9. Partnership Accounts-II

8/17/2019 9. Partnership Accounts-II

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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p - I I _ P a r t n e r s h i p A / c ’ s - I I _ A s s i g n m e n t S o l u t i o n s _ _ 1

No.1 for CA/CWA & MEC/CEC MASTER MINDS

9. PARTNERSHIP ACCOUNTS - II

SOLUTIONS TO ASSIGNMENT PROBLEMS

P R O B L E M N O . 1

Dr. Realisation Account Cr.

Particulars Amount Particulars Amount

To Debtors A/c 48,000 By Creditors A/c 48,000

To Stock A/c 60,000

To Fixtures A/c 24,000 By cash A/c (assets realized)

To Plant and machinery A/c 1,08,000 Plant and machinery 1,02,000

To Cash A/c (creditors) 45,600 Fixtures 18,000

To Cash A/c (sales tax) 4,200 Stock 84,000To Cash A/c (realization expenses) 1,500 Debtors 44,400 2,48,400

To Profit on realization By Q capital A/c(unrecorded assets taken over)

4,800

P – 3960

Q – 3960

R – 1980 9900

3,01,200 3,01,200

Dr. Partner’s Capital Accounts Cr.

Particulars P Q R Particulars P Q R

To Realization A/c - 4,800 - By Balance b/d 1,20,000 48,000 24,000

To Cash A/c (b/f) 1,47,960 71,160 37,980 By Reserve fund 24,000 24,000 12,000

By Realization A/c(Profit)

3,960 3,960 1,980

1,47,960 75,960 37,980 1,47,960 75,960 37,980

Dr. Cash Account Cr.


To Balance b/d 60,000 By Realization A/c (Creditors) 45,600

To Realisation A/c 2,48,400 By Realization A/c (Expenses) 1,500

By Realization A/c (Sales tax) 4,200

By Partners capitals accounts

P 1,47,960

Q 71,160

R 37,980

3,08,400 3,08,400

Note: Unrecorded asset is a gain and credited to realization A/c. since it is taken over by Q, his capitalA/c is debited.

♦ Hint given in the question is wrong.Correct Ans : Profit on Realization P -3,960, Q- 3,960, R- 1,980, total of cash A/c is 3,08400


2/18


P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m


In the books of M/s X, Y & Z

Dr. Realization A/c Cr.

Particulars Amount Particulars AmountTo Plant and Machinery 60,000 By Creditors A/c 70,000

To Furniture 10,000 By Bank O.D (W.N-2) 70,200

To motor cars A/c 40,000 By ‘X’ Loan A/c 22,550

To Stock 45,000 By D’s A/c (P.C) 90,000

To Sundry Debtors 60,000

To X’s Capital A/c(cost of dissolution)

2,800

To profit on Realisation: (3:2:1)

X capital A/c– 34,950 x 3/6 17,475

Y capital A/c – 34,950 x 2/6 11,650

Z capital A/c – 34,000 x 1/6 5,825

2,52,750 2,52,750

Dr. Cash A/c Cr.


To D’s A/c 90,000 By X’s Capital A/c 59,100

To Z’s Capital A/c 6,833 By Y’s Capital A/c 37,733

96,833 96,833

Dr. Capital A/c Cr.

Particulars X Y Z Particulars X Y Z

To Bal. b/d - - 12,658 By Balance b/d 38,825 26,083 -

To Cash A/c (b/f) 59,100 37,733 - By Realization A/c 2,800 - -

By Realization A/c 17,475 11,650 5,825

By Cash A/c (b/f) - - 6,833

59100 37733 12658 59100 37733 12658

Dr. D’s A/c Cr.


To Realization 90,000 By Cash A/c 90,000

90,000 90.000

WORKING NOTE:

Dr. Trading and Profit & Loss of M/s X, Y, Z for the period ended 31.03.2003 Cr.Particulars Amount Particulars Amount

To Opening stock 55,000 By Sales 45,000

To Purchases 30,000 By Closing Stock 45,000

To gross profit c/d 5,000

90,000 90,000

To Salaries & Wages 12,000 By Gross Profit b/d 5,000

To General & Office expenses 6,000 By Capital A/c (Loss): (3:2:1)

