Solution

PARTNERSHIP IMPORTANT QUESTIONS

Class 12 - Accountancy

1. (d) Interest on Drawings

Explanation: Interest on Drawings is shown on the credit side of Profit & Loss Appropriation A/c.
2. (c)
N’s Current A/c ... Dr. 15,000

To L’s Current A/c 12,000

To M’s Current A/c 3,000

Explanation:
Adjustment of amounts will be done as follows:
Amount wrongly taken (2%) L Rs.30,000 M Rs.60,000 N Rs.1,20,000 = Total Rs.2,10,000
Adjust 2,10,000 in 2:3:5 ratio L Rs.42,000 M Rs.63,000 N Rs.1,05,000
L has already taken Rs.30,000 but he should get 42,000, so credit him for Rs.12,000
M has already taken Rs.60,000 but he should get 63,000, so credit him for Rs.3,000
N has already taken Rs.1,20,000 but he should get 1,05,000, so Debit him for Rs.15,000
Entry will be:

L’s Current A/c ... Dr. 15000

To N’s Current A/c 12000

To M’s Current A/c 3000

3. (a) Revaluation of assets

Explanation: When reconstitution of a firm takes place, it is necessary to revalue the assets and re-assess the liabilities. The
process of recording change in the value of assets and liabilities is called revaluation. Profit or loss calculated through
revaluation is distributed among the partners Capital / Current A/c (in case of Fixed Capital A/c) in their profit sharing ratio.
4. (b) Amount of compensation = value’s of firm goodwill × share of profit sacrificed
Explanation: Due to change in the profit sharing ratio among the partners, the share of one or more partner may increase and
consequently share of one or more partner may decrease. therefore, gaining partner should compensate for sacrificing partner
by paying goodwill to him. amount of goodwill of the firm will be paid to the sacrificing partner, which will be called as
compensation, to the extent of share in profit sacrificed by him.
Journal entry
Gaining partner's capital A/c ... Dr.
To Sacrificing partner's capital A/c
5. (a) 27:16:17
Explanation: Calculation of new ratio of Partners are:
Ram’s old Share and Shyam’s old share
3

5
2

Share surrendered by Ram = 1

4
of 3

5
= 3

20

Ram’s new share = 3

5
- 3

20
= 9

20
or 27

60

Share Surrender by Shyam = 1

3
of 2

5
= 15
2

Shyam’s new share = 2

5
- 2

15
= 4

15
or 16

60

Ghanshyam share = share received from ram + share receive from shyam
3 9+8 17
= 20
+ 2

15
= 60
= 60

New Ratio of Ram, Shyam & Ghanshyam are = 27:16:17

6. (b) 12,000
Explanation: Amount payable to B = Rs. 30,000
Total Capital of new firm = 23,000 + 30,000 + 17,000 = Rs. 70,000

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 As they are distributing capital equal so,
The new capital of A and C will be = Rs.35,000 each
A will bring = 35,000 - 23,000 = Rs.12,000
7. (c) Credited Rs.1500
Explanation: Share of profit of T will be calculated as follows:
Profit = Rs.24,000
Profit for 3 months (from the last balance sheet till the date of his death) = 24,000 × 3

12
= Rs.6,000
T's share = 4

16

T’s share of profit for 3 months = 6,000 × 4

16
= Rs. 1,500
Profit received by T as he died so credited in his account.
8. In the books of Firm
Profit and Loss Appropriation Account
for the year ended March 31, 2013
Amount Amount
Particulars Particulars
(₹) (₹)

To Profit transferred to:(See W.N.) By Profit & Loss A/c (Given) 90,000

Pranshu’s Capital A/c 30,000

Himanshu’s Capital A/c 30,000

Anshu’s Capital A/c 30,000 90,000

Total 90,000 Total 90,000

Working Notes:
WN1: Calculation of New Profit Sharing Ratio
Old ratio = 3 : 2
Let the total share of the firm be Re 1
Anshu is admitted for 1/6th share in profits
Remaining Share = 1 − = 1

