1. A and B are partners sharing Profit and Loss in the ratio of 3 : 2 having Capital Account balances of % 50,000 and % 40,000 on 1st April, 2022. On 1st July, 2022, A introduced F 10,000 as his additional capital whereas 8 introduced only % 1,000. Interest on capital is allowed to partners @ 10% pa. Calculate interest on capital for the financial year ended 31st March, 2023. [Ans.: Total interest Payable: A—% 5,750; B—% 4,075. 2. Ram and Mohan are partners in a business. Their capitals at the end of the year were & 24,000 and & 18,000 respectively. During the year, Ram’s drawings and Mohan’s drawings were € 4,000 and 6,000 respectively. Profit (before charging interest on capital) during the year was ® 16,000. Calculate interest on capital @ 5% pa. for the year ended 31st March, 2023. [Ans.: Interest on Capital: Ram—R 1,000; Mohan—% 800.) 3. Pranshu and Himanshu are partners sharing profits and losses in the ratio of 3 : 2 respectively. They admit ‘Anshu as partner with 1/6 share in the profits of the firm. Pranshu personally guaranteed that Anshu's share of profit would not be less than % 30,000 in any year. The net profit of the firm for the year ending 31st March, 2013 was % 90,000. Prepare Profit & Loss Appropriation Account. (Al 2014 C) [Ans.: Deficiency to be borne by Pranshu—® 15,000; Share of Profit: Pranshu— ¥ 30,000; Himanshu—R 30,000; and Anshu—R 30,000; New Ratio = 3:2: 1.) ‘Ankur and Bobby were into the business of providing software solutions in india. They were sharing profits and losses in the ratio 3 : 2. They admitted Rohit for a 1/5 share in the firm. Rohit, an alumni of IIT, Chennai would help them to expand their business to various South African countries where he had been working earlier. Rohit is guaranteed a minimum profit of € 2,00,000 for the year. Any deficiency in Rohit's share is to be borne by Ankur and Bobby in the ratio 4 : 1. Loss for the year was % 10,00,000. Pass the necessary Journal entries. (CBSE Sample Paper 2015) [Ans.: For Distribution of Loss: Dr. Ankur's Capital A/c by % 4,80,000; Bobby's Capital A/c by % 3,20,000; and Rohit’s Capital A/c by & 2,00,000; and Cr. Profit & Loss A/c by € 10,00,000. For Meeting the Deficiency: Dr. Ankur's Capital A/c by ® 3,20,000; and Bobby's Capital A/c by ® 80,000 and Cr. Rohit’s Capital A/c by & 4,00,000.] 5. Anita, Bimla and Cherry are three partners. On 1st April, 2022, their Capitals stood as: Anita & 1,00,000, Bimla & 2,00,000 and Cherry ® 3,00,000. It was decided that: (a) they would receive interest on Capitals @ 5% pa, (b) Anita would get a salary of € 5,000 per month, () Bimla would receive commission @ 5% of net profit after deduction of commission, and (d) 10% of the divisible profit would be transferred to the General Reserve. Before the above items were taken into account, the profit for the year ended 31st March, 2023 was 5,00,000. Prepare Profit & Loss Appropri (Ans.: Divisible Profit 3,86,190; Commission (Bimla)—¥ 23,810; General Reserve—8 38,619; Share of Profit: Anita—¥ 1,15,857; Bimla—X 1,15,857, Cherry—X 1,15,857; Closing Balances of Capital A/cs: Anita— 2,80,857; Bimla— 3,49,667; Cherry—R 4,30,857] ion Account and the Capital Accounts of the Partners.6. A, Band C were partners. Their capitals were A—Z 30,000; B—% 20,000 and C—% 10,000 respectively. According to the Partnership Deed, they were entitled to an interest on capital @ 5% pa. In addition, B was also entitled to draw a salary of % 500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the salary payable to B. The net profit for the year were % 30,000 distributed in the ratio of capitals without providing for any of the above adjustments. The profits were to be shared in the ratio of 5 : 3 : 2. Pass necessary adjustment entry showing the workings clearly. [Ansa Debit A's Current A/c by & 3,675; Credit B's Current A/c by % 2,895 and C's Current A/c by ® 780.) [Hint: It is assumed that Capitals are fixed.) 