital A/cs: Stock 25,000

X
70,000

Fixed Assets 80,000

Y
31,000

1,01,000
Profit and Loss A/c
2,400

1,31,800

1,31,800

They admit Z into partnership with 1/8th share in profits on 1st April, 2019. Z brings ₹ 20,000 as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employees' Provident Fund liability is to be increased by ₹ 5,000.
(b) All Debtors are good.
(c) Stock includes ₹ 3,000 for obsolete items.
(d) Creditors are to be paid ₹ 1,000 more.
(e) Fixed Assets are to be revalued at ₹ 70,000.
Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.

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

	1,31,800		1,31,800

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Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Stock

3,000

Provision for D. Debts

600

Creditors

1,000

Fixed Assets

10,000

Loss transferred to

Provident Fund

5,000

X Capital

11,500

Y Capital

6,900

19,000

19,000

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Revaluation (Loss)

11,500

6,900

Balance b/d

70,000

31,000

Profit and Loss

1,500

900

Workmen’s Comp.
Fund

3,625

2,175

Balance c/d

72,625

25,375

20,000

Cash

20,000

Premium for Goodwill

12,000

85,625

33,175

20,000

85,625

33,175

20,000

Balance Sheet

as on March 31, 2019 after Z’s admission

Particulars

Amount

(₹)

Assets

Amount

(₹)

Creditors (15,000 + 1,000)

16,000

Land and Building

5,000

Provident Fund (10,000 + 5,000)

15,000

Sundry Debtors

20,000

Capital A/cs:

Stock (25,000 – 3,000)

22,000

X

72,625

Fixed Assets (80,000 – 10,000)

70,000

Y

25,375

Cash

32,000

Z

20,000

1,18,000

1,49,000

1,49,000

Working Notes

WN1: Distribution of Revaluation Loss

WN2: Distribution Accumulated Loss

WN3: Distribution of Workmen’s Compensation Fund

WN4: Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X.

WN5: Calculation of New Profit Sharing Ratio

Suggest Corrections

Similar questions

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.

Balance Sheet of X, Y and Z who shared profits in the ratio of 5 : 3 : 2, as on 31st March, 2019 was as follows:


Liabilities and Capital		₹	Assets	₹
Sundry Creditors		39,750	Bank (Minimum Balance)	15,000
Employees' Provident Fund		5,250	Debtors	97,500
Workmen Compensation Reserve		22,500	Stock	82,500
Capital A/cs:			Fixed Assets	1,87,500
X	1,65,000
Y	84,000
Z	66,000	3,15,000
		3,82,500		3,82,500

Y retired on 1st April, 2019 and it was agreed that:

(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y' s share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.

(ii) Fixed Assets be appreciated by 20%.

(iii) Stock be reduced to ₹ 75,000.

(iv) Y be paid amount brought in by X and Z so as to make their capitals proportionate to their new profit-sharing ratio.

Prepare Revaluation Account, Capital Accounts of all partners and the Balance Sheet of the New Firm.

Q. The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2018 is as follows:



Liabilities		₹	Assets	₹
Creditors		50,000	Cash at Bank	40,000
Employees Provident Fund		10,000	Sundry Debtors	1,00,000
Profit and Loss A/c		85,000	Stock	80,000
Capital A/cs:			Fixed Assets	60,000
X	40,000
Y	62,000
Z	33,000	1,35,000
		2,80,000		2,80,000

X retired on 31st March, 2018 and Y and Z decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim , included in Creditors for ₹ 10,000 , is settled at ₹ 8,000.
The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners' Capital Accounts.

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. X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2019 was:


Liabilities		₹	Assets	₹
Sundry Creditors		25,000	Cash/Bank	5,000
General Reserve		18,000	Sundry Debtors	15,000
Capital A/cs:			Stock	10,000
X	75,000		Investments	8,000
Y	62,000	1,37,000	Printer	5,000
			Fixed Assets	1,37,000



		1,80,000		1,80,000

They admit Z into partnership on the same date on the following terms:
(a) Z brings in ₹ 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at ₹ 10,000. X takes over Investments at this value.
(d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March, 2019 is ₹ 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.

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Revaluation Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Stock	3,000	Provision for D. Debts	600
Creditors	1,000
Fixed Assets	10,000	Loss transferred to
Provident Fund	5,000	X Capital	11,500
		Y Capital	6,900
	19,000		19,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation (Loss)	11,500	6,900		Balance b/d	70,000	31,000
Profit and Loss	1,500	900		Workmen’s Comp. Fund	3,625	2,175
Balance c/d	72,625	25,375	20,000	Cash			20,000
				Premium for Goodwill	12,000
	85,625	33,175	20,000		85,625	33,175	20,000

Balance Sheet as on March 31, 2019 after Z’s admission
Particulars		Amount (₹)	Assets	Amount (₹)
Creditors (15,000 + 1,000)		16,000	Land and Building	5,000
Provident Fund (10,000 + 5,000)		15,000	Sundry Debtors	20,000
Capital A/cs:			Stock (25,000 – 3,000)	22,000
X	72,625		Fixed Assets (80,000 – 10,000)	70,000
Y	25,375		Cash	32,000
Z	20,000	1,18,000
		1,49,000		1,49,000