6
5

Pranshu's New Share = 3

5
×
5

6
=
15

30

Himanshu's New Share = 2

5
×
5

6
=
10

30

Anshu's share = 1

6
or 5

30

New Profit Sharing Ratio = 15: 10: 5 or 3: 2: 1

WN2
Distribution of Profit
Ansh's Share of Profit = 10, 000 × = ₹ 15,000 1

Deficiency of ₹ 15,000 in Anshu's share of profit will be borne by Pranshu

3
Pranshu's Share of Profit = 90, 000 × 6
=₹ 45,000
Pranshu's actual share of profit (after bearing deficiency) ₹= ₹ 30,000 (45,000 - 15,000)
Himanshu's Share of Profit = 90, 000 × = ₹ 30,000 2

9. ADJUSTMENT ENTRY
Date Particulars LF Amt(₹) Amt(₹)

Praveen's Current A/c 10,400

Sahil's Current A/c 4,800

To Riya's current A/c 5,200

To General Reserve A/c

10,000
(Being the adjustment entry passed)
STATEMENT SHOWING ADJUSTMENT TO BE MADE
Particulars Praveen(₹) Sahil(₹) Riya(₹) Total

I. Amount already Recorded 60,000 20,000 20,000 1,00,000

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 Share of Profit i.e, ₹1,00,000 in 3: 1: 1

II.The amount which should have been Recorded

Interest on Capital 10,000 8,000 6,000 24,000

Salary 18,000 12,000 30,000

Share of profit i.e, 36,000 in 3: 1: 1 21,600 7,200 7,200 36,000

49,600 15,200 25,200 90,000

III. Balance to be adjusted(Net Effect) [I - II] 10,400(Dr) 4,800(Dr) 5,200(Cr) 10,000(Cr)

Calculation of Adjusted Profits
Adjusted Profits = Given Profit - Transfer to Reserve - Interest on Capital - Salary
= 1,00,000 - 10,000 - 24,000(10,000 + 8,000 + 6,000) - 30,000 (18,000 + 12,000)= ₹36,000
Calculation of Interest on Capital
= ₹10,000, Sahil× × 1,60,000 = ₹8,000, Riya = 120,000 × = ₹6,000
5 5 5
Praveen = 2,00,000 × 100 100 100

Salary : Praveen (1,500 × 12) = ₹18,000, Riya (1,000 × 12) = ₹12,000

Distribution of profit
Praveen = 36000 × 3/5 = 21,000, Sahil = 36,000 × 1/5 = 7200, Riya = 36,000 × 1/5 = 7,200.
10. Journal Entries
Date Particulars Dr. (Rs.) Cr. (Rs.)

P & L A/c......Dr. 9,000

To P's Capital A/c 2,250

To Q's Capital A/c 2,250

To R's Capital A/c 4,500

(Being Profit and Loss Account written off.)

Workmen's Compensation Reserve A/c.......Dr. 64,000

To Workmen's Compensation Claim A/c 30,000

To P's Capital A/c 8,500

To Q's Capital A/c 8,500

To R's Capital A/c 17,000

(Being Workmen's Compensation Reserve adjusted.)

P's Capital A/c.......Dr 60,000

Q's Capital A/c.......Dr. 60,000

To R's Capital A/c 1,20,000

(Being adjustment entry made for goodwill.)

11. IN THE BOOKS OF FIRM
JOURNAL ENTRIES
Dr. Cr.
Date Particulars L.F.
(₹) (₹)

2018

April
Reserve A/c Dr. 15,000
1

To Provision for Doubtful Debts A/c 3,000

To A's Capital A/c 6,000

To B's Capital A/c 4,000

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To C's Capital A/c 2,000

(20% of Reserve retained as provision for doubtful debts and the balance credited to old
partners in 3: 2: 1)

Revaluation A/c Dr. 25,000

To Claim for Damages A/c 1,000

To Stock A/c 18,000

To Patents A/c 6,000

(Recording the liability for damages and decrease in the value of stock and patents through
revaluation account)

Sundry Creditors A/c Dr. 4,000

To Revaluation A/c 4,000

(Decrease in the creditors recorded through revaluation account)

A's Capital A/c Dr. 10,500

B's Capital A/c Dr. 7,000

C's Capital A/c Dr. 3,500

To Revaluation A/c 21,000

(The transfer of loss on revaluation to old partners in old ratio)

Bank Overdraft A/c Dr. 20,000

To A's Capital A/c 20,000

(Bank Overdraft paid off by A credited to his capital A/c)

A's Capital A/c Dr. 7,500

B's Capital A/c Dr. 5,000

C's Capital A/c Dr. 2,500 15,000

(Goodwill already existing in the books written off in the old ratio)

