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INTERNATIONAL INDIAN SCHOOL, RIYADH

WORKSHEET (2020-2021)

GRADE - XII – ACCOUNTANCY - FIRST TERM

Chapter 1 : NOT FOR PROFIT ORGANISATION

Q.1 Show how the following items will be presented in the Balance Sheet of Nav

Nirman Club as on 31.03.2007.

Prize Fund as on 01.04.2006 Rs.200,000

Prize Fund investments as on 1.04.2006 Rs.200,000

Income from Prize Fund Investments during the year 2006- 07 Rs. 40,000

Prize awarded during the year 2006-2007 Rs. 58,000

(Ans: Investments-asset Rs.200,000 Prize Fund- Liability

Rs.182,000)

Q.2 Calculate the amount to be debited to Income & Expenditure Account under

the

heading Sports items for the year 2006-2007 in respect of the Osmosis Club.

Stock of Sports items on 1.4.2006 Rs. 44,700

Stock of Sports items on 31.3.2007 Rs. 24,500

Paid for Sports items during the year Rs. 97,900

Creditors for supplies of Sports items 31.3.2007 Rs. 26,500

(Ans: Rs.144,600)

Q.3 From the following informations calculate the amount of subscriptions to be

credited to the Income and Expenditure Account for the year 2007-08.

Subscriptions received during the year

40,000

Subscriptions outstanding on 31st March 2007 11,000

Subscriptions outstanding on 31st March 2008 5,000

Subscriptions received in advance on 31st March 2007 10,000

Subscriptions received in advance on 31st March 2008 12,000

Subscriptions of Rs. 5,000 are still in arrears for the year 2006-07

(Ans: Rs.37,000)

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Q.4 From the following information of a not-for-profit organisation, show the

‘Sport Material’ item in the Income and Expenditure A/c for the year ending on

31st March 2009 and Balance Sheets as on 31st March 2008 and 31st March 2009.

31.3.2008 31.3.2009

Rs. Rs.

Stock of Sports Material 6,200 4,800

Creditors for Sports Material 9,800 7,200

Advance to suppliers for Sports Material 11,000 19,000

Payment to suppliers for the sports material during the year was Rs. 102,000.

There were no cash purchases made.

(Ans: Expenditure Rs.92,800)

Q.5 From the following informations of Receipt and Payment A/c of Smart Club

for the year ended 31.3.2010, prepare an Income and expenditure account:

Details Rs.

Subscriptions received 265,000

Donation for building 60,000

Entrance Fees 23,000

Life membership fees 20,000

Interest on investment (Govt. Securities) 18,000

Lockers rent received 42,000

Printing and stationery 26,250

Lighting expenses 38,750

Rates and Taxes 17,000

Telephone charges 2,600

Postage 2,000

Salaries 88,000

Insurance Premium 15,000

Purchase of Govt. Securities 200,000

Additional Information:

Subscriptions included Rs.30,000 for the year 2008-09 and Rs. 10,000 for

the year 2010-2011. 25% amount received as entrance fees to be capitalised.

(Ans: Rs.112,650)

Q.6 From the following items of receipt and payment A/c of Bharti Club for the

year ended 31st March 2010, prepare an Income and Expenditure Account.

Rs.

Salaries Paid 150,000

Lighting Expenses 15,000

Stationery 13,500

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Subscription Received (including Rs.2,000 received in

advance and Rs. 8,000 for the previous year) 140,000

Net proceeds of Refreshment Room 91,000

Miscellaneous Expenses 24,000

Half year’s interest paid on loan 2,400

Rent and Rates (including Rs.1,500 pre-paid) 15,000

Lockers Rent received 6,700

Additional information:

Subscriptions in arrears on 31.03.2010 were Rs.9,000 and half year’s interest

on loan was also outstanding. (Ans: .15,900)

Q.7 From the following Receipts and Payments Account and information

provided, prepare the Income and Expenditure Account of Patel Education

Society for the year ended 31st March 2010.

Receipts Rs Payments Rs.

To Balance 130,000 By Rent 9,000

” Interest on

Investments

5,000 ” Postage Expenses 2,500

” Subscriptions 190,000 ” 10% Investment (July

1st)

50,000

” Sale of Newspapers 3,000 ” Payment to Creditors 3,500

” Sale of Computers 15,000 ” Advertisement

Expenses

10,000

” Donations 85,000 ” Salaries 35,000

428,000

” Balance c/d 3,000

428,000

Additional Information:

(a) Subscriptions due on 31st March 2009 and 31st March 2010 were

Rs. 2,500 and 6,000 respectively.

