16.

1 BA8IC ADJUSTMENTS
luatratlon 1
Piajakla And Manaavi wela in paitnership business sharing profit in the ratio of 3/5 and 2/5. On 1st
Apuil 2017 they admtted Riahika into partnership giving her 1/6 of the profits. Rishika brought
00,000 in cash of whleh 76,000 were considered as payment for goodwill and balance as her
Capital
The followlng Trlal Balance was extracted from books as on 31st March 2018.

Debt Balance Credit Balance

Purchases 3,14,325| Sales 5,35,800
Discont Allowed 4,300 Discount Received 5,375
Sundy 1Debtors 1,00,500 RDD 3,000
Stock (1 42017) 1,07,050 Sundry Creditors 81,350
Caniage lhwad 8,125 Capital A/c:
Miscellaneous Expenses 19,600 Prajakta 1,62,5000
Motor Vehicle 1,25,000 Manasvi 87,500
Land and Buildingg 2.00,000 Cash paid by Rishika
Cash at ank 12,600 on 1st April 2017 2,00,000
Telephone Enpen8es 8,100 Bank Overdraft 17,300
Printing and Stationery 6,725
Rent and Insurance 8,000
Bad Dobts 1,000
1,50,000
Investments
12,500
Drawings Prajakta 10,000
Manasvi
Rishika 5,000
1092,825 10,92,825
 324 FinancialAccounting (1: .Com.: SEM-VI
Additional Information:
1. Stock on 31st March, 2018 was7 1,05,625.
2. Bad Debts 7 3,000.
3. Depreciation to be charge on
Landand Building 5%
Motor Vehicle 20%
4. RDD to be maintained at 10% on Sundry Debtors.
5. Goods to the value of 2,500 have been lost by theft.
You are required to prepare:
1. Trading and Profit and Loss Account for the year ended
2. Balance Sheet
31stMarch,2018.
(S.Y.B.Com, March 2018, adapted)
as on that date.
Solution
Statement of Assets and Liabilities as at 31-3-2018

Particulars Sch.
I. CONTRIBUTION AND
LIABILITIES
1. Partners' Funds
Contribution 1
2. Liabilities 5,47,325
Short-term Borrowings 2
Creditors /Trade Payables 17,300
81,350
Total
. ASSET 6,45,975
Gross Fixed Assets
Less: Depreciation and Amortization 3,25,000
Net Fixed Assets (35.000)
3 2,90,000
Investments
Inventories 1,50,000
Debtors/Trade Receivables 1,05,625
Cash and Cash .
87,750
Equivalents
Total 12,600
6,45,975
Statement of Income and Expenditure for the perlod from 1-4-2017 to 31-3-2018
Particulars
Income Sch.
Gross Turnover
Other Income 5,35,800
Increase/(Decrease) in Stocks 5,375
Total (1,425)
2. Expenses
Purchases made for Resale
5,39,750
Administrative Expenses 8 3,19,950
Selling Expenses 9 22,825
Depreciation and Amortization 10 15,050
Other Expenses
11 35,000
3. Total
12 22,100
4. Profit transferred to Partners' Account 4,14,925
13 1,24,825
Schedules /Notes to Accounts
1. Contribution (WN)
Prajakta
Manasvi
Rishika 2,57,413
1,49,108
Total
1,40,804
5,47,325
 For Limited Liability Patnership 325
wvunting
Short-i Borrowings
B a n kO v e r a d r a f t
17,300
FixedA s s e t s

WDV
ngibleA s e s t s
Gross Depr
2,00,000 (10,000) 1,90,000
pndand Buildings
gs
Motor Vehicles
125.000 (25.000) 1,00,000
3,25,000 (35,000) 2,90,000
Total

Debtors/ Trade Recelvables

** **' *** ** ***
1,00,500
Debtors
*** **' * *** *"
(3.000)
ad Debts
Less (9.750)
forDoubtful Debts
** **"

**
***

*
Reserve
Less: 87,750
Total
Cash Equivalents 12,600
Cash and
Cash at Bank

6. Other Income ** ** '*" '*" 5,3

Discount

Decrease in Stocks 1,05,625

1. Increase/ (1,07,050)
Closing Stock
Less: Opening Stock (1,425)
0
Total
3,14,325
Purchasess ' * * *

8,125
Purchases (Gross)
Add: Cariage Inward (2.500)
Less: Goods Lost (Cost) 3,19,950
Total (Purchases
made for resale)
9. Administrative Expenses *** ***' '* *** *
8,000
6,725
Rent 8,100
Printing and Stationery
Telephone ExpensesS 22,825
0
Total
10. Selling Expenses 1,000
Bad Debts (T.B.) 3,000
Additional Bad Debts 9,750
DD (3.000) 10,750
New Reserve for 4,300
Reserve for DD *** ***
***

