Book Keeping & Accountancy Solutions Solutions for Class 12 Commerce Accountancy Chapter 5 Reconstitution Of Partnership (Death Of Partner) are provided here with simple step-by-step explanations. These solutions for Reconstitution Of Partnership (Death Of Partner) are extremely popular among class 12 Commerce students for Accountancy Reconstitution Of Partnership (Death Of Partner) Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Book Keeping & Accountancy Solutions Book of class 12 Commerce Accountancy Chapter 5 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Book Keeping & Accountancy Solutions Solutions. All Book Keeping & Accountancy Solutions Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.
Page No 140:
Question 1.A1:
Objective Questions :
Answer in one Sentence :
What is gaining ratio or benefit ratio?
Answer:
Gaining ratio is the ratio in which the continuing partners acquire the deceased partner’s share. It is calculated on the eve of retirement or death of a partner for adjusting the retiring or deceased partner’s share of goodwill. The formula for calculation of gaining ratio is as follows:
Page No 140:
Question 1.A2:
Objective Questions :
Answer in one Sentence :
How is gaining ratio calculated?
Answer:
Gaining ratio is calculated as the difference between the new ratio and old ratio. The formula for calculation of gaining ratio is as follows:
Page No 140:
Question 1.A3:
Objective Questions :
Answer in one Sentence :
When is gaining ratio required to be calculated?
Answer:
Gaining ratio needs to be calculated at the time of retirement or death of a partner for adjusting the retiring (or deceased) partner’s share of goodwill.
Page No 140:
Question 1.A4:
Objective Questions :
Answer in one Sentence :
How would you treat general reserve on death of a partner?
Answer:
The amount of general reserve is transferred to the capital accounts of all the partners in their profit sharing ratio. This is done to give the deceased partner’s nominee the required amount of share in profits of the firm. So, All Partners’ Capital Accounts are credited with their respective shares.
Page No 140:
Question 1.A5:
Objective Questions :
Answer in one Sentence :
How much amount due to the deceased partner is calculated?
Answer:
The heir of the deceased partner is entitled to receive the amount standing to the credit of Deceased Partner’s Capital Account, his share in goodwill, share in profits, revaluation of assets and liabilities, interest on capital etc. Moreover, amounts, such as share in accumulated losses, drawings, interest on such drawings etc., are debited. After making all the above adjustments, the amount standing in his/her capital account is transferred to a new account opened in the name of his/her executor.
Page No 140:
Question 1.A6:
Objective Questions :
Answer in one Sentence :
How is amount due to deceased partner settled?
Answer:
Payment to the deceased partner’s executor is made as stated in the partnership deed. The executor may be paid in full, i.e. in one instalment or in more than one instalment. In case the payment is made in instalments, the executor is entitled to interest @ 6% p.a. unless otherwise agreed, till the amount due to him/her is not paid.
Page No 140:
Question 1.A7:
Objective Questions :
Answer in one Sentence :
How is the share of deceased partner in accrued profit calculated?
Answer:
The share of a deceased partner in a firm’s profit can be calculated in two ways, i.e. on the basis of time or sales. Based on time, the profits are assumed to have arisen uniformly over the year and the deceased partner’s share is calculated according to the number of months he/she was alive during the year. In case sales are used as a base, we need sales for the year and sales up to the date of death and accordingly, rate of profit to sales can be calculated.
Page No 140:
Question 1.A8:
Objective Questions :
Answer in one Sentence :
How is a debit balance of profit and loss account dealt with on death of a partner?
Answer:
Debit balance of Profit & Loss Account represents accumulated losses. So, it is transferred to the debit side of All Partners’ Capital Accounts in their old profit sharing ratio.
Page No 140:
Question 1.B1:
Give a word / term / phrase which can substitute each of the following statements :
The account which shows revaluation of assets and liabilities.
Answer:
Revaluation or Profit and Loss Adjustment Account
Explanation: The account which shows revaluation of assets and liabilities is called Revaluation or Profit and Loss Adjustment Account. This account records the revised values of assets and liabilities, so that the deceased partner’s heir can be paid his share of profits that the firm has earned till the date of his death.
Page No 140:
Question 1.B2:
Give a word / term / phrase which can substitute each of the following statements :
Excess of credit side over debit side of revaluation account.