(b) Subscriptions paid in advance as on March 31st 2009 were Rs. 1,200

and on March 31st 2010 were Rs. 1,900.

(c) The book value of Computers on April 1st 2009 was Rs. 40,000 of

which half of the computers were sold during the year.

(d) The book value of investments on April 1st 2009 was Rs. 75,000 and

the rate of interest was 10% p.a

(e) Creditors on March 31st 2009 were Rs. 7,000.

(f) Outstanding expenses for Rent, Postage and Salaries for the current

year were Rs. 800 Rs.500 and Rs.10,000 respectively.

(Ans: Surplus Rs.5,800 CF Rs.187,600 BS Rs.203,000)

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Q.8 Following is the Receipts and Payments Account of Shivalik Club for the

year ended 31.3.2011.

Dr RECEIPTS AND PAYMENTS ACCOUNT FOR THE YEAR

ENDED 31.3.2011 Cr

Receipts Rs. Payments Rs.

To Balance b/d 9,700 By Salaries 12,000

” Subscriptions 23,700 (paid for 8 months only)

” Entrance Fees 12,300 ” Rent 5,600

” Donations

” Hall Rent

8,300

2,900

” Electricity (includes

Rs. 400 for next year)

4,400

(Rs. 900 for the year 2011-12) ” Printing and Stationery 900

” Sale of Investments 15,400 ” Books 41,000

(Book value Rs. 16,000) ” 9% Fixed Deposit 4,000

(on 31.10.2010)

72,300

” Balance c/d 4,400

72,300

Prepare Income and Expenditure Account from the above Receipts and

Payments Account. (Ans: Rs.17,350)

Q.9 From the following particulars which relate to a commercial and Literary

Society, prepare an Income and Expenditure account and receipts and

Payments accounts as on 31.12.2003.

BALANCE SHEET AS ON 31.12.2002

Cash at Bank 3,000

Outstanding Creditors 425 Govt. Securities 10,000

Accrued interest 125

Capital fund 15,575 Outstanding subscriptions 400

Library Books 1,000

Furniture 1,475

16,000 16,000

The transactions for the year 2003.

Receipts: Subscriptions Rs. 2,500, proceeds received from entertainment

and lectures Rs.1,000; Interest on securities Rs. 475; Entrance fees received

Rs. 500; Sale proceeds of old furniture Rs. 75. Payments: Rent Rs. 600.

Printing Rs. 150, Advertising Rs. 200; Petty expenses Rs. 55, Govt.

Securities Rs. 2,500; Furniture Rs. 400, Library books Rs. 300; Cost of

entertainment Rs. 750. The following were outstanding as on 31.12.2003;

Printing Rs. 75; Rent Rs. 100; Interest on securities Rs. 150 and

subscriptions Rs. 325.

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Q.9 Prepare Income & Expenditure Account and Balance Sheet of the Medical

Help Club from its following Receipts & Payment Account for the year ended

31st December, 2005.

Receipts (Rs.) Payments (Rs.)

To Balance b/d Cash in

hand

9,000 By Honorarium to Doctors 10,000

” Donations 14,000 ” Salaries 28,000

” Subscription 50,500 ” General Expenses 2,000

” Interest on 8%

Investments

for the year

8,000

” Medicines purchases

” Medical equipment

purchased

30,000

10,000

” Charity film show 12,000 ” Charity film show expenses 4,000

” Conveyance Expenses 2,500

93,500

” Balance c/s

Cash in Hand

2,500

7,000

93,500

Additional Informations As on 31.12.04 As on 31.12.05

(Rs.) (Rs.)

a. Subscription Due 800 1,000

b. Subscription in Advance 1,200 600

c. Stock of Medicines 10,000 15,000

d. Medical Bills for medicines

outstanding

6,000

9,000

e. Medical Equipment 25,000 32,000

f. Buildings 50,000 48,000

(Ans: Surplus Rs.5,800 CF Rs.187,600 BS Rs.203,000)

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CHAPTER: 2 ACCOUNTING FOR PARTNERSHIP FIRMS –

FUNDEMENTALS

1. State the provisions of Partnership Act ,1932 in the absence of partnership

deed.

2. A and B are partners sharing profits and losses in the ratio of 2:3 with

capitals of Rs 2,80,000 and 1,40, 000 respectively. On 1st July 2013 A and B

advanced loans of Rs56,000 and Rs 28,000 to the firm . Show the

distribution of profit s/Losses for the year ended 31-12 -2013 , if the profit

before interest for the year amounted to Rs 2,100.

