4.

88 Tulsian's Accountancy
Onth
ZS EXECUTORS ACCOUNT Cr. i n the
Dr.
estim
Date Particulars
Date Particulars ReqL
By Zs Capital A/c 23,600 profi
01.05.2014 To Bank Alc 5,600 01.05.2014 Interest Alc
31.10.2014 To Bank Ac 5,400 31.10.2014| By 900
(4,500 + 900) SOL
31.10.2014 To Balance c/d 13,500
24,500 24,500
13,725 01.11.2014|By Balance b/d 13,500
31.12.2014 To Balance cld
31.12.2014|By lnterest AVc (Accrued) 225
13,725 13,725 Inve
TO
iorking Noies:
(Bei
i. Xssacrifice = 3/8 5/10= (5/40). Ys gain = 5/8 -3/10 = 13/40
2. Firm's Goodwill = [(1,01,000 + 14,000 + 16.000 - 75,000)/4] x 2.5 =? 35,000 Wor
3. Zs Share of Goodwill =35.000 × 2/10 =7,000 To
4 Xs Share of Goodwill =35,000 x 5/40 =4,375
Average Profit (Loss) of Last 3 years = (14,000 + 16,000 - 75,000)/3 = (? 15,000) (Bei
exte
Zs Share of Loss = ( 15,000) x 4/12 x 2/10 = ( 1,000)
Dr. 7. CASH AT BANK ACCOUNT Cr. Gen
P&
Particulars Particulars
Inve
To Balance b/d 6,300 By Zs Capital Alc (Drawings) 5,000 Wor
To Investments 4,100 By Zs Executors A/c 5,600 T
To Bad Debts Recovered 100 T
To Balance c/d (b.f.) 100 T
10,600 10,600 (Be
In t

COMPREHENSIVE REVISIONALPROBLEMS A's

B's
Objective: The following Problems have been given ONLY to REVISE the Chapter. C's
In Examinatíon only somne of the parts and not all
the parts of such lengthy problemns
may be asked.
(Be
in
PROBLEM 1
The Balance Sheet of A, B and Csharing profits and
respectively is given below: losses in the ratio of 5:3: 2 Wor
1
Liabilities
Assets
A's Capital 40,000 Land and Building 2
30,000
B's Capital 30,000 Plant and Machinery 35,000
C's Capital 25,000
General Reserve 5,000
Investment (Market Value 19,000) 20,000 3

Profit and Loss Account 3,450 Machinery Replacement

Fund Investments
Investment Fluctuation Reserve 1,000 4
1,500 Current Assets 28,000
Machinery Replacement Fund 1,000
Workmen's Compensation Resenve 1,200 Advertisement Expenditure
(Deferred Revenue)
1,000
Employees' Provident Fund 2,000
Creditors
5,850
1,15,000 1,15,000
 Reconstitution of Partnership-Retirement/Death of a Partner 4.89

Cr. Onthis date, Bretires from the firm and Aand Ccontinue to share future profits &losses
in the ratio of 3 : 2 respectively. A claim on account of workmen's compensation is
estimated at 150 only.
S00 Required: Pass the necessary journalentries relating to the adjustment of accumulated
00 profits and losses.

S00 SOLUTION
JOURNAL

Particulars LF Dr. K) Cr. )

Investment Fluctuation Reserve A/c Dr. 1,000
To Investment Alc 1,000
(Being the value of investments brought down to market value)
Workmen Compensation Reserve A/c Dr. 150
To Provision for Workmen Compensation Claim Alc 150
(Being the workmen's compensation claim provided to the
extent of 150)
Cr. General Reserve Dr. 5,000
P& L Ac Dr. 3,450
Investment Fluctuation Reserve A/c [1,500- (20,000-19,000)] Dr. 500
00 Workmen's Compensation Reserve Alc Dr. 1,050
00 To A's Capital A/c 5,000
To B's Capital A/c 3,000
To C's Capital A/c 2,000

