worksheet I need answers fast please. 1. X and Y are partners in a firm. Their fixed capitals as on April 1, 2014 were Rs.2,50,000 and Rs.1,80,000 respectively. They share profits equally. On July 1, 2014, they decided that their capitals should be Rs.2,00,000 each. The necessary adjustments in the capitals were made by withdrawing or introducing cash. According to the partnership deed, interest on capital is to be allowed @8% p.a. X is to get an annual salary of Rs.4,000 and Y is allowed a monthly salary of Rs.800. It was found that Y was regularly withdrawing his monthly salary. The manager of the firm is entitled to a commission of 10% of the profit before any adjustment is made according to the partnership deed. Net profit for the year ended on 31st March, 2010, before charging interest on capital and salary, was Rs.80,000. Prepare the Profit and Loss Appropriation account and Partner's Current accounts. 2. A and B are partners with capitals of Rs.5,00,000 and Rs.3,00,000 respectively. The profits for the year ended 31st March, 2015 was Rs.3,46,000 before allowing interest on partner's loan. Show the distribution of profit after taking the following into consideration: (i) Interest on A's loan of Rs.1,50,000 to the firm provided on 1st April, 2014. (ii) Interest on capital to be allowed @ 5% p.a. (iii)Interest on drawings @6% p.a. Drawings were A Rs.60,000 and B Rs.40,000. (iv) B is to be allowed a commission of 2% on sales. Sales for the year were Rs.30,00,000. (v) 10% of the divisible profits is to be kept in a Reserve Account. 3. X and Y are partners with a profit sharing ratio of 1:2 with capitals of Rs.4,00,000 and Rs.6,00,000 respectively. On 1st October, 2014, X and Y granted loans of Rs.1,00,000 and Rs.60,000 respectively to the firm. Distribute the profits/losses amongst the partners for the year ended 31st March, 2015 in each of the following cases: Case (a) If the profit before interest for the year amounted to Rs.3,000. Case (b) If the loss before interest for the year amounted to Rs.7,500. 4. A and B contribute Rs.5,00,000 and Rs.3,00,000 respectively by way of capital on which they agree to allow interest @6% p.a. Their respective share of profit is 3:2 and the profit for the year is Rs.40,000 before allowing interest on capitals. Prepare the necessary account to allocate interest on capitals. 5. L, M and N are partners who have omitted interest on capitals for three years ended on 31st March,2015. Their fixed capitals in three years were L-Rs.40,000, M-Rs.25,000, N-Rs.15,000. Rate of interest on capital is 12%p.a. Their profit sharing ratios were 2013-5:2:1, 2014-3:2:1, 2015- 2:1:1. Give the necessary adjusting entry. 6. The net profit of a firm for the year ended 31st March, 2015 was Rs. 30,000, which has been duly distributed amongst its three partners A, B & C in their agreed proportions of 3:1:1 respectively. It was discovered on 10th April, 2015 that the under mentioned transactions were not passed through the books of accounts of the firm for the year ended 31st March, 2015 : a) Interest on capital @ 10% p.a. b) Interest on drawings : A Rs.350 B Rs. 250 C Rs. 150 c) Commission due to A on a special transaction Rs. 3,000 d) Salary of Rs.5,000 to A and Rs.7,500 to B. The capital accounts of the partners on 1st April, 2010 were: A Rs.25,000 B Rs.20,000 C Rs. 15,000 . You are required to suggest a journal entry to be passed on 10th April 2015. 7. A and B are partners with capitals of Rs.50,000 and Rs40,000 respectively, on which they are entitled to interest @ 10% p.a. They divide profits in the ratio of 2:1. They take C into partnership with 1/4th share of profits and guaranteed that his share of profits will not be less than Rs.20,000. C brought Rs.30,000 as his capital. Any excess profits received by C over his 1/4th share will be born by A & B in the ratio of 4:1. Profits at the end of the year before allowing interest on capitals amounted to Rs. 72,000. Distribute the profits. 8. A, B and C are in partnership. A & B sharing profits in the ratio of 3:1 and C receiving an annual salary of Rs.32,000 plus 5%of the profits after charging his salary and commission, or 1/4th of the profit of the firm whichever is more. Any excess of the latter over the former received by C is, under the partnership deed, to be borne by A and B in the ratio of 3:2. The profit for the year ended 31st March 2015 came to Rs.1,68,000 after charging C's salary. Show the distribution of profits among the partners. 