To Interest on X’s loan 550 X – 13,550 x 3/6 6,775

(22,000x10%x3/12) Y – 13,550 x 2/6 4,517

C – 13,550 x 1/6 2,2581,98,550 1,98,550


3/18



Balance Sheet of M/s X, Y, Z as on 31.03.2003

Liabilities Amount Assets Amount

X’s Capital 48,000 Plant & Machinery 60,000

(-) Drawings (2,400) Furniture & fittings 10,000(-) Loss (6,775) 38,825 Motor car 40,000

Y’s Capital 33,000 Stock 45,000

(-) Drawings (2,400) Sundry Debtors (W.N-3) 60,000

(-) Net Loss (4,517) 26,083 Z’s Capital A/c 8,000

- (+) Drawings 2,400

(+) Net loss 2,258 12,658

Loan A/c X 22,000

(+) Interest 550 22,550

Trade creditors 70,000

Bank Overdraft 70,200

2,27,658 2,27,658

Working Note - 1

Dr. Creditors A/c Cr.


To Bank A/c (b/f) 40,000 By Balance b/d 80,000

To Balance c/d 70,000 By Purchases 30,000

1,10,000 1,10,000

Working Note – 2

Dr. Bank A/c Cr.


To Debtors 25,000 By Balance b/d 30,000

To Balance c/d 70,200 By Salaries & Wages A/c 12,000

By General & Office expenses 6,000

By Drawings A/c (3x3x800) 7,200

By Creditors A/c 40,000

95,200 95,200

By Balanced b/d 70,200

Working Note - 3

Dr. Debtors A/c Cr.


To Balance b/d 40,000 By Cash / Bank A/c (b/f) 25,000

To Sales 45,000 By Balance c/d 60,000

85,000 85,000


4/18






To Sundry Assets: By Creditors 15,700Debtors 15,850 By Employee’s Provident Fund 6,300

Stock 25,200 By Bank A/c:

Prepaid Expenses 800 Joint Life Policy 4,500

Plant & Machinery 20,000 Debtors 10,800

Patents 8,000 69,850 Stock 15,600

To Bank – Creditors:(̀ 15,700 - ̀ 3,200 - ̀ 400)

12,100 Plant and Machinery 12,000

To Bank A/c Employee’s (P.F) 6,300 Patents60% of (̀ 8,000 - ̀ 5,000) 1,800 44,700

To Bank A/c (expenses) 1,500 By Loss on realisation A/c (4:3:2:1)

A’s Capital A/c 9,220B’s Capital A/c 6,915

C’s Capital A/c 4,610

D’s Capital A/c 2,305 23,050

89,750 89,750

Dr. Capital Accounts Cr.

Particulars A( ` )

B( ` )

C( ` )

D( ` )

Particulars A( ` )

B( ` )

C( ` )

D( ` )

To Balance b/d - - 3,200 8,415 By Balance b/c 40,000 20,000 - -

To Realisation A/c 9,220 6,915 4,610 2,305By Bank

(Realisation loss)9,220 6,915 4,610 -

To D’s Capital(Deficiency) 5,360 2,680 - -

By Bank (Recovery)(10,720X0.25) - - - 2,680

To Bank 34,640 17,320 - - By A’s Capital 2/3 - - - 5,360

By B’s Capital 1/3 - - - 2,680

By Bank A/c - - 3,200 -

49,220 26,915 7,810 10,720 49,220 26,915 7,810 10,720

Dr. Bank Account Cr.

Particulars ̀

Particulars ̀

To Balance b/d 535 By Realisation A/c 12,100

To Realisation A/c 44,700 By Realisation A/c 6,300

To A’s Capital A/c 9,220 By Realisation A/c 1,500

To B’s Capital A/c 6,915 By A’s Capital A/c 34,640

To D’s Capital A/c (10,720x25%) 2,680 By B’s Capital A/c 17,320

To C’s Capital A/c (4,610 + 3,200) 7,810

71,860 71,860

Working Note: Insolvent partner’s loss should be borne by solvent partners having credit balance. So,here D’s loss will be borne by A and B only as they are the solvent partners having credit balance. C willbring his share of loss in cash.


5/18




Dr. Realization Account Cr.