00 (Being the transfer of accumulated profits to all the partners

in their profit-sharing ratio)
Dr. 500
A's Capital Alc
B's Capital A/c Dr. 300
Dr. 200
ter. C's Capital A/c
To Advertisement Expenditure Alc 1,000
ms
(Being the transfer of accumulated loses to all the partners
in their profit-sharing ratio)

: 2 Working Notes:
1. Investment Fluctuation Reserve AcCount has been transferred directly to partners' capital
accounts. after providing for an anticipated loss of 1,000 (i.e. 20,000 19,000)
according to Prudence (conservatism) concept.
00
2. The balance of Workmen's Compensation Reserve Account after making Provision for
00
Claim has been transterred directly to partners' capital accounts.
D0 3. Machinery Replacement Fund is in the nature of accumulated depreciation and not in
nature of accumulated profits and hence is not distributed among the partners.
00 4. Employees' Provident Fund represents statutory liability due to employees towards
Provident Fund and is not an accumulated profits, hences it is not distribted among the
partners.

D0
 4.90 Tul_ian's Accountancy

PROBLEM 2
as at 31e
The Balance Sheet of A., Band C who are sharing profits in the ratio of 2:3:1,
Marh, 2014 is given below:
Liabilities Assets

A's Capital 1,00,000 Goodwill 12,000

B's Capital 2,00,000 Land and Building 2,50,000
C's Capital 3,00,000 Investments
Workmen Compensation Reserve 20,000 [Market Value 46,000] 50,000
Investment Fluctuation Reserve 10,000 Stock 80,000
Provision for Doubtful Debts 10,000 Debtors 3,00,000
Sundry Creditors 3,00,000 Bank 2,96,000
Employees' Provident Fund 60,000 Advertisement Suspense Ac 12,000
10,00,000 10,00,000

C retires from 1st April, 2014 and Aand B decide to share future profits losses in the
ratio of 3:2 and 50% is to be paid immediately and the balance in twO equal annual
instalments together with interest @ 10% p.a.
1. Goodwill is to be valued at 2 years' purchase of average profits of last three
completed years. The profits were | 48,000, II 93,000, | | 1,38,000.
2. Land & Buildingwas found under valued by ? 20,000 and Stock was found overvalued
by 38,000.
3. Provision for doubtful debts is to be made equal to 5% of the debtors.
4. Claim on account of workmen compensation is ? 8,000.
5. 10% of the sundry creditors be written back as no longer payable.
6. Out of the amount of insurance which was debited entirely to P&L A/c., 7 5,000 be
carried forward as an unexpired insurance.
Reguired: Pass the necessary journal entries and prepare the necessary ledger accounts
and the Balance Sheet.

SOLUTION
JOURNAL
Date Particulars LF Cr. R)
Dr. )
(1) A's Capital Alc Dr. 4,000
B's Capital A/c Dr. 6,000
C's Capital A/c
To Goodwill A/c
Dr. 2,000 Ledg
12,000 Dr.
(Being the existing goodwill w/o)
(2) A's Capital Alc ( 1,86,000 x 8/30) Dr. 49,600
To B's Capital (? 1,86,000 x 3/30) 18,600 To
To C's Capital Alc (? 1,86,000 x 5/30) 31,000 To
(Being the goodwill adjusted by debiting gaining To
partner (A for 8/30) and crediting Sacrificing
partners (B for 3/30) and (C for 1/6)1
 Reconstitution of Partiership-Retirement/Death of a Partner 4.91