Answer:
Profit on revaluation
Explanation: Excess of credit side over debit side of Revaluation Account is regarded as profit on revaluation. This profit is transferred to All Partners’ Capital Accounts in their old profit-sharing ratio (including the deceased partner).
Page No 140:
Question 1.B3:
Give a word / term / phrase which can substitute each of the following statements :
The method under which payment is made to retiring partner in instalment.
Answer:
Instalment method
Explanation: Under instalment method, the payment to a retiring partner is made in instalments. In this method, the payment is not made in one instalment (lump sum); rather, the amount due is paid off in instalments. Moreover, the executor is entitled to interest @ 6% p.a. (unless agreed otherwise) on outstanding amount till it remains unpaid.
Page No 140:
Question 1.B4:
Give a word / term / phrase which can substitute each of the following statements :
Excess of proportionate at capital over actual capital.
Answer:
Deficit capital
Explanation: Excess of proportionate capital over actual capital represents deficit capital. This implies that the existing capital of the partners is less than what the capital should be on proportionate basis. The amount of deficit capital must be brought in by the old partners or it is to be transferred to their current accounts.
Page No 140:
Question 1.B5:
Give a word / term / phrase which can substitute each of the following statements :
The account to which deceased partners capital balance is transferred.
Answer:
Deceased Partner’s Executors’ Loan Account
Explanation: The account to which deceased partner’s capital balance is transferred is known as Deceased Partner’s Executors’ Loan Account. The amount due is transferred to this account because actually, the payment is required to be made to the heirs of the deceased partner. The payment may be made in full, i.e. in one instalment or in more than one instalment.
Page No 140:
Question 1.B6:
Give a word / term / phrase which can substitute each of the following statements :
The partner who died.
Answer:
Deceased partner
Explanation: The partner who died is a deceased partner, whose legal heirs are entitled to the amount due and the rights which the deceased partner had.
Page No 140:
Question 1.B7:
Give a word / term / phrase which can substitute each of the following statements :
A person who represents the deceased partner.
Answer:
Legal heir or executor
Explanation: The person who represents the deceased partner is his legal heir or executor. This person is entitled to receive the amount due to the deceased partner.
Page No 140:
Question 1.C1:
Select the most appropriate answer from the alternatives given below :
Gaining ratio is calculated on ___________.
a) admission of a partner
b) retirement of a partner
c) death of a partner
d) retirement or death of a partner
Answer:
Gaining ratio is calculated on retirement or death of a partner.
Explanation: The gaining ratio is calculated for adjusting the retiring or deceased partner’s share of goodwill. The remaining partners compensate the outgoing partner (retiring or deceased as the case may be) by payment of premium for goodwill in the ratio in which they gain.
Page No 140:
Question 1.C2:
Select the most appropriate answer from the alternatives given below :
Gaining ratio is the ratio in which ________________.
a) the old partner gains on admission of a new partner
b) the goodwill of a new partner on admission is credited to old partners
c) the continuing partner’s benefits on retirement or death of a partner
d) none of the above
Answer:
Gaining ratio is the ratio in which the continuing partners benefit on retirement or death of a partner.
Explanation: On the eve of retirement or death, the remaining (continuing) partners acquire the outgoing (retiring or deceased as the case may be) partner’s share. The ratio in which the continuing partners acquire (gain) the outgoing partner’s share is termed as gaining ratio.
Page No 140:
Question 1.C3:
Select the most appropriate answer from the alternatives given below :
Share of profit of a deceased partner till the date of death is _________________.
a) debited to P/L Adjustment A/c
b) credited to P/L Adjustment A/c
c) debited to P/L Suspense A/c
d) credited to P/L Suspense A/c
Answer:
Share of profit of a deceased partner till the date of death is debited to P/L Suspense A/c.
Explanation: The executor of a deceased partner, apart from the other things, is also entitled to a share in profits till the date of his death. Also, it is not possible for any firm to close its books of accounts at any time (during an accounting period). Therefore, in case of death, profits are calculated either on the basis of time or on the basis of sales or turnover. The amount of profit or loss so ascertained is dispensed to the deceased partner through the Profit and Loss Suspense Account.
Page No 140:
Question 1.C4:
Select the most appropriate answer from the alternatives given below :
An amount received from the Insurance Company against the joint life policy is __________.
a) debited to deceased partner
b) credited to deceased partner
c) credited to continuing partners capital A/c
d) credited to all partners capital A/c in their profit sharing ratio.
