Partnership and LLP Accounts

Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

What is Piecemeal payments method under Partnership Dissolution? Briefly explain the two methods followed for determining the order in which the payments are made? [CA Inter May 2010, 2 Marks]

Explain Garner v. Murray rule applicable in the case of partnership firms. State, when is this rule not applicable? [CA Inter May 2013, 4 Marks]

Explain the Limitations of Liability of Limited Liability Partnership is of Liability of Limited Liability (LLP) and its partners.

Under what circumstances, an LLP can be wound up by the Tribunal. [CA Inter May 2015, 4 Marks]

Rules applicable in absence of partnership deed OR Discuss the rules if there is no Partnership Agreement. [Jan. 2021, 5 Marks]

Meaning of Limited Liability Partnership

Salient features of LLP?

Essential elements to incorporate LLP

Partnership and Joint Venture

A partner who devotes more time to a business than other partners is entitled to get a salary.

Partners can share profits or losses in their capital ratio, when there is no agreement.

The business of partnership firm must be carried on by all the partners.

Goodwill brought in by an incoming partner in cash for joining a partnership firm is taken away by the old partners in their new profit sharing ratio.

Goodwill is fictitious asset.

Goodwill is in the nature of personal account.

If a partner retires, then other partners have a gain in their profit sharing ratio.

Minor can be admitted to the benefits of LLP.

The objective of taking a joint life policy by the partnership firm is to secure the lives of the existing partners of the firm.

LLP has no separate legal entity.

LLP Partners act as agents of LLP and other partners.

When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%. [May 2018, 2 Marks]

Limited Liability Partnership (LLP) is governed by Indian Partnership Act, 1932.

A Partnership firm cannot own any Assets.

In case of admission of a new partner in a partnership firm, the profit/ loss on revaluation account is transferred to all partners in their new profit sharing ratio. [Nov. 2020, 2 Marks]; [MTP Jan. 2025]

Business of partnership comes to an end on death of a partner. [July 2021, 2 Marks]

The court has the option to order dissolution of a firm where a partner has becomes of unsound mind.

In case of dissolution of a firm a revaluation account is prepared.

Maximum loss method is the only method of piecemeal distribution.

Revaluation Account is also known as Profit and Loss Adjustment account.

Legal heirs of a deceased partner are entitled to his capital account balance only. [Sep. 2024, 2 Marks]

Goodwill is intangible asset therefore it cannot be valued. [RTP Jan. 2025]

The firm will receive surrender value of the joint life policy on the death of the partner. [RTP Jan. 2025]

M/s. TB is a partnership firm with the partners A, B and C sharing profits and losses in the ratio of 3:2:5. The balance sheet of the firm as on 30th June, 2020 was as under: Balance Sheet of M/s. TB as on 30-6-2020 Liabilities Amount Assets Amount A's Capital A/c B's Capital A/c C's Capital A/c Long Term Loan Bank Overdraft Trade Payables 1,24,000 96,000 1,60,000 4,20,000 64,000 2,13,000 Land Building Plant & Machinery Investments Inventories Trade Receivables 1,20,000 2,20,000 4,00,000 42,000 1,36,000 1,59,000 10,77,000 10,77,000 It was mutually agreed that B will retire from partnership and in his place D will be admitted as a partner with effect from 1st July, 2020. For this purpose, following adjustments are to be made : (a) Goodwill of the firm is to be valued at ₹ 3 lakhs due to the firm's location advantage but the same will not appear as an asset in the books of the reconstituted firm. (b) Building and Plant & Machinery are to be valued at 95% and 80% of the respective balance sheet values. Investments are to be taken over by the retiring partner at ₹ 46,000. Trade receivables are considered good only upto 85% of the balance sheet figure. Balance to be considered bad. (c) In the reconstituted firm, the total capital will be * 4 lakhs, which will be contributed by A, C and D in their new profit sharing ratio, which is 3:4:3. (d) The amount due to retiring partner shall be transferred to his loan ac- count. You are required to prepare Revaluation Account and Partners' Capital Accounts after reconstitution, along with working notes. [Nov. 2020, 10 Marks]; [RTP Jan. 2025; Modified]

Rama, Krishna and Raghu shared profits and losses in the ratio of 5:3:2. They took out a Joint Life Policy in 2017 for 50,000, a premium of ₹ 3,000 being paid annually on 10th June. The surrender value of the policy on 31st December of various years was as follows: 2017 - Nil 2018 - 900 2019 - 2,000 2020 - 3,600 Rama retired on 15th April, 2021 and the policy was surrendered. You are required to prepare Joint Life Policy Account from 2017 to 2021 (assuming the Policy Account is maintained at surrendered value basis). [July 2021, 5 Marks]; [MTP Jan. 2025]

Mr. X gives the following particulars in respect of business carried on by him: Particulars Amount Capital Invested in business 9,00,000 Market rate of interest on investment 8% Rate of risk return on capital invested in business 3% Remuneration per annum from alternative employment of proprietor if he was not engaged in business 36,000 The business earned profits of 2,40,000, 2,16,000 and 3,00,000 in the years 2018, 2019 and 2021 respectively but made a loss of 36,000 in the year 2020. Compute the value of Goodwill on the basis of 6 years' purchase of super profits of the business, calculated on the basis of average profit of last four years. [June 2022, 5 Marks]; [MTP Jan. 2025]

X and Y were partners in a firm, sharing profit and losses in the ratio of 3:2. They admit Z for 1/6th share in profits and guaranteed that his share of profits will not be less than 50,00,000. Total profits of the firm for the year ended 31st March, 2022 were 1,80,00,000. Calculate share of profit for each partner when: (i) Guarantee is given by firm (ii) Guarantee is given by A and B equally. [June 2023, 5 Marks]