50,0002,50,000

1,25,000

70,000

4,00,000

3,00,000

22,600

5,05,000

70,000

24,000

5,00,00070,000

1,00,000

3,00,000

49,000

3,80,000

2,70,000

1,25,000

22,600

To LandTo Buildings

To Office Equipments

To Computers

To Debtors

To Stock

To Other Asset A/c

To Bank A/c (Loan) (5,00,000 X 101%)

To Bank A/c

To profit on realisation: (4:4:1:1)

F Kapil 9,600

S Kapil 9,600

R Dev 2,400B Dev 2,400

18,16,600

By Loan from NBFCBy Current Liabilities

By Bank:

Land (200% of B.V)

Buildings (120% of B.V)

Computers (70% of B.V)

Debtors (95% of B.V)

Stock (90% of B.V)

Office Equipments

Other Current Assets

18,16,600

Dr. Partners Capital Account Cr.

Particulars FK SK RD BD Particulars FK SK RD BD

-

-

17,000

2,42,600

-

-

17,000

3,42,600

-

42,500

8,500

1,61,400

87,400

-

-

2,00,000

50,000

9,600

-

-

--

2,00,000

1,50,000

9,600

-

-

--

1,00,000

1,10,000

2,400

-

-

--

-

-

2,400

42,500

17,000

17,0008,500

To Current A/c

To BD A/c

To BD A/c

(2:2:1)

To Bank A/c

2,59,600 3,59,600 2,12,400 87,400

By Balance b/d

By Current A/c

By Realization A/c

By RD A/c

By FK A/c

By SK A/cBy RD A/c

2,59,600 3,59,600 2,12,400 87,400



75,000

12,46,600

5,05,000

70,000

1,61,400

2,42,600

3,42,600

To Balance b/d

To Realization A/c

13,21,600

By Realization A/c (Loan)

By Realization A/c

By RD capital A/c

By FK capital A/c

By SK capital A/c

13,21,600


Dr. Realization Account Cr.


96,060

64,000

28,600

84,000

1,02,400

1,02,400

2,26,880

45,780

To Debtors

To Stock

To Machinery

To Land and Buildings

To Bank

3,75,060

By Creditors

By Bank

By loss on realisation: (b/f)

A’s Capital 15,260

B’s Capital 15,260

C’s Capital 15,260

3,75,060


6/18



Dr. Partners’ Capital Account Cr.

Particulars A B C Particulars A B C

-

15,260

3,120

1,08,080

-

15,260

2,080

52,420

9,940

15,260

-

-

60,000

21,200

30,000

15,260

-

-

40,000

2,500

12,000

15,260

-

-

20,000

-

-

3,120

2,080

-

To Current A/c of C

To Realization A/c

To C’s Capital A/c(3:2)

To Bank A/c (b/f)

1,26,460 69,760 25,200

By Bal. (b/d)

By Current A/c

By Loan from

Partners

By Bank A/cBy A’s Capital

By B’s Capital

1,26,460 69,760 25,200



5,500

2,26,88015,260

15,260

1,02,400

1,08,08052,420

To Balance (b/d)

To Realization A/cTo A’s Capital A/c

To B’s Capital A/c

2,62,900

By Realization A/c

By A’s Capital A/cBy B’s Capital A/c

2,62,900

♦ Hint given in the question is wrong.

♦ Correct Ans.: Final Realization to Partners – A: 1,08,080; B: 52,420)


In the Books of M/s LMSStatement of Piecemeal Distribution

(Under Higher Relative Capital method)

Capital A/c’s

Particulars

AmountAvailable

̀

Creditors

̀

BankLoan

̀

L’s Loan

̀ L

̀

M

̀

S

̀

Balance due 1st

Instalment (includingcash and bankbalances) 5,00,000

2,00,000 5,00,000 10,00,000 15,00,000 10,00,000 5,00,000

Less: Liquidator’sExpenses and fee (1,00,000)

4,00,000

Less: Payment ofCreditors andrepayment of Bank

Loan in the ratio of 2:5 (4,00,000) (1,14,286) (2,85,714) - - - -

Balance Due - 85,714 2,14,286 10,00,000 15,00,000 10,00,000 5,00,000

2nd

Instalment 15,00,000

Less: Payment toCreditors andrepayment of bankloan in full settlement (3,00,000) (85,714) (2,14,286)

12,00,000 - - 10,00,000 15,00,000 10,00,000 5,00,000

Less: Repayment ofL’s Loan

(10,00,000) (10,00,000) - - -

2,00,000 15,00,000 10,00,000 5,00,000

Less: Payment to Mr.L towards relative

higher capital (W.N.1) (2,00,000) (2,00,000) - -

Balance Due 13,00,000 10,00,000 5,00,000


7/18


8/18



P r o b l e m N o . 7

Statement showing Realisation and Distribution of Cash Payments (Maximum Loss Method)