Dr. 20,000
(3) Land & Building A/c Dr. 30,000
Sundry Creditors Dr. 5,000
st Prepaid Insurance 55,000
To Revaluation A/c decrease
value of assets &
(Being the increase in
in SundryCreditors recorded)
Dr. 43,000
Revaluation Alc 38,000
(4) To Stock Alc
Debts Alc 5,000
To Provision for Doubtful
of assets & increase
(Being the decrease in Value
in provisions recorded)
Dr. 12,000
Revaluation A/c 4,000
(5)
To A's Capital A/c 6,000
To B's Capital Alc 2,000
To C's Capital A/c
revaluation)
(Being the transfer of profit on Dr. 20,000
Alc
(6) Workmen Compensation Reserve A/c
8,000
Claim
ne To Workmen Compensation 4,000
al To A's Capital Alc 6.000
To B's Capital A/c 2,000
To C's Capital A/c compensation
(Being the transfer of workmen
Reserve) 10,000
Dr.
Investment Fluctuation Fund Ac 4,000
(7) To Investment Alc 2,000
To A's Capital A/c 3,000
To B's Capital Alc 1,000
To C's Capital A/c
Fluctuation Fund)
(Being the transfer of Investment 4,000
be Dr.
(8) A's Capital A/c Dr 6,000
B's Capital Alc 2,000
Dr.
nts C's Capital A/c 12,000
To Advertisement Suspense Alc Advertisement
(Being the transfer of balance of
Suspense Ac) 3,32,000
Dr.
C's Capital A/c 1,66,000
(9)
To Bank Alc 1,66,000
To C's Loan Ac
t/f to Loan A/c)
(Being 50% paid and the balance
Ledger Accounts: Cr.
1. REVALUATION ACCOUNT
Dr.
00 Particulars
Particulars
By Land & Building 20,000
38,000
To Stock By Sundry Creditors 30,000
5,000
500 To Provision for Doubtful Debts 5,000
By Prepaid Insurance
D00 To Profit on Revaluation t/f to:
4,000
A
B
6,000
2,000
55,000 55,000
 4.92 Tulsian's Accountancy
Bretire
ACCOUNTS been ag
Dr 2. PARTNERS' CAPITAL Cr.
Particulars A (a) T
Particulars A (b) T

To Goodwill A/c 4,000 6,000 2,000 By Balance b/d 1,00,000|2,00,000|3,00,000

By A's Capital Ac 18,600
31,000
To B's Capital Alc 18,600
By Revaluation A/c 4,000 6,000 2,000
(e) T
To C's Capital Ac 31,000
To Adv. Exp. Sus. A/c 6,000 2,000 By Work Com. Res. 4,000 6,000 2,000
4,000
To Bank A/c 1,66,000 By Invest. FluS. Res. 2,000 3,000 1,000 ()
T
To C's Loan Ac 1,66,000 (g
T
To Balance c/d 52,4002,21,600 (h)
ir
1,10,000 2,33,6003,36,000 1,10,000|2,33,600|3,36,000
() T
3. BALANCE SHEET AS AT 31ST MARCH, 2014 i) T
t
Liabilities Assets
(k) T
3
A's Capital 52,400 Land & Building 2,70,000
B's Capital 2,21,600 Investments 46,000
C's Loan 1,66,000 Stock 42,000 (I) T
Sundary Creditors Debtors 3,00,000
(m) B
2,70,000
Workmen Compensation Claim 8,000 Less: Provision 15,000 2,85,000
60,000 Bank 1,30,000 tr
Employees' Provident Fund
Prepaid Insurance 5,000
7,78,000 7,78,000 Require
the Bal
Working Notes: SOLUT
1. Gain/Sacrifice = New Share - Old Share
2 2 3 3
A's Gain = = B's Gain = -