A, B and C were trading in partnership sharing profits and losses in the proportion of 4:3:3. The balances in the books of the firm as on 31st December, 2022 subject to final adjustment were as under: Debit Credit Capital Accounts: A B C Current Accounts: A B C Land and Building Furniture and Fixtures Stock Debtors Bank Account Profit for the year before charging interest Creditors 36,000 54,000 54,000 1,80,000 33,750 2,81,250 45,000 90,000 2,25,000 1,12,500 1,35,000 2,34,000 67,500 Total 7,74,000 7,74,000 Regarding Goodwill may be made separately, instead of through Revaluation Account C died on 30th June, 2022. The partnership deed provided that: (a) Interest was credited on Capital Account of Partners as @ 12% per annum on the balance at the beginning of the year. (b) On the death of partner: (i) Goodwill was to be valued at three years purchase of average annual profits of three years up to the death, after deducting inter- est on capital employed at 10% p.a. and a fair remuneration for each of the partners. (ii) Fixed assets were to be valued by an independent valuer and all other assets and liabilities to be taken at book value, and (c) Whenever necessary, profit or loss should be apportioned on a time basis. You ascertain that: (i) Profit for three years, before charging partners' interest were: 2019 2,52,000 2020 2,83,500 2021 2,70,000 (ii) The independent valuation on the date of death revealed: Land and Building 2,25,000 Furniture and Fixtures 22,500 (iii) For valuation of goodwill a fair remuneration for each of the partners would be ₹ 56,250 per annum and that the capital employed in the business to be taken as 5,85,000 throughout. It was agreed between the partners that: (1) Goodwill was not be shown as an asset of the firm as on 31st December, 2022. Therefore, adjustment for goodwill was to be made in Capital Accounts. (2) The amount due to C's Estate was to remain as loan with the firm carrying interest at 12% p.a. (3) A and B would share profits equally from the date of death of C. (4) Depreciation on revised value of assets would be ignored. You are required to prepare: (A) Partners' Capital Account and Current Account; and (B) Balance Sheet of the firm as on 31st December, 2022. Working should be done correct to the nearest rupee [June 2023, 20 Marks]

P, Q, R and S had been carrying on business in partnership sharing profits & losses in the ratio of 4:3:2:1. They decided to dissolve the partnership on the basis of following Balance Sheet as on 30th April, 2011: Liabilities Amount Assets Amount Capital Accounts P Q General reserve Capital reserve Sundry creditors Mortgage loan 1,68,000 1,08,000 95,00 25,000 36,000 1,10,000 'Land & building Furniture & fixtures Stock Debtors Cash in hand Capital overdrawn: R S 2,46,000 65,000 1,00,000 72,500 15,500 25,000 18,000 5,42,000 5,42,000 (i) The assets were realized as under: Land & building 2,30,000 Furniture & fixtures 42,000 Stock 72,000 Debtors 65,000 (ii) Expenses of dissolution amounted to 7,800. (iii) Further creditors of 18,000 had to be met. (iv) R became insolvent and nothing was realized from his private estate. Applying the principles laid down in Garner Vs. Murray, prepare the Realisation Account, Partners' Capital Accounts and Cash Account. [MTP Jan. 2025; Modified]

P, Q and R are the 3 partners in partnership firm. Partnership deed includes the following: (i) R is entitled to get salary of 10,000 p.a. (ii) P, Q and R are to get interest @ 6% on their respective capital of 2,50,000; 1,50,000 and 1,00,000. (iii) R is to get extra benefit of 10% of profit in excess of 50,000 after providing for (i) and (ii) mentioned above. (iv) Q is entitled to 10% of profits after providing all the amounts in paras (i), (ii) and (iii) mentioned above. (v) The balance of profits will be shared by P, Q and R is ratio of 5:3: 2. The profits for the year before providing above items are 3,50,000. You are required to prepare Profit and Loss Appropriation Account. [Dec. 2023, 5 Marks]

X, Y and Z were partners sharing profit and losses in the ratio of 5: 3 2. Their Balance Sheet as on 31st March 2023 is as follows: Balance Sheet as on 31st March 2023 Liabilities Amount Assets Amount Capital Accounts X Y Z General Reserve Trade Creditors 4,25,000 2,55,000 1,40,000 25,000 30,000 Building Machinery Debtors Stock Bank 2,00,000 3,50,000 1,95,000 1,05,000 25,000 8,75,000 8,75,000 Y retired from the business on 1st April 2023 on the following terms; (i) To appreciate building by 20% and to depreciate machinery by 5%. (ii) Provision for doubtful debts is to create at 10%. (iii) Goodwill of the firm is valued at 1,60,000 and Goodwill is not to be raised in the books of account. New profit sharing ratio will be 5 : 3. (iv) Entire sum payable to Y should be brought by X and Z in such a way to make their capital ratios according to new profit ratio. Balance of Y to be paid immediately. You are required to prepare Revaluation Account, Partners Capital Accounts and Balance Sheet after retirement. [Dec. 2023, 10 Marks]

P, Q and R were partners sharing profit & losses in the ratio of 3:2:1. They decided to dissolve the business as on 31st March, 2024 when their Balance Sheet was as follows: Liabilities Amount Assets Amount Capital Accounts P Q R General Reserve Employee Provident Fund Trade Creditors 3,55,000 2,20,000 1,25,000 1,50,000 60,000 1,24,000 Land & Building Machinery Furniture Stock Trade Debtors Cash & Bank 4,85,000 1,88,000 1,05,000 55,800 1,56,000 44,200 10,34,000 10,34,000 The following information is given to you: (i) There was an unrecorded investment which was sold for ₹ 30,000. (ii) One of the creditors agreed to take over some items of furniture of Books value 25,000 at 24,000. The rest of the creditors were paid at a discount of 5%. (iii) Out of the Debtors ₹ 9,000 proved bad, remaining were fully realized. (iv) The other assets were realised as under: Land & Building 5,25,000 Machinery 1,70,000 Furniture Remaining taken over by P at 75,000 Stock 60,000 (v) Expenses of dissolution amounted to 18,700. (vi) There was an outstanding bill for repairs which had to be paid for ₹ 3,500 You are required to prepare (1) Realisation A/c (2) Cash & Bank A/c (3) Partner's Capital A/c in the books of partnership firm. [June 2024, 8 Marks]

