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Solution - Xavier, Yusuf and Zaman Were Partners in a Firm Sharing Profits in the Ratio of 4:3: 2. on 1.4.2014 Their Balance Sheet Was as Follows: - Preparation of Revaluation Account and Balance Sheet

ConceptPreparation of Revaluation Account and Balance Sheet

Question

Xavier, Yusuf and Zaman were partners in a firm sharing profits in the ratio of 4:3: 2. On 1.4.2014 their Balance sheet was as follows:

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

Capital Accounts

    Xavier     1,20,000

    Yusuf        90,000

    Zaman      60,000

 

41,400

 

 

 

2,70,000

 

Cash at Bank

Sundry Debtors                   30,450

    Less: Prov. For Bad debts   1,050

Stock

Plant and Machinery

Land and Building

33,000

 

29,400

48,000

51,000

1,50,000

  3,11,400   3,11,400

Yusuf had been suffering from ill health and thus gave notice of retirement from the firm. An agreement was, therefore, entered into as on 1.4.2014, the terms of which were as follows:

1) That land and building be appreciated by 10%

2) The provision for bad debts is no longer necessary

3) That stock be appreciated by 20%

4) That goodwill of the firm be fixed at Rs 54,000. Yusuf share of the same be adjusted into Xavier's and Zamna's Capital Accounts, who are going to share future profits in the ratio of 2:1

5) The entire capital of the newly constituted firm be readjusted by bringing in or paying necessary cash so that the future capitals of Xavier and Zaman will be in their profit sharing ratio.

Prepare Revaluation Account and Partner's Capital Account

Solution

Revaluation Account
Dr.   Cr.
Particulars Rs Particulars Rs 

To Profit transferred to :

    Xavier’s Capital A/c   11,400

    Yusuf’s Capital A/c     8,550

    Zaman’s Capital A/c   5,700

 

 

 

25,650

By Land and Building A/c

By Sundry Debtors A/c

By Stock A/c

 

15,000

1,050

9,600

 

  25,650   25,650

 

Partner’s Capital Account
Dr.   Cr.
Particulars Xavier Yusuf Zaman Particulars Xavier Yusuf Zaman
To Yusuf’s Capital A/c 12,000   6,000 By Balance b/d 1,20,000 90,000 60,000
To Yusuf’s Loan A/c   1,16,550   By Revaluation Profit A/c 11,400 8,550 5,700
        By Xavier’s Capital A/c   12,000  
        By Zaman’s Capital A/c   6,000  
To Balance c/d 1,19,400   59,700        
  1,31,400 1,16,500 65,700   1,31,400 1,16,500 65,700

Working Notes:

WN1: Adjustment of Goodwill

Yusuf's share of Goodwill = `54000 xx 3/9 = 18000`

Xavier will pay = `18000 xx 2/3 = 12000`

Zaman will pay = `18000 xx 1/3 = 6000`

WN2 Adjustment of Capital
Adjusted Old Capital of Xavier = 1, 19,400
Adjusted Old Capital of Yusuf = 1, 16,500 ⇒ will be transferred to Loan A/c
Adjusted Old Capital of Zaman = 59,700
Total adjusted capital = 1, 19,400 + 59,700 = 1,79,100
New Profit Sharing Ratio = 2:1

Xavier's New Capital = `179100 xx 2/3 = 119400`

Zaman's New Capital = `179100 xx 1/3 = 59700`

Note: Since, here no information is given regarding the share acquired by Xavier and Zaman, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 4:2 or 2:1

Is there an error in this question or solution?

APPEARS IN

2014-2015 (March) All India Set 3
Question 17.2 | 8 marks
2014-2015 (March) All India Set 1
Question 17.2 | 8 marks
2014-2015 (March) All India Set 2
Question 17.2 | 8 marks

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J, H and K were partners in a firm sharing profits in the ratio of 5:3:2. On 31-3-2015 their Balance Sheet was as follows:

                                   Balance Sheet of J,H and K as on 31-3-2015

LIabilities Amount(Rs.) Assets Amount(Rs.)

Creditors

Investment Fluctuation Fund

P & L Account

Capital:

       J                            1,00,000

       H                             80,000

       K                             40,000 

 

42,000

20,000

80,000

 

 

 

2,20,000

 

Land and Building

Motor Vans

Investments

Machinery

Stock

Debtors                         80,000

      Less:                         6,000  

Cash

2,24,000

40,000

38,000

24,000

30,000

 

74,000

32,000

  3,62,000   3,62,000

On the above data H retires and J and K agreed to continue the business on the following terms:

(i) Goodwill of the firm was valued at Rs.1,02,000.

(ii) There was a claim of Rs.8,000 for workmen's compensation.

(iii) Provision for bad debts was to be reduced by Rs.2,000.

(iv) H will be paid Rs.14,000 in cash and the balance will be transferred in his loan account which will be paid in four equal yearly installments together with interest @ 10% p.a.

(v) The new profit sharing ratio between J and K 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 Balance Sheet of the new firm.

Solution for question: Xavier, Yusuf and Zaman Were Partners in a Firm Sharing Profits in the Ratio of 4:3: 2. on 1.4.2014 Their Balance Sheet Was as Follows: concept: Preparation of Revaluation Account and Balance Sheet. For the courses CBSE (Arts), CBSE (Commerce), CBSE (Science)
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