5 6 30
630
2. Calculation of Goodwill
A. Ayerage Profits = ( 48,000 + 93,000 + 1,38,000)/3 = 93.000 Revalua
To S
B. Firm's Goodwill = 93,000 x 2 = 1,86,000
To P
To P
PROBLEM 3
The Balance Sheet to A, B and Cwho were sharing profits in proportion in their capitals
(Being
provisio
stood as follows as on 31st DeC., 2013. Land &
Liabilities Assets Prepaid
Expense
Expenses Owing
Trade Creditors
900 Goodwill 9,000 ReservE
Mr. X
5,000 Cash at Bank 15,500
Employees' Provident Fund 1,000 Sundry Debtors 5,000
To Re
Reserve Fund 5,400 Less: Provision 100 4,900 (Being
and Re
Workmen Compensation Reserve 1,200 Stock 9,000
Investment Fluctuation Fund 1,900
21,600
Investments [Market value 8,700] 9,700 Revalua
To A'
A's Capital Land and Building 15,000
B's Capital 16,200 900 To B'
Advertisement Expenditure To C
C's Capital 10,800
64,000 64,000
(Being t
in their
 Reconstitution of Partnership-Retirement/Death of a Partner 4.93

| Bretires on
31.12.2013, and the following readjustments of the assets and liabilities have
Cr. been agreed upon
before the ascertainment of the amount payable to B:
down to 8.520.
(a) That the Stock be written upto 5% on debtors.
ini That the provision for doubttul debts be brought 5,000.
written up by
00 (c) That the Land and Building be
(d) That a provision of 4,420 be made in respect of outstanding legal charges.
which was debited entirely to P & L Alc.
il That out of the amount of insuranCe
insurance.
2.000 be carried forward as an unexpiredto 625.
be brought down
() That Expenses owing to agree to allow a discount of 2V½%.
That Trade Creditors
(a)
That X' an old customer whose account was written off as bad had promised
(h)
of his full debt of 500.
|D00 in writing to pay 350 in settlement Compensation is estimated at 300.
(i) That claim on account of workmen'S
in the proportion of five eighths and
(i) That Aand C are going to share in future
three eighths respectively. of
(k) That the goodwill is to be valued at 2 of years' purchase of the average profits 3.000.
retirement. The profits were: I
00 3 completed years preceding the date 8,000. No goodwill account is to be raised.
||3.520. Il|| 6,600, IV, 7,700, V?
over by B at market value.
(I) That the investments are taken raising a loan of ?7,000 on the security
is to be paid the amount due to him by
(m) B Exchange (without interest) payable at
of land and building and 460 by a Bill ofremainder to be paid in four equal half
the expiry of 3 monthsand carrying the
@ 6% p.a. on half yearly rests.
yearly instalments together with interest Prepare Partners' Capital Accounts and
hequired: Pass the necessary journal entries,
retirement:
the Balance Sheet after B's
SOLUTION
JOURNAL
LF Dr. R) Cr. R)
Particulars
Dr. 5,050
Revaluation A/c 480
To Stock Reserve Alc 150
To Provision for Doubtful Debts A/c 4,420
To Provision for Outstanding Legal Charges Alc amount of
(Being the falI in value of assets and increase in
provision recorded) 5,000
Dr.
tals Land & Building Dr. 2,000
Prepaid Insurance Dr. 275
Expenses Owing Dr. 125
Reserve for Discount on Trade Creditors Dr. 350
00 Mr. X 7,750
00 To Revaluation A/c
assets, decrease in liabilities
(Being the increase in value of
creditors recorded)
00 and Reserve for discount on 2,700
Dr.
00 Revaluation A/c 1,200
00 To A's Capital Ac 900
00 To B's Capital A/c 600
00 To C's Capital A/c
all partners
(Being the transfer of profit on revaluation to
D00 in their profit sharing ratio of 4: 3: 2)
 4.94 Tulsian's Accountancy
pr.
Dr. 1,200
Workmen Compensation Reserve P

