Partnership and LLP AccountsQ- 16 | Partnership and LLP AccountsQuestion 4872 of 108
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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]

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Detailed Solution & Explanation

(i) Journal Entry in the books of the M/s Krishna Date Particulars Debit Credit April 1, 2024 Amit's Capital A/ c Dr. Lalit's Capital A/c Dr. To Sumit's Capital A/ c (Being the required adjustment for goodwill through partner's capital accounts) 3,000 3,000 - - - 6,000 (ii) Revaluation Account Particulars Amount Particulars Amount To Furniture A/ c To Inventory A/ c To Partners' Capital A/c 's (Amit - 300, Lalit - 300, Sumit - 300) 3,000 1,200 900 By Machinery A/ c 5,100 5,100 5,100 Partners' Capital Account Particulars Amit Lalit Sumit Particulars Amit Lalit Sumit To Sumit (Goodwill) 3,000 3,000 By Balance b/d 24, 600 24, 600 27, 000 To Cash A/c 6,000 By General Reserve A/c 3,000 3,000 3,000 To Executors A/ c 30, 300 By Revaluation A/c (Profit) 300 300 300 To Balance c/ d 24,900 24,900 By Amit (Goodwill) 3,000 By Lalit (Goodwill) 3,000 Total 27,900 27,900 36,300 Total 27,900 27,900 36,300 Balance Sheet M/ s Krishna Bros after death of Sumit Liabilities Amount Assets Amount Capital Amit Lalit Sumit's Executors A/c Trade payables 24,900 24,900 30,300 14,100 Machinery Furniture Fixture Cash (9,000-6,000) Inventories Trade receivables Less: Provision for Doubtful debts 35,100 13,800 12,600 3,000 4,500 27,000 1,800 94,200 94,200 Working Note: Statement showing the Required adjustment for Goodwill Particulars Amit Lalit Sumit Right of goodwill before death Right of goodwill after death 1 / 3 1 / 2 1 / 3 1 / 2 1 / 3 - Gain / (Sacrifice) + 1 / 6 + 1 / 6 - 1 / 3

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

Journal Entry

The first formal record of a financial transaction under the double-entry bookkeeping system, showing the accounts to be debited and credited along with narration. It is recorded in the Journal, the 'Book of Original Entry'.

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.

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