Anu and Manu are carrying on business in partnership and sharing profits & losses in the ratio of 5:3. The firm's Balance Sheet as on 31st March, 2024 was as follows: Balance Sheet as on 31st March, 2024 Liabilities Amount Assets Amount Capital Accounts Anu Manu Long Term Loan Capital Accounts Trade Payables Outstanding Liabilities 2,80,000 2,50,000 2,00,000 1,19,500 16,200 Building machinery furniture trade Receivables inventories investments Cash at Bank 3,80,000 1,43,000 85,000 1,64,000 48,400 15,000 30,100 8,65,700 8,65,700 They decided to admit Ranu as a partner with effect from 1st April, 2024 on the following terms: (i) Ranu will be paid 1/5 share in the future profits and new profit sharing ratio would be 5: 3: 2. (ii) Ranu will bring 1,00,000 as his capital. (iii) Goodwill of firm is to be valued at 2 years' purchase of average profit of past 3 years and Ranu will bring his share of goodwill in cash. The profits of past 3 years ending on 31st March were as under: 31st March, 2022 87,000 31st March, 2023 1,06,000 31st March, 2024 1,22,000 (iv) It was also agreed that the partners will not withdraw their share of goodwill nor will the goodwill appear in the books of account. (v) It was also decided to value the assets: Building is to be appreciated by 2 50,000 and Machinery is to be depreciated by 10%. Furniture is revalued at 80,000, Investments at Inventories at 47,500. 16,000 and Provision for doubtful debts is to be created on debtors @ 5%. You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm as on 1st April, 2024. [June 2024, 12 Marks]

The following is the Balance Sheet of Krish and Bala, sharing profit and loss in the ratio 3: 2 Liabilities Amount Assets Amount Capital Accounts krish Bala General Reserve Workmen compensation reserve Creditors Employees provident fund 25,000 15,000 30,000 10,000 10,000 8,000 Land & Building Plant & machinery Stock Debtors Less : Provision Bank Advertisement Expenditure 28,000 15,000 10,000 25,000 (4,000) 20,000 4,000 8,65,700 8,65,700 On admission of Sobha for 1/6th share in the profits, it was decided that: (1) Value of land and buildings to be increased by ₹ 5,000. (2) Value of stock to be increased by ₹ 3,500. (3) Provision of doubtful debts to be increased by ₹ 1,500. (4) Liabilities of workmen's compensation reserve was determined to be 8,000. (5) Sobha was to bring in further cash of 25,000 as her capital. (6) Sobha brought in her share of goodwill 12,000 in cash. Prepare the Revaluation Account, the Capital Account and the Balance Sheet of the new firm. [Sept. 2024, 10 Marks]

X, Y and Z were in a firm sharing profit and loss as 3:2:1. Their Bal- ance Sheet on 31st March, 2024 was as follows: Liabilities Amount Assets Amount X's Capital Y's Capital Z's Capital Investment Fluctuation Fund Workmen's Compensation Trade Creditors Employee's Provident Fund 78,000 42,000 31,000 6,000 12,000 31,000 12,000 Goodwill Patents Machinery Investment (Market value 27,600) Stock Debtors 50,000 Less: Provision for doubtful debts (4,000) Cash at Bank 12,000 30,000 60,000 25,000 46,000 8,350 2,12,000 2,12,000 Z retired on the above date on the following terms: (1) Goodwill of the firm was valued at 60,000. (2) Value of patents was to be reduced by 20% and that of machinery to 90%. (3) Provision for doubtful debts was to be raised to 10%. (4) Liability on account of Provident fund was only 6,000. (5) Liability for workmen compensation to the extent of 6,000 is to be created. (6) Z took over the investment at market value. (7) Amount due to Z is to be settled on the following basis- 50% on retirement, 50% of the balance within one year and the balance by a bill of exchange (without interest) at 3 months. You are required the following: (i) Show entries for the treatment of goodwill, (ii) Prepare Revaluation Account, (iii) Partner Capital Account, & (iv) Balance Sheet. [Sept. 2024, 10 Marks]

Akbar and Bali are partners in a firm sharing profits and losses equally. On 1st April, 2023 the balance of their Capital Accounts were: Akbar 50,000 and Bali 40,000. On that date the balances of their Current Accounts were: Akbar 10,000 (credit) and Bali 3,000 (debit). Interest @ 5% p.a. is to be allowed on the balance of Capital Accounts as on 1.4.2023. Ball is to get annual salary of 3,000 which had not been withdrawn. Drawings of Akbar and Ball during the year were 1,000 and 2,000 respectively. The profit for the year ended 31st March, 2024 before charging interest on capital but after charging Bali salary was ₹ 70,000. It is decided to transfer 10% of divisible profit to a Reserve Account. Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2024 and show Capital and Current Accounts of the Partners for the year. [RTP Jan. 2025]

Neptune, Jupiter, Venus and Pluto had been carrying on business in partnership sharing profits and losses in the ratio of 3:2:1: 1. They decide to dissolve the partnership on the basis of the following Balance Sheet as on 30th April, 2024: Liabilities Amount Assets Amount Capital Account: Neptune Jupiter General Reserve Capital Reserve Sundry Creditors Mortgage Loan 1,00,000 60,000 56,000 14,000 20,000 80,000 Premises Furniture Stock Debtors Bank Capital Over drawn: Venus Pluto 1,20,000 40,000 1,00,000 40,000 8,000 10,000 12,000 3,30,000 3,30,000 (i) The assets were realised as under: Debtors 24,000 Stock 16,000 Furniture 60,000 Premises 90,000 (ii) Expenses of dissolution amounted to 34,000. (iii) Further creditors of 12,000 had to be met. (iv) General Reserve unlike Capital Reserve was built up by appropriation of profits. You are required to draw up the Realisation Account; Partners' Capital Accounts and the Bank Account assuming that Venus became insolvent and nothing was realised from his private estate. Apply the principles laid down in Garner vs Murray. [RTP Jan. 2025]