Cash A/c Dr. 78,000

To D's Capital A/c 60,000

To Premium for Goodwill A/c 18,000

(D brings for his capital and as his share of goodwill)

Premium for Goodwill A/c Dr. 18,000

To A's Capital A/c 9,000

To B's Capital A/c 9,000

(The amount of goodwill shared by A and B in their sacrificing ratio i.e. 1: 1 )

Cash A/c Dr. 13,000

To A’s Capital A/c 13,000

(Deficit capital brought in by A)

B's Capital A/c Dr. 11,000

C's Capital A/c Dr. 6,000

To Cash A/c 17,000

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 (Surplus capital withdrawn by B and C)
PARTNER'S CAPITAL ACCOUNTS
Dr. Cr.

Particulars A B C D Particulars A B C D

₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹

To Revaluation A/c 10,500 7,000 3,500 --- By Balance b/d 60,000 60,000 50,000 ---

To Goodwill 7,500 5,000 2,500 --- By ReserveA/c 6,000 4,000 2,000 ---

To Balance c/d 77,000 61,000 46,000 60,000 By Overdraft 20,000 --- --- ---

By Cash A/c 60,000

By Premium for Goodwill A/c 9,000 9,000 --- ---

95,000 73,000 52,000 60,000 95,000 73,000 52,000 60,000

To Cash (b/f) --- 11,000 6,000 --- By Balance b/d 77,000 61,000 46,000 60,000

To Balance c/d 90,000 50,000 40,000 60,000 By Cash (b/f) 13,000 -- -- --

90,000 61,000 46,000 60,000 90,000 61,000 46,000 60,000

BALANCE SHEET
as at 1st April, 2018
Liabilities ₹ Assets ₹

Sundry Creditors 32.000 Cash 88,000

Claim for Damages 1,000 Sundry Debtors 50,000

Capital Accounts : Less: Provision 5,500 44,500

A 90,000 Stock 42,000

B 50,000 Fixed Assets 98,500

C 40,000

D 60,000

2,73,000 2,73,000
Working Notes :
1. New Profit sharing ratios :
A= − =3

6
1

8
3

B= 2

6
−
1

8
=
5

24

C= 1

D= 1

Hence, the new profit sharing ratio between A, B, C and D will be : 3

8
:
5

24
:
1

6
:
1

4
or 9

24
:
5

24
:
4

24
:
6

24
or 9 : 5 : 4 : 6
D brings in ₹60,000 as his capital according to his 1/4th share of profit. Therefore, based on D’s capital, the total capital of the
new firm will be 60,000 × = ₹2,40,0004

∴ A's Capital in the new firm = 2,40,000 × 9

24
= ₹90,000
= ₹50,000
5
B’s Capital in the new firm = 2,40,000 × 24

C’s Capital in the new firm = 2,40,000 × 4

24
= ₹40,000
= ₹60,000
6
D’s Capital in the new firm = 2,40,000 × 24

Hence, A will bring in ₹90,000 - ₹77,000 = ₹13,000

B will withdraw ₹61,000 - ₹50,000 = ₹11,000
C will withdraw ₹46,000 - ₹40,000 = ₹6,000
2. Cash Balance = ₹14,000 + ₹78,000 + ₹13,000 - ₹11,000 - ₹6,000
= ₹88,000

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12. Revaluation Account
Dr. Cr.

Particulars ₹ Particulars ₹

To Fixed Assets A/c (60,000 - 57,500) 2,500 By Creditors A/c (10,000 - 8,000)

To Provision for Doubtful Debts A/c 5,000 By Loss on Revaluation transferred to:

X's capital A/c 2,750

Y's capital A/c 1,650

Z's capital A/c 1,100 5,500

7,500 7,500
Partners' Capital Account
Dr. Cr.

