HSC Commerce 12th Board ExamMaharashtra State Board
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# Micheal Vaz solutions for 12th Board Exam Accounts chapter 3 - Reconstitution of Partnership (Admission of Partner)

## Chapter 3: Reconstitution of Partnership (Admission of Partner)

ExercisePractical Problems

#### Micheal Vaz solutions for 12th Board Exam Accounts Chapter 3 Exercise [Page 107]

Exercise | Q 1 | Page 107

Answer in one sentence only.
What is meant by Reconstitution of partnership ?

Exercise | Q 2 | Page 107

Answer in one sentence only.
What is meant by admission of partner?

Exercise | Q 3 | Page 107

Answer in one sentence only.
What is sacrifice ratio?

Exercise | Q 4 | Page 107

Answer in one sentence only.
What does the excess of debits over credits in profit and loss adjustment account indicate?

Exercise | Q 5 | Page 107

Answer in one sentence only.
What is revaluation account?

Exercise | Q 6 | Page 107

Answer in one sentence only.
In what proportion is general reserve distributed amongst the old partners?

Exercise | Q 7 | Page 107

Answer in one sentence only.
When is goodwill account raised in the books of the firm?

Exercise | Q 8 | Page 107

Answer in one sentence only.
How is sacrifice ratio calculated?

Exercise | Q 9 | Page 107

Answer in one sentence only.
Why a new partner is admitted?

Exercise | Q 10 | Page 107

Answer in one sentence only.
When is the ratio of sacrifice to be calculated?

#### Micheal Vaz solutions for 12th Board Exam Accounts Chapter 3 Exercise [Pages 107 - 164]

Exercise | Q 1 | Page 107

Write the word/term or phrase which can substitute the following statement.
The account which shows change in the values of assets.

Exercise | Q 2 | Page 107

Write the word/term or phrase which can substitute the following statement.
Credit balance on revaluation account.

Exercise | Q 3 | Page 107

Write the word/term or phrase which can substitute the following statement.
The proportion in which old partners make a sacrifice.

Exercise | Q 4 | Page 107

Write the word/term or phrase which can substitute the following statement.
Excess actual capital over proportionate capital.

Exercise | Q 5 | Page 107

Write the word/term or phrase which can substitute the following statement.
Name of intangible asset having a value.

Exercise | Q 6 | Page 107

Write the word/term or phrase which can substitute the following statement.
Account which is debited when new partner brings cash for his share of goodwill.

Exercise | Q 6 | Page 164

Explain various methods for the treatment of goodwill on the admission of a new partner?

Exercise | Q 7 | Page 107

Write the word/term or phrase which can substitute  the following statement.
Account which is credited when goodwill is withdrawn by old partners.

Exercise | Q 8 | Page 107

Write the word/term or phrase which can substitute the following statement.
Profit and Loss Account appearing on the asset side of a balance sheet.

Exercise | Q 9 | Page 107

Write the word/term or phrase which can substitute the following statement.
Account which is opened to record the gains and losses on revaluation.

Exercise | Q 10 | Page 107

Write the word/term or phrase which can substitute the following statement.
Change in the relationship between the partners.

#### Micheal Vaz solutions for 12th Board Exam Accounts Chapter 3 Exercise [Pages 107 - 167]

Exercise | Q 1 | Page 107

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Account is debited when unrecorded liability is brought into business.

• liability

• revaluation

• capital

• current

Exercise | Q 2 | Page 107

Select the most appropriate answer from the alternative given below and rewrite the sentence.

When goodwill is withdrawn by old partners ________________ a/c is credited.

•  cash/bank

• capital

• revaluation

• Profit and Loss Adjustment

Exercise | Q 3 | Page 107

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Excess of proportionate capital over actual capital represents _________________.

• surplus capital

• deficit capital

• sacrifice

• equal capital

Exercise | Q 4 | Page 107

Select the most appropriate answer from the alternative given below and rewrite the sentence.

The proportion in which old partners make a sacrifice is called _________________ ratio.

• Capital

• gaining

• sacrifice

• new

Exercise | Q 5 | Page 107

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Jay, Vijay and Ajay are three partners sharing profits in 3:2:1. They decided to admit Sanjay and give him 1/7th share, new profit sharing ratio of partners will be _________________.

• equal

•  3:2:1:2

• 3:2:1:1

• 2:3:1:2

Exercise | Q 6 | Page 108

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Akash, Prakash and Deepak are partners who share profits as 3:2:1. They admit Suraj as a partner and decided to share future profits as 5:3:2:2. The sacrifice ratio will be __________

• 1:1:0

• 2:1:1

• 0:1:3

• 0:0:2

Exercise | Q 7 | Page 108

Select the most appropriate answer from the alternative given below and rewrite the sentence.