The following information given below: (i) Total Assets 10,00,000 (ii) External Liabilities 1,80,000 (iii) Normal Rate of Return 10% (iv) Average Net Profit of last five years 1,00,000 You are required to calculate goodwill by applying: (i) Capitalization Method and (ii) 3 year's purchase of super profits. [RTP Jan. 2025]

The following is the Balance Sheet of M/s. Krishna Bros as at 31st March, 2024, they share profit and losses equally: Balance Sheet as at 31st March, 2024 Liabilities Amount Assets Amount Capital Amit Lalit Sumit General Reserve Trade payables 24,000 24,000 27,000 9,000 14,100 Machinery Furniture Fixture Cash Inventories Trade receivables Less: Provision for Doubtful debts 30,000 16,800 12,600 9,000 5,700 27,000 (1,800) 99,300 99,300 Sumit died on 1st April, 2024 and the following agreement was to be put into effect. (a) Assets were to be revalued: Machinery to 35,100; Furniture to 13,800; Inventory to 4,500. (b) Goodwill was valued at 18,000 and was to be credited with his share, without using a Goodwill Account. (c) 6,000 is to be paid to the executors of the dead partner on 5th April, 2024. (d) After death of Sumit, Amit and Lalit shares the profit equally. You are required to prepare: (i) Journal Entry for Goodwill adjustment. (ii) Revaluation Account, Capital Accounts of the partners and Balance Sheet after the death of Sumit. [MTP Jan. 2025]

The Balance Sheet of a Partnership Firm M/s Dutch and Associates consisted of two partners P and Q who were sharing Profits and Losses in the ratio of 5:3 respectively. The position as on 31st March, 2024 was as follows: Liabilities Amount Assets Amount P's Capital Q's Capital Profit & Loss A/c Trade Creditors 4,10,000 3,30,000 1,12,000 54,800 Land & Building Plant & Machinery Furniture Stock Sundry debtors Cash at Bank 3,80,000 1,70,000 1,09,480 1,45,260 60,000 42,060 9,06,800 9,06,800 On the above date, R was admitted as a partner on the following terms: (a) R should get 1/5th of share of profits. (b) R brought 2,40,000 as his capital and 32,000 for his share of Good- will. (c) Plant and Machinery would be depreciated by 15% and Land & Buildings would be appreciated by 40%. (d) A provision for doubtful debts to be created at 5% on sundry debtors. (e) An unrecorded liability of ₹ 6,000 for repairs to Buildings would be recorded in the books of account. (f) Immediately after R's admission, Goodwill brought by him would be adjusted among old partners. Thereafter, the capital accounts of old partners would be adjusted through the current accounts of partners in such a manner that the capital accounts of all the partners would be in their profit sharing ratio. Prepare revaluation A/c, capital Accounts of the partners, new profit sharing ratio and Balance Sheet of the firm after the admission of R. [MTP Jan. 2025]

X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1st April, 2023, they had ₹ 2,80,000 and ₹ 1,60,000 respectively in their Capital Accounts. X introduced a further capital of 20,000 on 1 June, 2023 and another 15,000 on 1st October, 2023. On 31 January, 2024, X withdrew 25,000. On 1 August, 2023 Y Introduced further capital of ₹ 30,000. During the Financial year 2023-24, the partners drew the following amounts in anticipation of profit: X drew 5,000 at the beginning of each quarter and Y drew 1,500 per month at the end of each month beginning from April, 2023 As per partnership agreement, the profits were to be shared in capital ratio. The interest on Capital @ 12% p.a. is allowable and interest on drawings @ 10% p.a. is chargeable. You are required to calculate (i) Profit-sharing ratio; (ii) Interest on capital; and (iii) interest on drawings. [Jan. 2025, 5 Marks]

A, B and C are partners sharing profits & losses in the ratio of 3:2:1. The following is the Balance Sheet of their firm M/s. ABC Trading Corpo- ration as on 31 March, 2024: Balance Sheet as on 31st March 2024 Liabilities Amount Assets Amount Capital Accounts: A B C General Reserve Trade Payables 2,80,000 1,90,000 1,50,000 1,35,000 97,400 Land & Building Machinery Furniture & Fixtures Trade Receivables 1,55,200 Less: Provision for Doubtful debts 5,700 Stock Joint Life Policy Cash & Bank 2,40,000 1,50,000 1,05,000 1,49,500 85,600 90,000 32,300 8,52,400 8,52,400 C died on 30th June, 2024. As per Partnership deed the following arrangement was to be put into effect: i. Goodwill of firm was to be valued at 2 years' purchase of average profit of four years to 31st March preceding the death of partner. The profits were as under: 31st March, 2021 1,14,000 31st March, 2022 1,22,000 31st March. 2023 1,19,000 31st March, 2024 1,25,000 Goodwill Account will not be opened in the books of account and C was to be credited with his share. The new profit-sharing ratio of A and B will be 5:3. ii. Profit till the date of death to be ascertained on the basis of average profit of previous four years and share of C was to be credited to his capital account. iii. Assets were to be revalued: Land & Building was appreciated by 15%, Machinery to be depreciated by 5%, Furniture & Fixtures to be revalued at ₹ 1,00,000 and the value of Stock to be taken at ₹ 90,000. iv. Provision for doubtful debts to be increased by ₹ 1,800. v. A sum of 2,40,000 was received from insurance company against Joint Life Policy. vi. Amount due to C was paid to the executors. You are required to prepare Revaluation Account, Partners Capital Accounts and Balance Sheet as on 30th June, 2024, along with necessary workings. [Jan. 2025, 15 Marks]

How may a Company utilize its Securities Premium Reserve as per Companies Act, 2013?