Less Old * **

Discount Allowed 15,050

Total
5 and
Amortizatlon 10,000
11. Depreclation 25,000
Land and Building * **
35,000
Vehicles
Total *** *** **" '** *" 19,600
12.Other Expenses 2,500
5 Miscellaneous Expenses

Goods Lost (Cost) 22,100

Total to
Partners
62,413
Transferred
13. Profit
41,608
Prajakta 20.804
Manasvi
Rishika 1,24,825
Total

3
326 FinancialAccounting (1:YB.Com : SEM.V
Working Note:
Partners Contribution Account
Dr. Cr.
Particulars Prajakta Manasv Rishika Particulaars Prajakta Manasvi Rishika
Balance b/d 1,62,500 87,500
To Drawings 12,500 10,000 5,000 By Cash
To Balance c/d By
2,57,413|1,49,108 1,40,804 By Goodwill 45,000
1,25,000
30,000
By Net Profit 62,413 41,608 20,804
2,69,913|1,59,1081,45,804| 2,69,9131,59,1081,45,804
Total Contribution (2,57,413+ 1,49,108 + 1,40,804) = 5,47,325
lustration 5: (Net Loss, Loss by Fire)
From the following Trial Balance of Mohan and Sohan, you are required tO prepare a Trading and

Loss Account for the year ended 31st March 2018 and the
Balance Sheet as on
that date
Profit and
after taking into consideration the additional information
Dr. Cr.
Particularss
Mohan's Capital 2,00,000
Sohan's Capital ** * 1,80,000
Mohan's Drawings 14,450
Sohan's DrawingS *** *** **
10,000
Stock (1-4-2017) 2,20,000
Bills receivable 30,000
Purchases ***** ** ***
2.80,000
Sales 4,00,000
Bills payable 40,000
Return Outward ** * * * * *** **
4,500
Return Inward * * ***
5,000
Plant and Machinery 1,00,000
Goodwil 25,000
Patents *
20,000
Sundry Debtors 1,25.000
Sundry Creditors 1,38,000
Cash in hand 2,550
Cash in Bank 75,000
Salaries 11,000
Wages ***** *** **

17,000
Office Expenses ***
9,500
Insurance 3,000
Advertisement 5,000
General Expenses 6,500
Factory Rent 3,500
Total 9,62,500 9,62.500
Adjustments
1. Depreciate plant and machinery by 5% and patents by 15%.
2. Provide for Reserve for bad and doubtful debts@ 5% on sundry debtors.
3. Prepaid Insurance 600.
4. Provide for outstanding expenses : Salary 7 2,000, Wages 1,000, 700.
Advertisement
5. Stock on 31st March 2018 was valued at 1.20,000.
6. Goods costing 76,000 were destroyed by fire and the Insurance
for 3,800. Company has admitted a cla
7. Partners share profit and losses equally.
Solution
Statement of Assets and Liabilities as at 31-3-2018
Particulars
Sch.
cONTRIBUTION AND LIABILITIES
1. Partners' Funds
Contribution Received 3,06,000

1
2. Liabilities
Creditors/ Trade Payables **
2
1,81,700

Total 4,87,700
 o u n n g

Eor
F o r L

Limited Liability Partnership

335
S S E T

Fixed.Assets
GrOnepreciation and Amortüzation 1,45.000
Less.

N e tF i x e d A s s e t s
B.000)
* *
1,37,000
Advances 3
Loan a n d 600
Inventories
1,20,000
/Trade Receivables
Debto 1,48,750
nd Cash Equivalents 77,550
Cash
OtherA s s e t s
3,800

Total *** *** *** *** ***

4,87,700

, Statement of IIncome and Expendture for the perlod from 1-4-2017 to 31-3-2018
Partculars
Sch.

I n c o m e

Net Turnover 9 3,95,000

10(1,00.000)
Increas
/ (Decrease) in Stocks
** *** *° **" ***
2,95,000
Total
Expenses 2,69,500
made for Resale ** *** ** ***' **"
11
Purchases 12 31,000
Personnel Expenses
13 13,000
Aministrative Expenses 11,950
14
Selling Expenses
15 ,400
Insurance Expenses
16 8.000
Depreciation and Amortization **** *' ''***

8,700
*** **" ** ****
17
Other Expenses 3,44,550

Total 18 (49,550)
transferred to Partners' Account
Profit/(Loss)

Schedules/Notes to Accounts
1. Contribution
Mohan 2,00,000
Balance b/d (24.775)
1,75,225
Less: Net Loss 1,60,775
(14,450)
Less: Drawings
1,80,000
Sohan: (24.775)
Balance b/d 1,55,225
Less: Net Loss (10.000) 1,45.225

