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X, Y and Z Were Partners in a Firm Sharing Profit’S in the Firm of 5:3:2. on 31-3-2015 Their Balance Sheet Was as Follows - CBSE (Arts) Class 12 - Accountancy

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Question

X, Y and Z were partners in a firm sharing profit’s in the firm of 5:3:2. On 31-3-2015 their Balance Sheet was as follows:

                                   Balance sheet of X,Y and Z as on 31st march,2015

Liabilities Amount(Rs.) Assets Amount(Rs.)

Creditors

Investment Fluctuation Fund

P & L Account

Capital:

       X                            50,000

       Y                             40,000

       Z                            20,000

 

21,000

10,000

40,000

 

 

 

1,10,000

 

Land and Building

Motor Vans

Investments

Machinery

Stock

Debtors                         40,000

      Less:                         3,000

Cash

62,000

20,000

19,000

12,000

15,000

 

37,000

16,000 

  1,81,000   1,81,000

On the above date Y retired and X and Z agreed to continue the business on the following terms:

(1) Goodwill of the firm was valued at Rs.51,000

(2) There was a claim of 4,000 for Workmen’s Compensation.

(3) Provision for bad debts was to be reduced by 1,000

(4) Y will be paid 8,200 in cash and the balance will be transferred in his loan account which will be paid in four equally yearly instalments together with interest @ 10% p.a.

(5) The new profit sharing ratio between X and Z will be 3:2 and their capitals will be in their new profit sharing ratio. The Capital adjustments will be done by opening current Accounts

Prepare Revaluation Account. Partner’s Capital Accounts and the Balance Sheet of reconstituted firm.

Solution

                                                                   Revaluation Account

Dr.                                                                                                                                                                    Cr.

Particulars Amount(Rs.) Particulars Amount(Rs.)

To Claim for Workman Compensation

 

 

 

 

 

 

4,000

 

 

 

 

 

 

By Provision for Doubtful Debts

 

By Loss on Revaluation

       X’s Capital A/c                     1,500

       Y’s Capital A/c                        900

       Z’s Capital A/c                        600

 

1,000

 

 

 

 

3,000

 

  4,000   4,000

 

                                                                                                 Partner’s Capital Account

Dr.                                                                                                                                                                                                                Cr.

Particulars X (Rs.) Y (Rs.) Z (Rs.) Particulars X (Rs.) Y (Rs.) Z (Rs.)

Revaluation A/c

Y’s Capital A/c

Cash A/c

Y’s Loan A/c

 

Balance c/d

1,500

5,100

 

 

 

68,400

900

 

8,200

61,200

 

 

600

10,200

 

 

 

19,200

Balance b/d

IFF

P&L A/c

X’s Capital

Z’s Capital

 

50,000

5,000

20,000

 

 

 

40,000

3,000

12,000

5,100

10,200

 

20,000

2,000

8,000

 

 

 

  75,000 70,300 30,000   75,000 70,300 30,000

Current A/c

 

Balance c/d

15,840

 

52,560

 

 

 

35,040

Balance b/d

Current A/c

 

68,400

 

 

 

19,200

15,840

 

  68,400   35,040   68,400   35,040

 

                                                                     Balance Sheet as on March 31,2015

Liabilities Amount (Rs.) Assets Amount (Rs.)

Creditors

Capitals

      X                                            52,560

      Z                                            35,040

X’s Current A/c

Claim for Workmen Compensation

Y’s Loan A/c

 

 

 

21,000

 

 

87,600

15,840

4,000

61,200

 

 

 

Land and Building

Motor Vans

Investment

Machinery

Stock

Debtors                                           40,000

     Less: Provision                             2,000

Cash (16000 - 8200)

Z’s Current A/c

 

62,000

20,000

19,000

12,000

15,000

 

38,000

7,800

15,840

 

  1,89,640   1,89,640

 

Working Notes :

WN 1: Calculation of Gaining Ratio

X's = (3/5) - (5/10) = 1/10

Z's = (2/5) - (2/10) = 2/10

Gaining Ratio = 1 : 2

 

WN 2: Adjustment of Goodwill

Y's Share of Goodwill = 51,000 x (3/10) = 15,300

15,300 will be debited to gaining partners (X and Z) in the ratio of 1:2

X's Share = 15,300 x (1/3) = 5,100

Z's share = 15,300 x (2/3) = 10,200

 

WN 3: Adjustment of Capital

Adjusted Capital of X = 50,000 + 5,000 + 20,000 – 1,500 – 5,100 = 68,400

Adjusted Capital of Z = 20,000 + 2,000 + 8,000 – 600 – 10,200 = 19,200

Total Adjusted Capital = 68,400 + 19,200 = 87,600

X's New Capital = 87,600 x (3/5) = 52,560

Z's New Capital = 87,600 x (2/5) = 35,040

Z’s New Capital > Z’s Adjusted Capital (Z owes 15,840 to the firm)

X’s New Capital < X’s Adjusted Capital (Firm owes 15,840 to X)

 

WN 4 Amount transferred to Y’s Loan A/c

Amount to be transferred = (Credit side – Debit side) – Cash paid

                                      = (70,300 – 900) – 8,200

                                      = 61,200

  Is there an error in this question or solution?
Solution X, Y and Z Were Partners in a Firm Sharing Profit’S in the Firm of 5:3:2. on 31-3-2015 Their Balance Sheet Was as Follows Concept: Preparation of Revaluation Account and Balance Sheet.
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