The _____________ ratio is useful for making adjustment for goodwill among the old partners.

• new

• sacrifice

• old

• Profit and Loss Adjustment

Exercise | Q 8 | Page 108

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Krishna and Balram, who are equal partners, admit Arjun into partnership for 1/4th share, their new profit sharing ratio will be ________________.

• 3:3:1

• equal

• 3:3:2

• 2:2:1

Exercise | Q 9 | Page 108

Select the most appropriate answer from the alternative given below and rewrite the sentence.

If any asset is taken over by partner from the firm _________________ account will be debited.

• capital

• revaluation

•  asset

• Profit and Loss Adjustment

Exercise | Q 10 | Page 108

Select the most appropriate answer from the alternative given below and rewrite the sentence.

In case of admission of a partner, the profit or loss on revaluation of assets and liabilities is shared by _________________ partners.

• all

• old

• new

• none of these

Exercise | Q 25 | Page 167

Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at Rs 36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari’s admission.

#### Micheal Vaz solutions for 12th Board Exam Accounts Chapter 3 Exercise [Page 108]

Exercise | Q 1 | Page 108

State 'True' or 'False'
When goodwill is paid privately, no entry in the books of account is required.

• True

• False

Exercise | Q 2 | Page 108

State 'True' or 'False'
The goodwill brought in by a new partner is shared by the old partners.

• True

• False

Exercise | Q 3 | Page 108

State 'True' or 'False'
The goodwill brought in by the new partner is shared by all partners.

• True

• False

Exercise | Q 4 | Page 108

State 'True' or 'False'
Profit on revaluation account is distributed between the old partners on admission of a partner.

• True

• False

Exercise | Q 5 | Page 108

State 'True' or 'False'
The new partner must pay his share of goodwill in cash only.

• True

• False

Exercise | Q 6 | Page 108

State 'True' or 'False'
A new partner is admitted in the firm for getting additional capital and skill.

• True

• False

Exercise | Q 7 | Page 108

State 'True' or 'False'
The credit balance of revaluation account means loss on revaluation account.

• True

• False

Exercise | Q 8 | Page 108

State 'True' or 'False'
If the goodwill account raised up, goodwill account is debited.

• True

• False

Exercise | Q 9 | Page 108

State 'True' or 'False'
When goodwill is written off, goodwill amount is debited.

• True

• False

Exercise | Q 10 | Page 108

State 'True' or 'False'
On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account.

• True

• False

#### Micheal Vaz solutions for 12th Board Exam Accounts Chapter 3 Exercise Practical Problems [Pages 108 - 113]

Practical Problems | Q 1 | Page 108

The Balance Sheet of Rajkumar and Rajendra Kumar as on 31st March 2012 is set out below, they share profits and losses in the ratio of 2:1.

Balance Sheet as on 31st March, 2012

 Liabilities Amount (Rs) Assets Amount (Rs) Capital A/c’s - Rajkumar 200000 Buildings 100000 Rajendra Kumar 150000 Furniture 30000 General Reserve 120000 Stock 60000 Creditors 80000 Debtors 300000 Cash 30000 Profit and Loss A/c 30000 550000 550000

They agreed to admit Dhiraj Kumar on 1st April, 2012 as a partner into the firm on the following terms on.

(1) Dhiraj Kumar to bring Rs 60,000 as capital and Rs 45,000 as a goodwill, which is to be retained in the business. He will be entitled to 1/4th share of profit of the firm.

(2) 50% of General Reserve is to remain as Reserve for doubtful debts.

(3) Furniture is to be depreciated by 5%.

(4) Stock is to be revalued at Rs 65,000/-

(5) Creditors of Rs 5,000 are not likely to claim and hence should be written off.

(6) Rent of Rs 2,000 due but not received has not been recorded in the books.

Pass the necessary journal entries in the books of new firm and prepare Balance Sheet of the new firm.

Practical Problems | Q 2 | Page 109

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

Balance Sheet as on 31st March, 2013

 Liabilities Amount (Rs) Amount(Rs) Assets Amount(Rs) Amount(Rs) Capital A/c’s Building 30000 Suresh 50000 74000 Machinery 10000 Ramesh 24000 Furniture 9500 Creditors 57000 Debtors 40000 39000 Bills Payable 20000 (-) R.D.D 1000 Reserve fund 9000 Stock 30000 Bills Receivable 7600 Cash at Bank 33900 160000 160000

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

1) Kailash will bring Rs 30,000 as his capital for 1/4th 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.