3,06,000
Less: Drawings
138,000
2. Creditors/Trade Payables * * *** **
40,000

Sundry Creditors 1,000

***

Bills Payable * * *** *

2,
700
Wages Outstanding
Salary Outstanding 1,81,700
Advertising Outstanding9

3. Flxed Assets Gross Depi. WDV

sets 25,000
25,000
3,000 17,000
tangible 20,000
*ndwM 5,000 95,000
tents
an gible
1,00,000
8,000 1,37,000
1,45,000
arhi
Olal
nery
 ing For Limited Liability Partnership
335
troun

ASSET

Gross Fixed Assets

1,45.000
Depreciation and. Amortization ** *** ** ** 8.000)
Net
Less

Fixed.Assets 3 1,37,000
*** ***
Loans a n d A d v a n c e s 600
inventories 5 1,20,000
pebtors/Trade Receivables 6 1,48,750

and Cash Equivalents

77,550
Cash * *
Other Assets ** *** *** ** **
3,800
4,87,700
Total

statement of Income and Expenditure for the perlod from 1-4-2017 to 31-3-2018

Sch.
articulars

Income 3,95,000
Net Turnover

Increase/(Decrease) in Stocks 10 (1,00,000)

2,95,000
Total
Expenses 11 2,69,500
Purchases made for Resale 12 31,000
Personnel Expenses 13 13,000
Aministrative Expenses 14 11,950
Selling Expenses 15 2,400
Insurance Expenses 16 8,000
* *
Depreciation and Amortization 17 3,,700
Other Expenses 3,44,550
Total 18 (49,550)
Profi/(Los8) transferred to Partners' Account

chedules/Notes to Accounts
1. Contrlbutlon
Mohan 2,00,000
Balance b/d (24.775)
Less Net Loss 1,75,225
(14,450) 1,60,775
Less: Drawings
Sohan 1,80,000
Balance b/d (24.775)
Less: Net Loss 1,55,225
1,45.225
(10.000)
Less Drawings 3,06,000

2. Creditors/Trade Payables 138,000

Sundry Creditors *****
40.000
1,000
Bills Payable
Wages Outstanding **** *** *** *** 000
Salary Outstanding
700
Advertising Outstanding
1.81,700

3. Flxed Assets
Gross Depr. WDV
sets
25,000 25,000
tangible 20,000 3,000 17,000
0odwil
atents 1,00,000 5,000 95,000
angible
achinery 1,45,000 8,000 1,37,000
tal
 FinancialAccounting (1.YB. Com.:: SE
SEM-VI)
336

4. Loans and Advances *** *

Pre-paid Insurance 600
5. Inventorles 1,20,000
6. Debtors/Trade Receivables 1,25,000b
Debtors 6.250)
Less Reserve for D.D. 1,18,750
Bills Receivable 30,000
1,48,750
Cash and Cash Equlvalents
Cash in Hand 2,550
Cash at Bank
* * **
75,000
T7,550
8. Other Assets
Insurance Claim Receivable 3,800
9. Turnover
Gross
****

4,00,000
Less: Returns Inward (5.000)
3,95,000
10. Increase/(Decrease) in Stocks
Closing stocks
** ** ** *** **
1,20,000
Less: Opening stocks
** ** ** * ** **
(2.20,000)
K1.00.000)
11. Purchases
Gross 2,80,000
Less: Retuns Outward 4500) 2,75,500
Less Goods lost by fire (6,000)
2,69,500
12.Personnel Expenses
17.000
Wages 18,000
Add: Outstanding 1.000
Salaries 11,000
2.000 13,000
Add: Outstanding
31,000
13.Administrative Expenses
3,500
Factory Rent
9,500
Office Expenses
13,000

14. Seling Expenses

Advertisement 5,000
,700
Add: Outstanding 700
Reserve for D. D. **
6,250
11,950
3,000
15. Insurance (600)
Less: Pre-paid
2,400

16. Depreciation 5,000

Machinery (5% of 1,00,000) *** *** * *

3,000

Patents (15% of 20,000) ....

8,000

17.Other Expenses 6,500

General Expenses * * * 2,200

Lossby Fire (6,000 3,800) *
8,700

18.Profit 1 (Loss) transterred to Partners' Account 24,775

Mohan (1/2) 24,775

Sohan (1/2) **
(49,550)
 ng For Limi
Liability Partnership
37
Closing Stock, Goods tor Personal
6: (Value of
Mahesh patners sharing profts and losses 2:1.Use, Goods Lost by Fire) an
are

2018 Following is the Trial Balarce

Trial Balance as on 31-3-2018
ars

r Building
Dr Cr
55,000
and Wages 40,000
21,000
B a n k

n hand
40,000
1,100
ans

ce Expenses
20,000
r e s i s Capital
,000
1,16,000
Eresh s Capital
62,000
rage 5,000
Prcrases
2,20,000
e r n Outward
5,500
2,80,000
e t n inward 2,000
B d debts * " * ' *"' **.
1,000
erors *** *** *** *** *** 32,800
20,000
Credtors * * * *** ***

