Showing posts with label 2012 was as follows:. Show all posts
Showing posts with label 2012 was as follows:. Show all posts

Supriya, Surakha, and Sujata were partners sharing profits and losses in the ratio of 2:2:1 respectively. Their Balance Sheet as on 31st March, 2012 was as follows:

Retirement of a Partner: Accounting Problem

Problem Statement

Supriya, Surakha, and Sujata were partners sharing profits and losses in the ratio of 2:2:1 respectively. Their Balance Sheet as on 31st March, 2012 was as follows:

Balance Sheet as on 31st March, 2012

Liabilities Amount (₹) Assets Amount (₹)
Capital A/c: Land and Building 50,000
Supriya 40,000 Stock 30,000
Surekha 40,000 Debtors 37,500
Sujata 20,000 (-) R.D.D. (2,500)
Reserve Fund 10,000 Furniture 10,000
Creditors 16,000 Cash at Bank 5,000
Outstanding Expenses 4,000
Total 1,30,000 Total 1,30,000

Adjustments

Sujata died on 1st July, 2012. The following adjustments were agreed upon as per the partnership deed:

  • Land and Building to be valued at ₹60,000 and all debtors were good.
  • Stock to be depreciated by 10%.
  • The drawings of Sujata up to the date of her death amounted to ₹2,000.
  • Interest on capital was to be allowed at 10% p.a.
  • The deceased partner’s share of goodwill is to be valued at 2 years’ purchase of the average profit of the last 3 years. The profits were: 2009–10 = ₹15,000; 2010–11 = ₹17,000; 2011–12 = ₹13,000.
  • The deceased partner’s share of profit up to the date of her death should be based on the average profit of the last two years.

Required

You are required to prepare:

  1. Profit and Loss Adjustment Account.
  2. Sujata’s Capital Account showing the balance payable to her Executor’s Loan Account.
  3. Working notes for calculations.

Solution: In the books of Partnership Firm

Profit and Loss Adjustment Account

Dr. (Particulars) Amount (₹) Cr. (Particulars) Amount (₹)
To Stock A/c (Depreciation) 3,000 By Land & Building A/c (Appreciation) 10,000
To Profit on Revaluation transferred to Partners' Capital A/c (2:2:1) By R.D.D. A/c (Cancelled as debtors are good) 2,500
Supriya 3,800
Surekha 3,800
Sujata 1,900
Total 12,500 Total 12,500

Sujata’s Capital Account

Dr. (Particulars) Amount (₹) Cr. (Particulars) Amount (₹)
To Drawings A/c 2,000 By Balance b/d 20,000
To Sujata's Executor's Loan A/c (Bal. Fig.) 29,150 By Reserve Fund A/c (10,000 * 1/5) 2,000
By P&L Adjustment A/c (Profit) 1,900
By Interest on Capital A/c 500
By Goodwill A/c (Share) 6,000
By P&L Suspense A/c (Profit share) 750
Total 31,150 Total 31,150

Working Notes

1. Calculation of Goodwill

Average Profit (3 years): (15,000 + 17,000 + 13,000) / 3 = 45,000 / 3 = ₹15,000

Firm's Goodwill: Average Profit × No. of years’ purchase = 15,000 × 2 = ₹30,000

Sujata’s Share in Goodwill (1/5): 30,000 × (1/5) = ₹6,000

2. Calculation of Profit till Date of Death (P&L Suspense A/c)

Sujata was a partner for 3 months (April, May, June).

Average Profit (2 years): (17,000 + 13,000) / 2 = 30,000 / 2 = ₹15,000

Firm's Profit for 3 months: 15,000 × (3 / 12) = ₹3,750

Sujata's Share in Profit (1/5): 3,750 × (1/5) = ₹750

3. Calculation of Interest on Capital

Interest is calculated on the opening capital for the period she was a partner (3 months).

Interest: Capital × Rate × Period = 20,000 × (10/100) × (3/12) = ₹500

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

Vaibhav and Vikas 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
Assets
Amount
Capital A/c

Land & 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 ¼ th 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 and Building are valued at Rs. 30,000 wh8ile stock is valued at Rs. 55,000.

3. Plant is taken over by Vilas at 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 accounts of all the partners to be adjusted in their new profit sharing ratio and excess amount to be transferred to their loan accounts.

Prepare Profit and Loss Adjustment Account, Partner's Capital Accounts and Balance Sheet of New Firm.


Solution.


In the books of Partnership firm.

Profit and Loss Adjustment Account

Particulars
Rs.
Rs.
Particulars
Rs.
Rs.
To Plant

3000
By Land & Building A/c

5000
To Furniture A/c

200
By Stock

5000
To R.D.D. A/c

2900



To Partners' Capital A/c





Vaibhav
1560




Vilas
2340
3900





10000


10000



Partner's Capital Accounts

Particulars
Vaibhav
Vilas
Vivek
Particulars
Vaibhav
Vilas
Vivek
To Plant A/c
-
27000
-
By Balance b/d
50000
50000
-
To Partner's Loan A/c
29560
-
-
By Cash A/c
-
-
25000
To Balance C/d
30000
45000
25000
By Goodwill A/c
8000
12000
-




By Profit & Loss Adjustment A/c
1560
7660





By Partner's Loan A/c
[Deficit Transferred]
-
7660
-









59560
72000
25000

59560
72000
25000



Balance Sheet as on 1st April, 2013


Liabilities
Amount
Amount
Assets
Amount
Amount
Partners' Capital A/c


Land & Building
25000

Vaibhav
30000

(+) Appreciation
5000
30000
Vilas
45000

Plant
30000

Vivek
25000
100000
(-) Discount @ 10%
-3000

Loan from Vaibhav

29560

27000

Creditors

70000
(-) Plant taken over by Vilas
27000
NIL



Furniture
2000




(-) Depreciation @ 10%
-200
1800



Debtors
58000




(-) Less Provision for bad and Doubtful debts @ 5%
-2900
55100



Stock
50000




(+) Increase in Value
5000
55000



Cash

50000



Loan to Vilas

7660


199560


199560
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