ParticularsRealisation

̀

Creditors

̀

Partners’

Loan ̀

Partners’

Capital ̀

1. After taking into account cash balance andamount set aside for expenses

1,000 1,000 - -

2. 3,000 1,000 2,000 -

3. 3,900 - 3,000 900

4. 6,000 - - 6,000

Including saving in expenses 20,100 - - 20,100

34,000 2,000 5,000 27,000

To ascertain the amount distributable out of each instalment realised among the partners, the following

table will be constructed:

Statement of Distribution on Capital Account (Maximum Loss Method)(1) Calculation to determine the mode of distribution of

̀

900

ParticularsTotal

̀

A

̀

B

̀

C

̀

Balance 42,000 15,000 18,000 9,000

Less: Possible loss, should remaining assets prove to be

worthless ( 2:2:1) (41,100) (16,440) (16,440) (8,220)

+900 -1,440 +1,560 +780

Deficiency of A’s capital written off against those of B andC in the ratio of their capital, 18,000 : 9,000

(Garner vs. Murray)

(960) (480)

Manner in which the first ̀

900 should be distributed +600 +300

(2) Distribution of ̀

6,000

Balance after making payment of amount shown in step (1) 41,100 15,000 17,400 8,700

Less: Possible loss, assuming remaining assets

to be valueless (2:2:1)

(35,100) (14,040) (14,040) (7,020)

Balance available and to be distributed 6,000 960 3,360 1,680

(3) Distribution of ̀

20,100

Balance after making payment of amount shown in step (2) 35,100 14,040 14,040 7,020

Less: Possible loss, assuming remaining assets

to be valueless ( 2:2:1)

(15,000) (6,000) (6,000) (3,000)

Manner of distribution of ̀ 20,100 20,100 8,040 8,040 4,020

Summary:

Balance capital 42,000 15,000 18,000 9,000

Total amounts paid 27,000 9,000 12,000 6,000

Loss 15,000 6,000 6,000 3,000


9/18



PROBLEM NO. 8

Calculation of Purchase Consideration:

Particulars A & CO. B & CO.

1,10,000

4,10,300

11,000

1,40,800

5,06,000

1,100

88,000

-

-

2,37,600

2,47,500

-

11,79,200

(3,38,800)

(15,840)

(1,96,900)

5,73,100

(57,200)

(10,560)

-

Assets:

Goodwill

Land & Buildings

Fixture

Debtors

Stock

Cash in hand

Total (A)

(-) Creditors

(-) Loans

(-) Bank OD

Total (B)Purchase consideration (A - B)

5,51,540

6,27,660

67,760

5,05,340

Total Purchase consideration 11,33,000



4,10,300

11,000

3,78,400

7,53,500

1,100

1,98,000

3,96,000

26,400

1,96,900

11,33,000

To Lands & Buildings

To Fixture

To Debtors

To Stock

To Cash

To profit on realisation:

Partners Capitals: A – 99,000

B – 99,000

17,52,300

By Creditors

By Loans

By Bank OD

By Purchasing Company

17,52,300

Dr. Partners Capital A/c Cr.

Particulars A B Particulars A B

5,22,500

1,55,100

1,05,160

3,50,240

5,78,600

99,000

3,56,400

99,000

To Amount of shares in A Ltd.

To Amount of shares in B Ltd.6,77,600 4,55,400

By Balance b/d

By Realization A/c6,77,600 4,55,400

Statement showing discharge of purchase consideration to Partners

Particulars A B

Capital Balances

Shares in A Ltd.

Shares in B Ltd.

6,77,600

(5,22,500)

1,55,100 (b/f)

4,55,400

1,05,160 (b/f)

(3,50,240)

C o p y R i g h t s R e s e r v e d

T o M A S T E R M I N D S , G u n t u r


10/18

I P C C _ 3 4 e _ A c c o u n t s _ G r o u p - I I _ P a r t n e r s h i p A / c ’ s - I I _ A s s i g n m e n t S o l u t i o n s _ _ 1 0


Balance sheet of A Ltd. as on 31.12.2003

Particulars Note No Amount

1.

2.