To Provision for Workmen Compensation Claim

A/c 300
To A's Capital Alc 400 To G
To B's Capital Ac 300 To
To C's Capital A/c 200 To
(Being provision made for workmen compensation and surplus To Ir
Workmen Compensation reserve transferred)
To
Investment Fluctuation Reserve A/c Dr. 1.900
To
To Investments Alc 1,000 To
To A's OCapital A/c 400 To E
To B's Capital A/c 300
To C's Capital A/c 200
(Being investments brought down to its market value and
surplus t/t to capital a/cs)
Reserve Fund Dr. 5,400
To A's Capital A/c 2,400
Ex
To B'sCapital A/c 1,800
To C's Capital Alc 1,200 Tra
(Being the transfer of reserve to all partners in their profit Les
sharing ratio of 4:3:2) Em
A's Capital Alc Dr. 400 Prc
B's Capital A/c Dr. 300
C's Capital A/c Dr. 200 Pr
To Advertisement Expenditure Alc 900
(Being the transfer of Advertisement Expenditure to all
partners in their profit sharing ratio of 4: 3: 2) Bil
A's Capital A/c Dr. Lo
4,000
B's Capital Alc Dr. 3,000 6
C's Capital Alc Dr. 2,000
To Goodwill A/c A's
9,000 C'
(Being the existing book value of Goodwill w/o)
A's Capital Alc Dr. 2,145
C's Capital Alc Dr.
To B's Capital Alc
1,815 Wo
3,960
(Being share of goodwill credited to B and debited to the
remainingpartners in their gaining ratio which is 13: 11)
Bank A/c
Dr. 7,000
To Loan from Bank Alc
7,000
(Being the loan from Bank raised on the security of
Land & Building)
B's Capital A/c Dr. 20,160
To Investments Alc 8,700
To Bank Alc 7,000
To Bills Payable Alc 460
To 6% B's Loan Alc 4,000
(Being B's claim discharged-Investments 8,700, Cheque
F 7000. B/P 460 and the balance transferred to his Loan Alc)
 Reconstitution of Partnership-Retirement/Death of a Partner 4.95

CAPITAL ACCOUNTS OF PARTNERS Cr.

Dr.
Particulars A B
Particulars A

By Balance b/d 21,600 16,200 10,800

To Goodwill A/ 4,000 3,000 2,000
By Revaluation A/c 1,200 900 600
To B's Capital A/c 2,145 1,815
By Work. Comp. Res. 400 300 200
To Adv. Exp. A/c 400 300 200
400 300 200
To Investments A/c 8,700 By Invest. Flu. Res.
By Reserve Alc 2,400 1,800 1,200
To Bills Payable Ac 460
A's Capital A/c 2,145
To Bank Alc 7,000 By
1,815
To B's Loan A/c 4,000 By C's Capital A/c
To Balance c/d 19,455 8,985
26,000 23,460 13,000
26,000 23,460 13,000
DEC., 2013
BALANCE SHEET OFAAND C AS AT 31ST
Assets
Liabilities
Cash at Bank 15,500
Expenses Owing 625
Sundry Debtors 5,000
Trade Creditors 5,000
Less: Provision 250 4,750
Less: Reserve 125 4,875
350
Employees' Provident Fund 1,000 Mr X
Prepaid Insurance 2,000
Provision for Workmen's
300 Stock 9,000
Compensation claim 8.520
Less: Reserve 480
Provision for Outstanding Legal 20,000
4,420 Land & Building
Charges
460
Bills Payable
Loan from Bank 7,000

6% B's Loan 4,000

19,455
A's Capital
8,985
C's Capital 51,120
51,120

Working Notes:
6,600 + 7,700)/3
1. Average Profits = ( 3,520 +
=5,940
2. Firm's Goodwill = 5.940 x 2 =? 11,880
3
3. B's Share of Goodwill =
11,880 x 9 =? 3,960

Excess Workmen Compensation Reserve (i.e., ? 1,050) may directly be

4. Alternatively: in their profit sharing ratio and accordingly
the
transferred to the Capital accounts of partners
reduced by 1,050.
profit on revaluation will be
 4.96 Tulsian's Accountancy

PRÌBLEM 4
Thé Balance Sheet of A, Band Csharing profits and losses in the ratio of 5 :3:2 on A's C
(31.12.2013 is given below:
C's
Liabilities Assets Sund
Bank Emp
Trade Creditors 26,500 20,000
Employees' Provident Fund 3,500 Debtors
30,000
Reserve 20,000 Stock 55,000
A's Capital 1,00,000 Fixed Assets 1,15,000 Worki
B's Capital 50,000 Goodwill 15,000
C's Capital 40,000 Advertisement Expenditure 5,000 1.