3. Arun , Arjun and Ayush are partners having capitals of Rs 120,000 Rs

120,000 and Rs 160,000 respectively. Their current account balances were

Rs 20,000, Rs 10,000 and Rs 4,000.respectively.

According to the partnership deed, the partners were entitled to interest on

capital @5% per annum. The profits were to be divided as follows:

(a) The first Rs 40,000 in proportion to their capitals.

(b) Next Rs 60,000 in the ratio of 5:3:2.

(c) Remaining profits to be shared equally

The firm made a profit of Rs 3, 12,000 before charging the above items.

Prepare profit and loss appropriation account .and show your workings

clearly.

4. On 31st march 2014 after the close of books of accounts, the capital accounts

of A , B and C stood at Rs 24,000 Rs 20,000 and Rs 12,000 respectively.

The profit for the year was Rs 36,000 which was distributed equally.

Subsequently, it was discovered that interest on capital @ 5% p.a had been

omitted. The profit sharing ratio was 2:2:1. Pass an adjustment entry.

5. Three Chartered Accountants X ,Y and Z form a partnership firm sharing

profits and losses equally, subject to the following conditions:

(a) Z ‘s share of profit is guaranteed to be not less than Rs 90,000 p.a.

(b) Y gives guarantee to the effect that the gross fees earned by him shall not

be less than Rs 80,000.

Profit for the first year is Rs 2, 00,000. The gross fees earned by Y are Rs

67,000.

Prepare Profit and Loss appropriation Account.

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6. E , F and G are partners where fixed capitals were Rs 30,000 and Rs 24,000

and Rs 18,000 respectively . As per partnership agreement, there is a

provision for allowing interest on capitals @ 5% per year but entries for the

same have not been made for the last two years. The profit sharing ratio

during these years is as follows.

Year E F G

2011

2012

2013

4

3

1

3

2

1

2

1

1

Make the necessary adjustment entry at the beginning of the third year (Jan

2014).Show your workings clearly.

7. Nivin , Safwan and Fouzan are partners in a firm. The partnership deed

provided that interst on drawings will be charged @ 6% p.a. during the year

ended 31-12 -2012 ,Nivin witdraws Rs 6,000 in the beginning of each

quarter and safwan withdraws Rs 6,000 in the middle of each quarter and

Fouzan withdraws Rs 6,000 at the end of each quarter . calculate interest on

partners drawings.

8. A ,B and C entered into partnership on October 1 2014 to share profits and

losses in the ratio of 3:2:1. A ,.however personally guaranteed that C’s share

of profit after charging interest on capitals at 5% p.a wuld not be less than

Rs 30,000 in any year. The capital contributions were A RSs 3,00,000, B RS

2,00,000 and C Rs 1,00,000. The profits for the period ended March 31st

2015 were Rs 1,20,000. Show the distribution of profits.

9. X and Y are partners in a business their capitals at the end of the year were

Rs 96,000and Rs 72,000 respectively. During the year ended 31-Dec 2013

, X’s drawings were Rs 16,000 and Rs 24,000 respectively. Profits before

charging interest on capital during the year were Rs 64,000. Calculate

interest on capital @5% for the year ended 31st December 2013, assuming

that the capitals were fixed.

10. A ,B and C were partners in a firm on 1st Jan 2015 their fixed capitals were

Rs 1,00,000, Rs 50,000 and Rs 50,000 respectively. As per the provisions of

partnership ded:

(a) All the partners were entitled to receive 5% interest per annum on their

capital.

(b) Profits were to be divided in their capital ratio.

(c) B was entitled for a salary of Rs 7,500 per annum

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The net profits for the year ended 31st December 2014 and 31st

December 2015 were Rs 58, 500 and 75,000 respectively.net profits

were divided equally without providing for the above terms.

Pass an adjustment entry to rectify the above error.

CHAPTER 2: ADMISSION OF A PARTNER

1. Singh, Gupta and Khan are partners in a firm sharing profits in 3:2:3 ratio.

They admitted Jain as a new partner. Singh surrendered 1/3 of his share in

favour of Jain: Gupta surrendered 1/4 of his share in favour of Jain and Khan

surrendered 1/5 in favour of Jain. Calculate new profit sharing ratio?

2. Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They

admit C into the firm and the new profit sharing ratio was agreed at 4:2:1.

Calculate the sacrificing ratio?

3. Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio.