EQUITY AND LIABILITIES:

1. Share holder fundsa. Share capital

2. Non-current Liabilities

Long term borrowings

3. Current liabilities

Trade payables

Total

1

2

3

6,65,500

2,20,000

3,38,800

12,24,300

ASSETS:

1. Non-current Assets

a. Fixed assets

i) Tangible Assets

ii) Intangible Assets (Goodwill)

b. Other Non-current Assets (Formation Exp.)

2. Current Assets

a. Inventory

b. Trade receivables

c. Cash and Cash Equivalents

Total

5

9

4,21,300

1,10,000

14,300

5,06,000

1,40,800

31,900

12,24,300

Notes to Balance Sheet:1. Share capital

a. Equity share capital (6,27,660 + 22,000) = 6,49,660(Out of 6,49,660, 6,00,000 amount of shares issued

for a consideration other than cash)

b. Preference share capital = 15,840

6,65,500

2. Long term borrowingsMortgage loan (land and buildings) = 2,20,000

3. Trade payables = 3,38,800

5. Tangible AssetsLand & Buildings = 4,10,300Plant & Machinery = 11,000

4,21,3009. Cash and Cash equivalents

Opening Balance 1,100

Add: Cash received for shares 22,000

Add: Loan mortgage 2,20,000

Less: Bank OD (1,96,900)

Less: Formation Exp. (14,300) = 31,900

C o p y R i g h t s R e s e r v e d

T o M A S T E R M I N D S , G u n t u r


11/18



PROBLEM NO. 9

In the books of Black & Green



To Balance at Bank 42,000 By Creditors 64,000

To Investments 15,000 By Mints & Co. A/c (W.N-1) 3,16,600

To Debtors 71,000 By Black Capital (investments) 12,000

To Stock 59,000

To Vehicles 25,000

To Freeholds 75,000

To Fixtures 18,000

To Capital A/c’s (profit)

Black – 87,600 x 8/15 = 46,720

Green – 87,600 x 7/15 = 40,880 87,6003,92,600 3,92,600

Dr. Capital A/c Cr.

Particulars Black Green Particulars Black Green

To Realization 12,000 - By Balance b/d 1,20,000 1,05,000

To Mints & Co. A/c(b/f) 1,64,720 1,51,880 By Current A/c 10,000 6,000

By Realization 46,720 40,880

1,76,720 1,51,880 1,76,720 1,51,880

Dr. Tints & Co. A/c Cr. Particulars Amount Particulars Amount

To Realization A/c 3,16,600 By Black’s Capital 1,64,720

By Green’s Capital 1,51,880

3.16,600 3,16,600

In the Books of Brown and GreyDr. Realization A/c Cr.


To Balance at bank(1,00,000+31,000)

1,31,000 By Creditors A/c 56,000

To Debtors 65,000 By Tins & Co. A/c (W.N-1) 2,63,400To Stock 67,000 By loss on realisation A/c(3:2)

To Vehicles 17,000 Brown Capital A/c 6,360

To Freeholds 50,000 Grey capital A/c 4,240 10,600

3, 30,000 3, 30,000

Dr. Capital A/c Cr.

Particulars Brown Grey Particulars Brown Grey

To Realisation A/c 6,360 4,240 By Balance b/d 1,10,000 78,000

To Tints & Co. 1,55,240 1,08,160 By profit on saleof fixtures (3:2)


12/18



(1,00,000-14,000) 51,600 34,400

1,61,600 1,12,400 1,61,600 1,12,400

Working Note - 1

Dr. Tints & Co. A/c Cr.


To Realization 2,63,400 By Brown’s capital 1,55,240

By Grey’s capital 1,08,160

2,63,400 2,63,400

In the Books of new Partnership FirmBalance Sheet of Tints & Co. as on 01.01.03


Capital A/c’s: Balance at bank

Black – 1,50,000 (42,000 + 1,31,000) - 80,000 93,000

Green – 1,25,000 Debtors (Less provisions)(71,000+65,000-4,000-5,000) 1,27,000

Brown – 1,25,000 Stock (57,000 + 62,000) 1,19,000

Grey – 1,00,000 5,00,000 Vehicles (23,000 + 15,000) 38,000

Creditors 1,17,000 Freeholds 95,000

Goodwill (75,000 + 50,000) 1,25,000

Fixtures 20,000

6,17,000 6,17,000

Dr. Capital A/c Cr.

