Partnership and LLP AccountsQ- 12 | Partnership and LLP AccountsQuestion 5201 of 108
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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]

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Detailed Solution & Explanation

(i) X Y Z XY XY Old Ratio 3:2:1 New Ratio 3:2 Gaining Ratio 3:2 (a) X's Capital A/c Dr. 6,000 Y's Capital A/c Dr. 4,000 Z's Capital A/c Dr. 2,000 To Goodwill A/c 12,000 (Being goodwill written off in old ratio among the old partners) (b) X's Capital A/c Dr. 6,000 Y's Capital A/c Dr. 4,000 [60000 × 1/6] To Z's Capital A/cs 10,000 (Being Z' share in goodwill credited to him in Gaining Ratio i.e. 3 :2) Revaluation A/ c Particulars Amount Particulars Amount To Patents A/ c To Machinery A/ c To Provision for Doubtful Debts A/c 6,000 6,000 1,000 By Investment A/ c By Employee's Provident fund A/c By Loss on Revaluation X Y Z 2,600 6,000 2,200 1,467 733 13,000 13,000 Partner's Capital A/ c Particulars X Y Z Particulars X Y Z To Revaluation A/c (loss) 2,200 1,467 733 By Balance b/d 78, 000 42, 000 31, 000 To Goodwill A/ c 6,000 4,000 2,000 By Investment Fluctuation fund 3,000 2,000 1,000 To Z's Capital Al c 6,000 4,000 By Workmen's Compensation A/c 3,000 2,000 1,000 To Investment A/ c 27, 600 By X's Capital (GW) 6,000 To Bank A/c 6,334 Ry Y's Capital (GW) 4,0000 To Z's Loan A/ c 3,167 To Bills Payable 3,166 To Balance c/ d 69,800 36,533 Total 84,000 46,000 43,000 Total 84,000 46,000 43,000 Balance Sheet of the Firm after Retirement of Z Liabilities Amount Assets Amount X' Capital A/c Y's Capital A/c Z's Loan A/c Bills Payable Workmen's Compensation Trade Creditors Employee's Provident Fund 69,800 36,533 3,167 3,166 6,000 31,000 6,000 Patents Machinery Stock Debtors 50,000 Less: Provision for doubtful debts (5,000) Cash at Bank [8,350-6,334] 24,000 54,000 30,650 45,000 2,016 1,55,6666 1,55,666

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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