Solution

Adv. Accounting Test-2 CH-3

Ans-1:-
a) Liabilities of designated partners

As per Section 8 of LLP Act, unless expressly provided otherwise in this Act, a designated partner
shall be-

1. responsible for the doing of all acts, matters and things as are required to be done by the
limited liability partnership in respect of compliance of the provisions of this Act including
filing of any document, return, statement and the like report pursuant to the provisions of
this Act and as may be specified in the limited liability partnership agreement; and
2. liable to all penalties imposed on the limited liability partnership for any contravention of
those provisions (2 points x 1 Mark = 2 Marks)

b) Partners’ Current Accounts

Particulars X (Rs) Y (Rs) Z (Rs) Particulars X (Rs) Y (Rs) Z

(Rs)
31.3.2018 31.03.2018
To Balance b/d --- --- 10,000 By Balance b/d 40,000 30,000 --

To X’s Current --- 30,000 15,000 By Y’s Current A/c 30,000 -- --

A/c - goodwill
– goodwill

To X’s Current --- 20,000 10,000 By Z’s Current A/c 15,000 -- -

A/c–
– goodwill
Revaluation
Profit

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 To X’s Capital 1,21,000 - - By Y’s Current A/c 20,000 -- -
A/c – transfer – Revaluation
profit
By Z’s Current A/c 10,000
– Revaluation
profit
By Joint assurance 6,000 4,000 2,000
policy

By Balance c/d 16,000 33,000

1,21,000 50,000 35,000 1,21,000 50,000 35,000

1.4.18 31.3.19

To Balance b/d 16,000 33,000 By Profit & Loss 29,136 14,568

31.3.19 Appropriation
A/c
To Drawings 15,000 8,000 By Balance c/d 1,864 26,432
A/c

31,000 41,000 31,000 41,000

1.4.19 1.4.19

To Balance b/d 1,864 26,432 By Realization A/c 31,674 15,837

-
profit
To Y’s Capital 29,810 --- By Z’s Capital A/c - --- 10,595
A/c transfer
– transfer
31,674 26,432 31,674 26,432

* To be read as 1.4.2018 (1 Mark)

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 Partners’ Capital Accounts

Particulars X (Rs) Y (Rs) Z (Rs) Particulars X (Rs) Y (Rs) Z (Rs)

31.3.18 31.3.18

To X’s Executors 1,81,000 --- --- By Balance b/d 40,000 20,000

A/c
60,000

To Balance c/d 40,000 20,000 By X’s Current A/c 1,21,000 --- ---

1,81,000 40,000 20,000 1,81,000 40,000 40,000

31.3.19 1.4.18

To Balance c/d 40,000 20,000 By Balance b/d 40,000 20,000

40,000 20,000 40,000 20,000

1.4.19 1.4.19

To Z’s Current --- 10,595 By Balance b/d 40,000 20,000

A/c –transfer

30.6.19 1.4.19

69,810 9,405 By Y’s Current 29,810 ---

To Bank A/c A/c – transfer

69,810 20,000 69,810 20,000

(1 Mark)

X’s Executor’s Account

Date Particulars Amount Date Particulars Amount

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 31.3.18 To Bank A/c 30,000 31.3.18 By X’s Capital A/c 1,81,000
31.3.18 To Balance c/d 1,51,000
1,81,000 1,81,000
30.9.2018 To Bank A/c 30,000 1.4.2018 By Balance b/d 1,51,000
30.9.2018 To Balance c/d 1,25,530 30.9.2018 By Interest A/c 4,530
1,55,530 1,55,530
31.3.2019 To Bank A/c 30,000 1.10.18 By Balance b/d 1,25,530
99,296 31.3.19 By Interest A/c 3,766
1,29,296 1,29,296
30.6.2019 To Bank A/c 1,00,785 1.4.2019 By Balance b/d 99,296
By Interest A/c 1,489
1,00,785 1,00,785
(1 Mark)

Working Notes:
1) Adjustment in regard to Goodwill

Partner X Y Z
Share of goodwill before death (Rs) 45,000 30,000 15,000
Share of goodwill after death (Rs) --- 60,000 30,000
Gain (+)/Sacrifice (-) (Rs) (45,000) 30,000 15,000
Cr. Dr. Dr.
(0.5 Mark)

2) Adjustment in regard to revaluation of assets

Partner X Y Z
Share of profit on revaluation (Rs) 30,000 20,000 10,000
credited to all the partners
Debited to the continuing partners (Rs) -- 40,000 20,000
(Rs) (30,000) 20,000 10,000

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 Cr. Dr. Dr.

