T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
1. X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 1 : 2. On 31st March, 2020, their
Balance Sheet was:
Liabilities
` Assets `
Bills Payable 1,20,000 Freehold Premises 4,00,000
Sundry Creditors 2,80,000 Machinery 3,00,000
General Reserve 1,20,000 Furniture 1,20,000
Capital A/cs: Stock 2,20,000
X 3,00,000 Sundry Debtors 2,00,000
Y 2,00,000 Less: Provision for Doubtful Debts 10,000 1,90,000
Z 2,80,000 7,80,000 Cash 70,000
13,00,000 13,00,000
Z retired on 1st April, 2020 from the business and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ` 15,000.
(d) Goodwill of the firm is valued at ` 2,10,000 on Z’s retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of Z.
Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.
[Ans.: Gain (Profit) on Revaluation—` 69,600; Z’s Loan A/c—` 4,13,200; Capital Accounts:
X—` 4,17,300; Y—` 1,39,100 (New firm); X’s Current A/c : ` 75,000 (Dr.);
Y’s Current A/c: ` 75,000 (Cr.); Balance Sheet Total—` 14,44,600.]
2. The Balance Sheet of X, Y and Z who were sharing profits in ratio of their capitals was as follows as at
31st March, 2020:
Liabilities
` Assets `
Sundry Creditors 13,800 Cash at Bank 11,000
Capital A/cs: Sundry Debtors 10,000
X 45,000 Less: Provision for Doubtful Debts 200 9,800
Y 30,000 Stock 16,000
Z 15,000 90,000 Plant and Machinery 17,000
Land and Building 50,000
1,03,800 1,03,800
Y retired on 1st April, 2020 on the following terms:
(a) Out of the insurance premium debited to Profit & Loss Account, ` 1,500 to be carried forward as
Prepaid Insurance.
(b) Provision for Doubtful Debts to be brought up to 5% of Sundry Debtors.
(c) Land and Building to be appreciated by 20%.
(d) A provision of ` 4,000 be made in respect of outstanding bills for repairs.
(e) Goodwill of the firm was determined at ` 21,600.
Y’s share of goodwill be adjusted to that of X and Z who will share profits in future in the ratio of 3 : 1.
Pass necessary Journal entries and give the Balance Sheet after Y’s retirement.
[Ans.: Gain (Profit) on Revaluation—` 7,200; Y’s Loan—` 39,600; Balance Sheet Total—` 1,15,000.]
1
, T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
3. A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. Their Balance Sheet as on 31st March,
2019 is given below:
Liabilities
` Assets `
Capital A/cs: Building 18,00,000
A 11,00,000 Investments 4,00,000
B 11,40,000 Stock 6,00,000
C 7,60,000 30,00,000 Debtors 10,00,000
Workmen Compensation Reserve 10,00,000 Cash and Bank 6,00,000
Creditors 2,00,000
Employees’ Provident Fund 2,00,000
44,00,000 44,00,000
C retires on 30th June, 2019 and it was mutually agreed that:
(a) Building be valued at ` 22,00,000.
(b) Investments to be valued at ` 3,00,000.
(c) Stock be taken at ` 8,00,000.
(d) Goodwill of the firm be valued at two years’ purchase of the average profit of the past five years.
(e) C’s share of profits up to the date of retirement be calculated on the basis of average profit of
the preceding three years.
The profits of the preceding five years ended 31st March, were as under:
Year 2015 2016 2017 2018 2019
Profits (`) 4,00,000 5,00,000 6,00,000 8,00,000 7,00,000
(f ) Amount payable to C to be transferred to his Loan Account carrying interest @ 10% p.a.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet as at 30th June, 2019.
[Ans.: Gain (Profit) on Revaluation—` 5,00,000; C’s Loan—` 13,35,000; Partners’ Capital Accounts:
A—` 17,00,000; B—` 15,00,000; Balance Sheet Total—` 49,35,000.]
4. X, Y and Z were in partnership sharing profits and losses in the ratio of 3 : 2 : 1. On 1st April, 2020,
Y retired from the firm. On that date, their Balance Sheet was:
Liabilities
` Assets `
Trade Creditors 30,000 Cash in Hand 15,000
Bills Payable 45,000 Cash at Bank 75,000
Expenses Owing 45,000 Debtors 1,50,000
General Reserve 1,35,000 Stock 1,20,000
Capital A/cs: X 1,50,000 Factory Premises 2,25,000
Y 1,50,000 Machinery 80,000
Z 1,50,000 4,50,000 Loose Tools 40,000
7,05,000 7,05,000
2
1. X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 1 : 2. On 31st March, 2020, their
Balance Sheet was:
Liabilities
` Assets `
Bills Payable 1,20,000 Freehold Premises 4,00,000
Sundry Creditors 2,80,000 Machinery 3,00,000
General Reserve 1,20,000 Furniture 1,20,000
Capital A/cs: Stock 2,20,000
X 3,00,000 Sundry Debtors 2,00,000
Y 2,00,000 Less: Provision for Doubtful Debts 10,000 1,90,000
Z 2,80,000 7,80,000 Cash 70,000
13,00,000 13,00,000
Z retired on 1st April, 2020 from the business and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ` 15,000.