2,40,000 2,40,000 2

Bretires on 1.1.2014. For the purpose, the following adjustments were agreed upon: 3
(a) That the goodwill be valued at 2 years' purchase of the average profits of
3completed years preceding the date of retirement. The profits for previous 4
years were: I? 45,000, I| 50,000, I|| 55,000, IV 60,000. 5
(b) That Fixed Assets were found undervalued by 25,000.
(c) That Stock was found overvalued by 5,000. 6
(d) That the new profit sharing ratio of Aand C will be 3 : 2
(e) That Bbe paid through cash brought in byA and Cinsuch a way as to make their
capitals proportionate. Minimum Bank Balance is to be maintained at 10,000.
() The partners decide that Goodwill is not to appear in the New Balance Sheet.
Prepare Revaluation Account, Capital Account of Partners and the Balance Sheet. PRC
SOLUTION The
Dr. REVALUATION ACCOUNT Cr.
stooc
Particulars Particulars
To Stock 5,000 By Fixed Assets 25,000
To Profit on Revaluation tUf to: Exp
A's Capital A/c (5/10) 10,000 Trac
B's Capital A/c (3/10) 6,000 Emp
C's Capital Alc (2/10) 4,000 Res
Wor
25,000 25,000 Inve
A's
Dr. CAPITAL ACCOUNTS OF PARTNERS Cr. B's
Particulars A(3) B () C(*) Particulars A () B (3) C() C's
To B's Capital Ac 2,000 4,000 By Balance b/d 1,00,000 50,000 40,000
To Goodwill A/c 7,500 4,500 3,000 By Revaluation 10,000 6,000 4,000
To B's Capital A/c
To Adv. Exp. A/c
9,000
1,500
18,000 By Reserve 10,000 6,000 4.000 Bret
beer
2,500 1,000 By A's Capital Alc 11,000
To Balance cld 99,000 89,000 22,000 By C's Capital Ac 22,000 (a
1,20,000 95,000 48,000 1,20,000 95,000 48,000 (b
To Bank Alc 89,000 By Balance b/d 99,000 89,000 22,000
To Balance b/d 1,20,000 80,000 By Bank A/c 21,000 58,000
(C
1,20,000 89,000 1,20,000 89,000 80,000
(d
80,000
 BALANCE SHEET OF AAND C AS AT 1ST JAN., 2014

Liabilities Assets

A's Capital 1,20,000 Fixed Assets 1,40,000

80,000 Stock 55,000
C's Capital
Sundry Creditors 26,500 Less: Reserve 5,000 50,000
Employees' Provident Fund 3,500 Debtors 30,000
Bank 10,000
2,30,000 2,30,000

orking Notes:
1. Average Profits = (? 50,000 + 55,000 + 60,000)/3 = 55,000
2. Firm's Goodwill = 55,000 x 2 =1,10,000
3
3. B's Share of Goodwill =1,10,000 x 10 =733,000

4. Shortage of Cash =89,000 - 10,000 (i.e. 20,000 10,000) = 79,000

5. Total Capital of New Firm =99,000 + 22,000 + 79,000 = 2,00,000
3
6. A's NewCapital = ? 2,00,000 x 5
=? 1,20,000,
2
C's New Capital 2,00,000 x 5
F =80,000.

PROBLEM 5
The Balance Sheet to A, Band Cwho were sharing profits in proportion in their capitals
stood as follows as on 31st Dec.. 2013.