Particulars Black Green Brown Grey Particulars Black Green Brown Grey

To Cash 14,720 26,880 30,240 8,160 By SundryAssets

1,64,720 1,51,880 1,55,240 1,08,160

To Bal. c/d5L(6:5:5:4)

1,50,000 1,25,000 1,25,000 1,00,000

1,64,720 1,51,880 1,55,240 1,08,160 1,64,720 1,51,880 1,55,240 1,08,160

By Bal. b/d 1,50,000 1,25,000 1,25,000 1,00,000

Working Note: 1Computation of Purchase consideration:

Particulars Block & Green Brown & Gray

Bank 42,000 1,31,000(1,00,000+31,000)

Investments - -

Debtors 71,000 65,000

Stocks 57,000 62,000

Vehicles 23,000 15,000

Fixtures 20,000 -

Freeholds 95,000 -

Goodwill 75,000 50,000

(-) Provisions for doubtful debts 4,000 5,000

(-) Creditors (after discount) 62,400 54,600

P.C 3,16,600 2,63,400


13/18



PROBLEM NO. 10

In the books of M/s XYZ & CJournal Entries

Particulars Debit Credit

Buildings A/c Dr.

Machinery A/c Dr.

Furniture A/c Dr.

Debtors A/c Dr.

Cash at Bank A/c Dr.

Cash in hand A/c Dr.

Stock A/c Dr.

Due from Y Co. A/c Dr.

Advances A/c Dr.

Goodwill A/c Dr.

To Creditors A/cTo Due to X & CO

To Bank loan A/c

To X’s capital A/c

To Y’s capital A/c

To Z’s capital A/c

(Being incorporation of assets & liabilities of Mrs. R & CO and

Mrs. Y & CO at agreed values)

2,00,000

8,50,000

52,000

7,20,000

2,40,000

60,000

5,20,000

2,00,000

1,20,000

1,82,000

4,72,0002,00,000

1,60,000

8,17,500

11,40,500

3,54,000

X Capital A/c Dr.

Y Capital A/c Dr.

Z Capital A/c Dr.

To Goodwill A/c

(Being goodwill written off)

91,000

60,667

30,333

1,82,000

Due to X & Co A/c Dr.

To Due from Y & Co A/c

(Being inter firm owings cancelled)

2,00,000

2,00,000

Cash A/c Dr.

To X’s capital A/c

To Z’s capital A/c

(Being necessary cash bought in by X & Z)

3,69833

3,38,500

31,333

Y’s capital A/c Dr.

To Cash A/c

(Being excess balance paid to Y)

3,69,833

3,69,833

Balance Sheet of Mrs. X, Y, Z & CO as on 31.03.2003


10,65,500

7,10,000

3,55,500

4,72,000

1,60,000

2,00,000

8,50,000

52,00

5,20,000

7,20,000

2,40,000

60,000

1,20,000

Capitals A/c’s:

X

Y

Z

Creditors

Bank Loan

27,62,500

Buildings

Machinery

Furniture

Stock

Debtors

Cash

Bank

Advances

27,62,500


14/18



Working Notes: 1

Computation of capital contributions X, Y, Z in the forms of X & Co and Y & Co.

X & CO(3:1) Y & CO (2:1)Particulars

X Y Y Z4,80,000

75,000

2,62,500

3,20,000

25,000

87,500

4,00,000

2,00,000

1,08,000

2,00,000

1,00,000

54,000

Capital A/c Balances

Reserves

Realization profit

8,17,500 4,32,500 7,08,000 3,54,000

11,40,500

Working Notes: 2 - profit on Realisation

Particulars X & Co. Y & Co.

Building (2,00,000 – 1,00,000)

Machinery (4,50,000 – 3,00,000) & (4,00,000-3,20,000)Goodwill as per given

profit on Realisation

partner’s capital A/c:

X

Y

Z

1,00,000

1,50,0001,00,000

3,50,000

2,62,500

87,500

-

-

80,00082,000

1,62,000

-

1,08,000

54.000

Working Notes: 3 Adjustments of Capital:

Particulars X Y Z

8,17,500(91,000)

7,26,500

11,40,500(60,667)

10,79,833

3,54,000(30,333)

3,23,667

21,30,000

(X) 3/6 (Y) 2/6 (Z) 1/6

Capital Account BalancesLess: Goodwill written off (as per new ratio 3:2:1)

Desired Capital (21,30,000 as per 3:2:1)

Actual Capital

Balance cash to be brought in / withdrawn

10,65,000

7,26,500

3,38,500

7,10,000

10,79,833

(3,69,833)

3,55,000

3,23,667

31,333

♦ Hint given in the question is wrong.