Particulars X Y Z Particulars X Y Z

To Revaluation A/c 2,750 1,650 1,100 By Balance b/d 40,000 62,000 33,000

X's Capital A/c 24,000 16,000 By Profit and Loss A/c 42,500 25,500 17,000

To Balance c/d 1,19,750 61,850 32,900 By Y's Capital A/c 24,000

By Z's Capital A/c 16,000

1,22,500 87,500 50,000 1,22,500 87,500 50,000

To Bank A/c 1,19,750 By Balance b/d 1,19,750 61,850 32,900

To Balance c/d 1,18,500 79,000 By Bank A/c 56,650 46,100

1,19,750 1,18,500 79,000 1,19,750 1,18,500 79,000

W.N:
i. Gaining Ratio = New Ratio - Old Ratio
′ 3 3 6−3 3
Y s= − = =
5 10 10 10

′ 2 2 4−2 2
Z s= − = =
5 10 10 10

Gaining Ratio (Y and Z) = 3:2

ii. Total Goodwill of the Firm = 80,000
5
X's Share in Goodwill = 10
× 80,000 = 40,000
3
Y's = 40,000× 5
= 24,000
2
Z's = 40,000× 5
= 16,000
X's share of goodwill is to be distributed between Y and Z in their = 3:2
iii. Total Capital of New Firm = X's Capital + Y's Capital + Z's Capital + Closing balance of Bank Account - Available Bank
Balance = 1,19,750 + 61,850 + 32,900 + 15,000 - 32,000 = ₹ 1,97,500
New Profit Sharing Ratio = 3: 2
Y's Capital = × 1,97,500 = 1,18,500
5

Z's Capital = 2

5
× 1,97,500 = 79,500

Particulars X Z

New Capital Balance 1,18,500 79,000

Adjusted Old Capital Balance (61,850) (32,900)

Cash Brought in by the Partner 56,650 46,100

iv. Cash at Bank A/c
Dr. Cr.

Particulars ₹ Particulars ₹

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 To Balance b/d 40,000 By Creditors A/c 8,000

To Y's Capital A/c 56,650 By X's Capital A/c 1,19,750

To Z's Capital A/c 46,100 By Balance c/d 15,000

1,42,750 1,42,750

13. IN THE BOOKS OF THE FIRM

JOURNAL ENTRIES
Dr. Cr.
Date Particulars L.F.
(₹) (₹)

2014

June
Workmen Compensation Reserve A/c Dr. 6,400
30

To B's Capital A/c 6,400

(Transfer of B's share of reserve to his Capital Ac)

June
Interest on Capital A/c Dr. 375
30

To B's Capital A/c 375

(Interest credited to his Capital A/c provided for)

June
A's Capital A/c Dr. 10,500
30

C's Capital A/c Dr. 10,500

To B's Capital A/c 21,000

(Adjustment of B's share of goodwill into the Capital A/cs of A and C in their gaining ratio
i.e., equally)

June
Profit & Loss Suspense A/c Dr. 2,625
30

To B's Capital A/c 2,625

(Transfer of profit till his death)

June
B's Capital A/c Dr. 60,400
30

To B's Executor's A/c 60,400

(Amount due to B transferred to his Executor's A/c)

July 1 B's Executor's A/c Dr. 20,400

To Bank A/c 20,400

(Amount paid to B's Executor)

B's CAPITAL A/C
Dr. Cr.

Date Particulars ₹ Date Particulars ₹

2014 2014

June 30 To B's Executor's A/c 60,400 April 1 By Balance b/d 30,000

June 30 By Workmen Compensation Reserve A/c 6,400

June 30 By Interest on Capital A/c 375

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 June 30 By A's Capital A/c 10,500

June 30 By C's Capital A/c 10,500

June 30 By Profit & Loss Suspense A/c 2,625

60,400 60,400
B's EXECUTOR'S A/C
Dr. Cr.

Date Particulars ₹ Date Particulars ₹

2014 July 1 To Bank A/c 20,400 2014 June 30 By B's Capital A/c 60,400

By Interest A/c
2015 March 31 To Balance c/d 41,800 2015 March 31 6 9 1,800
(60,400 - 20,400) × 100
×
12

62,200 62,200

To Bank A/c
2015 June 30 12,400 2015 April 1 By Balance b/d 41,800
(10,000 + 1,800 + 600)
6 3
2016 March 31 To Balance c/d 31,350 2015 June 30 By Interest A/c 40, 000 × 100
×
12
600
6 9
2016 March 31 By Interest A/c 30, 000 × 100
×
12
1,350

43,750 43,750

To Bank A/c
2016 June 30 11,8000 2016 April 1 By Balance b/d 31,350
(10,00 + 1,350 + 450)
6 3
2017 March 31 To Balance c/d 20,900 2016 June 30 By Interest A/c 30, 000 × 100
×
12
450
6 9
2017 March 31 By Interest A/c 20, 000 × 100
×
12
900