(d) Goodwill of the firm is valued at ` 2,10,000 on Z’s retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of Z.
Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.
[Ans.: Gain (Profit) on Revaluation—` 69,600; Z’s Loan A/c—` 4,13,200; Capital Accounts:
X—` 4,17,300; Y—` 1,39,100 (New firm); X’s Current A/c : ` 75,000 (Dr.);
Y’s Current A/c: ` 75,000 (Cr.); Balance Sheet Total—` 14,44,600.]
2. The Balance Sheet of X, Y and Z who were sharing profits in ratio of their capitals was as follows as at
31st March, 2020:
Liabilities
` Assets `
Sundry Creditors 13,800 Cash at Bank 11,000
Capital A/cs: Sundry Debtors 10,000
X 45,000 Less: Provision for Doubtful Debts 200 9,800
Y 30,000 Stock 16,000
Z 15,000 90,000 Plant and Machinery 17,000
Land and Building 50,000
1,03,800 1,03,800
Y retired on 1st April, 2020 on the following terms:
(a) Out of the insurance premium debited to Profit & Loss Account, ` 1,500 to be carried forward as
Prepaid Insurance.
(b) Provision for Doubtful Debts to be brought up to 5% of Sundry Debtors.
(c) Land and Building to be appreciated by 20%.
(d) A provision of ` 4,000 be made in respect of outstanding bills for repairs.
(e) Goodwill of the firm was determined at ` 21,600.
Y’s share of goodwill be adjusted to that of X and Z who will share profits in future in the ratio of 3 : 1.
Pass necessary Journal entries and give the Balance Sheet after Y’s retirement.
[Ans.: Gain (Profit) on Revaluation—` 7,200; Y’s Loan—` 39,600; Balance Sheet Total—` 1,15,000.]
1
, T.S. Grewal’s Double Entry Book Keeping—Accounting for Not-for-Profit Organisations and Partnership Firms
3. A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. Their Balance Sheet as on 31st March,
2019 is given below:
Liabilities
` Assets `
Capital A/cs: Building 18,00,000
A 11,00,000 Investments 4,00,000
B 11,40,000 Stock 6,00,000
C 7,60,000 30,00,000 Debtors 10,00,000
Workmen Compensation Reserve 10,00,000 Cash and Bank 6,00,000
Creditors 2,00,000
Employees’ Provident Fund 2,00,000
44,00,000 44,00,000
C retires on 30th June, 2019 and it was mutually agreed that:
(a) Building be valued at ` 22,00,000.
(b) Investments to be valued at ` 3,00,000.
(c) Stock be taken at ` 8,00,000.
(d) Goodwill of the firm be valued at two years’ purchase of the average profit of the past five years.
(e) C’s share of profits up to the date of retirement be calculated on the basis of average profit of
the preceding three years.
The profits of the preceding five years ended 31st March, were as under:
Year 2015 2016 2017 2018 2019
Profits (`) 4,00,000 5,00,000 6,00,000 8,00,000 7,00,000
(f ) Amount payable to C to be transferred to his Loan Account carrying interest @ 10% p.a.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet as at 30th June, 2019.
[Ans.: Gain (Profit) on Revaluation—` 5,00,000; C’s Loan—` 13,35,000; Partners’ Capital Accounts:
A—` 17,00,000; B—` 15,00,000; Balance Sheet Total—` 49,35,000.]
4. X, Y and Z were in partnership sharing profits and losses in the ratio of 3 : 2 : 1. On 1st April, 2020,
Y retired from the firm. On that date, their Balance Sheet was:
Liabilities
` Assets `
Trade Creditors 30,000 Cash in Hand 15,000
Bills Payable 45,000 Cash at Bank 75,000
Expenses Owing 45,000 Debtors 1,50,000
General Reserve 1,35,000 Stock 1,20,000
Capital A/cs: X 1,50,000 Factory Premises 2,25,000
Y 1,50,000 Machinery 80,000
Z 1,50,000 4,50,000 Loose Tools 40,000
7,05,000 7,05,000
2