Renit
' ** *' 1,100
sPayable
35,000
Traveling Expenses (Salesmen) 7,000
Sock (1-4-2017) 30,000
* * *"' ***
1,500
nsurance
* * * *** 8,000
Discount 12,000
** ***** ***

dvertisement
20,000
Furniture
5,18,500 5,18,500

Mdjustments: 7
stock was ? 41,000 and its market price was 42,000.
On 31-3-2018 the cost price of closing use were not entered in the books of
Goods worth 5,000 taken over by Ramesh for personal
2
accounts. to pay 7 4,000 in full
Insurance Co. agreed
3 Goods worth 5,000 were destroyed byfire and
setlement of the claim.
7 100 and Salary 7 500.
Outstanding expenses Rent : on furniture.
10% on machinery and 5%
.Provide depreciation debts on debtors.
800 for Reserve for doubtful
Provide and Profrt and LosS ACCount
for the year ending 31-3-2018 and
You are required to prepare Trading the above adjustments.
after considering
e Balance Sheet as on that date

Solution
Assets and Llabllitles as at 31-3-2018
Statement of
Sch.
articulars
CONTRIBUTION AND LIABILITIES

Partners' Funds 1 1,92,500

Contribution Received
Liabilities
Creditors/ Trade Payables
** ** 2 55,600
2,48,100
Total
ASSET * * * ***
1,35,000
Gross Fixed Assets (5,000)
Amortization
Depreciation and 1,30,000
ess: ** * **

Net Fixed Assets * *** 41,000

Inventories
 Financial Accounting (1. Y. B.Com. : SEM.
338
Debtors/Trade Receivables
* * *** *

32,000
Cash and Cash Equivalents
** *
41,100
4,000
* ***

Other Assets
Total
*

2,48,100
perlod from 1-4-2017 to 31-3-2018
Statement of Income and Expend ture for the

Sch.
Particulars
1. Income
Net Turnover
** "* **

9
2,78,000
Increase/(Decrease) in Stocks
***

11,000
Total 2,89,000
2. Expenses 10
Purchases made for Resale
* * *

2,04,500
11 21,500
Personnel Expenses 12
Aministrative Expenses
* **' ***** '

2,200
13 33,800
Selling Expenses 14 1,500
Insurance Expensees
Depreciation and Amortization
15 5,000
16 1,000
Other Expenses
Total 2,69,500
17 19,500
3. Profit transferred to Partners' Account

Schedules/Notes to Accounts
1. Contribution
Ramesh
1,16,000
Balance b/d
13.000
Add Net Profit
1,29,0000
Less Goods taken (5.000) 1,24,000
Mahesh
Balance b/d 62,000
Add Net Profit 6.500 68,500
1,92,500
2. Creditors/Trade Payables
20,000
Sundry Creditors
35,000
Bills Payable 500
*** ** *
Salary Outstanding9 100
Rent Outstanding
55,600

3. Flxed Assets
WDV
Tangible Assets Gross Depr.
55,000
Land & Building 55,000 20,000
Motor Vans 20,000 36,000
Machinery 40,000 4,000
19,000
Furniture 20,000 1,000
| 1,35,000 5,000 1,30,000
Total
41,000
4. Inventorles
5. Debtors/Trade Recelvables 32,800

Debtors (800)
Less: Reserve for D.D.
32,000

6. Cash and Cash Equlvalents 1,100

Cash in Hand 40,000
Cash at Bank ***

41,100
 imited Liability Partnership
339
p n e rA s s e t s

nce Ciaim Receivable

nsure

Turnover 4,000
ross

Returns Inward 2,80,000

(2,000)

Se/(Decrease) in Stocke 2,78,000

e2
Increase/
cosing Stocks
41,000
5 s Opening Stocks
(30,000)
11,000
Purchases

r O s s 2,20,000
Less Returns Outward
(5,500)
e s s
Goods lost by Fire (5.000)
Goods taken by Partner
Less:
(5,000)
2,04,500
1 ,Personnel Expenses
21,000
Salanies & Wages
500
Add:Outstanding
21,500

2Administrative Expenses
1,000
Ofice Expenses
1,100
Rent 1,200
Add: Outstanding
100
2,200

Seling Expenses 5,000

Carnage 1,000
Bad Debts
**
800
Reserve for D. D. 7,000
Travelling (Salesmen) 8,000
Discount 12,000
Advertisement 33,800

1,500
14. Insurance
4,000
5.Depreciation 1,000
Machinery (10% of 40,000)
Fumiture (5% of 20,000) 5,000

1,000
. Other Expenses

Loss by Fire (5,000- 4,000)