Answer:
An amount received from the Insurance Company against the joint life policy is credited to all partners’ capital A/c in their profit sharing ratio.
Explanation: Joint life policy is an insurance policy purchased by a firm on the joint lives of all the partners. In this manner, it is an asset of the firm. So, every partner, including the deceased partner, has as much right on it as the other (continuing) partners. Therefore, on the death of any one partner, the amount received from the insurance company against the joint life policy is credited to All Partners’ Capital Accounts in their old profit sharing ratio.
Page No 140:
Question 1.C5:
Select the most appropriate answer from the alternatives given below :
M.N.S. are partners in a firm having joint life policy of Rs 10,00,000 on which premium has been paid by a firm. M dies and his legal representatives want the whole amount of the policy where as N & S want to distribute the amount among all the partners.
a) M’s representatives and correct
b) N & S are correct
c) All are wrong
d) Insurance company will decide
Answer:
N & S are correct
Explanation: Joint life policy is an insurance policy taken by the firm on the joint lives of all the partners; so, it is an asset of the firm. Therefore, every partner, including the deceased partner, has as much right on it as the other partners. Also, in this case, the premium expense is paid by the firm. Hence, N and S are correct and the amount received from the policy must be distributed amongst all the partners in their old profit sharing ratio.
Page No 141:
Question 1.D1:
State whether the following statements are true or false :
Retiring partner is entitled to his share of goodwill.
Answer:
True
Explanation: The remaining/continuing partners need to compensate the outgoing (retiring/deceased) partner. This is because after the retirement/death of a partner, the fruits of the collective past performances and reputation will be shared only by the continuing partners. Hence, the remaining partners compensate the retiring or the deceased partner by entitling him/her to a share of the firm's goodwill.
Page No 141:
Question 1.D2:
State whether the following statements are true or false :
Retiring partner is not entitled to his share of general reserve.
Answer:
False
Explanation: The retiring partner is very much entitled to his respective share in all the accumulated profits and reserves (including general reserve). Such reserves include profits which were earned by them during the previous years when the retiring partner was a partner in the firm.
Page No 141:
Question 1.D3:
State whether the following statements are true or false :
The capital account of a retiring partner always shows a debit balance.
Answer:
False
Explanation: The capital account of a retiring partner may show a debit balance sometimes if the amount to be paid to him is less than the amount withdrawn by him from the firm. However, it is not necessary that the capital account of a retiring partner will always show a debit balance.
Page No 141:
Question 1.D4:
State whether the following statements are true or false :
An amount due to a deceased partner is transferred to his executor’s loan A/c.
Answer:
True
Explanation: The amount due to a deceased partner is paid to his/her legal heirs. So, the amount due is transferred to his/her Executors’ Loan A/c.
Page No 141:
Question 1.D5:
State whether the following statements are true or false :
If goodwill is written off retiring partner’s capital account is debited.
Answer:
True
Explanation: The old goodwill already existing in the books of a firm (as reflected in the Old Balance Sheet prior to retirement) is written off by debiting All Partners’ Capital Accounts (including retiring partner) in their old profit sharing ratio and by crediting the Goodwill A/c.
Page No 141:
Question 1.D6:
State whether the following statements are true or false :
Death of a partner is like a compulsory retirement
Answer:
True
Explanation: Unlike retirement that can be planned, death may occur on any day. In case of death of a partner, all those adjustments that are generally made at the time of retirement are to be performed at the time of death compulsorily. Therefore, it is correct to say that death of a partner is like compulsory retirement.
Page No 141:
Question 1.D7:
State whether the following statements are true or false :
Total amount due to deceased partner is paid in cash to executor immediately after his death.
Answer:
False
Explanation: There are two methods that can be adopted for making the payment to the executor, i.e. lump-sum method or instalment method. In the lump-sum method, the payment is made in full, i.e. in one single instalment, whereas in instalment method, payment is made in more than one instalment. So, it is not compulsory to make payment immediately in cash, unless otherwise agreed. Hence, the statement is incorrect.
Page No 141:
Question 1.D8:
State whether the following statements are true or false :
On the death of a partner, his share in the goodwill is divided equally among continuing partners.
Answer:
False
Explanation: On the death of a partner, share in goodwill is not divided equally among the continuing partners; rather, it is shared in the gaining ratio.
