Partnership and LLP AccountsQ-1 | Partnership and LLP AccountsQuestion 4857 of 108
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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]

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Detailed Solution & Explanation

Revaluation A/ c Particulars Amount Particulars Amount To Building A/ c To Plant and Machinery A/ c To Trade Receivable A/ c 11,000 80,000 23,850 By Investments A/ c By Loss transferred to A (3/10) 33,255 B (2/10) 22,170 C (5/10) 55,425 4,000 1,10,850 1,14,850 1,14,850 Partner's Capital A/ c Particulars A B C D Particulars A B C D To Revaluation A/c (loss) 33, 255 22, 170 55, 425 - By Balance b/d 1,24, 000 96, 000 1,60, 000 - To B’s & C’s Capital A/c (2) - - - 90, 000 By D’s Capital A/c (2) - 60, 000 30, 000 - To investments A/c - 46, 000 - - By Bank A/c (3) (Bal. fig.) 29, 255 - 25, 425 2,10, 000 To B’s Loan A/c (bal. fig.) - 87, 830 - - To Bal C/d 1,20, 000 - 1,60, 000 1,20, 000 Total 1,53, 255 1,56, 000 2,15, 425 2,10, 000 Total 1,53, 255 1,56, 000 2,15, 425 2,10, 000 Working Notes: 1. Calculation of Sacrifice/Gain: Old Share - New Share A = 3 / 10 – 3 / 10 = NIL B = 2 / 10 – NIL = 2 / 10 (Sacrifice) C = 5 / 10 – 4 / 10 = 1 / 10 (Sacrifice) D = NIL – 3 / 10 = - 3 / 10 (Gain) 2. Goodwill Treatment: (3,00,000 X 3/ 10) D's Capital A/ c Dr. 90,000 - (3,00,000 X 2/ 10) To B's Capital A/ c - 60,000 (3,00,000 X 1/ 10) To C's Capital A/ c - 30,000 3. Capital Adjustment: Total Capital of the firm: 4,00,000 A (3 / 10) C (4 / 10) D (3 / 10) Capital in the New firm 1,20,000 1,60,000 1,20,000 Less: Capital balance 90,745 1,34,575 1,20,000 Short - 29,255 Short - 25,425 -

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Balance Sheet

A statement showing the financial position of a business at a particular date, listing all assets on one side and all liabilities and capital on the other side. It is not an account but a statement.

Goodwill

An intangible asset representing the good reputation, brand name, customer loyalty, and earning capacity of a business over and above its net tangible assets. It arises in accounting during partnership changes or business acquisitions.

Related Comparison Tables

Revenue Expenditure vs Capital Expenditure: AccountsTrading Account vs P&L Account: Final Accounts ExplainedSLM vs WDV Depreciation: CA Foundation Accounts

More Questions from 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]

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