7. Gian, Rajat and Bishan are partners sharing profits equally. Gian drew regularly & 10,000 in the beginning of every month for six months ended 30th September, 2022, Rajat drew regularly % 10,000 at the end of every month for six months ended 30th September, 2022. Bishan drew regularly % 10,000 in the middle of every month for six months ended 30th September, 2022. Calculate interest on drawings @ 5% paa. for the year ended 31st March, 2023. [Ans.: Interest on Drawings: (i) Gian— 2,375; (i) Rajat—X 2,125; (i) Bishan— 2,250] 8, Prem and Manoj are partners in a firm sharing profits in the ratio of 3: 2. The Partnership Deed provided that Prem was to be paid salary of € 2,500 per month and Manoj was to get a commission of € 10,000 per year. Interest on capital was to be allowed @ 5% paa, and interest on drawings was to be charged @ 6% pa. Interest on Prem’s drawings was % 1,250 and on Manoj’s drawings was % 425. Interest on Capitals of the partners were & 10,000 and & 7,500 respectively. The firm's net profit for the year ended 31st March, 2023 was % 90,575. Prepare Profit & Loss Appropriation Account of the firm. (Ans.: Divisible Profit 34,750; Share of Profit: Prem— 20,850; Manoj—% 13,900) 9. Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio 2:1 with capitals % 5,00,000 and % 4,00,000 respectively. Kanika withdrew the following amounts during the year to pay the hostel expenses of her son: Ist April % 10,000 Ist June % 9,000 Ist November % 14,000 Ist December 5,000 Gautam withdrew % 15,000 on the first day of April, July, October and January to pay rent for the accommodation of his family. He also paid % 20,000 per month as rent for the office of partnership which was in a nearby shopping complex. Calculate interest on drawings @ 6% p.a. (CBSE Sample Paper 2015) IAns.: Interest on Drawings: Kanika—¥ 1,500; Gautam—R 2,250.] 10, Cand D are partners in a firm; C has contributed & 1,00,000 and D 60,000 as capitals, Interest is payable @ 6% p.a, and D is entitled to salary of % 3,000 per month. In the year ended 31st March, 2023, the profit was & 80,000 before interest and salary. Prepare Profit & Loss Appropriation Account. [Ans.: Sharing Profit : C: % 17,200 and D— 17,200. C will get & 23,200 and D— 56,800.)11. Aan and Ban are partners sharing profits in the ratio of 3 : 2 with capitals of = 50,000 and & 30,000 respectively. Interest on capital is agreed @ 6% pa. Ban is to be allowed an annual salary of % 2,500. A provision of 5% of net profit is to be made in respect of Manager's Commission and rent of % 24,000 is to be accounted being payable to Aan. Profit for the year before manager's commission and rent to Aan was % 39,000. Prepare Profit & Loss Appropriation account and the Partners’ Capital Accounts. [Ans.: Share of Profit: Aan—® 4,170 and Ban—% 2,780; Balances of Capital A/cs: ‘Aan—R 57,170 and Ban— 37,080.) [Hint: Manager's Commission and rent are charges against profit. Hence, they will be transferred to Profit & Loss Account to determine Net Profit before appropriations (such as partner's salary, interest on capital). Dr. PROFIT & LOSS ACCOUNT for the year ended... cr. Particulars z Particulars z To Rent A/c 24,000 | By Profit (given) 39,000 To Manager's Commission A/c 750 (5/100 x 15,000) To Net Profit trfd. to P & L App. A/c 14,250 39,000 } 12. Anshul and Asha are partners sharing profits and losses in the ratio of 3 : 2. Anshul being a non-working partner contributed ¥ 8,00,000 as her capital. Asha being a working partner did not contribute