Practical Problems | Q 3 | Page 109

Snehal and Meenal are equal partners in a business. Their Balance sheet is as follows :

Balance Sheet as on 31st March, 2012

 Liabilities Amount(Rs) Amount (Rs) Assets Amount(Rs) Amount(Rs) Capital A/c’s Premises 20500 Snehal 80000 125000 Investments 10500 Meenal 45000 Equipments 5000 Creditors 26000 Bills Receivable 18000 Bank Loan (Taken on 1.1.2012) 40000 Debtors 110000 99000 (-) R.D.D 11000 Profit and Loss A/c 6600 Bank 31400 191000 191000

They agreed to admit Kamal on 1st April, 2012 on the following terms.

1) He should bring 50,000 towards his capital for 1/4th share in future profit.

2) Goodwill A/c be raised in the books of the firm Rs 40,000/-

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

4) Premises to be valued at Rs 30,000 and Equipments to be written off fully.

5) Interest at the rate of 15% p.a. is due on bank loan.

6) Creditors allowed a discount of Rs 1100/- and they were paid off immediately.

Pass necessary journal entries to record the above scheme of admission.

Practical Problems | Q 4 | Page 110

Following is the balance sheet of Harish and Girish

Balance Sheet as on 31st March, 2010

 Liabilities Amount (Rs) Amount (Rs) Assets Amount (Rs) Amount (Rs) Creditors 38000 Cash in Hand 37000 Bills Payable 46,000 Stock 21000 Profit and Loss A/c 16,000 Debtors 46000 40000 Capital A/c’s (-)R.D.D 6000 Harish 100000 240000 Equipments 12000 Girish 140000 Furniture 25000 Plant 85000 Building 120000 340000 340000

They admitted Shirish on 1st April 2010 on the following conditions:

1) For his 1/3rd share in the future profits Shirish brings Rs 2,00,000 as his Capital.

2) It is decided to raise goodwill by Rs 90,000 and write it off fully after Shirish’s admission.

3) Equipments and plant to be depreciated by 20% and10% respectively and Building to be appreciated by 15%.

4) Bills Payable were retired for Rs 35,000

5) All debtors are considered good.

6) Furniture of the book value Rs 12,000 was taken over by Harish at 40% of the book value.

Prepare, revaluation A/c, Partner’s Capital Account and Balance Sheet of the new firm.

Practical Problems | Q 5 | Page 110

From the following Trial Balance of M/s Kale and Gore, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet on that date. They share profits and losses in their capital ratio.

Trial Balance as on 31st March, 2013

 Debit Balance Amount Rs Credit Balance Amount Rs Opening stock 28,000 Capital A/c Purchases 1,16,400 Kale 80000 Trade Expenses 2,400 Gore 40000 Royalties 6,200 Sundry Creditors 54000 Wages and Salaries 14,800 Sales 212000 Advertisement 8,200 Reserve for Doubtful Debts 1800 Salaries 11,000 Bills payable 36000 Plant and Machinery 44,000 Freehold Property 36,000 Office Rent 4000 Motor Van 63000 Bills Receivable 16000 Sundry Debtors 60000 Cash in hand 10000 Bad debts 1000 General expenses 2,800 423800 423800

1) Closing stock was valued at cost Rs 76,000 while its market price was Rs 80,000.

2) Uninsured goods worth Rs 10,000 were stolen.

3) Goods worth Rs 10,000 were sold and delivered on 31st March 2013, but on entry is passed sales book.

4) Depreciate Plant and Machinery at 10% and Motor van at 15% p.a.

5) Bills Receivable includes a dishonoured bill of Rs 4,000.

6) Create a reserve for doubtful debts at 5% on Debtors.

Practical Problems | Q 6 | Page 111

Raj and Dev are partners sharing profits and losses 3:2 respectively. Their position on 31st March, 2011

Balance Sheet as on 31st March, 2011

 Liabilities Amount (Rs) Assets Amount (Rs) Capital A/c’s Buildings 100000 Raj 100000 175000 Furniture 10000 Dev 75000 Stock 31000 Creditors 10000 Debtors 50000 49000 Bills Payable 5000 (-) R.D.D 1000 General Reserve 15000 Bank Balance 15000 205000 205000

On 1st April, 2011 they admitted Manoj on following terms:

1) Manoj should bring in cash Rs 1,00,000 as a capital for 1/5th share in future profit and Rs 25,000 as goodwill.

2) Building should be revalued for Rs 1,25,000.

3) Depreciate furniture at 12 ½ % p.a. and stock at 10% p.a.

4) R.D.D. should be maintained as it is.

5) The Capital accounts of partners should be adjusted in their new profit sharing ratio through bank account.

Prepare, Profit and Loss Adjustment Account, Capital Accounts, Balance Sheet of new firm and show how you have calculated new ratio and new capital.

Practical Problems | Q 7 | Page 111

Following is the Balance Sheet of Dhiraj and Niraj who shared profits and losses equally.