Nominal and Registered Capital

Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

What is Piecemeal payments method under Partnership Dissolution? Briefly explain the two methods followed for determining the order in which the payments are made? [CA Inter May 2010, 2 Marks]

Explain Garner v. Murray rule applicable in the case of partnership firms. State, when is this rule not applicable? [CA Inter May 2013, 4 Marks]

Explain the Limitations of Liability of Limited Liability Partnership is of Liability of Limited Liability (LLP) and its partners.

Under what circumstances, an LLP can be wound up by the Tribunal. [CA Inter May 2015, 4 Marks]

Rules applicable in absence of partnership deed OR Discuss the rules if there is no Partnership Agreement. [Jan. 2021, 5 Marks]

Meaning of Limited Liability Partnership

Salient features of LLP?

Essential elements to incorporate LLP

Partnership and Joint Venture

A partner who devotes more time to a business than other partners is entitled to get a salary.

Partners can share profits or losses in their capital ratio, when there is no agreement.

The business of partnership firm must be carried on by all the partners.

Goodwill brought in by an incoming partner in cash for joining a partnership firm is taken away by the old partners in their new profit sharing ratio.

Goodwill is fictitious asset.

Goodwill is in the nature of personal account.

If a partner retires, then other partners have a gain in their profit sharing ratio.

Minor can be admitted to the benefits of LLP.

The objective of taking a joint life policy by the partnership firm is to secure the lives of the existing partners of the firm.

LLP has no separate legal entity.

LLP Partners act as agents of LLP and other partners.

When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%. [May 2018, 2 Marks]

Limited Liability Partnership (LLP) is governed by Indian Partnership Act, 1932.

A Partnership firm cannot own any Assets.

In case of admission of a new partner in a partnership firm, the profit/ loss on revaluation account is transferred to all partners in their new profit sharing ratio. [Nov. 2020, 2 Marks]; [MTP Jan. 2025]

Business of partnership comes to an end on death of a partner. [July 2021, 2 Marks]

The court has the option to order dissolution of a firm where a partner has becomes of unsound mind.

In case of dissolution of a firm a revaluation account is prepared.

Maximum loss method is the only method of piecemeal distribution.

Revaluation Account is also known as Profit and Loss Adjustment account.

Legal heirs of a deceased partner are entitled to his capital account balance only. [Sep. 2024, 2 Marks]

Goodwill is intangible asset therefore it cannot be valued. [RTP Jan. 2025]

The firm will receive surrender value of the joint life policy on the death of the partner. [RTP Jan. 2025]

M/s. TB is a partnership firm with the partners A, B and C sharing profits and losses in the ratio of 3:2:5. The balance sheet of the firm as on 30th June, 2020 was as under: Balance Sheet of M/s. TB as on 30-6-2020 Liabilities Amount Assets Amount A's Capital A/c B's Capital A/c C's Capital A/c Long Term Loan Bank Overdraft Trade Payables 1,24,000 96,000 1,60,000 4,20,000 64,000 2,13,000 Land Building Plant & Machinery Investments Inventories Trade Receivables 1,20,000 2,20,000 4,00,000 42,000 1,36,000 1,59,000 10,77,000 10,77,000 It was mutually agreed that B will retire from partnership and in his place D will be admitted as a partner with effect from 1st July, 2020. For this purpose, following adjustments are to be made : (a) Goodwill of the firm is to be valued at ₹ 3 lakhs due to the firm's location advantage but the same will not appear as an asset in the books of the reconstituted firm. (b) Building and Plant & Machinery are to be valued at 95% and 80% of the respective balance sheet values. Investments are to be taken over by the retiring partner at ₹ 46,000. Trade receivables are considered good only upto 85% of the balance sheet figure. Balance to be considered bad. (c) In the reconstituted firm, the total capital will be * 4 lakhs, which will be contributed by A, C and D in their new profit sharing ratio, which is 3:4:3. (d) The amount due to retiring partner shall be transferred to his loan ac- count. You are required to prepare Revaluation Account and Partners' Capital Accounts after reconstitution, along with working notes. [Nov. 2020, 10 Marks]; [RTP Jan. 2025; Modified]

Rama, Krishna and Raghu shared profits and losses in the ratio of 5:3:2. They took out a Joint Life Policy in 2017 for 50,000, a premium of ₹ 3,000 being paid annually on 10th June. The surrender value of the policy on 31st December of various years was as follows: 2017 - Nil 2018 - 900 2019 - 2,000 2020 - 3,600 Rama retired on 15th April, 2021 and the policy was surrendered. You are required to prepare Joint Life Policy Account from 2017 to 2021 (assuming the Policy Account is maintained at surrendered value basis). [July 2021, 5 Marks]; [MTP Jan. 2025]

Mr. X gives the following particulars in respect of business carried on by him: Particulars Amount Capital Invested in business 9,00,000 Market rate of interest on investment 8% Rate of risk return on capital invested in business 3% Remuneration per annum from alternative employment of proprietor if he was not engaged in business 36,000 The business earned profits of 2,40,000, 2,16,000 and 3,00,000 in the years 2018, 2019 and 2021 respectively but made a loss of 36,000 in the year 2020. Compute the value of Goodwill on the basis of 6 years' purchase of super profits of the business, calculated on the basis of average profit of last four years. [June 2022, 5 Marks]; [MTP Jan. 2025]

X and Y were partners in a firm, sharing profit and losses in the ratio of 3:2. They admit Z for 1/6th share in profits and guaranteed that his share of profits will not be less than 50,00,000. Total profits of the firm for the year ended 31st March, 2022 were 1,80,00,000. Calculate share of profit for each partner when: (i) Guarantee is given by firm (ii) Guarantee is given by A and B equally. [June 2023, 5 Marks]

