12. PARTNERSHIP ACCOUNTS-1

Transcription

1 (i) No.1 for CA/CWA & MEC/CEC SOLUTIONS TO ASSIGNMENT PROBLEMS PROBLEM NO.1 1. PARTNERSHIP ACCOUNTS1 Statement of Affairs of A,B & C As on 0 th June, 008 Liabilities Assets,8 0,000 Capital (Bal. Fig.) Creditors,1 Furniture Stock Book debts Cash in hand and at bank 9,000 90,000 1,80,000 6,000,1 (ii) Statement showing Profit and Loss of partners A, B and C for six months ending on 0 th June, 008. Particulars Capital as on 0 th June, 008 Add: Drawings of A,B and C ( 1, , ,000) Add: Interest on drawings of A, B and C ( ) Less: Interest on capital of A, B and C (,400 +, ) Less: Capital as on 1 st January, 008 of A, B and C ( 96, , ,000),8 7,000 1,50,1,50 (6,750),06,600 (,70,000) Net Profit 6,600 Statement showing allocation of profits and other adjustments in the capital accounts of A, B and C Particulars A () B () C () Capital as on 1 st January, ,000 90,000 Add: Net profit in the ratio of ::1 (6,600) 14,640 14,640 Add: Interest on 5% p.a. for 6 months Less: Drawings Less: Interest on drawings,400 1,1,040 (1,000) (600),50 1,06,890 (9,000) (450) 84,000 7,0,100 9,40 (6,000) (00) Capital as on 0 th June, 008 1,00,440 97,440 87,10 To General reserve To Salaries to partners Good 8,800 Better 19,00 Best 1,600 To Interest on Capital Good 10,00 Better 6,600 Best 7,0 PROBLEM NO. Profit and Loss Appropriation Account Particulars Particulars,40 By Net Profit (See W.N.1) By Interest on drawings (W.N.) Good 1,040 Better ,600 Best 600 4,10,,410 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 1

2 Ph: /6 To Commission to partners Good 18,000 Better 10,81 (W.N.4) Best,500 To Partners Capital A/cs (profit) Good 0, Better 1,48 Best 6,964 50, ,669,7,410,7,410 Working Notes: 1. Profit and Loss Account Particulars RS. Particulars To Salary (Firm s Accountant) 4,000 By Profit,76,000 To Commission (Firm s Accountant) (W.N.) 7,000 To Net Profit transferred to P & L Appropriation A/c,,76,000,76,000. Commission of Firm s Accountant: (Given 1% after charging is commission) Pr ofit after salary of firm' s accoun tan t (,76,000 4,000) = x1% = x1% = 7, 000 ( )% ( )%. Interest on Drawings: Particulars Good (at the beginning of every month) Better (at the end of every month) Best (at the middle of every month) (,000 x 6.5 x 8%) ( 1,750 x 5.5 x 8%) ( 1,50 x 6 x 8%) 1, , Commission of Better: Commission of Better = [Net profit for appropriation (excluding interest on drawings) General reserve Interest on capital Salaries to partners commission to good and best)] x 15% Commission to Better = [,,40 4,10 69,600 18,000,500] x 15% = 68,540 x 15% = 10,81 PROBLEM NO. Note:In the hint it is wrongly given that total of debtors ledger adjustment A/c is,. But the correct hint is total of profit and loss adjustment A/c is 1,. Profit and loss adjustment account Particulars Particulars 1, By Income not considered 66,000 (for years ) (18, , ,000) By Partners Capital accounts (loss) Laurel Hardy To Expenses not provided (year ) (0, , ,000) 1,,000,000 1, Note: It is assumed that expenses and incomes not taken into account in earlier years were fully ignored. IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions

3 No.1 for CA/CWA & MEC/CEC Partner s Capital Accounts Particulars Laurel Hardly Chaplin Particulars Laurel Hardly Chaplin To P & L Adj. A/c To Hardly,000 1,9,500,000 1,89,500 6,800 By Laurel By Cash,11,500 1,51,500 6,800,11,500,11,500 6,800,11,500,11,500 6,800 Capital accounts Laurel Hardly Chaplin Sundry Creditors Balance Sheet of LH & Co. As on (After admission of Chaplin) Liabilities Amount Assets Amount Outstanding expenses Working Notes: 1,9,500 1,89,500 6,800,7,000 1, 7,19, Calculation of profit and loss distributed among partners: Profit for the year ended , , , , Total Profit 10,80,000 Plant and Machinery Sundry Debtors Stock in trade Accrued income Cash on hand ( ) Cash at bank Laurel Hardly Total Profit shared in old ratio i.e. 5:4 6,00,000 4,80,000 10,80,000 Profit to be shared as per new ratio i.e. 5, 5, 10,80,000 Excess share () Deficit share Laurel to be debited by and Hardly to be credited by. Capital brought in by Chaplin: Capital to be brought in by Chaplin must be equal to 0% of the combined capital of Laurel and Hardly Capital of Laurel (,11,500,000 ) 1,9,500 Capital of Hardly (1,51,000,000 ) 1,89,500 Combined capital,19,000 0% of the combined capital brought in by Chaplin (0% of,19,000) 6,800,0, 66,000 7, ,19,800 Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions

4 Ph: /6 (i) Journal Entries (on admission of partners): PROBLEM NO.4 Date 1 st April, 009 Particulars X s capital A/c Y s capital A/c Z s capital A/c To P s Capital A/c To Q s Capital A/c To R s Capital A/c (Being goodwill adjusted through capital accounts) Bank A/c To X s Capital A/c ( + ) To Y s Capital A/c ( + ) To Z s Capital A/c ( + ) (Being goodwill and capital brought in by news partners) Bank A/c To P s Capital A/c To Q s Capital A/c To R s Capital A/c (Being capital brought in by existing partners) Debit (), 1, Credit () 70,000 70,000 70,000 (ii) Profit & Loss Account: For the year ended 1 st March, 010 Particulars () Particulars () To Medicines, injections and other Consumables To Printing and Stationery To Telephone expenses To Rent To Power and light To Nurses salary To Attendants wages To Depreciation Xray machine 1 ECG equipment Furniture Surgical equipment To Interest on capital (W.N.) To Net profit transferred to partners capital account (iii) Partner s Capital Accounts: Debit side: Particulars To P,Q & R A/cs (Goodwill) 4,000 0,000 9,600 11,4,400 14,1 By Visiting fee By Chamber fee By Fee for report operation etc. For the year ended 1 st March, 010,7 6,6 4,7 14,1 P Q R X Y Z 4,56,600 4,56,600,96,600,96,600,1,600,1,600,69,400,89,400 1,64,400 1,84,400,4,400,44,400 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 4

5 No.1 for CA/CWA & MEC/CEC Credit side: Particulars P () Q () R () X () Y () Z () By X, Y, & Z A/c's (Goodwill) By Bank By Interest on capital (W.N.) By Fee (share) (W.N.1) By Profit (share) (W.N.) Working Notes: 10,00,0 71,400 4,56,600 10,00 1,4 71,4000,96,600 10,00 80,000 71,400,1, Statement showing distribution of fee among partners: 70,000 1,4 71,400,89,400 70,000 71,400 1,84,400 70,000 71,400,44,400 Partner Name P Q R X Y Z Visiting Fees (70%) () 1,0 17,500 70,000 1,9,500 Chamber Fees (50%) () 87,500 7,,500 Operations fees (40%) () 0,000 80,000 1,90,000 Total (),0 1,4 80,000 1,4 7,1. Statement showing distribution of profit among partners: Particulars Profit as per profit and loss account Less: Fee payable to partners Profit to be divided equally among partners 11,4,400 (7,1) 4,8,400 Share of each partner in remaining profit = 4,8,400/6 = 71,400. Interest on capital employed: Particulars P () Q () R () X () Y () Z () Opening balance Add: Premium for goodwill Shared equally by old Partners Add: Capital brought in cash 1,70,000 10,00 1,70,000 10,00 1,70,000 10,00 Total interest = 9,600 Note: It is assumed that amount of premium for goodwill brought in by new partners X,Y and Z has not been withdrawn by old partners P,Q and R and it is still kept in the business. IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 5

6 Ph: /6 PROBLEM NO.5 Journal Entries in the Books of EFG & Co. Particulars () Cr. () 1 Building Account 11,000 To Revaluation Account 11,000 (Being building appreciated) Revaluation Account,500 To Furniture Account To Provision for Doubtful Debts Account,500 1,000 (Being Furniture depreciated by 10% and Provision for doubtful debts 5% on Debtors) Revaluation Account To E s Capital Account To F s Capital Account To G s Capital Account (Being profit on revaluation transferred to capital accounts of partners) 4 F s capital Account G s capital Account To E s Capital Account (Being adjustment for E s share of Goodwill) 5 Bank Account To F s Capital Account To G s Capital Account (Being fresh capital introduced by F and G) 6 E s capital Account To Bank Account To E s Loan Account (Being Settlement of E s Capital on his retirement) 7 E s Loan Account To H s Capital Account (Transfer of E s Loan Account to H s Capital Account) 8 H s capital Account To F s Capital Account To G s Capital Account (Being adjustment entry passed for H s Share of goodwill) Partner s Capital Accounts 7, ,750,750 1,500,750,50 1,500 4,750,750 6,50 6,50 Particulars E () F () G () Particulars E () F () G () To E (Goodwill) To Bank To E s Loan A/c 4,750 4, ,500 78,750 5,50 64,500 By Revaluation A/c By F (Goodwill) By G (Goodwill) By Bank (fresh capital),750 1,50 8,000 1,500 78,750 5,50 64,500 To F (Goodwill) To G (Goodwill) F () G () H () F () G () H () 48,500 55,750 6,50 6,50 1,50 48,500 55,750,750 By E s Loan A/c By H (goodwill) 4,50 49,500,750 6,50 6,50 48,500 55,750,750 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 6

7 No.1 for CA/CWA & MEC/CEC Working Notes: 1. Calculation of gaining ratio: Partners New Ratio Old Ratio Gain Sacrifice E F = 10 G = 10 Hence, ratio of gain between F and G = :. Value of total goodwill of the firm = x = E s Share = x 10 5 = F will bear = x 5 = F will bear = x 5 = 1. H s share of goodwill = x 4 1 = 1,500 F and G share equal profit. Therefore, their sacrificing ratio will also be equal. Hence, each of them will be credited with 6,50 PROBLEM NO.6 (i) Statement showing distribution of profits for the accounting year ended 1 st March, 01 Net profit for the year ended A s share (Profit distributed to deceased partner A & his executor) (a) Profit for 4 months ( ) (W.N.1) 67,500 (b) Application of Sec. 7 ( ) (W.N.5) 8,01 B s share (a) Profit for 4 months ( ) (W.N.) 4,700 (b) Profit for months ( ) (W.N.6) 4,787 (c) Profit for 6 months ( ) (W.N.10) 9,600 C s share (a) Profit for 4 months ( ) (W.N.) 8,467 (b) Profit for months ( ) (W.N.6) 16,55 (c) Profit for 6 months ( ) (W.N.10) 6,400 D s share (a) Profit for 6 months ( ) (W.N.10) 5,000 4,16,000 95,51 1,61,087 1,07,9 5,000 4,16,000 Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 7