They admit Ravi as a new partner for 1/8 share in the profits. The new profit

sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing

ratio and sacrificing ratio?

4. Compute the value of goodwill on the basis of four years’ purchase of the

average profits based on the last five years? The profits for the last five years

were as follows:

5. Capital employed in a business is Rs. 2,00,000. The normal rate of return on

capital employed is 15%. During the year 2002 the firm earned a profit of

Rs. 48,000. Calculate goodwill on the basis of 3 years purchase of super

profit?

6. The books of Ram and Bharat showed that the capital employed on

31.12.2002 was Rs. 5,00,000 and the profits for the last 5 years : 2002 Rs.

40,000; 2003 Rs. 50,000; 2004 Rs. 55,000; 2005 Rs. 70,000 and 2006 Rs.

85,000. Calculate the value of goodwill on the basis of 3 years purchase of

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the average super profits of the last 5 years assuming that the normal rate of

return is 10%?

7. Rajan and Rajani are partners in a firm. Their capitals were Rajan Rs.

3,00,000; Rajani Rs. 2,00,000. During the year 2002 the firm earned a profit

of Rs. 1,50,000. Calculate the value of goodwill of the firm assuming that

the normal rate of return is 20%?

8. A business has earned average profits of Rs. 1,00,000 during the last few

years. Find out the value of goodwill by capitalisation method, given that the

assets of the business are Rs. 10,00,000 and its external liabilities are Rs.

1,80,000. The normal rate of return is 10%?

9. Verma and Sharma are partners in a firm sharing profits and losses in the

ratio of 5:3. They admitted Ghosh as a new partner for 1/5 share of profits.

Ghosh is to bring in Rs. 20,000 as capital and Rs. 4,000 as his share of

goodwill premium. Give the necessary journal entries:

a) When the amount of goodwill is retained in the business.

b) When the amount of goodwill is fully withdrawn.

c) When 50% of the amount of goodwill is withdrawn.

d) When goodwill is paid privately

10. A and B are partners in a firm sharing profits and losses in the ratio of 3:2.

They decide to admit C into partnership with 1/4 share in profits. C will

bring in Rs. 30,000 for capital and the requisite amount of goodwill

premium in cash. The goodwill of the firm is valued at Rs, 20,000. The new

profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give

necessary journal entries?

11. Arty and Bharti are partners in a firm sharing profits in 3:2 ratio, They

admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings Rs.

50,000 for his capital and Rs. 10,000 for his 1/4 share of goodwill. Goodwill

already appears in the books of Arti and Bharti at Rs. 5,000. the new profit

sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the

necessary journal entries in the books of the new firm?

12. .Given below is the Balance Sheet of A and B, who are carrying on

partnership business on 31.12.2006. A and B share profits and losses in the

ratio of 2:1.

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C is admitted as a partner on the date of the balance sheet on the following

terms:

(i) C will bring in Rs. 1,00,000 as his capital and Rs. 60,000 as his share of

goodwill for 1/4 share in the profits.

(ii) Plant is to be appreciated to Rs. 1,20,000 and the value of buildings is to

be appreciated by 10%.

(iii) Stock is found over valued by Rs. 4,000.

(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.

(v) Creditors were unrecorded to the extent of Rs. 1,000. Pass the necessary

journal entries, prepare the revaluation account and partners’ capital

accounts, and show the Balance Sheet after the admission of C.

13. Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio.

On 1.1.2007 they admitted Ranjan as a partner. On Ranjan’s admission the

profit and loss account of Amit and Viney showed a debit balance of Rs.

40,000. Record necessary journal entry for the treatment of the same.

14. A and B share profits in the proportions of 3/4 and 1/4 . Their Balance Sheet

on Dec. 31, 2006 was as follows

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On Jan. 1,2007, C was admitted into partnership on the following terms:

(a) That C pays Rs. 10,000 as his capital.

(b) That C pays Rs. 5,000 for goodwill. Half of this sum is to be withdrawn

by A

and B.

(c) That stock and fixtures be reduced by 10% and a 5%, provision for

doubtful debts be created on Sundry Debtors and Bills Receivable.

(d) That the value of land and buildings be appreciated by 20%.

(e) There being a claim against the firm for damages, a liability to the extent

of Rs. 1,000 should be created.

(f) An item of Rs. 650 included in sundry creditors is not likely to be

claimed and hence should be written back.

Record the above transactions (journal entries) in the books of the firm

assuming that the profit sharing ratio between A and B has not changed.

Prepare the new Balance Sheet on the admission of C.