(0.5 Mark)

3) Ascertainment of Profit for the year ended 31.3.19

Rs Rs
Profit before charging interest on balance due to X’s 52,000
executors
Less: Interest payable to X’s executors:
From 1.4.18 to 30.9.18
From 1.10.18 to 31.3.19 4, 530
Balance of profit to be shared by Y and Z in 2:1 3,766 (8,296)
43,704
(0.5 Mark)

4) Ascertainment of Sundry Assets as on 31.3.19

Liabilities Rs Assets Rs
Capital Account – Y 40,000 Sundry Assets (balancing figure) 1,31,000
Capital Account – Y 20,000 Partner’s Current A/c –Y 1,864
X’s Executors A/c 99,296 Partner’s Current A/c s Z 26,432
1,59,296 1,59,296
(0.5 Mark)

5) Realization Account
Rs Rs
To Sundry Assets A/c 1,31,000 By Bank A/c 1,80,000
(purchase

consideration)

To Interest A/c – X’s Executors 1,489

To Partner’s Capital A/c – Y 31,674

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 To Partner’s Capital A/c –Z 15,837
1,80,000 1,80,000
(0.5 Mark)

6) Bank Account
Rs Rs
To Purchase consideration 1,80,000 By X’s Executors A/c 1,00,785
By Y 69,810
By Z 9,405
1,80,000 1,80,000
(0.5 Mark)

Ans-2:-

a) Number of Shares to be issued to Partners

Rs
Assets: Machinery Rs 1,40,000 + Inventory Rs 1,37,400 +Trade Receivable 5,01,400
Rs 1,24,000 + Bank Rs 1,00,000 (1,69,400)
Less: Liabilities taken over
Net Assets taken over (Purchase Consideration) 3,32,000
(1 Mark)

Classes of Shares to be issued : Mohit Neel Om Total

10% Preference Shares of Rs 10 each (to retain 1,36,000 90,000 46,000 2,72,000
rights as to Interest on Capital)
Balance in Equity Shares of Rs 10 each 30,000 18,000 12,000 60,000
(3,32,000 -2,72,000) (issued in profit sharing
ratio)
1,66,000 1,08,000 58,000 3,32,000

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 (1 Mark)

b) Partners’ Capital Accounts

Particulars Mohit Neel Om Particulars Mohit Neel Om

To Drawings 50,000 46,000 34,000 By balance 1,36,000 90,000 46,000
b/d
To 10% Preference 1,36,000 90,000 46,000 By Interest 13,600 9,000 4,600
share capital on Capital
To Equity Shares 30,000 18,000 12,000 By profit for 1,10,700 66,420 44,280
the year 5:3:2
(W.N. 1)
To Bank – 54,300 17,420 6,880 By 10,000 6,000 4,000
Additional Machinery*
drawings (W.N. 2) A/c
Total 2,70,300 1,71,420 98,880 2,70,300 1,71,420 98,880

*Gain on Transfer of Machinery = Rs 1, 40,000 – (Rs 2, 00,000-Rs 80,000) = Rs 20,000 in 5:3:2 ratio.

(2 Marks)

c) Balance sheet of MNO Ltd. as on 31st March, 2019 (after Takeover of Firm)

Note no. Rs
I Equity and Liabilities:
Shareholders’ Funds
Share Capital
(2)Current Liabilities 1 3,32,000
Trade Payables 1,69,400
Total 5,01,400

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 II Assets
Non-Current Assets
Fixed Assets

Tangible Assets- Machinery 1,40,000

Current Assets:

a) Inventories 1,37,400
b) Trade Receivables 1,24,000
c) Cash and Cash Equivalents 1,00,000

Total 5,01,400

(2 Marks)
Notes to Accounts

Rs
1. Shares capital Authorized

shares capital 20,00,000

Issued, Subscribed & paid up
6,000 Equity Shares of Rs 10 each 60,000
27,200 10% Preference Shares capital of Rs 10 each 2,72,000
(All above shares issued for consideration other than cash, in 3,32,000
takeover of partnership firm)

(1 Mark)

Working Note:

1. Profit & Loss Appropriation Account for the year ended 31st March

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 Particulars Rs Rs Particularly Rs
To Interest on Capital: By Net Profit (given) 2,48,600
M [Rs 1,36,000 x 10%] 13,600
N [Rs 90,000 x 10%] 9,000
O [Rs 46,000 x 10%] 4,600 27,200
To Profits transferred to
Capital in profit sharing
ratio 5:3:2
M 1,10,700
N 66,420
O 44,280 2,21,400
Total 2,48,600 2,48,600
(1 Mark)

2. Statement showing Additional Drawings in Cash

a) Funds available for Drawings

Total Drawing of Partners (given) 1,30,000

Add: Further Funds available for Drawings (1,78,600-1,00,000) 78,600
2,08,600
Less: Interest on Capital (27,200)