8 Ph: /6 (ii) Journal Entries: Year 011 Particulars () Cr. () July 1 Machinery A/c 7,000 To A s Capital A/c To B s Capital A/c To C s Capital A/c 1,500 8,100 5,400 (Wages spent on installation of new machinery capitalized and credited to partner s capital accounts after providing depreciation for six months ended 1 st March, 011) Profit and Loss Suspense A/c 67,500 To A s Capital A/c 67,500 (A s share of profit for four months as calculated in W.N. 1 credited to his capital account) Goodwill A/c 7, To A s Capital A/c To B s Capital A/c To C s Capital A/c,,16,000 1,44,000 (Goodwill raised in the books and credited to partners in the old profit sharing ratio 5 : : A s capital A/c 1, To A s Executor s A/c 1, (Balance due to A transferred to his executor s account) (W.N 4) Profit & Loss Suspense A/c 8,01 To A s Executor s A/c 8,01 (Profit earned out of the unsettled capital credited to A s executor s account as per W.N.5) Oct 1 A s Executor s A/c 1,48,01 To D s Capital A/c 1,48,01 (Final balance of A s executor s account transferred to D s capital account) B s Capital A/c,4,000 C s Capital A/c,16,000 D s Capital A/c 1,80,000 To Goodwill (Goodwill written off and debited to partners in the new profit sharing ratio 9 : 6 : 5) 7, March 1 March 1 B s Capital A/c C s Capital A/c D s Capital A/c To B s Drawings A/c To C s Drawings A/c To D s Drawings A/c (Drawings debited to partner s capital accounts) Profit and Loss Appropriation A/c To Profit and loss suspense A/c ( 67, ,01) To B s Capital A/c To C s Capital A/c To D s Capital A/c (Division of profits as shown distribution of profits and balance suspense account transferred to appropriation account) 0,000 4,16,000 0,000 95,51 1,61,087 1,07,9 5,000 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 8

9 No.1 for CA/CWA & MEC/CEC Working Notes: 1. Computation of A s share in profit for the period : A s share in profit for the period of 1 st April, 011 to 1 st July, 011 is to be calculated on the basis of profit earned during the immediately previous accounting year i.e. year ended on 1 st March, 011 Profit for the year ended 1 st March, 011,78,000 Add: Capital expenditure of wages spent on installation Of new machinery, treated as revenue expenditure 0,000 4,08,000 Less: Depreciation on 0,000 (being the value of 0% P.a. for 6 months () Correct profit for the year ended 1 st March, 011 4,0 Profit for 4 months on the basis of last year s profit = 4,0 x 4/1 = 1, A s share in profit = 1, x 10 5 = 67,500. Valuation of Goodwill: Profit for the year ended 1 st March, 009,9,000 Profit for the year ended 1 st March, 010,46,000 Profit for the year ended 1 st March, 011 4,0 Total Profit 10,80,000 Average Profit 10,80,000 = =, Goodwill (two year s purchase) =, x = 7,. Distribution of profit for first 4 months ended 1 st July, Net Profit Rs.4,16,000 x 1,8,667 1 A s share (W.N.1) 67,500 B s Share Rs.71,167 x 4,700 5 C s Share Rs.71,167 x 8, Partner s Capital Accounts as on 1 st July, 011 Particulars A () B () C () Particulars A (Rs) B () C () To Drawings To A s Executor s A/c 1, 1, 9,54,600 9,74,600 8,44,067 8,64,067 By Plant & Machinery By Goodwill By Share in Profit (W.N.) 5. Application of section 7 of the Partnership Act Either (i) Interest of 1, x 6/100 x /1 = 1,00 (or) (ii) Profit earned out of unsettled capital 7,79,000 1,500, 67,500 1, 7,07,800 8,100,16,000 4,700 9,74,600 6,86,00 5,400 1,44,000 8,467 8,64,067 1, Rs.4,16,000 x x = 8,01(approx) 1 (1, + 9,54, ,44,067) In the absence of specific agreement amongst partners on the above subject matter, the representatives of the deceased partner can receive at their opinion, interest at the rate of 6% p.a. or share of profit earned for the amount due to the deceased partner. In the above case, it would be rational to assume that A s representatives would opt for 8,01. IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 9