A, B and C were trading in partnership sharing profits and losses in the proportion of 4:3:3. The balances in the books of the firm as on 31st December, 2022 subject to final adjustment were as under: Debit Credit Capital Accounts: A B C Current Accounts: A B C Land and Building Furniture and Fixtures Stock Debtors Bank Account Profit for the year before charging interest Creditors 36,000 54,000 54,000 1,80,000 33,750 2,81,250 45,000 90,000 2,25,000 1,12,500 1,35,000 2,34,000 67,500 Total 7,74,000 7,74,000 Regarding Goodwill may be made separately, instead of through Revaluation Account C died on 30th June, 2022. The partnership deed provided that: (a) Interest was credited on Capital Account of Partners as @ 12% per annum on the balance at the beginning of the year. (b) On the death of partner: (i) Goodwill was to be valued at three years purchase of average annual profits of three years up to the death, after deducting inter- est on capital employed at 10% p.a. and a fair remuneration for each of the partners. (ii) Fixed assets were to be valued by an independent valuer and all other assets and liabilities to be taken at book value, and (c) Whenever necessary, profit or loss should be apportioned on a time basis. You ascertain that: (i) Profit for three years, before charging partners' interest were: 2019 2,52,000 2020 2,83,500 2021 2,70,000 (ii) The independent valuation on the date of death revealed: Land and Building 2,25,000 Furniture and Fixtures 22,500 (iii) For valuation of goodwill a fair remuneration for each of the partners would be ₹ 56,250 per annum and that the capital employed in the business to be taken as 5,85,000 throughout. It was agreed between the partners that: (1) Goodwill was not be shown as an asset of the firm as on 31st December, 2022. Therefore, adjustment for goodwill was to be made in Capital Accounts. (2) The amount due to C's Estate was to remain as loan with the firm carrying interest at 12% p.a. (3) A and B would share profits equally from the date of death of C. (4) Depreciation on revised value of assets would be ignored. You are required to prepare: (A) Partners' Capital Account and Current Account; and (B) Balance Sheet of the firm as on 31st December, 2022. Working should be done correct to the nearest rupee [June 2023, 20 Marks]

P, Q, R and S had been carrying on business in partnership sharing profits & losses in the ratio of 4:3:2:1. They decided to dissolve the partnership on the basis of following Balance Sheet as on 30th April, 2011: Liabilities Amount Assets Amount Capital Accounts P Q General reserve Capital reserve Sundry creditors Mortgage loan 1,68,000 1,08,000 95,00 25,000 36,000 1,10,000 'Land & building Furniture & fixtures Stock Debtors Cash in hand Capital overdrawn: R S 2,46,000 65,000 1,00,000 72,500 15,500 25,000 18,000 5,42,000 5,42,000 (i) The assets were realized as under: Land & building 2,30,000 Furniture & fixtures 42,000 Stock 72,000 Debtors 65,000 (ii) Expenses of dissolution amounted to 7,800. (iii) Further creditors of 18,000 had to be met. (iv) R became insolvent and nothing was realized from his private estate. Applying the principles laid down in Garner Vs. Murray, prepare the Realisation Account, Partners' Capital Accounts and Cash Account. [MTP Jan. 2025; Modified]

P, Q and R are the 3 partners in partnership firm. Partnership deed includes the following: (i) R is entitled to get salary of 10,000 p.a. (ii) P, Q and R are to get interest @ 6% on their respective capital of 2,50,000; 1,50,000 and 1,00,000. (iii) R is to get extra benefit of 10% of profit in excess of 50,000 after providing for (i) and (ii) mentioned above. (iv) Q is entitled to 10% of profits after providing all the amounts in paras (i), (ii) and (iii) mentioned above. (v) The balance of profits will be shared by P, Q and R is ratio of 5:3: 2. The profits for the year before providing above items are 3,50,000. You are required to prepare Profit and Loss Appropriation Account. [Dec. 2023, 5 Marks]

X, Y and Z were partners sharing profit and losses in the ratio of 5: 3 2. Their Balance Sheet as on 31st March 2023 is as follows: Balance Sheet as on 31st March 2023 Liabilities Amount Assets Amount Capital Accounts X Y Z General Reserve Trade Creditors 4,25,000 2,55,000 1,40,000 25,000 30,000 Building Machinery Debtors Stock Bank 2,00,000 3,50,000 1,95,000 1,05,000 25,000 8,75,000 8,75,000 Y retired from the business on 1st April 2023 on the following terms; (i) To appreciate building by 20% and to depreciate machinery by 5%. (ii) Provision for doubtful debts is to create at 10%. (iii) Goodwill of the firm is valued at 1,60,000 and Goodwill is not to be raised in the books of account. New profit sharing ratio will be 5 : 3. (iv) Entire sum payable to Y should be brought by X and Z in such a way to make their capital ratios according to new profit ratio. Balance of Y to be paid immediately. You are required to prepare Revaluation Account, Partners Capital Accounts and Balance Sheet after retirement. [Dec. 2023, 10 Marks]

P, Q and R were partners sharing profit & losses in the ratio of 3:2:1. They decided to dissolve the business as on 31st March, 2024 when their Balance Sheet was as follows: Liabilities Amount Assets Amount Capital Accounts P Q R General Reserve Employee Provident Fund Trade Creditors 3,55,000 2,20,000 1,25,000 1,50,000 60,000 1,24,000 Land & Building Machinery Furniture Stock Trade Debtors Cash & Bank 4,85,000 1,88,000 1,05,000 55,800 1,56,000 44,200 10,34,000 10,34,000 The following information is given to you: (i) There was an unrecorded investment which was sold for ₹ 30,000. (ii) One of the creditors agreed to take over some items of furniture of Books value 25,000 at 24,000. The rest of the creditors were paid at a discount of 5%. (iii) Out of the Debtors ₹ 9,000 proved bad, remaining were fully realized. (iv) The other assets were realised as under: Land & Building 5,25,000 Machinery 1,70,000 Furniture Remaining taken over by P at 75,000 Stock 60,000 (v) Expenses of dissolution amounted to 18,700. (vi) There was an outstanding bill for repairs which had to be paid for ₹ 3,500 You are required to prepare (1) Realisation A/c (2) Cash & Bank A/c (3) Partner's Capital A/c in the books of partnership firm. [June 2024, 8 Marks]