15. A and B are partners sharing profits and losses in the ratio of 3:1. On Ist Jan.

2007 they admitted C as a new partner for 1/4 share in the profits of the firm.

C brings Rs. 20,000 as for his 1/4 share in the profits of the firm. The

capitals of A and B after all adjustments in respect of goodwill, revaluation

of assets and liabilities, etc. has been worked out at Rs. 50,000 for A and Rs.

12,000 for B. It is agreed that partner’s capitals will be according to new

profit sharing ratio. Calculate the new capitals of A and B and pass the

necessary journal entries assuming that A and B brought in or withdrew the

necessary cash as the case may be for making their capitals in proportion to

their profit sharing ratio?

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16. Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan.

01, 2007 they admitted Vimal for 1/5 share in the profits. The Balance Sheet

of

Ashish and Dutta as on Jan. 01, 2007 was as follows:

It was agreed that:

i) The value of Land and Building be increased by Rs. 15,000.

ii) The value of plant be increased by 10,000.

iii) Goodwill of the firm be valued at Rs. 20,000.

iv) Vimal to bring in capital to the extent of 1/5th of the total capital of the

new firm.

Record the necessary journal entries and prepare the Balance Sheet of the

firm after Vimal’s admission.

CHAPTER 3: RETIREMENT OF A PARTNER

Q.1 State any two items of deduction that may have to be made from the amount

payable to a retiring partner.

Q.2 A, B and C are partners sharing profits in the ratio of 3:2:1. B retires and the

new profit sharing ratio between A and C is 3:1. State the gaining ratio.

Q.3 How can a partner retire from a firm?

Q.4 A, B and C were partners in a firm sharing profits in the ratio of 6:5:4. C

retires and his share is taken up equally by A and B. Find the new profit

sharing ratio.

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Q.5 Why are ‘Reserves and Surplus’ distributed at the time of reconstitution of the

firm.

Q.6 R,S and N are partners sharing profits 2/5,2/5, and 1/5. M decides to retire

from the business, and his share is taken by R and S 2:1. Calculate the new

profit sharing ratio.

Q.7 X, Y and Z are partners in a firm sharing profits and losses in the ratio of

3:2:1. On 01.04.2009, Z retires from the firm. X and Y agree that the capital

of the new firm shall be fixed at Rs. 210,000 in the profit sharing ratio. The

capital accounts of X and Y after all adjustments on the date of retirement

showed balance of Rs. 145,000 and Rs. 63,000 respectively. State the amount

of actual cash to be brought in or to be paid off to the partners.

Q.8 A, B and C were partners in a firm sharing profits in the ratio of 6:5:4. Their

capitals were A, Rs.100,000 B, Rs.80,000 and C, Rs. 60,000 respectively. On

1st April 2009 A retired from the firm and the new profit sharing ratio between

B and C was decided as 1:4. On A’s retirement the goodwill of the firm was

valued at Rs. 180,000. Showing your calculations clearly, pass necessary

journal entry for the treatment of goodwill on A’s retirement.

Q.9 The Balance Sheet of A, B and C on 31. 3. 2007 was as follows:

Liabilities Amount.

Rs.

Assets. Amount.

Rs.

Creditors 50,000 P& L Account 30,000

A’s Capital 80,000 Land and Buildings 80,000

B’s Capital 80,000 Plant & Machinery 56,000

C’s Capital 60,000 Motor car 54,000

Debtors 48,000

270,000

Cash 2,000

270,000

The following terms were agreed upon for A’s retirement:

(a) Goodwill to be valued at Rs. 42,000 and not to be shown in the books

after A’s retirement.

(b) Land and Buildings to be appreciated by Rs. 20,000.

(c) Plant and Machinery to be reduced to Rs. 46,000.

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(d) Provision for doubtful debts to be created at 5% on Debtors.

(e) Create a provision of Rs. 1,400 for discount on creditors.

(f) The sum payable to A to be brought in by B and C in such a manner

that their capitals are in proportion to the profit sharing ratio.

Prepare Revaluation Account, Partners’ Capital Accounts and the

Balance Sheetto give effect to the above.

Q.10 A, B and C were in partnership sharing profits in proportion to their capitals.

Their balance sheet on 31.3.2008. was as follows.

Liabilities Rs. Assets. Rs.