10 Ph: /6 6. Distribution of profit for months ended 1 st oct, 011: Particulars Net profit Rs.4,16,000 x , A s executor s share (W.N.5) 8,01 4,787 B s share Rs.4,1,1 x 5 C s share Rs.4,1,1 x 5 16,55 7. A s Executor s Account Particulars Particulars To D s Capital A/c 1,48,01 1,48,01 By A s capital A/c By Share in profit (W.N.6) 1, 8,01 1,48,01 8. Partner s Capital Accounts (1 st August, 011 to 0 th Sept., 011) Particulars B () C () Particulars B () C () To Drawings By P & L A/c 9,69,87 9,79,87 8,50,59 8,60,59 9. Computation of new profits sharing ratio between B,C & D D is admitted for ¼ share B s new ratio = 9 x = C s new ratio = 6 x = D s new ratio = 1 5 l New profit sharing ratio = 9 : 6 : Distribution of profit for 6 months ended 1 st March, 01 Particulars 6 Net profit Rs.4,16,000 x 1 9 B s share Rs.,08,000 x 0 6 C s share Rs.,08,000 x 0 5 D s share Rs.,08,000 x 0 9,54,600 4,787 9,79, Partner s Capital Accounts as on 1 st March, 01 8,44,067 16,55 8,60,59,08,000 9,600 6,400 5,000 Particulars B () C () D () Particulars B () C () D () To Goodwill To Drawings,4,000 0,000 7,08,987 10,6,987,16,000 0,000 6,66,99 9,1,99 1,80,000 0,000 10,90,01 1,00,01 By A s Executor s A/c By Share of profit (W.N.10) 9,69,87 9,600 10,6,987 8,50,59 6,400 9,1,99 1,48,01 5,000 1,00,01 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 10

11 No.1 for CA/CWA & MEC/CEC Notes : 1. It is assumed that profit was earned uniformly throughout the year. Although notional profit was calculated for the first four months, it is to be transferred from the current year s profit (as calculated in working note ). The question requires that A s share of profit for this period is to be calculated on the basis of profit earned during year ended 1 st March, 011. The balance amount after calculating his share has been credited to B and C in ratio :.. It is assumed that drawings were made evenly throughout the year. However, single entry has been given at the year end in the main solution relating to transfer of drawings and distribution of profit but the partner s capital accounts shown in the working notes include the entries of drawings and distribution of profit of respective dates with in the year. PROBLEM NO.7 a. Profit after Depreciation Add: Depreciation Profit before Depreciation Particulars b. Profit for the 1 st half (assumed : evenly spread) Less: Depreciation with respect to 1 st half Post Depreciation profit c. Profit for the nd half Less: Depreciation for the nd half nd half profit after Depreciation 40,500 9,500 () (4,500) 0,500 d. Profit and Loss Appropriation A/c Cr. To Interest on Mohan s Capital (0,000 x 5% for 6 months),750 By Profit To Rohan 8,15 Sohan 8,15 16,50 e. Capital Accounts as on Particulars Rohan Sohan Mohan Particulars Rohan Sohan Mohan To Revaluation Loss Of Fixed Assets To Drawings To Mohan To Executors A/c 4,000 4,15 49,000 4,000 4,15 9,000,000 1,750 4,000 6,15 5,15 45,750 f. Application of Section 7 of the Partnership Act: Either (i) Interest of 4,000 x 6/100 x 6/1 = 1,60 Or (ii) Profit earned out of unsettled capital 4,000 0,500 x = 6,6 (49, , ,000) By Reserves By Rohan & Sohan By Profit & Loss Appn. A/c 4,000 8,15 4,000 8,15 0,000,000,750 6,15 5,15 45,750 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 11

12 Ph: /6 g. In the absence of specific agreement amongst partners on the above subject matter, the representatives of the deceased partner can receive at their option, interest at the rate of 6% p.a. or the share of profit earned for the amount due to the decease partner. h. i. j. In the above case, it would be rational to assume that the representatives would opt for 6,6. Profit and Loss Appropriation A/c for the second half Cr. Particulars Particulars To Executors A/c 6,6 By Net Profit 0,500 To Rohan Sohan 6,98 6,99 1,877 0,500 0,500 Capital Accounts as on Cr. Particulars Rohan Sohan Particulars Rohan Sohan To Drawings 49,000 9,000 50,98 40,99 By Profit & Loss Appn. A/c 6,98 6,99 55,98 45,99 55,98 45,99 Executors Account Cr. Particulars Particulars To Bank 48,6 By Mohan s Capital A/c 4,000 By Profit & Loss Appn. A/c 6,6 48,6 48,6 k. Balance Sheet as on Liabilities Assets Capital Accounts Fixed Assets Rohan 50,98 Less: Written down () Sohan 40,99 91,877 90,000 Creditors Less: Depreciation (9,500) 80,500 Debtors 19,000 Stock Cash and Bank 4,77 1,6,877 1,6,877 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 1