9. A, B and C after completing their computer engineering decided to start the business of developing computer softwares. They entered into partnership for this purpose on 1st April, 2014. Identify any four values which according to you motivated them to form the partnership firm. 10. A,B, C and D are partners in a firm. A has contributed Rs.5,00,000 more towards capital on which he claims interest @ 6% p.a. B and C agreed to it but D opposed it arguing that partnership deed does not provide for it. Identify the value being ignored in this case. 11. A and B are partners. A was authorised to buy goods for the firm. A placed an order of Rs. 10,00,000 with a supplier, who offered 15% commission to A. A declined to receive commission and requested the supplier to reduce to purchase price by 15%. Supplier agreed to it. Which value has been fulfilled by A? 12. Partners decided that 5% profits, each year be given to Resident Welfare Association of the area for establishing a waste management mechanism by setting up a door to door collection system of the waste. Which value has been fulfilled by Partners? 13. Define Goodwill. State its nature. 14. List the factors affecting the value of goodwill. 15. What is meant by” number of years purchase”? 16. Distinguish between average profits and super profits. 17. Give the formula for calculating goodwill in each of the following methods:- (i) Average profit method (ii) super profit method (iii) capitalization method 18. Calculate the value of goodwill as on 1st Jan 2015 on the basis of three years’ purchases of average profits of the last five years profits. The profits & losses for the years were: 2009– Rs. 30000 (profit); 2010 – Rs. 40000 (loss); Rs.2011 – Rs. 92000 (profit); 2012 – Rs. 55000 (profit); 2013 – Rs. 70000 (profit); 2014 – Rs. 90000(profit).During 2010 profit on sale of fixed asset amounted to Rs 2000, during 2012 amounted to Rs 5000, and in 2014 loss on sale of fixed asset amounted to Rs 5000. 19. On 1st April 2015 an existing firm had assets of Rs 75000 including cash of Rs 5000. The creditors amounted to Rs 5000 on that date. The firm had reserve fund of Rs 10,000 while partner’s capital accounts showed a balance of Rs 60,000. If the normal rate of return is 20% and the goodwill of the firm is valued at Rs 24,000 at four years’ purchase of super profits, find the average profits per year. 20. A firm earns profit of Rs 1, 00,000. The normal rate of return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outsiders liabilities as on the date of valuation of goodwill are Rs 11, 00,000 and Rs 2, 80,000 respectively. Calculate the value of goodwill according to capitalization of super profits method. TOPIC –Accounting for partnership firm(Change in profit sharing ratio among existing partners) 1. What is meant by reconstitution of firm? 2. State the occasions on which reconstitution of partnership firm can take place. 3. What is meant by change in profit sharing ratio? 4. X, Y and Z are sharing profits & losses in the ratio of 5:3:2. They decide to share future profits and losses in the ratio of 2:3:5 with effect from 1st April 2015. They decide to record the effect of the following accumulated profits, losses and reserves without affecting their book figures, by passing a single adjusting entry. Rs General reserve 24000 Profit & Loss a/c 6000 Advertisement suspense A/c (Dr) 12000 5. X, Y and Z are sharing profits & losses in the ratio of 5:3:2. They decide to share future profits and losses in the ratio of 2:3:5 with effect from 1st April 2015. An extract of their Balance Sheet as on 31-3-2014 is as follows: Liabilities Rs Assets Rs Investment fluctuation Reserve1500 Investment (at cost)20000Show the accounting treatment in each of the following cases: (a) If no other information is given. (b) If market value of investment is Rs 20000. (c) If market value of investment is Rs 19000.if market value of investment is Rs 18000. (d) If market value of investment is Rs 20500.
Answers to question no. 1,2 & 3 of Topic Accounting for partnership firm (Change in profit sharing ratio among existing partners) are provided below.
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Ans 1) Reconstitution of the firm refers to situation of change in existing terms & conditions of the partnership Firm & between the partners.
Ans 2) Occasions on which reconstitution can take place :
a) On Change in profit sharing ratio among partners.
b) On Admission of a partner,Death or Retirement of any partner.
Ans 3) Change in profit sharing ratio refers to the situation wherein the partners decide to change there existing profit sharing Ratio.