Creditors
Bills Payable
Bank Overdraft
Reserve
Jain's Capital
Gupta's Capital
20,000
3,000
17,000
15,000
70,000
60,000
Cash
Debtors
20500
Less Provision
For Bad Debts
300
Stock
Plant
Building
Motor Vehicles
14,800
20,200
20,000
40,000
70,000
20,000
1,85,000
1,85,000
They agreed to admit Mishra for th share from 1-4-2008 subject to the following items :
a. Mishra to bring in capital equal to th of the total capital of Jain and Gupta after all adjustment including premium for goodwill.
b. Building to be appreciated by 14,000 and stock to be depreciated by ₹6000
c. Provision for Bad debts on Debtors to be raised to ₹1000/-
d. A provision be made for 1800 for Outstanding legal charges
e. Mishra's share of goodwill / premium was calculated at ₹10,000 which is brought by him in ash.
Prepare Revaluation Account, Partner's Capital Account and the Balance Sheet of the new firm on Mishra's admission.
Cash
Debtors
Stock
Plant and Machinery
Land and Building
62,000
50,000
75,000
3,25,00
4,00,00 9,12,000
For the above purpose, it was agreed that
(a) Plant and machinery should be written down by Rs. 25,000.
(b) Stock is found overvalued by 10% . It was decided to reduced its value accordingly.
(c) Land and building has to be appreciated by 25%.
(d) Creditors amounting to Rs. 5,500 are not likely to claim their amount.
(e) Goodwill at the time of reconstitution, is to be valued at 3 year's purchase of average profits of last five years, which were Rs. 22,500.
You are required to give effect to the above adjustments
(i) By opening revaluation account (ii) By passing a single adjustment entry.
Jain and Gupta were partners sharing profits in the ratio of 3:2. Their Balance Sheet as at 31st March 2008 was as follows:
March 2008 was as follows:
Bills Payable
Bank Overdraft
Reserve
Jain's Capital
Gupta's Capital
3,000
17,000
15,000
70,000
60,000
Debtors
20500
Less Provision
For Bad Debts
300
Stock
Plant
Building
Motor Vehicles
20,200
20,000
40,000
70,000
20,000
They agreed to admit Mishra for th share from 1-4-2008 subject to the following items :
a. Mishra to bring in capital equal to th of the total capital of Jain and Gupta after all adjustment including premium for goodwill.
b. Building to be appreciated by 14,000 and stock to be depreciated by ₹6000
c. Provision for Bad debts on Debtors to be raised to ₹1000/-
d. A provision be made for 1800 for Outstanding legal charges
e. Mishra's share of goodwill / premium was calculated at ₹10,000 which is brought by him in ash.
Prepare Revaluation Account, Partner's Capital Account and the Balance Sheet of the new firm on Mishra's admission.
Q4. X purchased the business of y from 1st April 2019. For this purpose goodwill is to be valued at 100% of the average annual profits of the last four years.
The profits shown by Y's business for the last four years were:
Year ended
₹
31st March, 2016 Profit 1,00,000 (after debiting loss of stock by fire ₹50,000)
" 2017 Loss 1,50,000 (includes voluntary retirement compensation paid ₹80,000)
" 2018 Profit 1,50,000
" 2019 Profit 2,50,000
Verification of books of accounts revealed the following:
(1) During the year ended 31st March, 2017, a machine got destroyed in accident and ₹60,000 was written off as loss in Profit & Loss Account.
(ii) On 1st July 2017, Two Computers costing ₹40,000 each were purchased and were debited to Travelling Expenses Account on which depreciation is to be charged @ 10% p.a. on Straight Line Method.
Calculate the value of goodwill.
Q9. Arun, Barun and Chug are partners dealing in musical instruments sharing profit in 3 : 2 : 2. They admitted Mallika, the famous classical dancer into partnership for share which she acquired from Arun, Barun and Chug in 2 : 2 : 1 ratio respectively. You are required to :
(i) Identify the value involved in taking Mallika as a partner.
(ii) Calculate the new profit sharing ratio.
Q12. Kavita, Meenakshi and Gauri are partners doing a paper business in Ludhiana. After the accounts of partnership have been drawn up and closed, it was discovered that for the year ending 31stMarch 2013 and 2014. Interest on capital has been allowed to partners @ 6% p.a although there is no provision for interest on capital in partnership deed. Their fixed capitals were Rs. 2,00,000; Rs. 1.60,000 and Rs. 1,20,000 respectively. During the last years they had shared the profit as under:
Year Ratio
31 March 2013 3 : 2 : 1
31 March 2014 5 : 3 : 2
You are requied to given necessary adjusting entry on April 1, 2014.
i profirand loss account rs 24,000
ii advertisements suspense account rs12,000
pass necessary adjutmententry .
if in any ques it is mentioned that ithout affecting their boo value, so do we have to ditribute profit n loss in sacrificing ratio in uch ques ?
Please explain how to calculate the premium for goodwill in order to pass the entry.
Profit for last 4 years:
2015 80,000
2016 1,45,000
2017 1,60,000
2018 2,00,000
1) abnormal loss of ?20,000 was debit to p&l a/c for the year ended 31st March 2015.
2) A fixed assets was sold in the year ended 31st March 2016 & gain ( profit) of ?25,000 was credited to p&l a/c.
3) In the year ended 31st March 2016 assets of the firm were not insured due to oversight. Insurance premium not paid was ?15,000.
Balance Sheet as on March 31, 2015 was as follows ?
Liabilities Rs. Assets Rs.