13 No.1 for CA/CWA & MEC/CEC PROBLEM NO.8 Computation of entitlement of legal heirs of C 1. Profits for the half year ended 1 st March, 011: Particulars Profit for the year ended 1 st March, 011 (after depreciation) 48,000 Add: Depreciation Profits before depreciation 58,000 Profits for the first half (assumed evenly spread) 9,000 Less: Depreciation for the first half (6,000) Profits for the first half year (after depreciation) Profits for the second half (i.e., 1 st October, 010 to 1 st March, 011) 9,000 Less: Depreciation for the second half (4,000) Profits for the second half year (after depreciation). Capital Accounts of Partners as on 0 th September, 010: Particulars A () B () C () Particulars A () B () C () To Fixed Assets (Loss on revaluation) To Drawings To C Executor s A/c 6,000 9,000 57,000 8,000 1,000 76,000 6,000 5,000 By Reserve By Goodwill By P & L Appropriation A/c (Interest on 5% for 6 months) 48,000 6,000 18,000 64,000 8,000 4,000 48,000 6,000 18,000 6,000 7,000 96,000 78,000 7,000 96,000 78,000. Application of Section 7 of the Partnership Act: Legal heirs of C have not been paid anything other than the share in joint life policy. The amount due to the deceased partner carries interest at the mutually agreed upon rate. In the absence of any agreement, the representatives of the deceased partner can receive at their option interest at the rate of 6% per annum or the share of profit earned for the amount due to the deceased partner. Thus, the representatives of C can opt for Either, (i) Interest on 5,000 for 6 6 % p.a. = 1,560 Or (ii) Profit earned out of unsettled capital (in the second half year ended 1 st March, 011) x5,000/57,000+76, =7,07(approx) In the above case, it would be rational to assume that the legal heirs would opt for 7, Amount due to legal heirs of C Balance in C s Executor s account 5,000 Amount of profit earned out of unsettled capital [c] = edde Amount due 59,07 Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 1

14 (a) Ph: /6 PROBLEM NO.9 Trading A/c To Opening stock To Purchases 1,400 6,000 By Sales By Closing stock 96,000 14,00 To Wages To Gross Profit 14,600 1,00 1,10,00 1,10,00 Particulars To Salaries (W.N1) To Trade Exp. (W.N) To Rent & Rates (W.N) To Bad debts To Provision for doubtful Debts (4,600 x 5%) To Depreciation (W.N4) To P & L Appropriation To Interest on capital: Glad Happy Joy To Current A/c: Glad Happy Joy Upto 1 st March, ,475,810 10, ,60 1,10,810 Profit and Loss A/c Upto 0 th Particulars Sept.,50 By Gross Profit 1, ,00 4,765 10, ,754 1,84 4,765 By P & L A/c Upto 1 st Upto 0 th March Sept. 10,600 10,600 10,600,810,810 10,600 4,765 4,765 (b) Partner s Capital Accounts Particulars Glad Happy Joy Particulars Glad Happy Joy To Glad (goodwill) To Glad s Loan A/c 16,000,00,800 4,800,00 By Cash By Happy (goodwill) By Joy (goodwill) By Cash 8,000,00 4,800 6,000 16,000 6,000 8,000 16,000 6,000 8,000 Partner s Current Accounts Particulars Glad Happy Joy Particulars Glad Happy Joy To Car taken over To Drawings To Transfer to loan Account 600 1,800,500,400, ,00 By Interest on Capital By Profit,400 40,60 1,600 64, ,84 4,900 5,745 1,90 4,900 5,745 1,90 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 14

15 No.1 for CA/CWA & MEC/CEC,45 1,00 14, ,00 0,795 (c) Balance Sheet as at 0 th September 01 Liabilities Amount Assets Amount Capital Accounts: Happy Joy,800,00 9,800 Working Notes: 1 Current Accounts: Happy Joy Loan from Glad Current liabilities: Outstanding Trade expenses Creditors Salaries Total as per trial balance Less: Partner s Drawings Glad Happy Joy Fixed assets: Plant and machinery (14,000 4,00) Motor Vehicles (4,800,975) Current assets: Stock Debtors Prepaid Rent Balance at bank 85 14,00 4, ,00 0,795 Particulars Allocation Halfyear to 1 st March, 01: ½ x ( 5,700 1,00) + Joy s salary of 1,00 Half year to 0 September 01: ½ x (5,700 1,00) Trade Expenses Total as per trial balance Add: Accrual 1,800, ,800 (5,100) 5,700,450,50 5,700 1, ,780 4 Allocation Halfyear to 1 March 01: ½ x ( 1,780 50) Halfyear to 0 th September 01: ½ x ( 1,780 50) + Professional charges of 50 Rent and rates Total as per trial balance Less: Rent paid in advance Allocation: 50 : 50 Depreciation Plant and machinery: 10% per annum on 14,000 1,400, Allocated 50 : 50 Motor Vehicles: Halfyear to 1 st March 01 : 5% per annum on 6,00 = 775 Halfyear to 0 th September 01 : 5% per annum on 4,800 = ,015 1,780 1,400 (400) 1,000 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 15

16 Ph: / Glad s Loan Account Particulars Particulars To Cash from Joy 14,040 By Transfer from capital account By transfer from current account By profit and loss account: Interest at 8% p.a. on 1,500 for six months By balance b/d 16,000, ,040 14, Car taken over by Glad Cost Depreciation upto 0 th September 011 Upto 1 st March, 01 Motor Vehicles Per trial balance Less : Vehicle sold Change for year to 0 th September 01 Debtors Balance per trial balance Less: Provision for bad debts Cost 6,00 (1,400) 4,800 1, Depreciation,400 (800),600 1,75,975 4,600 (0) 4,70 PROBLEM NO.10 Hari (1 : 1) Ram Suraj (y6) Working Notes: Computation of New profit sharing ratio Hari = Y Y6 = /6 = Ram = Y 0 = Y Suraj = Y6 New profit sharing ratio as H, R & S = : : 1 Adjustment entries for goodwill: 1. Suraj capital A/c Dr Hari Capital A/c. Bank A/c Suraj Capital A/c. Bank A/c Hari Capital A/c Capital A/c Balances of Hari and Ram after adjustments on admission: Hari + 7,500 = 6,500 Ram 7,500 = 5,500 1,1 For 5/6 th 1,1 Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 16