Liabilities Assets

Expenses Owing 900 Goodwill 9,000

Trade Creditors 5,000 Cash at Bank 15,500
Employees' Provident Fund 1,000 Sundry Debtors 5,000
Reserve Fund 5,400 Less: Provision 100 4,900
Workmen Compensation Reserve 1,200| Stock 9,000
Investmnent Fluctuation Fund 1,900| Investments [Market value 8,700] 9,700
A's Capital 21,600 Land and Building 15,000
16,200 Advertisement Expenditure 900
B's Capital
10,800
C's Capital
64,000 64,000

B retires on 31.12.2013, and the following readjustments of the assets and liabilities have
been agreed upon before the ascertainment of the amount payable to B:
(a) That the Stock be written down to 8,520.
(b) That the provision for doubtful debts be brought upto 5% on debtors.
(c) That the Land and Building be written up by 5,000.
(d) That a provision of 4,420 be made in respect of outstanding legal charges.
 4.98 Tulsian's Accountancy

Workme
(e) That out of the amount of insurance which was debited entirely to P &L AC. To Pr
2,000 be carried forward as an unexpired insurance. To A
(f) That Expenses owing to be brought down to 625. To B'
(g) That Trade Creditors agree to allow a discount of 2V2%. To C'
(h) That X'an old customer whose account was written offas bad had prornised in (BeingE
writing to pay ? 350 in settlement of his full debt of 500. surplus
(0) That claim on account of workmen's compensation is estimated at 300. Investm
() That A
and C are going to share in future in the proportion of five eighths and three To In
eighths respectively. To A'
(k) That the goodwill is to be valued at 2 years' purchase of the average profits of To B'
3 completed years preceding the date of retirement. The profits were: I 3,000, To C
I| 3,520, II 6,600, IV 7,700, V 8,000. No goodwill account is to be raised. (Being
() That the investments are taken over by B at market value. surplus
(m) Bis to be paid through Cash brought in by Aand C in such a way as to make Reserve
their capitals proportionate to their newprofit sharing ratio subject to the condition To A
that a bank balance of 10,000 is to be maintained. To B
Required: Pass the necessary journal entries, Prepare Partners' Capital Accounts and To C
the Balance Sheet after B's retirement:
(Being
sharing
SOLUTION A's Ca
JOURNAL
B's Ca
C's Ca
Particulars |LE Dr. ) Cr. ) To A
Revaluation Ac Dr. 5,050 (Being
To Stock Reserve A/c 480 partner
To Provision for Doubtful Debts A/c
150 A's Ca
To Provision for Outstanding Legal Charges A/c
4,420 B's Ca
(Being the fall in value of assets and increase in amount of
provision recorded) C's Ca
Land & Building
To G
Dr.
Prepaid Insurance
5,000 (Being
Dr. 2,000
Expenses Owing A's Ca
Dr. 275
Reserve for Discount on Trade Creditors C's Ca
Dr. 125
Mr. X To E
Dr. 350
To Revaluation Alc
7,750
(Being
(Being the increase in value of assets, decrease in liabilities remain
and Reserve for discount on creditors recorded) B's Ca
Revaluation A/c To I
Dr. 2,700
To A's Capital Alc To E
1.200
To B's Capital A/c 900 (Being
To C's Capital A/c 600 Bank
(Being the transfer of profit on revaluation to all partners To F
in their profit sharing ratio of 4:3 :2) To (
(Being
 Reconstitution of Partnership-Retirement/Death of a Partner 4.99

Alc, Workmen Compensation Reserve

To Provision for Workmen Compensation
Claim A/c
Dr. 1,200
300
400
To A's Capital A/c 300
To B's Capital Alc 200
ed in To C's Capital Alc
compensation and
(Being provision made for workmen
transferred)
surplus Workmen Compensation reserve 1,900
Dr.
Investment Fluctuation Reserve Alc 1,000
nree To Investments Alc 400