Amount available for Additional Drawings 1,81,400

(1 Mark)
b) Ascertainment of Additional Drawings

As per above statement Rs 1,81,400(in profit 90,700 54,420 36,280

sharing ratio)
Add: Interest 13,600 9,000 4,600

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 1,04,300 63,420 40,880
Less: Already drawn (50,000) (46,000) (34,000)
Additional drawings 54,300 17,420 6,880
(1 Mark)

Ans-3:-
a)
Realization Interest on Interest
loans from on loans
partners’
spouses
A B C Total
Rs Rs Rs Rs Rs Rs Rs
Balances due (1) 2,000 1,000 9,600 6,000 8,400 24,000

(i) Sale of investments (1,000) -

1,000 -

(ii) Sale of furniture 1,000 1,000

2,000 (1,000) (1,000)
(iii) Sale of machinery
1,200
Maximum possible loss
Rs.
22,800
(totals of capitals Rs.
(11,400) (6,840) (4,560) (22,800)
24,000 less cash available
Rs. 1,200) allocated to
partners in the profit
sharing ratio i.e. 5 : 3 : 2
Amounts at credit (1,800) (840) 3,840 1,200

Deficiency of A and B 18,00 840 (2,640)

written off against C
Amount paid (2) - - 1,200 1,200

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Balances in capital 9,600 6,000 7,200 22,800
accounts (1 – 2) = (3)
(iv) Sale of stock 4,000
Maximum possible loss (9,400) (5,640) (3,760) (18,800)
18,800 (22,800 – 4,000)
Allocated to partners in
the ratio 5 : 3 : 2

Amounts at credit and 200 360 3,440 (4,000)

cash paid (4)

Balances in capital
accounts left unpaid — 9,400 5,640 3,760 18,800
Loss
(3 – 4) = (5)
(4 Marks)

b) Balance sheet of the firm as at 30.06.2019

Liabilities Rs Assets Rs
Capital Accounts Plant :
P's Capital 1,33,800 Opening Balance 1,60,000
Q's Capital 1,15,800 Less: Depreciation 1,52,000
@ 10% 8,000
Creditors 60,000 Building:
Bank Overdraft 40,000 Opening Balance 48,000
Less: Written-off @ 5% 2,400 45,600
Debtors 68,000
Stock 84,000
Total 3,49,600 Total 3,49,600
(3 Marks)

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 Realization Account

Particulars Rs Particulars Rs
To Sundry Assets: By Creditors 60,000
Plant 1,52,000 By Bank Over Draft 40,000
Building 45,600 By PQ Limited A/c 3,79,600
(working note 2)
Stock 84,000
Debtor 68,000
To Profit:
P's Capital A/c 65,000
Q's Capital A/c 65,000
Total 4,79,600 Total 4,79,600
(1 Mark)

Partner's Capital Account

Date Particulars P (Rs) Q (Rs) Date Particulars P(Rs) Q (Rs)
01.01.19 To Profit & 15,000 15,000 1.1.19 By Balance b/d 1,50,000 1,30,000
Loss A/c
01.01.19 To Drawing 9,000 7,000 By Profit (W. N. 15,600 15,600
A/c 1)
30.06.19 To Drawing 7,800 7,800
A/c
(W. N.-1)
30.06.19 To Balance 1,33,800 1,15,800
C/d
Total 1,65,600 1,45,600 Total 1,65,600 1,45,600
30.06.19 To Shares 1,98,800 180,800 By Balance b/d 1,33,800 1,15,800
in PQ Ltd.
By Realization 65,000 65,000
(2 Marks)

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 Working Notes:

(1) Ascertainment of profit for the 6 Months ended 30.06.2019

Closing Assets Amount (Rs)
Stock 84,000
Debtors 68,000
Plant Less Depreciation 1,52,000
Building Less Written off 45,600
Total 3,49,600
Less: Closing Liabilities
Creditors 60,000
Bank Over Draft 40,000 1,00,000
Closing Net Assets 2,49,600
Less: Opening adjusted Capital
P (Rs 1,50,000 – Rs 15,000 – Rs 9,000) 1,26,000
Q (Rs 1,30,000 – Rs 15,000 – Rs 7,000) 1,08,000 2,34,000
Profit Net of drawings 15,600
Actual Profit for Six Months before drawings(half of profit) = 15,600 x 2 31,200
Combined Drawing during six months (half of profit) 15,600

(1 Mark)
(2) Ascertainment of purchase consideration
Rs
Closing Net Assets (As above) 2,49,600

Add Goodwill 1,30,000

Total Purchase Consideration 3,79,600

(1 Mark)

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