Creditors 15,600 Buildings 100,000

Reserve 6,000 Machinery 48,000

A’s Capital 90,000 Stock 18,000

B’s Capital 60,000 Debtors 20,000

C’s Capital 30,000 Less provision

For doubtful debts 400

19,600

201,600

Cash 16,000

201,600

On the above date B retired owing to ill health and the following adjustments

were agreed upon:

(a) Buildings be appreciated by 10%

(b) Provision for doubtful debts be increased to 5% of debtors.

(c) Machinery be depreciated by 15%.

(d) Goodwill of the firm be valued at Rs. 36,000 and be adjusted into the

Capital Accounts of A and C who will share profits in future in the ratio

of 3:1.

(e) A provision be made for outstanding repairs bill of Rs.3,000.

(f) Included in the value of creditors is Rs. 1,800 for an outstanding legal

claim which is not likely to arise.

(g) Out of the insurance premium paid Rs. 2,000 is for the next year. The

amount was debited to P and L A/c.

(h) The partners decide to fix the capital of the new firm as Rs.120,000 in

the

profit sharing ratio.

(i) B to be paid Rs. 9,000 in cash and the balance to be transferred to his

Loan account.

Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance

Sheet of the new firm after B’s retirement.

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CHAPTER: DEATH OF A PARTNER

Q.1 State any two deductions that may have to be made from the amount payable

to the legal representative of a deceased partner.

Q.2 What is the need for treatment of goodwill on the death of a partner?

Q.3 A, B and C are partners in a firm whose books are closed on March 31st

each year. C died on 30th June 2009 and according to the agreement, the

share of profits of a deceased partner up to the date of the death is to be

calculated on the basis of the average profits for the last five years. The net

profits for the last 5 years have been: 2005, Rs.14,000; 2006, Rs.18,000;

2007, Rs.16,000; 2008, Rs.10,000 (loss) and 2009, Rs.16,000. Calculate C’s

share of the profits upto the date of death and pass necessary journal entry.

Q.4 P, Q and R were partners n a firm sharing profits in 2:2:1 ratio. The

partnership deed provided that on the death of a partner his executors will be

entitled for the following:

(i) Interest on capital @ 12% p.a.

(ii) Interest on drawings @ 18% p.a.

(iii) Salary of Rs. 12,000 p.a.

(iv) Share in the profit of the firm (upto the date of death) on the basis of

previous year’s profit.

P died on 31.5.2006. His capital was Rs. 80,000. He had withdrawn Rs.

15,000 and interest on his drawings was calculated as Rs. 1,200. The profit

of the firm for the previous year ended 31.3.2006 was Rs. 30,000.

Prepare P’s capital account to be presented to his executors.

Q.5 Indu and Hema were partners. The partnership deed provided for:

(a) Profits to be divided as Indu 1/2 , Hema 1/3 and 1/6th to be transferred

to reserves.

(b) The accounts are closed on March 31st each year.

(c) In the event of the death of a partner the executors will be entitled to:

(i) Capital to the credit on the date of the death.

(ii) Interest on capital at 12% p.a

(iii) Proportion of profit to the date of death based on the average

profits credited for the last 3 years.

(iv) Share of goodwill based on three years purchase of the average

profits of the preceding 3 years.

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The following information is provided to you:

(Indu’s Capital Rs. 120,000, Hema’s Capital Rs. 80,000, Reserves Rs.

30,000, Cash Rs. 110,000, Investments Rs. 70,000)

Prepare Indu’s capital account to be presented to her executors who died on

April 30th,2007. The profits for the three preceding years were Rs. 84,000

Rs. 90,000 and Rs. 99,000.

Q.6 X, Y and Z were partners sharing profits in the ratio of 3:2:1. On 31st March

2008, their balance sheet stood as under.

Liabilities Rs. Assets Rs.

Capitals:

X : 75,000

Y : 70,000

Z : 50,000

Creditors

General reserve

195,000

72,000

24,000

291,000

Cash at bank

Investments

Patents

Stock

Debtors

Buildings

Machinery

70,000

50,000

15,000

25,000

20,000

75,000

36,000

291,000

Y died on 31st May 2008. It was agreed that:,

(a) Goodwill was valued at 3 years’ purchase of the average profits of the

last five years, which were, 2003: Rs. 40,000; 2004 : Rs. 40,000

2005 : Rs.30,000; 2006: Rs. 40,000 and 2007; Rs. 50,000.

(b) Machinery was valued at Rs. 70,000, Patents at Rs. 20,000 and

buildings at Rs. 66,000.

(c) For the purpose of calculating Y’s share of profits till the date of his

death, it was agreed that the same be calculated based on the average

profits for the last 2 years.