Page No 141:
Question 1.D9:
State whether the following statements are true or false :
Deceased Partner’s share in profit up to the date of his death will be debited to his capital A/c.
Answer:
False
Explanation: The deceased partner’s share in profit up to the date of his death will be credited to his capital account, as the amount is required to be paid to him. Thereafter, this amount is transferred to his Executors’ Loan Account.
Page No 141:
Question 1:
PRACTICAL PROBLEMS
Vilas, Mangal, Guru were partners in a business sharing profits and losses in the ratio of 2:1:1 respectively. Their Balance sheet as on 31st March, 2012 was as follows:
|
Balance Sheet as on 31st March 2012 |
||||
|
Dr. |
Cr. |
|||
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
|
Capital |
|
Land and Building |
6,000 |
|
|
Vilas |
6,000 |
Debtors |
5,000 |
|
|
Mangal |
7,000 |
Stock |
3,000 |
|
|
Guru |
3,400 |
Cash |
6,000 |
|
|
Creditors |
2,000 |
|
|
|
|
General Reserve |
1,600 |
|
|
|
|
|
20,000 |
|
20,000 |
|
|
|
|
|
|
|
Guru died on 1st July, 2012
1) Land and Building was to be revalued to Rs 7,000 and RDD was to be created of Rs 200.
2) The drawings of Guru upto the date of his death amounted to Rs 1,000/-
3) Charge interest on drawings Rs 100/-
4) His share of goodwill should be calculated at ‘Three’ years purchase of the profits for the last four years which were Rs 15,000, Rs 13,000/-, Rs 7,000, Rs 5,000
5) The deceased partners share of profit upto the date of his death to be calculated on the basis of average profit of last two years.
Prepare:
1) Profit and Loss Adjustment A/c
2) Partners Capital A/cs
3) Balance Sheet of the continuing firm
4) Give working or share of profit and goodwill
Answer:
|
Profit and Loss Adjustment Account
|
|||||
|
Dr.
|
Cr.
|
||||
|
Particulars
|
Amount
Rs
|
Particulars
|
Amount
Rs
|
||
|
|
|
|
|
||
|
Reserve for Doubtful Debts
|
200
|
Land and Building
|
1,000
|
||
|
Profit transferred to:
|
|
|
|
||
|
Vilas’s Capital
|
400
|
|
|
|
|
|
Mangal’s Capital
|
200
|
|
|
|
|
|
Guru’s Capital
|
200
|
800
|
|
|
|
|
|
1,000
|
|
1,000
|
||
|
|
|
|
|
||
|
Partners’ Capital Accounts
|
||||||||
|
Dr.
|
Cr.
|
|||||||
|
Particulars
|
Vilas
|
Mangal
|
Guru
|
Particulars
|
Vilas
|
Mangal
|
Guru
|
|
|
|
|
|
|
|
|
|
|
|
|
Drawings
|
|
|
1,000
|
Balance b/d
|
6,000
|
7,000
|
3,400
|
|
|
Interest on Drawings
|
|
|
100
|
General Reserve
|
800
|
400
|
400
|
|
|
Legal Heir’s Loan A/c
|
|
|
10,775
|
Profit and Loss Adjustment A/c (Profit)
|
400
|
200
|
200
|
|
|
Balance c/d
|
7,200
|
7,600
|
|
Goodwill
|
|
|
7,500
|
|
|
|
|
|
|
Profit and Loss Suspense A/c
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200
|
7,600
|
11,875
|
|
7,200
|
7,600
|
11,875
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
as on April 01, 2012
|
|||||
|
Liabilities
|
Liabilities
|
Liabilities
|
Liabilities
|
||
|
|
|
|
|
||
|
Creditors
|
2,000
|
Land and Building
|
7,000
|
||
|
Capital A/cs
|
|
Stock
|
3,000
|
||
|
Vilas
|
7,200
|
|
Cash
|
6,000
|
|
|
Mangal
|
7,600
|
14,800
|
Debtors
|
5,000
|
|
|
Guru’s Legal Heir’s Loan A/c
|
10,775
|
Less: Reserve for Doubtful Debts
|
200
|
4,800
|
|
|
|
|
Profit and Loss Suspense A/c
|
375
|
||
|
|
27,575*
|
|
21,175*
|
||
|
|
|
|
|
||
*Note: As per the textbook, the Profit of P&L Adjustment Account, Closing Balance of Legal Heir’s Loan A/c and the total of the Balance Sheet are given as Rs 900, Rs 10,800 and Rs 20,175, respectively. However, as per the above solution, we are getting Profit as Rs 800, whereas, Loan A/c balance as Rs 10,775. In addition to this, there seems to be some problem in the question either in terms of missing items or in terms of misprint of amounts, since the amount of Liabilities side is not getting matched with that of the Assets side.