P R O B L E M N O . 1 1


ParticularsAmount

( ̀

)Particulars

Amount( ̀

)

To Land and building 2,46,000 By Sundry creditors 36,000

To Furniture and fixtures 65,000 By Mortgage loan 1,10,000

To Stock 1,00,000 By Cash account

To Debtors 72,500 By Land and building 2,30,000

To Cash A/c (expenses on dissolution) 7,800 By Furniture & fixtures 42,000

To Cash A/c (creditors ̀

36,000 + ̀

18,000) 54,000 By Stock 72,000

To Cash A/c (Mortgage loan) 1,10,000 By Debtors 65,000


15/18



By Partners’ capitalA/c (Loss 4:3:2:1)P = 40,120Q = 30,090

R = 20,060S = 10,030 1,00,300

6,55,300 6,55,300

Dr. Partners’ Capital Accounts Cr.

P Q R S P Q R SParticulars

̀ ̀ ̀ ̀ Particulars

̀ ̀ ̀ ̀

To Balance b/d - - 25,000 18,000 By Balance b/d 1,68,000 1,08,000 - -

To RealizationA/c (Loss)

40,120 30,090 20,060 10,030By General

Reserve38,000 28,500 19,000 9,500

To R’s CapitalA/c (Deficiency)

12,636 8,424 - -By Capital

Reserve10,000 7,500 5,000 2,500

To Cash A/c (b/f) 2,03,364 1,35,576 - -

By Cash A/c

(realizationloss)

40,120 30,090 - 10,030

By P’s CapitalA/c

- - 12,636 -

By Q’s CapitalA/c

- - 8,424 -

By Cash A/c(b/f)

- - - 6,000

2,56,120 1,74,090 45,060 28,030 2,56,120 1,74,090 45,060 28,030

Note: P, Q and S brought cash to make good, their share of the loss on realization. However, inactual practice they will not be bringing any cash, only a notional entry will be made.

Dr. Cash Account Cr.

ParticularsAmount

( ̀

)Particulars

Amount( ̀

)

To Balance b/d 15,500 By Realization A/c:

To Realization A/c: Expenses on dissolution 7,800

Land and building 2,30,000 Creditors (36,000 + 18,000) 54,000

Furniture & fixtures 42,000 Mortgage loan 1,10,000

Stock 72,000 By P’s capital A/c 2,03,364

Debtors 65,000 By Q’s capital A/c 1,35,576

To P, Q, S’s capital A/c’s

(40,120 + 30,090 + 10,030)

80,240

To S’s Capital A/c 6,000

5,10,740 5,10,740

Working Note: As per Garner Vs. Murray rule, solvent partners have to bear the loss due to insolvencyof a partner in their capital ratio.

Calculation of Capital Ratio of Solvent Partners

Particulars P ( ̀

) Q ( ̀

) S ( ̀

)

Opening capital 1,68,000 1,08,000 (18,000)

Add: General reserve 38,000 28,500 9,500

Capital reserve 10,000 7,500 2,500

2,16,000 1,44,000 (6,000)


16/18



Though S is a solvent partner yet he cannot be called upon to bear loss on account of insolvency of Rbecause his capital account has a debit balance.

Therefore, capital ratio of P & Q = 216 : 144 = 3:2

Deficiency of R = ̀

{(25,000 + 20,060) – 19,000 + 5,000)} = ̀

45,060 - ̀

24,000 = ̀

21,060.

Deficiency of R will be shared by P & Q in the capital ratio of 3 : 2 i.e.

P = ̀

21,060 x 3/5 = ̀

12,636

Q = ̀

21,060 x 2/5 = ̀

8,424

PROBLEM NO. 12

Journal entries in the books of firm

Particulars Debit Credit

a. Profit & Loss adjustment A/c Dr.

To Stock A/c (1,800 x 20%)

To Investment A/c (12,500 x 10%)

4,850

3,600

1,250

Profit & Loss Adjustment A/c Dr.

To Book Debts A/c (2,500 x 10%)

250

250

b.

R’s Capital A/c Dr.

To Book Debts A/c

2,250

2,250

Unrecorded assets:

Vehicles A/c Dr.

To Profit & Loss Adjustment A/c

3,000

3,000

c.

R’s Capital A/c Dr.