Partners' Accountt
13,000
transferred to
**

rOfit 6,500
Ramesh (2/3)
19,500
Mahesh (1/3)
 IHustration 17: (Revaluation of
Furnlture, Unrecorded Purchases)
From the following Trial Balance of A and B and
Profit and Loss Account for the given adjustments, prepare Trading Account,
a
year ended 31st March 2018 and a Balance
sheet as on that date.
Trlal Balance as on 31st March 20188

Debit Balances Credit Balances

Stock
25,000 Sales
Purchases 1,70,000| Returns 4,30,000
A's Drawings 3,000
B's Drawings 10,000 Discount
10,000 Creditors 3,500
Returns 2,500 A's Capital 35,000
Sundry Expenses 500 B's Capital 1,20,000
Wages 23,000 Bills Payable 90,000
Salaries 45,000 15% Bank Loan 45,000
ravelling Expenses 6,000 (Taken on 1-7-2017) 50,000
dvertising
Rent 10,000
6,800
nsurance
Bad Debts 4,000
3,200
Uscounts 4,000
 Financial Accounting (T.YB.Com. : 1-VI)
368

Commission 6,300
Buildings 1,30,000
Machinery 1,20,000
Furniture 50,000
Sundry Debtors 45,000
Cash 5,000
Bills Receivable 50,000
Goodwill 50,200

7.76,500 7,76,500
Adjustments
(1) Stock on 31-3-2018 was valued at 7 64,500
(2 Depreciate Building by 10%, Machinery by 15%. Furniture was revalued at thne end of the year at

7 40,000
(3) Provide 7 3,500 as further Bad debts and R.D.D. is to be maintained at 5% on debtors.
(4) Outstanding Expenses were-wages7 11,000. Rent 4,000 and prepaid insurance 2,000.
(5) Interest on capital is to be provided at 10% p.a. and interest on drawing is to be ignored.

(6) Purchases on credit of T 10,000 are not recorded in the books.

Solution
Statement of Assets and Liabilities as at 31-3-2018

Sch.
Particulars
I. cONTRIBUTION AND LIABILITIEs
1. Partners' Fundss
Contribution Received **** '* ***
3,09.500
2. Liabilities
Secured Loans 55,625
Creditors/ Trade Payables 1,05,000
Total 4,70,125
II. ASSETT
Gross Fixed Assets 3,50,200
Less Depreciation and Amortization 41.000)
Net Fixed Assets 4 3,09,200
Loans and Advances 2,000
Inventories *** *** "** **"

*" 64,500
Debtors/Trade Receivables 89,425
Cash and Cash Equivalents *** *** *** ** ***
5,000
Total 4,70,125
Statement of Income and Expend ture for the period from 1-4-2017 to 31-3-2018

Particulars Sch.
1. Incomne
Net Tumover ** *** *** *
8 4,27,500
Other Income * ** 9 3,500
Increase/(Decrease) in Stocks 10 39,500
Total 4,70,500
2. Expenses
Purchases made for Resale **** *** ***
11 1,77,000
Personnel Expenses * *"** 12 79,000
Administrative Expenses 13 16,800

Selling Expenses 14 29,075

Insurance Expenses 15 2,000
Depreciation and Amortization * " *"** 16 41,000
Interest 17
5,625

500
Other Expenses * * **** 18
Total *** *a* *** ***
3,51,000

3. Profit transterred to Partners'Account 19 1,19,500

 unting For Limited Liability Partnership 369

aules/Notesto Accounts

Contribution

A
B1lance b/d (Opening) 1.20.000

Add (Less): Net Prott/(Loss) * * ** ** ***

49 250

Add: Interest on
Capital 12.000
*** ******
Less: Drawings ** (10,000)
Net Balance ***** *** ** **
1.71.250

Balance b/d (Opening) ** **

90,000
Add/(Less): Net Protit/(Loss) * * ***
49.250
Add Interest on Capital ** ** ** ** ***
9,000
Less: Drawings ** *** *** * * * * (10,000)
1.38.250
Net Balance ** *** ** * **

3,09,5000
Total * ** ***

Secured Loans
Bank Loan ** ** '* * ***
50.000
5,625
Add : Interest Accrued
*** ** * ** **

55,625
Total
*** *** **

Creditors/ Trade Payables

35.000
Sundry Creditors 10.000 45.000
Add: Unrecorded Purchases
45.000
Bills Payable 11.000
*** *** *

O's Wage *** *** ** ** **

4,000
Os Rent
1,05,000
Total
Fixed Assets
WDV
Gross Depr.
ixed Assets
Tangible Assets 1,30,000 (13.000) 1,17.000

Building 1,20,000 (18.000) 1,02.0000

Machinery 50.000 (10.000) 40.000

Furniture 3.00.000(41.000) 2.59.000
Total
Intangible Assets 50.200
50.200
Goodwill 3,50,200 (41,000) 3,09,200
Total (i +i)
Loans and Advances * * *** * 2,000
Pre-paid Insurance
Inventories **
64,500
Closing Stock
Debtors/Trade Receivables 45,000
Debtors (3.500)
(2.075) 39.425
Less Bad Debts
Debts 50,000
Less: Reserve for Doubtful
Bills Receivable 89,425
Total
4,30.000
Turnover
*** *** ** ** ***