(d) The executor of deceased partner is to be paid the entire amount due

by means of cheque.

Prepare Y’s capital account to be rendered to is executor and also a journal

entry for the settlement of the amount due to the executor.

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Q.7 Ramesh, Suresh and Dinesh were partners in a firm sharing profits in the

ratio of 3:3:4. Their capitals were Rs. 500,000; Rs. 400,000 and Rs. 500,000

respectively. The firm closes its books on 31st March every year. On

31.3.2006 Ramesh died. The executor of a deceased partner, according to

the agreement, was entitled for the following:

(i) Interest on capital from the first day of the accounting year till the

date of his death @ 9% p.a.

(ii) His share of goodwill – The goodwill of the firm on Ramesh’s death

was valued at Rs. 180,000.

(iii) His share of profits. The profit of the firm for the year ended

31.3.2006 was Rs. 120,000.

Ramesh’s executor was paid the sum due in two equal annual instalments

with interest @ 10% p.a.

Prepare Ramesh’s capital account as on 31.3.2006 to be presented to his

executor and his executor’s loan account for the years ending 31.3.2007 and

31.3.2008.

Q.8 A, B and C are partners in a trading firm. The firm has a fixed capital of

Rs.60,000 held equally by all the partners. Under the partnership deed the

partners were entitled to:

(a) A and B to a salary of Rs.1,800 and Rs.1,600 per month respectively.

(b) In the event of death of a partner, goodwill was to be valued at 2 years

purchase of the average profit of the last 3 years.

(c) Profit upto the date of death based on the profits of the previous year.

(d) Partners were to be charged interest on drawings at 5% p.a and

allowed interest on capitals at 6% p.a.

A died on January 1st 2011. His drawings to the date of death were

Rs.2,000 and the interest thereon was Rs.60. The profits of three years

ending March 31st 2008, 2009 and 2010 were: Rs.21,200, 3,200 (Dr) and

Rs.9,000 respectively. Prepare A’s capital account to calculate the amount

to be paid to his executors.

Page 18 of 21

Q.9 A, B and C were partners in a firm sharing profits in the ratio of 2:1:1. Their

Balance Sheet as on 31.3.2010 was as follows.

Liabilities.

Amount.

Rs.

Assets.

Amount.

Rs.

Capital accounts: Furniture 9,000

A 10,000 Stock 4,000

B 5,000 Debtors 6,000

C 5,000 20,000 Bills Receivable 2,000

General Reserve 3,200 Cash at Bank 5,000

Creditors 3,000

26,200

Cash in hand 200

26,200

On 30.6.2010 C died. Under the provisions of partnership deed the

executors of a deceased partner were entitled to the following:

(i) Amount standing to the credit of partners capital account.

(ii) Interest on Capital @ 5% p.a.

(iii) Share of goodwill on the basis of two years purchase of the average

profits of last three years.

(iv) Share of profit in the year of his death, till the date of his death on the

basis of the last year’s profit.

The profits of the firm during the previous three years were as follows:

Year Profit

Rs.

2007-2008 5,000

2008-2009 9,000

2009-2010 7,000

C’s executors were paid Rs. 800 on 1.7.2010 and the balance in three equal

instalments of equal intervals of 6 months starting from 31.12.2010 with

interest @ 10% per annum.

Pass necessary journal entries, at the time of C’s death, prepare C’s Capital

Account and C’s Executor’s Account upto 31.12.2010.

Page 19 of 21

Q. 10. A, B, C and D are partners sharing profits in the ratio of 3: 2:1:4 A

dies and his share is acquired by B and C in the ratio of 3:2.

Calculate new profit-sharing ratio and gaining ratio. Also write entry related

to goodwill valued at Rs. 30,000 on the death of A.

CHAPTER: DISSOLUTION OF PARTNERSHIP FIRM

Q.1 Give any one difference between reconstitution of a firm and dissolution of a

firm.

Q.2 When an asset taken over by a partner, why is his capital account debited?

Q.3 When a liability is to be discharged by a partner, why is his capital account

credited?

Q.4 Pass the necessary journal entries for the following transactions of the

dissolution of the firm of R and L after the various assets (other than cash)

and outside liabilities have been transferred to Realisation Account:

(i) R paid creditors Rs. 17,000 in full settlement of their claim of

Rs. 20,000.

(ii) L agreed to pay his wife’s loan Rs. 17,000

(iii) Stock Rs. 40,000 was taken over by R for Rs. 39,000

(iv) Other assets realised Rs. 39,000

(v) Expenses of realisation Rs. 4,900 were paid by L.