To Vehicles A/c

3,000

3,000

d. R’s Capital A/c Dr.To Profit & Loss Adjustment A/c (Salary Refund)

3,0003,000

e. R’s Capital A/c (5:4)Dr.

To P’s Capital A/c

To Q’s Capital A/c

9,000

5,000

4,000

f. Cash A/c Dr.

To Investments A/c

12,000

12,000

g. Investments A/c Dr.

To P’s Capital A/c

To Q’s Capital A/c

750

375

375

In the Books of P, Q & R

Dr. Profit & Loss Adjustment A/c Cr.


3,600

1,250

250

900

3,000

3,000

To Stock

To Investment

To Book Debts

To Partners Capital:

P – 300

Q – 300

R – 3006,000

By Vehicles A/c

By R’s Capital A/c

(50% of 1 year salary)

6,000


17/18



Dr. Partners Capital A/c Cr.

Particulars P Q R Particulars P Q R

61,250 50,250

2,250

3,000

3,000

9,000

14,750

50,000

1,700

5,000

375

3,875

300

40,000

1,700

4,000

375

3,875

300

30,000

1,700

300

To Book Debts

To Vehicles

To P & L Adj. A/c

To P & Q Capital

To Cash

To Balance c/d

61,250 50,250 32,000

By Balance b/d

By P & L A/c

By R Capital

By investment

(12,000-11,500)

By Cash (3,500+375)

By P & L A/c

61,250 50,250 32,000

Balance sheet of Mrs. P & Q as on 31.12.03


1,11,500

7,000

8,000

7,900

7,000

14,400

5,000

32,000

40,000

28,000

8,000

Capital A/c’s:

P 61,250

Q 50,250

Creditors

Staff security Deposit

Staff provident fund

1,34,400

Cash

[2000 + 12,000 + 7,750 – 14,250]

Stock [18,000 – 3,600]

Book debt [7500 – 250 – 2,250]

Factory Sec – P

Factory Sec – Q

Vehicles

FDR of staff security

1,34,400

Working note:

Computation of amount brought in by P & Q:

Amount payable to R = 14,750(+) Minimum cash balance = 7,00021,750

(-) Available cash (2000 + 12,000) (14,000)7,750

Balance Sheet of P & Q Ltd as on 01.01.2014

Particulars Note No Amount

EQUITY & LIABILITIES:

Share holders fund

Share capital

Non-current liabilities:Other non-current liabilities

Current Liabilities:

Trade payables

Total

1 2,00,000

15,900

7,000

2,22,900

ASSETS:

Non-Current Assets:

Fixed Assets

Tangible Assets

Non-current investments

Other non-current investment [F.D.R]

Current Assets:

2 1,25,000

8,000


18/18



Inventory

Trade receivables [Debtors]

Cash & Cash equivalents

Other current assets

Total

3

4

14,400

5,000

63,500

7,000

2,22,900

Notes to accounts:

Particulars ̀

1. Share capital

Equity share capital

issued and subscribed & paid up

20,000 equity shares of Rs. 10 each fully paid

(Out of the above 11,500 shares issued to P&Q ,

3,000 shares are issued to R&S for consideration other

than cash.)2. Tangible assets

Factory 32,000

Plant & Machinery (WN: 2) 65,000

Vehicles 28,000

3. cash & cash Equivalents

Opening balance(WN:1) 7,000

Equity Share Capital 58,500

Less: dismantling charges (2,000)

4. other Current Assets:

Loss on sale of factor 5,000

Dismantling charges 2,000

2,00,000

1,25,000

63,500

7,000

Working note: 1

Dr. Cash A/c. Cr.

Particulars Amount ( ̀

) Particulars Amount( ̀

)

To Balance c/d. 2,000 By R Capital A/c 14,750

To Investments A/c 12,000

To P’s capital A/c 3,875

To Q’s Capital A/c 3,875 7,750 By Balance C/d 7,000

21,750 21,750

Working note: 2

Dr. Plant & Machinery A/c. Cr.

Particulars Amount ( ̀

) Particulars Amount( ̀

)

To Balance c/d. 40,000 By loss on sale 7,000

To cash A/c 2,000

To cash A/c 30,000 By Balance C/d 65,000

72,000 72,000

THE END C o p y R i g h t s R e s e r v e d T o M A S T E R M I N D S , G u n t u r

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9. Partnership Accounts-II

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