(2.500)
Gross
* * ** *** ***

4,27,500
Less: Returns Inward
Total 3,500
Other Income
Discount
 370 FinancialAccounting (TT YB.Com. :
SEM-V)
10.Increase / Decrease In Stock
Closing Stock 64,500
Less : Opening Stock
Total
(25,000)
11. Purchases
39,500
Purchases (Gross) *** ***

1.70,000
Add Unrecorded 10,000
Less : Return Outward
Total
(3,000)
1,77.000
* *

12. Personnel Expenses

Wages 23,000
Add Outstanding 11.000 34,000
Salaries 45,000
Total 79,000
13. Administrative Expenses
Rent 6,800
Add Outstanding 4.000 10,800
Travelling9 6,000
Total 16,800
14. Selling Expenses
Advertisement 10,000
Commission 6,300
Bad Debts (T.B.) 3,200
Additional Bad Debts 3,500
New Reserve for DD 2,075
Discount Allowed 4,000
Total 29,075
15. Insurance 4,000
Less Prepaid (2,000)
Total 2,000
16. Depreciation and Amortization
Land and Building 13,000
Plant and Machinery 18,00
Furniture 10,000
Total 41,000
17.Interest
Interest on Loan 5,625
18.Other Expenses
Sundry Expenses 500
19. Profit Transferred From P & L A/c 1,19,500
Less: Interest on Capltal
Shriram (12,000)
Shridhar 9.000) (21,000)
Total 98,500
A 49,250
B 49,250

Profit Transferred to Partners 98,500

 374 Financial Accounting (1EYB.Com : SEM-V

17.2 ILLUSTRATIONS
17.2.1 Conversion of Partnership Fims into LLP
lustration 17 (Basic)
Following is the Balance Sheet of Prem & Co. as at 31st March, 2019:

Liabilities ASSets

Capital Computers 10,000

Prem 11,500 Furniture 5,000
Anil 11,500| Inventory 000
Creditors 5,000 Debtors 6,000
Bills Payable 5,000 Bank 2,000
Cash 1,000
33,000 33,000
Prem& Co. was converted to Prem LLP from that date.
Terms of conversion were as follows
(a) Computers were valued at 7 12,000.
(b) Furmiture was not taken over by LLP.
(c) A resenve of 5% is to be created on debtors.
(d) Goodwill was valued at 7 10,000.
(e) The LLP also assumed other Assets and Liabilties of old fim at book value. Show necessary
Ledger accounts in the books of old firm. (SYBCom, IDOL, Aprll 2016, adpated)
Solution:

Calculation of Purchase Consideration

Assets Taken Over
Computers ****** *** *** **
12,000
Debtors ****" *** ** **
6,000
Inventory 9,000
Bank 2,000
Cash 1,000
Goodwill ****** 10,000
(A) 40,000
Liabilities Taken Over
R.D.D. (5% x 6,000) 300
5,000
Bills Payable
5,000
Creditors
10,300
(B)
Purchase Consideration (= Capital tfd.) (A- B) 29,700
BOOKS OF PREM& COo.
Realisation Account Cr.
Dr.

Particulars Particulars
To Assets: By Liabilities
5,000
Computers 10,000 Creditors
5,000
Furniture 5,000 Bills Payable
2,500
Debtors 6,000 By Prem (Fumiture) 2,500
Inventory 9,000 By Anil (Fumiture) 29,700
Bank 2,000 By Prem LLP (P.C.)
Cash 1,000
To Profit:
Prem 5,850
Anil 5,850 44,700
44,700
 ing For Limiled Liability Partnership
375
Partners Capital Account
Cr.
Prem Anil Particulars Anil
Prem
asaDon Ac
2.500 2.500 By Balance B/d 11.500 11,500
By Realisation (Proft) 5 850 5.850
Ptd) 14 850 14,850
Alc

17.350 17.350 17.350 17.350

Prem LLP Account Cr.

Cars
Particulars
.aisabon Ac (P.C.)
29.700 By Prem's Capital (td. to LLP) 14,850
By Anil's Capital (tfd. to LLP) 14,850

2329.700 29.700
usration 18 (Investment Fluctuation Reserve)
CSconvered into AB LLP with efect from 1-4-2019. Their balance sheet as on 31-3-2019

abties
Assets
1,00.000 Land and Building 2,80.000
Cacta 2.00.000 Stock 3,00.000
a Reserve 1.00.000 Debtors 2,00,000
1.20,000
smntFluctuation Reserve
7.50.000|
Cash and Bank Balance
3,00.000
50,000 Investments

12.00.000 12.00.000
comversion was subject to the folowing tems
e assets and all the iabites of the firm shall be taken over by the LLP
and and Building shall be appreciated by 20%.
:Stock shal be increased by 7 50.000
Debtors shall be decreased by 7 10,000.
Goodwill of shail be valued at 1.00.000.
Tvestments shall be taken over at 7 2.80.000.