Anu and Manu are carrying on business in partnership and sharing profits & losses in the ratio of 5:3. The firm's Balance Sheet as on 31st March, 2024 was as follows: Balance Sheet as on 31st March, 2024 Liabilities Amount Assets Amount Capital Accounts Anu Manu Long Term Loan Capital Accounts Trade Payables Outstanding Liabilities 2,80,000 2,50,000 2,00,000 1,19,500 16,200 Building machinery furniture trade Receivables inventories investments Cash at Bank 3,80,000 1,43,000 85,000 1,64,000 48,400 15,000 30,100 8,65,700 8,65,700 They decided to admit Ranu as a partner with effect from 1st April, 2024 on the following terms: (i) Ranu will be paid 1/5 share in the future profits and new profit sharing ratio would be 5: 3: 2. (ii) Ranu will bring 1,00,000 as his capital. (iii) Goodwill of firm is to be valued at 2 years' purchase of average profit of past 3 years and Ranu will bring his share of goodwill in cash. The profits of past 3 years ending on 31st March were as under: 31st March, 2022 87,000 31st March, 2023 1,06,000 31st March, 2024 1,22,000 (iv) It was also agreed that the partners will not withdraw their share of goodwill nor will the goodwill appear in the books of account. (v) It was also decided to value the assets: Building is to be appreciated by 2 50,000 and Machinery is to be depreciated by 10%. Furniture is revalued at 80,000, Investments at Inventories at 47,500. 16,000 and Provision for doubtful debts is to be created on debtors @ 5%. You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm as on 1st April, 2024. [June 2024, 12 Marks]

The following is the Balance Sheet of Krish and Bala, sharing profit and loss in the ratio 3: 2 Liabilities Amount Assets Amount Capital Accounts krish Bala General Reserve Workmen compensation reserve Creditors Employees provident fund 25,000 15,000 30,000 10,000 10,000 8,000 Land & Building Plant & machinery Stock Debtors Less : Provision Bank Advertisement Expenditure 28,000 15,000 10,000 25,000 (4,000) 20,000 4,000 8,65,700 8,65,700 On admission of Sobha for 1/6th share in the profits, it was decided that: (1) Value of land and buildings to be increased by ₹ 5,000. (2) Value of stock to be increased by ₹ 3,500. (3) Provision of doubtful debts to be increased by ₹ 1,500. (4) Liabilities of workmen's compensation reserve was determined to be 8,000. (5) Sobha was to bring in further cash of 25,000 as her capital. (6) Sobha brought in her share of goodwill 12,000 in cash. Prepare the Revaluation Account, the Capital Account and the Balance Sheet of the new firm. [Sept. 2024, 10 Marks]

X, Y and Z were in a firm sharing profit and loss as 3:2:1. Their Bal- ance Sheet on 31st March, 2024 was as follows: Liabilities Amount Assets Amount X's Capital Y's Capital Z's Capital Investment Fluctuation Fund Workmen's Compensation Trade Creditors Employee's Provident Fund 78,000 42,000 31,000 6,000 12,000 31,000 12,000 Goodwill Patents Machinery Investment (Market value 27,600) Stock Debtors 50,000 Less: Provision for doubtful debts (4,000) Cash at Bank 12,000 30,000 60,000 25,000 46,000 8,350 2,12,000 2,12,000 Z retired on the above date on the following terms: (1) Goodwill of the firm was valued at 60,000. (2) Value of patents was to be reduced by 20% and that of machinery to 90%. (3) Provision for doubtful debts was to be raised to 10%. (4) Liability on account of Provident fund was only 6,000. (5) Liability for workmen compensation to the extent of 6,000 is to be created. (6) Z took over the investment at market value. (7) Amount due to Z is to be settled on the following basis- 50% on retirement, 50% of the balance within one year and the balance by a bill of exchange (without interest) at 3 months. You are required the following: (i) Show entries for the treatment of goodwill, (ii) Prepare Revaluation Account, (iii) Partner Capital Account, & (iv) Balance Sheet. [Sept. 2024, 10 Marks]

Akbar and Bali are partners in a firm sharing profits and losses equally. On 1st April, 2023 the balance of their Capital Accounts were: Akbar 50,000 and Bali 40,000. On that date the balances of their Current Accounts were: Akbar 10,000 (credit) and Bali 3,000 (debit). Interest @ 5% p.a. is to be allowed on the balance of Capital Accounts as on 1.4.2023. Ball is to get annual salary of 3,000 which had not been withdrawn. Drawings of Akbar and Ball during the year were 1,000 and 2,000 respectively. The profit for the year ended 31st March, 2024 before charging interest on capital but after charging Bali salary was ₹ 70,000. It is decided to transfer 10% of divisible profit to a Reserve Account. Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2024 and show Capital and Current Accounts of the Partners for the year. [RTP Jan. 2025]

Neptune, Jupiter, Venus and Pluto had been carrying on business in partnership sharing profits and losses in the ratio of 3:2:1: 1. They decide to dissolve the partnership on the basis of the following Balance Sheet as on 30th April, 2024: Liabilities Amount Assets Amount Capital Account: Neptune Jupiter General Reserve Capital Reserve Sundry Creditors Mortgage Loan 1,00,000 60,000 56,000 14,000 20,000 80,000 Premises Furniture Stock Debtors Bank Capital Over drawn: Venus Pluto 1,20,000 40,000 1,00,000 40,000 8,000 10,000 12,000 3,30,000 3,30,000 (i) The assets were realised as under: Debtors 24,000 Stock 16,000 Furniture 60,000 Premises 90,000 (ii) Expenses of dissolution amounted to 34,000. (iii) Further creditors of 12,000 had to be met. (iv) General Reserve unlike Capital Reserve was built up by appropriation of profits. You are required to draw up the Realisation Account; Partners' Capital Accounts and the Bank Account assuming that Venus became insolvent and nothing was realised from his private estate. Apply the principles laid down in Garner vs Murray. [RTP Jan. 2025]