capital. The Partnership Deed provides for interest on capital @ 5% and salary to every working partner @ % 2,000 per month. Net profit (before providing for interest on capital and partner's salary) for the year ended 31st March, 2023 was & 32,000. Show distribution of profits. (Ans.: Interest on Anshul’s Capital—& 20,000; Salary to Asha—¥ 12,000] {Hint: Since, both interest on capital and salary to partner are appropriations and net profit is less than the amount of appropriations to be made, net profit has been distributed in the ratio of appropriations to be made, ie., € 40,000 (interest on Anshul's capital): & 24,000 (Asha’s salary) or 5:3] 13, A, Band Care partners in a firm. Net profit of the firm for the year ended 31st March, 2023 is ® 30,000, which has been duly distributed among the partners in their agreed ratio of 3: 1: 1. Itis noticed on 10th April, 2023 that the undermentioned transactions were not passed through the books of account of the firm for the year ended 31st March, 2023. {@) Interest on Capital @ 6% per annum, the capital of A, 8 and C being % 50,000; % 40,000 and % 30,000 respectively. (b) Interest on drawings: A % 350; B ¥ 250; C % 150. (©) Partners’ Salaries: A % 5,000; 8 & 7,500. (d) Commission due to A (for some special transaction) € 3,000. You are required to pass a Journal entry, which will not affect Profit & Loss Account of the firm and the position of partners inter se. {Ans.t Dr. A’ Capital A/e—X 2,520 and C's Capital A/e—8 2,740; Cr. B's Capital Ae 5,260.) 14, Vikas and Vivek were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2022, they admitted Vandana as a new partner for 1/8th share in the profits with a guaranteed profit of € 1,50,000. New profit- sharing ratio between Vikas and Vivek will remain same but they decided to bear any deficiency on account of guarantee to Vandana in the ratio 3 : 2. Profit of the firm for the year ended 31st March, 2023 was % 9,00,000. Prepare Profit & Loss Appropriation Account of Vikas, Vivek and Vandana for the year ended 31st March, 2023. [Ans.: Deficiency of Vandana—R 37,500 borne by Vikas—¥ 22,500 and Vivek—X 15,000. Share of Profit: Vikas—% 4,50,000; Vivek 3,00,000; Vandana—R 1,50,000} 315. A, Band Care partners sharing profits and losses in the ratio of A 1/2, B 3/10, C 1/5 after providing for interest @ 5% on their respective capitals, viz., A = 50,000; B 30,000 and C % 20,000 and allowing 8 and C salary of & 5,000 each per annum. During the year ended 31st March, 2023, A has drawn % 10,000 and Band Cin addition to their salaries have drawn % 2,500 and 1,000 respectively. Profit & Loss Account for the year ended 31st March, 2023 showed net profit of 45,000. On 1st April, 2022, the balances in the Current Accounts of the partners were A (Cr. & 4,500; 8 (Cr) & 1,500 and C (Cr) ® 1,000. Interest is not charged on Drawings and allowed on Current Account balances. Show Partners’ Capital and Current Accounts as at 31st March, 2023 after division of profits in accordance with the partnership agreement. IAns.: Share of Profit: A 15,000; B— 9,000; CX 6,000; Balances of Current A/cs: A (Cr.}—8 12,000; B (Cr.}—€ 9,500; C (Cr) 7,000] 16. The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2: 2: 1, have existed for some years. Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit-sharing ratio should come into effect retrospectively for the three years. Harry and Porter have agreed to it. Profits for the last three years ended 31st March, were: Year ended 31st March, 2021 2022 2023 Profit @) 2,20,000 2,40,000 2,90,000 Show adjustment of profits by means of an adjustment Journal entry. (NCERT, Modified) Ans. Debit Harry by & 50,000 and Porter by % 50,000; Credit Ali by & 1,00,000) 17. A, Band Care partners in a firm sharing profits in the ratio of 3 :2 : 1. They earned profit of & 30,000 during the year ended 31st March, 2023. Distribute profit among 4, B and C if: (2) Cs share of profit is guaranteed to be % 6,000 minimum. (b) Minimum profit payable to C amounting to % 6,000 is guaranteed by A. (0) Guaranteed minimum profit of % 6,000 payable to C is guaranteed by B. (d) Any deficiency after making payment of guaranteed & 6,000 will be borne by A and B in the ratio of 3:1. [Ans.: (a) A—% 14,400; B—% 9,600 and C—% 6,000; (b) A— 14,000; B—% 10,000 and C—% 6,000; () AX 15,000; B—R 9,000 and C—R 6,000; (d) A—X 14,250; B—X 9,750 and C—R 6,000} 18. Amar and Bimal are partners sharing profits equally. Their capitals as on 1st April, 2022 were 10,00,000 each. Partners are allowed interest on capital @ 5% p.a. Drawings of each partner were 1,00,000. Salary is to be allowed to Bimal @ 5,000 per month. Net Profit for the year ended 31st March, 2023 was 9,80,000. 10% of the net divisible profit is to be set aside to General Reserve. Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2023. [Ans.: Transfer to General Reserve—X 70,000 (10/110 x % 7,70,000); Share of Profit— % 3,50,000 each of Amar and Bimal) 19. Harry, Garry and Parry are partners sharing profits equally. Parry is guaranteed minimum annual profit of % 1,00,000. Interest is allowed on capital @ 5% p.a., which is € 30,000 for each partner. Net Profit for the year ended 31st March, 2023 is € 5,40,000. Prepare Profit & Loss Appropriation Account for the year. [Ans.: Share of Profit: Harry, Garry and Parry—R 1,50,000 each.) 4n, if their 20. Prepare Capital Accounts of the partners Ajay and Sanjay from the following informa capitals are fluctuatin Ajay R) Sanjay @) Capitals on 1st April, 2022 4,00,000 3,00,000 Drawings during the year ended 31st March, 2023 50,000 30,000 Interest on Capital 5% pa. 5% pa. Interest on Drawings 1,250 750 Share of Profit for the year ended 31st March, 2023 60,000 50,000 Partner's Salary 36,000 = Commission 5,000 3,000 {Ans.: Ajay’s Capital A/e— 4,69,750; Sanjay’s Capital A/e—R 3,37,250.] 21. Ram and Shyam are partners in a firm sharing profits in the ratio of 3: 2. On Ist April, 2022, their fixed capitals were & 3,00,000 and & 2,50,000 respectively. On 1st October, they decided that their total capital (Fixed) should be ® 6,00,000 in their profit-sharing ratio. Accordingly, they introduced extra capital or withdrew excess capital. The Partnership Deed provided for the following: (i) Interest on capital @ 12% p.a. (il) Interest on Drawings @ 18% pa. ‘A monthly salary of % 2,000 to Ram and a quarterly salary of & 4,500 to Shyam, The drawings of Ram and Shyam were as follows: Particulars [Ram @)_| Shyam ‘On 30th September, 2022 20,000 | 15,000 On 31st December, 2022 20,000 25,000 During the year ended 31st March, 2023, the firm earned a net profit of & 1,50,000. 10% of this profit was to be transferred to General Reserve. You are required to prepare: () Profit & Loss Appropriation Account; Partners’ Capital Accounts, and Partners’ Current Accounts. [Ans.: Profit transferred to General Reserve: & 15,000. Ram (@) Shyam ®) Salary 24,000 18,000 Interest on Capital 39,600 29,400 Interest on Drawings 2,700 2475 Share of Profit 17,505 11,670 Balances: Capital Accounts 3,60,000 2,40,000 Current Accounts 38405 16,595) 2 Capital to be introduced by Ram: % 60,000; Capital to be withdrawn by Shyam: % 10,000.) 