32,700 32,700

2017 June 30 To Bank A/c (10,000 + 900 + 300) 11,200 2017 April 1 By Balance b/d 20,900
6 3
2018 March 31 To Balance c/d 10,450 2017 June 30 By Interest A/c 20, 000 × 100
×
12
300
6 9
2018 March 31 By Interest A/c 10, 000 × 100
×
12
450

21,650 21,650

2018 June 30 To Bank A/c (10,000 + 450 + 150) 10,600 2018 April 1 By Balance b/d 10,450
6 3
2018 June 30 By Interest A/c 10, 000 × 100
×
12
150

10,600 10,600
Notes:
i. Total amount due to B9s Executor’s is ₹ 40,000 payable in 4 instalments. Hence, yearly instalment = 40,000 ÷ 4 = ₹ 10,000
plus interest.
14. Realisation Account
Particulars ₹ Particulars ₹

To Sundry Assets By Creditors 50,400

Buildings 23,500 By A (investments) 18,000

Furniture 6,500 By Cash A/c (Assets Realised)

Stock 20,100 Fixed Assets 29,700

Debtors 62,600 Stock and Debtors 80,000 1,09,700

Investments 16,000 1,28,700 By Capital A/cs Losses

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 To Cash A/c- A 1,000

Creditors = (50,400 - 800) = 49,600 B 1,000

Bills dishonoured 1,500 C 1,000 3,000

Expenses 1,300 52,400

1,81,100 1,81,100
Cash Account
Particulars ₹ Particulars ₹

To Balance b/d 3,700 By Realisation A/c 52,400

To Realisation A/c 1,09,700 By Capital A/c A 25,000

To A's Loan A/c 10,000 B 28,000

C 18,000 71,000

1,23,400 1,23,400
Partner's Capital Accounts
Particulars A (₹) B (₹) C (₹) Particulars A (₹) B (₹) C (₹)

To Real. A/c 18,000 - - By Balance b/d 40,000 25,000 15,000

To Real. Loss 1,000 1,000 1,000 By Reserves 4,000 4,000 4,000

To Cash A/c 25,000 28,000 18,000

44,000 29,000 19,000 44,000 29,000 19,000

15. Particulars ₹ Particulars ₹

By Provision for
Building 1,20,000 4,000
Doubtful Debts

Investments 30,600 By Creditors 80,000

By Mrs. Param's
Debtors 34,000 84,000
Loan

By Investments
Bills Receivable 37,400 8,000
Fluctuation Reserve

By Cash A/c (Assets

Goodwill 40,000
Realised):

Param's Capital A/c

84,000 Debtors 24,000
(Wife's loan)

Cash A/c: Building 1,52,000

Creditors 78,000 Bills Receivable 36,000 2,12,000

By Raman's Capital
Realisation Expenses 2,500 80,500 27,000
A/c

Param's Capital A/c 10,000 (Investments)

By Loss transferred
(Remuneration)
to:

Param's Capital A/c 12,900

Raman's Capital A/c 8,600 21,500

4,36,500 4,36,500
RAMAN'S LOAN ACCOUNT

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 Particulars ₹ Particulars ₹

To Raman's Capital A/c 25,600 By Balance b/d 88,000

To Cash A/c 62,400

88,000 88,000
PARTNERS' CAPITAL ACCOUNTS
Particulars Param (₹) Raman (₹) Particulars Param (₹) Raman (₹)

To Profit and Loss

48,000 32,000 By Balance b/d 42,000 42,000
A/c

To Realisation A/c By Realisation A/c

- 27,000 10,000 -
(Investments) (Remuneration)

To Realisation A/c By Realisation A/c

12,900 8,600 84,000 -
(Loss) (Wife's Loan)

To Cash A/c 75,100 - By Raman's Loan A/c 25,600

1,36,000 67,600 1,36,000 67,600

CASH ACCOUNT
Particulars ₹ Particulars ₹

To Balance b/d 6,000 By Realisation A/c 80,500

To Realisation A/c 2,12,000 By Raman's Loan A/c 62,400

By Param's Capital A/c 75,100

2,18,000 2,18,000

16. i. (a) Richa

ii. (c) Profit ₹ 17,500

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