The following information given below: (i) Total Assets 10,00,000 (ii) External Liabilities 1,80,000 (iii) Normal Rate of Return 10% (iv) Average Net Profit of last five years 1,00,000 You are required to calculate goodwill by applying: (i) Capitalization Method and (ii) 3 year's purchase of super profits. [RTP Jan. 2025]

The following is the Balance Sheet of M/s. Krishna Bros as at 31st March, 2024, they share profit and losses equally: Balance Sheet as at 31st March, 2024 Liabilities Amount Assets Amount Capital Amit Lalit Sumit General Reserve Trade payables 24,000 24,000 27,000 9,000 14,100 Machinery Furniture Fixture Cash Inventories Trade receivables Less: Provision for Doubtful debts 30,000 16,800 12,600 9,000 5,700 27,000 (1,800) 99,300 99,300 Sumit died on 1st April, 2024 and the following agreement was to be put into effect. (a) Assets were to be revalued: Machinery to 35,100; Furniture to 13,800; Inventory to 4,500. (b) Goodwill was valued at 18,000 and was to be credited with his share, without using a Goodwill Account. (c) 6,000 is to be paid to the executors of the dead partner on 5th April, 2024. (d) After death of Sumit, Amit and Lalit shares the profit equally. You are required to prepare: (i) Journal Entry for Goodwill adjustment. (ii) Revaluation Account, Capital Accounts of the partners and Balance Sheet after the death of Sumit. [MTP Jan. 2025]

The Balance Sheet of a Partnership Firm M/s Dutch and Associates consisted of two partners P and Q who were sharing Profits and Losses in the ratio of 5:3 respectively. The position as on 31st March, 2024 was as follows: Liabilities Amount Assets Amount P's Capital Q's Capital Profit & Loss A/c Trade Creditors 4,10,000 3,30,000 1,12,000 54,800 Land & Building Plant & Machinery Furniture Stock Sundry debtors Cash at Bank 3,80,000 1,70,000 1,09,480 1,45,260 60,000 42,060 9,06,800 9,06,800 On the above date, R was admitted as a partner on the following terms: (a) R should get 1/5th of share of profits. (b) R brought 2,40,000 as his capital and 32,000 for his share of Good- will. (c) Plant and Machinery would be depreciated by 15% and Land & Buildings would be appreciated by 40%. (d) A provision for doubtful debts to be created at 5% on sundry debtors. (e) An unrecorded liability of ₹ 6,000 for repairs to Buildings would be recorded in the books of account. (f) Immediately after R's admission, Goodwill brought by him would be adjusted among old partners. Thereafter, the capital accounts of old partners would be adjusted through the current accounts of partners in such a manner that the capital accounts of all the partners would be in their profit sharing ratio. Prepare revaluation A/c, capital Accounts of the partners, new profit sharing ratio and Balance Sheet of the firm after the admission of R. [MTP Jan. 2025]

X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1st April, 2023, they had ₹ 2,80,000 and ₹ 1,60,000 respectively in their Capital Accounts. X introduced a further capital of 20,000 on 1 June, 2023 and another 15,000 on 1st October, 2023. On 31 January, 2024, X withdrew 25,000. On 1 August, 2023 Y Introduced further capital of ₹ 30,000. During the Financial year 2023-24, the partners drew the following amounts in anticipation of profit: X drew 5,000 at the beginning of each quarter and Y drew 1,500 per month at the end of each month beginning from April, 2023 As per partnership agreement, the profits were to be shared in capital ratio. The interest on Capital @ 12% p.a. is allowable and interest on drawings @ 10% p.a. is chargeable. You are required to calculate (i) Profit-sharing ratio; (ii) Interest on capital; and (iii) interest on drawings. [Jan. 2025, 5 Marks]

A, B and C are partners sharing profits & losses in the ratio of 3:2:1. The following is the Balance Sheet of their firm M/s. ABC Trading Corpo- ration as on 31 March, 2024: Balance Sheet as on 31st March 2024 Liabilities Amount Assets Amount Capital Accounts: A B C General Reserve Trade Payables 2,80,000 1,90,000 1,50,000 1,35,000 97,400 Land & Building Machinery Furniture & Fixtures Trade Receivables 1,55,200 Less: Provision for Doubtful debts 5,700 Stock Joint Life Policy Cash & Bank 2,40,000 1,50,000 1,05,000 1,49,500 85,600 90,000 32,300 8,52,400 8,52,400 C died on 30th June, 2024. As per Partnership deed the following arrangement was to be put into effect: i. Goodwill of firm was to be valued at 2 years' purchase of average profit of four years to 31st March preceding the death of partner. The profits were as under: 31st March, 2021 1,14,000 31st March, 2022 1,22,000 31st March. 2023 1,19,000 31st March, 2024 1,25,000 Goodwill Account will not be opened in the books of account and C was to be credited with his share. The new profit-sharing ratio of A and B will be 5:3. ii. Profit till the date of death to be ascertained on the basis of average profit of previous four years and share of C was to be credited to his capital account. iii. Assets were to be revalued: Land & Building was appreciated by 15%, Machinery to be depreciated by 5%, Furniture & Fixtures to be revalued at ₹ 1,00,000 and the value of Stock to be taken at ₹ 90,000. iv. Provision for doubtful debts to be increased by ₹ 1,800. v. A sum of 2,40,000 was received from insurance company against Joint Life Policy. vi. Amount due to C was paid to the executors. You are required to prepare Revaluation Account, Partners Capital Accounts and Balance Sheet as on 30th June, 2024, along with necessary workings. [Jan. 2025, 15 Marks]

How may a Company utilize its Securities Premium Reserve as per Companies Act, 2013?

Nominal and Registered Capital