22. Capital Accounts of A and 8 stood at & 4,00,000 and 3,00,000 respectively after necessary adjustments in respect of the drawings and the net profit for the year ended 31st March, 2023. It was subsequently noticed that 5% p.a. interest on capital and also drawings were not taken into account in arriving at the distributable profit. The drawings of the partners had been: A— 12,000 drawn at the end of each quarter and B—¥ 18,000 drawn at the end of each half year. The profit for the year as adjusted amounted to % 2,00,000. The partners share profits in the ratio of 3:2. You are required to pass Journal entries and show adjusted Capital Accounts of the partners. [Ans.: Partners’ Capital Accounts: A—R 3,98,790; 8— 3,01,210; Capitals on 1.4.2022: (Opening Capital): A—8 3,28,000; BX 2,56,000; Interest on Capital: A—% 16,400; B—Z 12,800; Interest on Drawings: A—% 900; B—% 450) (Hints: (i) For Interest on Capital: Dr. Profit & Loss Adjustment A/c by & 29,200; Cr. A's Capital by A/c by % 16,400 and B's Capital A/c by % 12,800. (ii) For Interest on Drawings: Dr. A’s Capital A/c by € 900 and B's Capital A/c by % 450; Cr. Profit & Loss Adjustment A/c by & 1,350. (ii) Loss on Adjustment: Dr. A's Capital A/c by % 16,710 and B’s Capital A/c by & 11,140; Cr. Profit & Loss Adjustment A/c by % 27,850.] (Hit 523. A and B are partners since 1st April, 2021, without a Partnership Deed and they introduced capitals of % 35,000 and % 20,000 respectively. On Ist October, 2021, A gave loan of % 8,000 to the firm without any agreement as to interest. Profit & Loss Account for the year ended 31st March, 2022 shows profit of % 15,000 but the partners cannot agree an payment of interest and on the basis of division of profit. You are required to divide the profits between them giving reasons for your method. [An and B each gets ® 7,380 as profit and A gets & 240 as interest on loan] 24, P and Qwere partners in a firm sharing profits and losses equally. Their fixed capitals were & 2,00,000 and % 3,00,000 respectively. The Partnership Deed provided for interest on capital @ 12% per annum. For the year ended 31st March, 2016, profits of the firm were distributed without providing interest on capital. Pass necessary adjustment entry to rectify the error. (Outside Dethi 2017) [Ans.: Debit P's Current A/c and Credit Q's Current A/c by & 6,000.) ing Value Questions 25. (Commission to Partners and Distribution of Profit). Mohan and Sohan are partners in a firm. Mohan gets a commis ion of 10% on the net profits before charging any commission and Sohan gets a commission of 10% on the net profits after charging all commissions. Compute the missing values (?) from the following Profit é& Loss Appropriation Account for the year ended 31st March, 2023: Or. PROFIT & LOSS APPROPRIATION ACCOUNT for the year ended 31st March, 2023 cr. Particulars Patticulars To Mohan's Commission A/c By Profit & Loss A/c (Net Profit) To Sohan's Commission A/c To Profit transferred to: Mohan's Capital A/c Sohar's Capital A/c= Apel de Lo be veld at Asan ae passe St —— ead O08 ) 6) ue les 0 201m = 12.000 Lol] — |8o0o _ 201% 7 |bo00 Yeas | roy | dois | 2o}s |. 2ol7 | 2018 Prcspih orion | Reon Senet UYscen |_S 0000 ou se"e= dgon-= ae? Sorcha = = Spor fuopet XN0. §) Yease Hower,1. Assertion (A): Goodwillis a fictitious asset. Reason (R): Goodwill has a realisable value. In the context of above two statements, which of the above options is correct? 2. Assertion (A): Goodwill has a value which is normally gealised, when business is sold. Reason (R): Goodwill is a fictitious asset, since it is normally realised on sale of business. In the context of above two statements, which of the above options is correct? 3. Assertion (A): Favourable contracts are recognised.as assets. Reason (R): Favourable contract has positive effect on value of goodwill. In the context of above two statements, which of the above options is correct? 