Working Notes:
W N 1: Calculation of Gaining Ratio of Vilas and Mangal:
WN 2: Calculation of Goodwill
WN3: Calculation of Share of Profit of Guru
Page No 142:
Question 2:
PRACTICAL PROBLEM
Sheetal, Anjali, Rajendra were sharing profits and losses as 7:5:4. Their Balance sheet as on 31st March, 2011:
|
Balance Sheet as on 31st March 2012
|
|||||
|
Dr.
|
|
Cr. |
|||
|
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||
|
Capital
|
|
Furniture
|
17,000
|
||
|
Sheetal
|
23,000
|
Machinery
|
18,000
|
||
|
Anjali
|
15,000
|
Building
|
16,000
|
||
|
Rajendra
|
12,000
|
Cash
|
37,000
|
||
|
Bills Payable
|
4,000
|
|
|
||
|
Creditors
|
8,000
|
|
|
||
|
Loan
|
10,000
|
|
|
||
|
General Reserve
|
16,000
|
|
|
||
|
|
88,000
|
|
88,000
|
||
|
|
|
|
|
||
Rajendra died on 30th June 2012 and the following adjustments were agreed as per deed.
1) Furniture, Machinery and Building are to be revalued at Rs 16,700/-, Rs 16,200, to Rs 30,100.
2) Rajendra’s share is goodwill to be valued from firm’s goodwill which was valued at two times the average profit of last three years. Profits of last three years Rs 30,000, Rs 25,000, Rs 20,000/-.
3) His profit upto the date of death is to be calculated on the basis of last years profit.
4) Rajendra was entitled to get a salary of Rs 800/-per month.
5) Interest on capital at 10% be allowed.
6) Rajendra’s drawing upto date of death were Rs 600 p.m.
Prepare:
1) Rajendra’s Capital A/c showing amount payable to his executor
2) Give working of share of goodwill and profit
Answer:
|
Rajendra’s Capital Account |
||||
|
Dr. |
Cr. |
|||
|
Particulars |
A |
Particulars |
A |
|
|
|
|
|
|
|
|
Drawings |
1,800 |
Balance b/d |
12,000 |
|
|
Executor’s A/c |
33,650 |
Profit and Loss Adjustment A/c (Profit) |
3,000 |
|
|
|
|
Goodwill |
12,500 |
|
|
|
|
Profit and Loss Suspense A/c |
1,250 |
|
|
|
|
Salary |
2,400 |
|
|
|
|
Interest on Capital |
300 |
|
|
|
|
General Reserve |
4,000 |
|
|
|
35,450 |
|
35,450 |
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of share of Goodwill of Rajendra
WN2: Calculation of Share of Profit of Rajendra
WN3: Rajendra’s Share of General Reserve
Note:
WN4: Profit and Loss Adjustment Account
|
Profit and Loss Adjustment Account |
|||||
|
Dr. |
Cr. |
||||
|
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
|
|
|
|
|
||
|
Furniture |
300 |
Building |
14,100 |
||
|
Machinery |
1,800 |
|
|
||
|
Profit transferred to: |
|
|
|
||
|
Sheetal’s Capital |
5,250 |
|
|
|
|
|
Anjali’s Capital |
3,750 |
|
|
|
|
|
Rajendra’s Capital |
3,000 |
12,000 |
|
|
|
|
|
14,100 |
|
14,100 |
||
|
|
|
|
|
||
Note: As per the book amount payable to Rajendra’s Executor is Rs 33,350 but as per our solution it is Rs 33,650.