2quired to prepare:
Statement showing caiculation of purchase consideraton.
Reaisation A/c and Partners' Capital A/c in the books of AB & Co.

Solution
Calculation of Purchase Consideration

Panticulars
Assets taken over
a&Buiding (120% of 2,80.000)
** ** **' ***
3,36.000
** '** 3,50.000
LEors
** *** ** ** ***
1,90,000
1,20.000
asn&Bank 2.80.000
vestments
** *** *** *** ***

1.00.000
13.76.000
Less Creditors * * * ** **

7.50.000
6,26.000
urchase Consideration (=Capitaltfd)
376 Financial Accounting (EYB.Com. :SEM-V)
(2) IN THE BOOKS OF AB & CO.
Dr. Realisation Account
Cr.
Particulars Particulars
To Land & Building 2,80,000| By Creditors
To Stock
7,50,000
3,00,000 By Investment Fluctuation Reserve 20,000
To Debtors 2,00,000 (Note)
To Cash & Bank 1,20,000 By AB LLP (P. C.)
To Investments
6,26,000
3,00,000
To Capital Account
A (1/2) 98,000
B (1/2) 98,000 1,96,000

|13,96,000 |13,96,000
Dr. Partners' Capital Accounts Cr.
Particulars A Particularss B

To Capital in AB LLP
(tfd.)2,63,000 3,63,000| By Balance b/d 1,00,000 2,00,000
By General Reserve 50,000 50,000
By Investment Fluctuation
Reserve 15,000 15,000
By Realisation (Profit) 98,000 98,000
2,63,000 3,63,000 2,63,000 3,63,000
Note: Investment Fluctuation Reserve to the extent of
20,000 (3,00,000 2,80,000) is transferred
-

to Healisation A/c. Balance the nature of 'reserve' is credited to Parthers' Capitals.

being in
Ilustration 10./PanilnonTIn L.
 ting For Linmited Liability Partnership
untin
379

21: (Goodwll Valuation; Credtors Pald; Patents Sold)

ustration 2 1 :(Goc

d Kunal are parthers sharing profits and loss in the ratio of 3: 2. They decided to convert
Audraa n d K u n a l

businesS
into aa L
ess into LLP, AK LLP on 31-3-2019, when the balance sheet stood as under:
neir
LIabltles
Assets
Capita. A c c o u n t s Land and Building 80,000
70,000 Plant and Machinery 60,000
Rudra
21,000
Kunal
50,000 1,20,000 Furniture
18,000
Reseve Fund 30,000 Patents
24,000
Loan Creditors 80,000 Stock
16,000
Sundry C r e d i t o r s 33,000 Bills Receivable
28,000
Sundry Debtors
16,000
Cash at Bank
2,63,000
2,63,000
the LLP
are agreed upon by
order to arrive at the purchase consideration, the following terms
In
over Sundry Creditors.
a) The
LLP will take over the loan creditors but will not take and all
72,000 and Stock 7 32,000
and Buildings will be valued at 7 95,000, Machinery are valued at
(D) Land at their book values. Patents
taken (except cash and patents)
other assets
25,000 and realised in cash. three
will be valued at 2 years' purchase of the average
profit of the last
of the firm each year
c) The goodwill three after setting aside 10,000 to
Reserve Fund
The protits for the last years
years.
were asfollows:
2012-7 44,000; 2013 7 52,000;2014-7 60,000in the books of the firm
assuming that all
the
accounts
You are required to show the necessary distributed equally and
the
cash, if any, was
transactions have been duly completed and surplus
in the new LLP.
balance was adjusted by the capitals
Solution
and Kunal
In the Books of Rudra
Valuation of Goodwil

Particulars aside ? 10,000

three years after setting 1,56,000
Total Profits for the last + 52,000 + 60,000)
to General
Reserve (44,000
x3)
* * * *** 30,000
Reserve Fund (10,000
Add: Amount transferred to ' ** * ** 1,86,000
three years 62,000
Total Profts for the last (1,86,000/3)
for the last three years
Average Profts 62,000 x 2).. 1,24,000
profit (
Goodwill at 2 years'purchase of average
Value of Purchase Consideration
Calculatlon of

Particulars
Assets Taken over 1,24,000
95,000
Goodwill ** *** * ***'*|

Land and Building *** * 72,000

Plant and Machinery ** *** ** **'* **
21,000
Furniture 32,000
Stock ** *** 16,000
Bills Receivable 28,000
Sundry Debtors
(A) 3,88,000