4, Assertion (A): According to AS-26, self-generated goodwill is not recorded in the books of accounts. Reason (R): Self-generated goodwill is gecggnised in the books of accounts. In the context of above two statements, which of the above options is correct? 5. Assertion (A): Goodwill is not regagnised on the retirement or death of a partner. Reason (R): Because on retirement or death of a partner, reconstitution of the firm takes place and gaining partners have to compensate the sacrificing partners for gaining profit share. In the context of above two statements, which of the above options is correct? 6. Assertion (A): Goodwill is an intangible asset and is recorded in the books of account if an amount is paid. Reason (R): AS-26 Intangible Assets prescribes to recognise, goodwill as an asset only when it is purchased. In the context of above two statements, which of the above options is correct? 7. Assertion (A): Goodwill when valued by Average Profit Method, super profit is considered as nil. Reason (R): Super profit means profit earned in excess of normal business profit. In the context of above two statements, which of the above options is correct?1. Assertion (A): Interest on Capital is transferred to Profit & Loss Appropriation Account. Reason (R): Interest on Capital is an appropriation of profit. In the context of above two statements, which of the above options is correct? 2. Assertion (A): Each partner is principal as well as an agent for all the other partners. Reason (R): As per the definition of Partnership Act, partnership business may be carried on by all the partners or any of them acting for all. dn the context of above two statements, which of the above options is correct? 3. Assertion (A): Salary/Commission to partner is transferred to the debit of Profit & Loss Account. Reason (R): Salary/Commission to a partner is an appropriation of profit and thus, transferred to Profit & Loss Appropriation Account. In the context of above two statements, which of the above options is correct? 4. Assertion (A): Interest on Drawings is charged at the same rate as interest is allowed on Capital. Renson (R): Interest on Drawings is charged at the rate as stated in the Partnership Deed or agreed. In the context of above two statements, which of the above options is correct? 5. Assertion (A): Minimum profit guaranteed to a partner is not paid if the firm incurs loss. Reason (R): Since minimum profit is guaranteed, it is paid to a partner whether firm incurs loss or earns profit. In the context of above nwo statements, which of the above options is correct? 6. Assertion (A): Minimum profit may be guaranteed by a partner, some of the partners or even by the firm. Reason (R): The partners may agree who will bear the deficiency in minimum guaranteed profit. In the context of above two statements, which of the above options is correct?1. Aand 8 are partners sharing profits in the ratio of 4 : 3. Their Balance Sheet as at 31st March, 2022 stood as: Liabilities Assets Sundry Creditors 28,000 | Cash 20,000 Reserve 42,000 | Sundry Debtors 1,20,000 Capital A/cs: Stock 1,40,000 A 2,40,000 Fixed Assets 1,50,000 8 1,20,000 | 360,000 They decided that with effect from Ist April, 2022, they will share profits and losses in the ratio of 2:1, For this purpose they decided that: (i) Fixed Assets are to be reduced by 10%. {ii)_A Provision for Doubtful Debts of 6% be made on Sundry Debtors. (ili) Stock be valued at % 1,90,000. (iv) An amount of & 3,700 included in Creditors is not likely to be ed. Partners decided to record the revised values in the books. However, they do not want to disturb the Reserve. You are required to pass Journal entries, prepare Capital Accounts of Partners and the revised Balance Sheet. {Ans.: Gain (Profit) on Revaluation—X 31,500; Adjustment