Page No 142:
Question 3:
PRACTICAL PROBLEM
The Balance sheet of Mohan, Subhash and Babi as on 31stDecember, 2011 was as under. They were sharing profits and losses in the ratio of 2:1:1.
|
Balance Sheet as on 31st December,2011 |
|||||
|
Dr. |
|
Cr. |
|||
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
|
Capital |
|
Investments |
20,000 |
||
|
Mohan |
25,000 |
Buildings |
33,000 |
||
|
Subhash |
15,000 |
Debtors |
12,000 |
||
|
Babi |
15,000 |
Stock |
28,000 |
||
|
Creditors |
30,000 |
Cash |
8,000 |
||
|
Reserve |
16,000 |
|
|
||
|
|
1,01,000 |
|
1,01,000 |
||
|
|
|
|
|
||
Babi died on 1st July, 2012 and partnership deed provided that in the event of death of the partner his executor will be entitled to be paid out.
1) Capital to the credit at the date of last balance sheet
2) Proportion of reserves
3) Proportion of goodwill to be calculated twice the average profits of last three years.
4) His proportion of profits to the date of death based on the average profits of the last three year plus 20%.
5) The net profits for last 3 years Rs 18,000, Rs 18,000, Rs 16,500.
6) Babi had withdrawn Rs 6,000/- to the date of her death.
7) The investments were sold at par and the amount was paid off to Babi’s executor and the balance was transferred to loan A/c.
Prepare:
1) Babi’s Capital A/c only.
Answer:
|
Babi’s Capital Account
|
||||
|
Dr.
|
Cr.
|
|||
|
Particulars
|
Amount
|
Particulars
|
Amount
|
|
|
|
|
|
|
|
|
Drawings
|
6,000
|
Balance b/d
|
15,000
|
|
|
Cash A/c
|
20,000
|
Reserves
|
4,000
|
|
|
Executor’s Loan A/c
|
4,375
|
Goodwill
|
8,750
|
|
|
|
|
Profit and Loss Suspense A/c
|
2,625
|
|
|
|
30,375
|
|
30,375
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Share of goodwill of Babi
WN2: Calculation of Share of Profit of Babi
WN3: Babi’s Share of Reserve:
Note: As no information is given regarding the New Ratio of Mohan and Subhash, hence, it is 2:1 and Gaining Ratio is same as the New Ratio.
Page No 143:
Question 4:
PRACTICAL PROBLEM
Minaxi, Ramesh and Poonam were partners sharing profits and losses in the proportion to their capitals, Their Balance sheet of the firm on 31st March, 2012 was as under:
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Balance Sheet as on 31st March, 2012
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Liabilities
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Amount
Rs
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Assets
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Amount
Rs
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Capital
|
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Land and Building
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40,000
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Minaxi
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30,000
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Investment
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20,000
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Ramesh
|
20,000
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Debtors
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16,000
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Poonam
|
10,000
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Less: R.D.D.
|
2,000
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14,000
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Creditors
|
28,000
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Stock
|
18,000
|
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Reserve
|
18,000
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Cash
|
14,000
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1,06,000
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1,06,000
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Poonam died on 1stAugust, 2012 and the following adjustments were made
1) Assets revalued as under-Land & Building Rs 44,000, Investment Rs 18,000, Stock Rs 17,000.
2) All debtors were good.
3) Goodwill of the firm valued at two times the average profits of the last 4 years. No goodwill account to be shown in the books of the firm.
4) Poonam’s share of profit upto her death to be calculated on the basis of average profits of last two year.
5) Profits were Rs 6,000, Rs 12,000, Rs 7,000, Rs 11,000
Prepare:
1) Profits and loss adjustment A/c
2) Balance sheet as on 1stAugust 2012
Answer:
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Profit and Loss Adjustment Account
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Dr.
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Cr.
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Particulars
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Amount
Rs
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Particulars
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Amount
Rs
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||
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Investments
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2,000
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Land and Building
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4,000
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Stock
|
1,000
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Reserve for Doubtful Debts
|
2,000
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Loss transferred to:
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Minaxi
|
1,500
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Ramesh
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1,000
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Poonam
|
500
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3,000
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6,000
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6,000
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Balance Sheet
as on Aug 01, 2012 after Poonam’s death
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Liabilities
|
Amount
Rs
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Assets
|
Amount
Rs
|
||
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|
|
|
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Creditors
|
28,000
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Land and Building
|
44,000
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Poonam’s Legal Heir’s A/c
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17,000
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Debtors
|
16,000
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Capital A/cs:
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Cash
|
14,000
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Minaxi
|
38,700
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Investments
|
20,000
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Ramesh
|
25,800
|
64,500
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Less: Amortised
|
2,000
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18,000
|
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Stock
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18,000
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Less: Depreciation
|
1,000
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17,000
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Profit and Loss Suspense A/c
|
500
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1,09,500
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1,09,500
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Working Notes:
Calculation of Gaining Ratio of Minaxi and Ramesh:
WN1: Distribution of Reserve:
WN2: Share of Profit of Poonam
WN3: Calculation of Share of goodwill of Poonam
WN4: Partners’ Capital Accounts
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Partners’ Capital Accounts
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Dr.