S of To A's Capital A/c 300

To B's Capital Ac 200
D00, To C's Capital A/c
sed. (Being investments brought down to its market
value and
surplus tf to capital A/cs) 5,400
ake Dr.
Reserve Fund 2,400
tion To A's Capital A/c 1,800
To B's Capital A/c 1,200
To C's Capital Alc
partners in their profit
(Being the transfer of reserve to all
sharing ratio of 4:3:2) 400
Dr.
A's Capital A/c Dr. 300
B's Capital A/c Dr. 200
C's Capital A/c 900
A/c
To Advertisement Expenditure
Advertisement Expenditure to all
(Being the transfer of
ratio of 4:3: 2)
80
partners in their profit sharing Dr. 4,000
50 A's Capital A/c Dr. 3,000
20 B's Capital A/c Dr. 2,000
C's Capital A/c 9,000
To Goodwill A/c
value of Goodwill w/o)
(Being the existingbook Dr. 2,145
A's Capital A/c Dr. 1,815
C's Capital A/c 3,960
11,880 x 3/9]
To B's Capital A/c R credited to B and debited to the
(Being share of goodwill gainingratio which is 13: 11)
50 remaining partners in their Dr 20,160
B's Capital A/c 8,700
To Investments A/c 11,460
To Bank Alc
00 (Being B's Claim discharged) 5,960
Dr.
00 Bank A/c 2,045
00 To A's Capital Ac 3,915
To C's Capital Ac
remaining partners)
(Being the additional cash brought In by
4.100 Tulsian's Accountancy

PARTNERS
Dr. CAPITAL ACCOUNTS OF Cr. (c)
A
0)
B Particulars
A
Particulars (i)
4,000 3,000 2,000 By Balance b/d 21,600| 16,200 10,800
To Goodwill Alc
1,815 By Revaluation Alc 1,200 900 600
(ii)
To B's Capital Alc 2,145
400 300 200 By Work. Com. Res. 400 300 200 (iv)
To Adv. Exp. A/c 400 300
To Investments A/c 8,700 By Invest. Fluc. Res. 200 His C
By Reserve A/c 2,400 1,800
To Balance cld 19,455 11,460 8.985
2,145
1,200 Shee
By A's Capital A/c
By C's Capital Ac 1,815
26,000 23,460 | 13,000 26,000 23,460 13,000
19,455| 11,460 X's
To Bank A/c 11,460 By Balance b/d 8,985
2,045 Y's
To Balance c/d 21,500 12,900 By Bank A/c (b.f.) 3,915
Res
21,500 11,460 | 12,900 21,500 11,460 12,900
Cre
BALANCE SHEET OF A AND C AS AT 31ST DEC., 2013

Liabilities Assets TH
1st N
Expenses Owing 625 Cash at Bank 10,000
Trade Creditors 5,000 Sundry Debtors 5,000
Or
were
Less: Reserve 125 4,875 Less: Provision 250 4,750
Employees Provident Fund 1,000 Mr X 350 SOL
Provision for Workmen Prepaid Insurance 2,000
Dr.
Compensation Claim 300 Stock 9,000
Provision for Outstanding Less: Reserve 480 8,520
Legal Charges Land & Building 20,000
Legal Charges 4,420 To D
A's Capital 21,500 To Ir
C's Capital 12,900 (2
45,620 To A
45,620
To Y

Working Notes:
1. Firm's Goodwill =({ 3,520 + ? 6,600 + ? 7,700)/3] × 2 = 11,880
2. Share of Goodwill = 11,880 x 3/9 = 3,960
3. Shortage of Cash = 11,460 - 5,500 (i.e. Z 15,500 ? 10,000) = 5,960
4. Total Capital of New Firm = R19,455 +? 8,985 + ? 5,960 = 34.400
5 A's New Capital =? 34,400 x 5/8 = 21,500, Dr.
6 C's New Capital =?34,400 x 3/8 = 12,900

PROBLEM 6
To E
X and Yare partners. The partnership deed provides as under: To E
(a) That the account be balanced on 31st Dec. each vear.
That the profit be divided as follows: X one half, Y one third and carried to a
Reserve Account one sixth.