17 No.1 for CA/CWA & MEC/CEC W.N1 Journal Entries Date Particulars L.F Debit Credit Revaluation A/c 18,000 To Investment To Plant To Investment A/c To Plant A/c (Being revaluation as assets made) Creditors A/c To Revaluation a/c (Being value ass creditor reduced) Hari Capital A/c Ram Capital A/c To Revaluation A/c (Being revaluation amount given by Suraj) Bank A/c To Hari Capital A/c (Being goodwill amount given by Suraj credited to Hari Capital A/c) Hari Capital A/c To Bank A/c (Being part of the goodwill withdrawn by Hari) Bank A/c To Suraj Capital A/c (Being proportionate capital introduced by Suraj) 7,500 7,500 0,000 1,000 6, ,000 Revaluation A/c 1,000 6,000 By Creditors 18,000 By Partners Capital: Hari 7,500 Ram 7, ,000 W.N Capital A/c Particulars Hari Ram Suraj Particulars Hari Ram Suraj To Revaluation To Bank To Drawings 7,500 0, , ,500 7,500 5,500 By Balance By Bank By Bank 1, 90,000 4,000 By P & L a/c 0,000 1, 90,000 4,000 W.N To Balance b/d To Hari Capital To Suraj Capital To Profit Bank A/c By Hari Capital By Drawings By Balance c/d 1,6 0, ,000 1,6 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 17

18 Ph: /6 Creditors (1,0 ) Capital A/c s: Hari 67,500 Ram Suraj 5,500,5 Balance Sheet as Hari, Ram and Suraj as on ,0,000 Cash at Bank (W.N) Book debts Stock Investments (0,000 1,000) 1,5 Furniture Plant ( 6,000) 88,000 18,000 9,000,5 PROBLEM NO.11 In the books of Flower & Co Dares Capital A/c : To Drawings To Dares representatives Loan A/c 1,6,000 1,67, : : By Dares current A/c By Salary (5 x 600) By Interest on capital (1.L x 5%x5/1) By Interest on capital (1.L x 10%x5/1) By Flower capital By Strong Capital 1, 1,500,500 18,000 6,000 1,67,000 Dares Representatives Loan A/c Date Particulars Amount Date Particulars Amount To Bank To Bank 40,500 45,60 81,000 1,66, By Dares Capital By Interest (1,6,00040,500)x8% x 6/1) 1,6,000 4,860 1,66,860 Profit and Loss Appropriation A/c By Profit and Loss A/c 56,000 To Dares Salary To Interest on Capital: Flower (1,80,000 x 5%) Dares (1, x 5% x 5/1) Strong ( x 5%) To Interest on capital in lieu of profits (1, x 10% x 5/1) To Interest on Dares representative loan To Partners Current A/c s: Flower (8,640 x /4) Strong (8,640 x ¼) 9,000,500 4,860 1,480 7,160 56,000 56,000 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 18

19 No.1 for CA/CWA & MEC/CEC Working Notes: 1) Computation of Goodwill Average Profits = = 6000 Goodwill = x 6,000 x 7,000 Dare s share of Goodwill 7,000 x /6 = 4,000 Flowers : 1 Strong 18,000 6,000 Flowers Capital A/c Dr 18,000 Strong Capital A/c Dr 6,000 To Dares Capital A/c 4,000 PROBLEM NO.1 In the books of the firm Journal Entry Particulars () Cr. () 6,000 Reserves A/c To Anil s Capital A/c To Bimal s Capital A/c (Being reserve transferred to the Partners Capital Accounts in the old ratio before change in the constitution) Anil s Capital A/c (Refer W.N.) To Bimal s Capital A/c (Being the adjustment for goodwill made through the Partners Capital Accounts) 1,000 1,000 Balance Sheet of Anil and Bimal as at Liabilities Amount Assets Amount Capital Accounts: Anil: ` (1,000+1,000) Bimal: ` (6,000++1,000) Account Payables 14,000 4,000 8,000 Sundry Assets 8,000 8,000 Working Note: Calculation of share of sacrifice/gain Particulars Anil Bimal Old ratio (1:1) 1 1 New ratio (5:) 1 (Gain) 6 6,000 x 1/6 1 1 (Sacrifice) 6 6,000 x 1/6 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 19

20 Ph: /6 PROBLEM NO.1 Partners Capital Accounts Cr. Particulars Ram Rahim Robert Richard Particulars Ram Rahim Robert Richard To Revaluation A/c (W.N.1) To Loan from Robert A/c 6,000 4,000,00,000 By General Reserve 1,,00,000 To Bank,4,7,000 58,000 By Goodwill (W.N. ) 5,000,5,4,6,000,5,4,6,000 To Goodwill 5 6,667 18, By Loan A/c transfer,4,7,000,00,000 1,90,000,00, 1,95,167,4,7,000,1,500 By Bank 1,500,4,7,000,1,500 Capital Accounts: Ram Rahim Richard Sundry Creditors Loan from Robert Working Notes: Balance Sheet as at after the admission of Richard Liabilities Amount Assets Amount 1,90,000,00, 1,95,167 8,00,000,00,000 15,85,500 Land and Building Plant and Machinery Stock Debtors Cash at Bank (W.N. ) Cash in hand 6,00,000,70,000 1,90,000 4, 55,500 15,85,500 (1) Revaluation Account Amount To Plant and Machinery To Stock To Provision for doubtful debts 0,000 By Land and Building By Partners Capital A/cs: Ram 90,000 () Calculation of Goodwill: Profit for the year ended Profit for the year ended Profit for the year ended ,6 Average profit = = 5 Goodwill = 5 years = 1, Rahim Robert 6,000 4,000 70,000 90,000 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 0