Balance Sheet as on 31st March, 2013

 Liabilities Amount (Rs) Assets Amount (Rs) Capital A/c’s Plant and Machinery 45000 Dhiraj 125000 Land and Building 84000 Niraj 35000 Patents 3400 Creditors 86200 Stock 47800 Bills Payable 28,000 Furniture 10600 General Reserve 6800 Debtors 80000 Cash 10200 281000 281000

On 1st April, 2013 they agreed to admit Suraj on the following terms and conditions:

1) Suraj to bring for 1/3rd share in future profit in cash Rs 90,000 towards his capital.

2) The firms goodwill should be raised to Rs 90,000 and it is to be written off after Suraj admission in new profit ratio.

3) Plant and Machinery was found undervalued by 10% and Land and Building was found overvalued by 20%.

4) Stock to be increased by Rs 2,200 and furniture to be reduced to Rs 10,000/-

5) Out of creditors Rs 1,200 is no more payable.

6) The Capital A/c to be adjusted in new profit sharing ratio by opening the current accounts.

Prepare Revaluation A/c, Capital A/c and New Balance Sheet.

Practical Problems | Q 8 | Page 112

Vaibhav and Vilas were partners sharing profit and losses in the ratio of 2:3 respectively. Their Balance Sheet as on 31st March, 2012 was as follows.

Balance Sheet as on 31st March, 2012

 Liabilities Amount(Rs) Assets Amount(Rs) Capital A/c's Land and Building 25000 Vaibhav 50000 Plant 30000 Vilas 50000 Furniture 2000 Creditors 70000 Stock 50000 Debtors 58000 Cash 5000 170000 170000

They agreed to admit Vivek as a partner on 1st April 2012 on the following terms:

1) Vivek will have 1/4th share in future profits for which he shall bring Rs 25,000 as his capital and Rs 20,000 as his share of goodwill.

2) Land & Building are valued at Rs 30,000 and while stock is valued at Rs 55,000.

3) Plant is taken over by Vilas 10% discount.

4) Depreciate furniture by 10%.

5) Provision for bad and doubtful debts is to be maintained at 5% on debtors.

6) The capital account of all the partners to be adjusted in their new profit sharing ratio and excess amount to be transferred to their loan account.

Practical Problems | Q 9 | Page 112

Manoj and Rahul are equal partners in a business. Their Balance sheet as on 31st March, 2013 stood as under:

Balance Sheet as on 31st March, 2013

 Liabilities Amount(Rs) Asset Amount(Rs) Sundry Creditors 180000 Cash at Bank 120000 General Reserve 36000 Debtors 62000 60000 Capitals- (-)R.D.D 2000 Manoj 90000 Bills receivable 24000 Rahul 60000 Building 114000 Machinery 48000 366000 366000

They decided to admit Amit on 1st April, 2013 on the following terms:

1) The Machinery and Building be depreciated by 10%

2) Reserve for doubtful debts to be increased to Rs 5,000.

3) Bills receivable are taken over by Manoj at a discount of 5%.

4) The amount of creditors paid at a discount of 10%.

5) The Capital Accounts of all the partners be adjusted in current account of partners.

6) Amit should bring Rs 80,000 as capital for his 1/4th in future profits and goodwill account be opened in the books of the firm at Rs 40,000.

Prepare Profit and Loss Adjustments A/c, Partner’s Capital A/c and Balance sheet of the firm at Rs 4,000/-

Practical Problems | Q 10 | Page 113

The Balance Sheet of Ramakant and Shyamkant who shared the profits in the ratio of 2:1 is as under

Balance Sheet as on 31st March, 2012

 Liabilities Amount(Rs) Assets Amount(Rs) Capitals: Leasehold Property 20000 Ramakant 134000 254000 Live Stock 6600 Shyamkant 120000 Loose Tools 90200 Creditors 51000 Stock 84800 Rent Outstanding 10000 Debtors 48000 46000 Reserve Fund 7200 (-) R.D.D 2000 Current A/c Bank 75400 Ramakant 2800 Current A/c Shyamkant 2000 325000 325000

On 1st April, 2012 Umakant was admitted as 1/4th partner on the following terms:

1) He brings equipments of Rs 80,000 as his capital.

2) Firm’s goodwill is valued at Rs 1,44,000 and Umakant agreed to bring his share in firm’s goodwill by cheque.

3) R.D.D. should be maintained at 7.5% on debtors.

4) Increase live stock by Rs 2,600 and write off loose tools by 20%.

5) Outstanding rent paid Rs 9,040 in full settlement.

Pass necessary journal entries to record the above scheme of admission.

## Chapter 3: Reconstitution of Partnership (Admission of Partner)

ExercisePractical Problems

## Micheal Vaz solutions for 12th Board Exam Book Keeping and Accountancy chapter 3 - Reconstitution of Partnership (Admission of Partner)

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