for Reserve: Dr. A’s Capital A/c and Ct. BS Capital A/c by & 4,000; Capitals: AR 2,54,000; B—X 1,37,500 and Balance Sheet Total— 4,57,800) 2. X, Yand Z share profits as 5: 3: 2. They decide to share their future profits as 4: 3: 3 with effect from 1st April, 2022. On this date the following revaluations have taken place: Book Values (2) Revised Values (2) Investments 22,000 25,000 Plant and Machinery 25,000 20,000 Land and Building 40,000 50,000 Outstanding Expenses 5,600 6,000 ‘Sundry Debtors 60,000 50,000 Trade Creditors 70,000 60,000 Pass necessary adjustment entry to be made because of the above changes in the values of assets and liabilities. However, old values will continue in the books. [Ans.: Dr. Z's Capital A/c and Cr. X's Capital Ac—Z 760.) 3. X, ¥ and Z are partners in a firm sharing profits and losses as 5 : 4 : 3. Their Balance Sheet as at 31st March, 2022 was: Liabilities z Assets z Sundry Creditors 40,000 | Cash at Bank 40,000 Outstanding Expenses 15,000 | Sundry Debtors 2,10,000 General Reserve 75,000 | Stock 3,00,000 Capital Acs: Furniture 60,000 x 4,00,000 Plant and Machinery 420,000 y 3,00,000 Zz 2,00,000 | _9,00,000 10,30,000From Ist April, 2022 they agree to alter their profit-sharing ratio as 4: 3 : 2. It is also decided that: (a) Furniture be taken at 80% of its value. (b) Stock be appreciated by 20%. (©) Plant and Machinery be valued at & 4,00,000. (d)_ Outstanding Expenses be increased by % 13,000. Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve. You are required to pass a single Journal entry to of the new firm. [Ans.: Gain (Profit) on Revaluation—R 15,000; Adjustment for Revaluation and General Reserve: Dr. X's Capital A/c and Cr. 2's Capital A/c—R 2,500; Balance Sheet Total—% 10,30,000.] 4, Jai and Raj are partners sharing profits in the ratio of 3 : 2. With effect from Ist April, 2022, they decided to share profits equally. Goodwill appeared in the books at & 25,000. As on Ist April, 2022, it was valued at & 1,00,000. They decided to carry goodwill in the books of the firm. Pass the Journal entry giving effect to the above. {Ans.: Dr. Raj’s Capital A/c—R 7,500; Cr. Ja’s Capital A/e— 7,500.) effect to the above. Also, prepare Balance Sheet Following is the Balance Sheet of A and B, who shared Profits and Losses in the ratio of 2: 1, as at Ast April, 2022: BALANCE SHEET OF A AND B as on Ist April, 2022 Liabilities z Assets z Capital A/cs: Land and Building A 3,00,000 Furniture 8 2,00,000 | 5,00,000 | Stock General Reserve 1,50,000 | Debtors Creditors 2,00,.000 | Bank Cash 850,000 On the above date, the partners changed their profit-sharing ratio to 3 : 2. For this purpose, the goodwill of the firm was valued at € 3,00,000, The partners also agreed for the following: ing will be € 5,00,000; (b) General Reserve is to be maintained at € 3,00.000. (©) The total capital of the partners in the new firm will be % 6,00,000, which will be shared by the Partners in their new profit-sharing ratio. (a) The value of Land and Bui Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm. [Ans.: Gain (Profit) on Revaluation—R 2,10,000; Partners’ Capital Accounts: A—R 3,60,000; B— 2,40,000. Amount to be brought in by B—X 60,000 and Withdrawn by AX 20,000. Balance Sheet Total—¥ 11,00,000) [Hint: General Reserve appearing in the Balance Sheet before the change in the profit-sharing ratio will be distributed between A and B in their old ratio, ie. 2: 1. When it is again brought back in the books the Partners’ Capital Accounts will be debited in the new profit-sharing ratio, ie, 3 : 2. Thus, A’s Capital Account will be debited by % 1,80,000 (ie, 3/5 of € 3,00,000) and B's Capital Account will be debited by & 1,20,000 (ie, 2/5 of 3,00,000).) 2