21 No.1 for CA/CWA & MEC/CEC () Bank Account To Balance b/d To Richard s Capital A/c 1,500 1,1,500 By Roberts Capital A/c By Balance c/d 58,000 55,500 1,1,500 PROBLEM NO.14 Journal Entries Particulars Amount Amount 1. Insurance Company s A/c To Life Policy A/c (Being the policy on the life of Amrish matured on his death). Life Policy A/c To Amitabh s Capital A/c To Abhishek s Capital A/c To Amrish s Capital A/c (Being the transfer of balance in life policy account to all partners capital accounts). Amitabh s Capital A/c Abhishek s Capital A/c Amrish s Capital A/c To Advertisement suspense A/c (Being Advertisement suspense standing in the books written off fully) 4. Land & Buildings A/c To Revaluation A/c (Being an increase in the value of assets recorded) 5. Investment Fluctuation Reserve A/c To Investment A/c (Being reduction in the cost of investment adjusted through Investment Fluctuation Reserve) 6. Revaluation A/c To Stock A/c To Provision for Doubtful Debts A/c (Being the fall in value of assets recorded) 7. Amitabh s Capital A/c Abhishek s Capital A/c To Amrish s Capital A/c (Being the share of Amrish s revalued goodwill adjusted through capital accounts of the remaining partners) 8. Profit & Loss Suspense Account To Amrish s Capital A/c (Being Amrish s Share of profit to date of death credited to his account) 9. Revaluation A/c To Amitabh s Capital A/c To Abhishek s Capital A/c To Amrish s Capital A/c (Being the transfer of profit on revaluation) 9,000 1,600 1,600 1,600 7, ,600,500,500 1,500,400 7,800 7, ,00,400 7,000 1,500 11,1 11,1 11,14 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 1

22 Ph: /6 10. General Reserve A/c Investment Fluctuation Reserve A/c (, ) To Amitabh s Capital A/c To Abhishek s Capital A/c To Amrish s Capital A/c (Being the transfer of accumulated profits to capital accounts) 11. Amrish s Capital A/c To Amrish s Executor s A/c (Being the transfer of Amrish s Capital A/c to his Executor s A/c) 8,000 1,800 5,00,67,67,66 5,00 Balance Sheet as at 1 st March, 009 Liabilities Amount Assets Amount Amount Amithabh s Capital Account Abhishek s Capital Account Amrish s Executors Account Sundry Creditors 61,00 41,00 5,00 5,800 1,81,700 Land & Building Life Policy: Amitabh Abhishek Investments Stock Debtors Less: Provisions Insurance Company Cash & Bank Balance Profit and loss Suspense A/c Working Notes: (i) Calculation of Amrish s Share of Profit Total profit for last three years 18, ,000 + = 54,000 Average profit 54,000/ = 18,000 Profit for months = 18,000 x /1 = 4,500 Amrish s share of Profit = 4,500 x 1/ = 1,500,500,500 (4,000) 1,11,000 9,400 18,800 16,000 1,500 1,81,700 (ii) Calculation of Goodwill Total profits for last five years 1,0 Average profit 1,0/5 = 1,000 Goodwill at one year s purchase 1,000 x 1 = 1,000 PROBLEM NO.15 In the absence of partnership deed, the following provision are applied (a) The Partners will share profits and losses equally. (b) 6% per annum is to be paid on the loan advanced to the firm by a partner Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions

23 No.1 for CA/CWA & MEC/CEC To Investments (Loss) To Capital A/c s: A B C Capital A/c s: A 0 B,97,500 C 1, D E PROBLEM NO.16 In the books of Mrs. Evergreen & CO Revaluation A/c 1,6 1,6 By A s Capital (7 ) By Investment (1,9 70,000) 1, 1,6 Balance Sheet of Ms. Evergreen & Co as Liabilities Amount Assets Amount 6,7,500 6,7,500 Fixed Assets (at cost),00,000 () Provision for Depreciation 1,1 Investments Working Capital Net current asset,00,000 (+) Bank 57,500 Adjustment of goodwill: Particulars A B C D E Goodwill in old ratio Goodwill in new ratio C s Capital A/c D s Capital A/c To A s Capital A/c ,9,57,500 6,7,500 7 Sacrifice Gain Partners Capital A/c Particulars A B C D E Particulars A B C D E To Disposal of asset To Revaluation To Investments To Balance b/d To A s capital 1,,97,000 1, By Reserves By Revaluation By C s Capital By D s Capital By D & E s Loans By Bank 7,500 67,500,00,000 7,500 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 1,,0,000,97,500 1,6 1,,0,000,97,500 1,6 1,,97,500 1, Fixed Assets A/c (at cost) To Balance b/d,00,000 By Disposal of Asset By Balance c/d,00,000,00,000,00,000