Creditors
Bills Payables
Workmen Comp. Reserve
Capital Accounts ?
- Anil 60,000
- Sunil 60,000
- Ramesh 30,000
60,000
65,000
25,000
1,50,000
Cash-at-Bank
Debtors
Stock
Furniture
Buildings
Advertisement Suspense
20,000
45,000
75,000
35,000
1,00,000
25,000
3,00,000 3,00,000
On April 1, 2015, they decided to share future profits & losses in the ratio of 3:2:1 &
following adjustments were agreed upon ?
a) Furniture to be decreased by Rs. 3,500.
b) Building is to be appreciated by 25%.
c) A provision for bad debts is to be maintained for Rs. 6,000 on debtors.
d) Goodwill of the firm is to be valued at Rs. 90,000.
Prepare Revaluation Account, Partners? Capital Account & Balance Sheet
Liability rs assest rs
Bills payable 20000 cash 40000
Creditor 20000 bills recieveable 5000
General reserve 30000 Debtor's 15000
Capital
Ram 50000 stock 50000
Shyam 30000 furniture 20000
Hari 250000 machinery 30000
Goodwill 15000
On 1 April 2013 partners decided to share profit equally
Goodwill of the firm should be valued at rs 30000
Furniture and machinery is to be revalued at rs 25000 and rs 35000 respectively
Value of stock is to be reduced to rs 4000
You are required to give necessary journal entry to give effect to the above arrangement and prepare revaluation account prepare capital accounts and balance sheet of the firm after reconsitution
Q17. Surya Ltd. with a registered capital of 10,00,000 equity shares of Rs.10 each, issued 1,00,000 equity shares payable Rs.3 on application, Rs.2 on allotment, Rs. 3 on first call Rs. 2 on second and final call. The amount due on allotment was duly received except Mr. X holding 6,000 shares. His shares were immediately forfeited. On the first call being made, Mr. Y holding 5,000 equity shares paid the entire balance on his holding. Second call was not made.
Pass the necessary journal entries to record and transactions and show how the share capital will be resented in the balance sheet of the company. Also prepare notes to accounts.
Pass the journal entry giving effect to the above.
Priya and Riya were partners in a firm sharing profits in the ratio of 3:1.On 1st April 2015 they admitted Siya As new partner for 1/4th share in the profits of the firm.On the date of Siya's admission the balance sheet of Priya and Riya showed a General Reserve of Rs 80000, a debit balance of Rs 40000 in Profit and Loss A/c and Workmen Compensation Fund of Rs20000.
The following was agreed on Siya's admission.
i) Siya will bring Rs200,00 as her capital and the necessary amount of cash as premium for his share of goodwill.
ii) Goodwill of the firm is valued at Rs 80000.
iii) There was acclaim of Workmen compensation for Rs28000.
iv) The partners decided to share future profits in the ratio of 2:1:1.
Pass the necessary journal entries for the above on Siya's admission.
In most of the sample papers of accountancy,some adjustments are being given for goodwill such as-
"Pass entries assuming that the partners do not want g/w to appear in the b/s."
"Goodwill was raised at its full value"
What will be the treatment for these ? Is it being given just to cnfse the students /there is some significance of it? kindly reply.
(i) Goodwill is valued at three years purchase of the average profits of the last four years . Profit of the last four years were as : year 2009 --- Rs. 40,000, year 2010 --- Rs. 58,000, year 2011 --- Rs. 53,000, year 2012 --- Rs. 62,000.
(ii) Abnormal loss of Rs. 2000 due to theft has reduced the profits of the year 2009.
(iii) Profits for the year 2010 include abnormal profit of Rs. 4,000.
(iv) A speculative and lottery profit of Rs. 5,000 was received during the year 2011 which was included in that year's profit.
(v) Profits of the year 2012 were reduced by Rs. 10,000 on such a machinery which was destroyed by fire during the year.
Rs. 50,000. He was to pay 20% of the cash purchase price at the time of delivery and the balance
in 5 half-yearly instalments starting from 31.12.1997 with interest @ 5% per annum. On X?s
failure to pay the instalment due on 30.6.1997, it was agreed that X would return 3 trucks to the
vendor and remaining 4 would be retained by him. The vendor agreed to allow him a credit for the
amount paid against these 3 trucks less 25%. Show the relevant accounts in the books of 'X'
assuming that his books are closed in June every year and depreciation @ 20% is charged on
trucks.(Ans: 1,60,000, Amount credited in respect of three trucks returned-40,500)
Balance Sheet
as at 31st March 2015
Rs.
Rs.
Outstanding Expenses
Archie 3,75,000
Betty 2,25,000
Veronica 2,00,000
1,00,000
12,000
8,00,000
9,12,000
Debtors
Stock
Plant and Machinery
Land and Building
62,000
50,000
75,000
3,25,00
4,00,00
9,12,000
For the above purpose, it was agreed that
(a) Plant and machinery should be written down by Rs. 25,000.
(b) Stock is found overvalued by 10% . It was decided to reduced its value accordingly.
(c) Land and building has to be appreciated by 25%.
(d) Creditors amounting to Rs. 5,500 are not likely to claim their amount.
(e) Goodwill at the time of reconstitution, is to be valued at 3 year's purchase of average profits of last five years, which were Rs. 22,500.
You are required to give effect to the above adjustments
(i) By opening revaluation account (ii) By passing a single adjustment entry.
invetment fluctuation reserve 54,000
investment (at cost) 6,00,000
show the accounting treatment if the market value of investments is 5,91,000