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Cr.
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Particulars
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Minaxi
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Ramesh
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Poonam
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Particulars
|
Minaxi
|
Ramesh
|
Poonam
|
|
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Legal Heir’s A/c
|
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|
17,000
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Balance b/d
|
30,000
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20,000
|
10,000
|
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Goodwill A/c
|
1,800
|
1,200
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Reserve
|
9,000
|
6,000
|
3,000
|
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Balance c/d
|
38,700
|
25,800
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Goodwill
|
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3,000
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Profit and Loss Suspense A/c
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500
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Profit and Loss Adjustment A/c (Profit)
|
1,500
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1,000
|
500
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40,500
|
27,000
|
17,000
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40,500
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27,000
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17,000
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Page No 144:
Question 5:
PRACTICAL PROBLEM
Vishnu, Prabhakar and Krishna were partners in a business sharing profits and losses in the ratio of 3:1:1 respectively. Their Balance Sheet as on 31stMarch, 2012 was as follows:
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Balance Sheet as on 31st March, 2012
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Dr.
|
Cr.
|
|||
|
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|
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Capital
|
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Plant and Machinery
|
35,000
|
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Vishnu
|
40,000
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Stock
|
25,000
|
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Prabhakar
|
30,000
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Debtors
|
20,000
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Krishna
|
25,000
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Cash
|
30,000
|
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Creditors
|
5,000
|
|
|
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Reserve fund
|
10,000
|
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1,10,000
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1,10,000
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Krishna died on 1stOctober, 2012 and the partnership deed provided that:
1) The deceased partner to be given his share of profit to the date of death on the basis of the profits of the previous year.
2) His share of goodwill will be calculated on two years purchase of average profit of the last 4 years. The net profit for last 4 years were Rs 70,000, Rs 55,000, Rs 45,000, Rs 30,000
3) Plant and Machinery to be valued at Rs 40,000. Reserve for doubtful debts of Rs 2,000 to be created.
4) The drawings of Krishna upto the death amounted to Rs 20,000
5) Interest on capital at 10% p.a. is to be allowed and 6% p.a. to be charged on drawings. Both the interest should be calculated for 6 months.
Prepare:
1) Krishna’s capital A/c and P/L Adjustment A/c
Answer:
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Krishna’s Capital Account
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||||
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Dr.
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Cr.
|
|||
|
Particulars
|
Amount
|
Particulars
|
Amount
|
|
|
|
|
|
|
|
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Drawings
|
20,000
|
Balance b/d
|
25,000
|
|
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Interest on Drawings
|
600
|
Reserve fund
|
2,000
|
|
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Legal Heir’s Loan A/c
|
31,250
|
Profit and Loss Adjustment A/c (Profit)
|
600
|
|
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Goodwill
|
20,000
|
|
|
|
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Profit and Loss Suspense A/c
|
3,000
|
|
|
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Interest on Capital
|
1,250
|
|
|
|
51,850
|
|
51,850
|
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Profit and Loss Adjustment Account |
|||||
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Dr. |
Cr. |
||||
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Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
|
|
|
|
|
||
|
Reserve for Doubtful Debts |
2,000 |
Plant and Machinery |
5,000 |
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|
Profit transferred to: |
|
|
|
||
|
Vishnu |
1,800 |
|
|
|
|
|
Prabhakar |
600 |
|
|
|
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|
Krishna |
600 |
3,000 |
|
|
|
|
|
5,000 |
|
5,000 |
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Working Notes:
WN1: Krishna’s share of Reserve Fund
WN2: Calculation of Share of Goodwill of Krishna
WN3: Calculation of Share of Profit of Krishna
Note: As no information is given regarding the New Ratio of Vishnu and Prabhakar, hence, it is 3:1 and Gaining Ratio is same as the New Ratio.
View NCERT Solutions for all chapters of Class 15