24 Ph: /6 To Disposal of asset A/c (b/f) Provision for Depreciation A/c 6 1,1 1,80,000 1,80,000 1,80,000 1,1 Disposal of asset A/c To Fixed Asset By Provision for Depreciation 6 By A Capital A s Capital A/c 7 To Disposal of Asset A/c To Revaluation A/c To Balance b/d To Revaluation Investment A/c 80,000 1, By A s Capital By Revaluation By Balance c/d 1,9,0,0 To Balance b/d 1,9 A s Capital A/c Revaluation A/c To Investment A/c Investment A/c 1, To Revaluation A/c 1, 5,650 1,44,000 19,870 4,000 PROBLEM 17 Partners Capital A/c Cr. Particulars C N W Particulars C N W 9,000 19,500 68,000 47,800,000 4,500 6,000 To C s capital (Goodwill and Surplus from asset Revaluation) To Drawings To C s executes Loan A/c 9,940 7,000 1,79,650 8,870 6,440 By Bal. b/d By Salary By Interest on capital By JLP By Interest on capital in lieu of profits By C s loan By Interest on loan By N s Capital By W s Capital (Goodwill and surplus from asset Revaluation) By P & L App. A/c, , ,000 19,500,90 16,680 8,40 1,79,650 8,870 6,440 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 4 1,100

25 No.1 for CA/CWA & MEC/CEC C s Executor Loan A/c Cr. Date Particulars ` Date Particulars ` To Bank (6, ,440) 7,440 1,08, By C s Capital A/c By Interest on loan 1,44,000 (1,44,000 x 6% /1) 1,440 1,45,440 1,45, ,08,000 Working Note: 1 Calculation of Gaining Ratio: Old ratio of C, N & W = : : 1 New ratio of N & W = : 1 (After C s death) Gaining Ratio of N & W = : 1 Working Note: (i) Adjustment for Goodwill: Goodwill is valued of 84,000. In the given problem, C is to be credited without raising Goodwill A/c and hence C s share of goodwill shall be borne by N and W in Gaining Ratio : 1. C s share of goodwill = 84,000 = 4, N is to bear 4,000 = 8, W is to bear 4,000 = 14, 000 (ii) Surplus on revaluation of other assets = (1, 15, 800 8,800) is to be credited to C s A/c without adjusting value of other assets. C s share of surplus is to be borne by N & W in their gaining ratio : 1 C s share of surplus =,000 = 16, Amount to be borne by N = 16,500 = 11, W = 16,500 = 5, 500 Entry for goodwill and surplus on revaluation of assets N s capital A/c Dr 9,000 W s capital A/c Dr 19,500 To C s Capital A/c 58,500 Copy Rights Reserved To, Guntur IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 5

26 Ph: /6 Profit and Loss Appropriation A/c Cr. Particulars ` Particulars ` To Interest on C s loan A/c To C s Salary A/c To C s interest on capital in lieu of profits A/c To Interest on capital A/c C,550 N,90 W 1,100 To N s Salary A/c To Interest on C s executors loan A/c 1,440 Add: Interest 540 To Net profit N 16,680 W 8, ,500 10,00 6,040 6,000 1,980 5,00 54,640 By Profit (Given) 54,640 54,640 PROBLEM 18 Memorandum Revaluation A/c To Stock (8,000 x 6%) To PBD (50 100) To Provision for o/s legal charge To Partners Capital A/c s: A 1,600 B 1,00 C 800 To Factory, L & B By Factory L & B,600 By Stock 480 By PBD 150 By Provision for o/s L.C 770 By Partners Capital A/c s: A,50 B Nil C 1,50,600 Partners Capital A/c s Particulars A B C Particulars A B C To Memorandum Revaluation To B s Capital To B s Loan,50 1,950 17,500 19,800 1,50 1,650 10,500 1,700 19,800 1,500 By Bal. b/d By Memorandum Revaluation A/c By A s Capital By C s Capital By Bank (b/f) 1, ,00 1,950 1, ,700 1,700 19,800 1,500 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 6

27 No.1 for CA/CWA & MEC/CEC Sundry creditors Capital A/c s: Arthur 17,500 Curtis 10,500 B s Loan 54,700 Balance Sheet as Mrs. A & C as on Liabilities Amount Assets Amount 6,900 Cash at bank ( ,700) Sundry Debtors ( 100) 8,000 19,800 Stock Plant and Machinery Factory, L & B 8,00 4,900 8,000 8,500 54,700 Working Notes: Given that B s share of goodwill be adjusted into accounts of A and C. This represents B s share of goodwill shall be by A and C in their, gaining ratio of old ratio of A, B, C = 4 : :, New ratio of A, C = 5 : Gaining Ratio = New ratio Old ratio A = 5/8 4/9 = 1/7 C = / /9 = 11/7 gaining ratio = 1 : 11 B s share of goodwill 10,800 x /9 =,600 A s Capital A/c = 1950 C s Capital A/c = 1650 To B s Capital A/c,600 A 1 : 11 D A C 1) Desired capital [8,000 in 5 : ] 17,500 10,500 ) Actual capital 17,400 7, ,700 Bank A/c,800 (Bring in) To A s Capital 100 To C s Capital,700 PART B Computation of annual installment Far ? 771(p, i) Date Particulars Amount Date Particulars Amount , By B s Capital 19,800 19,800 19, To Bank To Bank 7,71 1,519 0,790 7,71 6,94 14, By Interest (19,800 x 5%) By Interest (1,519 x 5% To Bank 7, By Interest (7,71 6,94) THE END 19, ,790 1, ,195 6,94 47 IPCC_e_Accounts_GroupI_ Partnership Accounts_Assignment Solutions 7