(vi) Loss on dissolution Rs. 9,000 was divided between R and L in the

ratio of 3:1.

Q.5 A,B and C were partners sharing profits in the ratio of 3:1:1. Their Balance

Sheet as on March 31st 2009, the date on which they dissolve their firm, was

a follows.

Liabilities Amount

Rs.

Assets Amount

Rs.

Capitals:

A : 27,500

B : 10,000

C : 7,000

Loan

Creditors

44,500

1,500

6,000

52,000

Sundry Assets

Stock

Debtors 24,200

Less: Provision for

doubtful debts (−)1,200

Bills receivables

Cash

17,000

7,800

23,000

1,000

3,200

52,000

Page 20 of 21

It was agreed that:

(a) A to take over Bills Receivables at Rs. 800, debtors amounting to

Rs. 20,000 at Rs. 17,200 and the creditors of Rs. 6,000 were to be paid

by him at this figure.

(b) B is to take over all stock for Rs. 7,000 and some sundry assets at

Rs. 7,200 (being 10% less than the book value).

(c) C to take over remaining sundry assets at 90% of the book value

and assume the responsibility of discharge of loan together with

accrued interest of Rs. 300.

(d) The expenses of realisation were Rs. 270. The remaining debtors

were sold to a debt collecting agency at 50% of the book value.

Prepare Realisation A/c Partners Capital A/c and Cash A/c.

Q.6 X,Y and Z were partners sharing profits in the ratio of 2:2:1. The Balance

Sheet on 31st March 2010 when they dissolved the firm was as follows:

Liabilities

Rs Assets Rs

X’s Capital 127,500 Other Sundry Assets 117,000

Y’s Capital 110,000 Furniture 11,000

Z’s Capital 17,000 Debtors 124200

Loan 11,500 Less provision

Creditors 16,000 for doubtful debts 1200 123,000

Stock 17,800

282,000

Cash 13,200

282,000

(a) Z to take over furniture at Rs.8,000 and debtors amounting to

Rs.120,000 at Rs.117,200 and the creditors of Rs.16,000 were to be

paid to him at this figure.

(b) X is to take over all stock for Rs.17,000 and some sundry assets at

Rs. 72,000 (being 10% less than the book value).

(c) Y to take over remaining sundry assets at 80% of the book value and

assume the responsibility of discharge of loan together with accrued

interest of Rs.2,300.

(d) The expenses of realisation were Rs.2,700. The remaining debtors

were sold to a debt collecting agency at 50% of the value.

Prepare necessary accounts to close the books of the firm.

Page 21 of 21

Q.7 Pass the necessary journal entries for the following transactions on the

dissolution of the firm of James and Haider who were sharing profits and

losses in the ratio of 2:1. The various assets (other than cash) and outside

liabilities have been transferred to Realisation Account:

(i) James agreed to pay off his brother’s loan Rs. 10,000.

(ii) Haider took over all investments at Rs. 12,000.

(iii) Sundry creditors Rs. 20,000 were paid at 5% discount.

(iv) Loss on realisation was Rs. 10,200.

(v) A debtor whose debt of Rs. 9,300 was written off in the books paid

Rs. 7,500 in full settlement.

(vi) Realisation expenses Rs. 3,400 were paid by Sudha for which she was

allowed Rs. 3,000.

Q.8. Emil, Minhaj and Irfan decided to dissolve their partnership firm on

31.03.2011 when their position was as under.

Liabilities. Rs. Assets. Rs.

Sundry creditors 96,000 Loan to Emil 20,000

Capital Accounts Building 100,000

Emil 96,000 Investments 20,000

Minhaj 64,000 Machinery 40,000

Irfan 32,000 192,000 Stock 80,000

Current Accounts Sundry Debtors 65,000

Emil 40,000 Less: Reserve (5,000) 60,000

Irfan 30,000 70,000 Bank 28,000

358,000

Minhaj Current A/c 10,000

358,000

Minhaj took over building for Rs. 120,000, Emil took over investments for

Rs. 12,000, Machinery, Stock and Debtors realised Rs.35,000; Rs.70,000;

and Rs. 50,000 respectively.

The Creditor were paid off at a discount of 3% . There was a contingent

liability for a bill discounted for Rs. 5,000 was dishonoured and nothing will

be recovered from the drawee. Expenses of winding up were Rs.1,800.

Journalise the above and prepare necessary ledger accounts to close the

books of the firm.

Prepared by :

XI-XII Boys section.