Liabilties Taken over

Less: *** ** ** *** ***
80,000
Loan Credtors
(B) 80,000
Captals tfd.) (A B)
Purchase
Consideration ( 3,08,000
38O FinancialAccounting (1Y.B.Com. : SEM-V

Kunal
In the Books of Rudra and
Dr. Realisation Account Cr
Particulars
Particulars
To Land and Building 80,000 By Loan Creditors 80,000
To Plant and Machinery 60,000 By Sundry Creditors 33,000
To Furniture 21,000 By RK LLP 3,08,000
To Patents 18,000 (Purchase Consideration)
To Stock 24,000 By Bank (Sale of Patents) 25,000
To Bills Receivable 16,000
To Sundry Debtors 28,000|
To Bank (Sundry Creditors) 33,000
ToProfit on Realisation:
Rudra 99,600
Kunal 66,400 1,66,000
4,46,000| | 4,46,000
Dr. Partner's Capital Account Cr.
Particulars Rudra Kunal Particulars Rudra Kunal

To Bank 4,000 By Balance b/d

4,000 70,000 50,000
To Capital in RK LLP
1,83,600 1,24,400 By Reserve Fund 18,000 12,000
By Realisation A/c (Profit) 99,600 66,400
1.87 600 1.28,400 1,87,600 1,28,400
Dr. Bank Account Cr.

Particulars Particulars
To Balance b/d
16,000 By Realisation A/c (Creditors) 33,000
To Realisation Alc 25,000 By Rudra's Capital A/c 4,000
By Kunal's Capital A/c 4,000
41,000
Dr.
41,000
RK LLP Account
Cr.
Particulars 7 Particulars
To Realisation A/c (P.C) 3,08,000 By Rudra's Capital Alc in 1,83,600
By Kunal's Capital A/c in LLP 1,24,400
3,08,000 3,08,000
17.2.2 Balance Sheet of LLP after Conversion
llustration 22
Ranjit, Manjit and Paramjit are equal partners of M/s. Hindal & Co. The
on 31-3-2019 was as follows Balance Sheet of the firm as

Liablitles Assets
Capltal Account Fixed Assets
Ranjit 50,000 Land
Manjit 1,00,000| Building 50,000
Paramjit (Dr. Bal.) (30.000)1,20,000 Plant and 70,000|
Loan from Bank Machinery 2.00.000 3,20,000
Creditors 5,00,000 Current Assets
1,00,000| Stock
Debtors 3,00,000
Total 1.00,0004,00,000
|7,20,000 Total 7,20.000
 For Limited Liability Partnership
381
4 is decided to convert the
partnership into Hindal LLP on the foll owing terms
be revalued at ? 1.50,000
d to
3and Machinery to be revalued at 7 2,50,000.
3ation amounting to 20,000 to be written off on Building.
epreciati

4rOVISIon of 10
10% of book value to be made for obsolete
stocks.
tfui debts to be made at 10% of the
for doubtfu
4OVISion
debtors.
Ount ot 6% would be eamed on creditors when paid out.
atner will have capital of 7 72,000 in the LLP as purchase consideiration.
ach

henecessary Ledger Accounts to close the books of Hindal & Co. and show the opening
E e Sheet of the new LLP. Allpartners are solvent and have sutficient ca:sh resources as may
ceSsary to settie the respective accounts.

Solution:

In the Books of Hindal& Co.

Realisation Account Cr.

Fcular Particulars
5,00,000
TLand AC 50,000 By Loan from Bank A/c
To Building A/c 70,000| By Creditors A/c 1,00,000
2,16,000
Plant and Machinery Alc 2.00,000 By Hindal LLP A/C
(Purchase Considerati on)
TStock A/c 3,00,000
To Debtors Ac 1,00,000
To Partners' Capital Ac
32,000
Ranjit
32,000
Manjit 32,000
Paramjit
8,16,000
8.16,000
Partners' Capital Accounts Cr.
Dr.
Manjit Paramjit Particulars Ranit Manijit Paramjit
Particulars Ranjit

By Balance b/d
30,000 50,000 1,00,000
To Balance b/d Realisation A/c 32,0 00 32,000 32,000
To Capital in LLP 72,000 72.000 72,000 By (Profit)
To Bank A/C 10,000 60,000 By Bank A/c
(Final Payment) (Cash brought in) 70,000

82.000 1.32,000 1.02,000 82,000 1,32,000 1,02,000

Cr.
Bank Account
Dr.
Particulars
10,000
Particulars
AlC
70,000 By Ranjit Capital A/c 60,000
To Paramjit Capital By Manjit Capital A/c
70,000
70.000
Hindal LLP
Liabilities as at 31-3-2019
Statement of Assets and

Sch.
Particulas
AND LIABILITIES
cONTRIBUTION
.1. Partners' Funds

Contribution Received
1 2,16,000

2. Liabifities

S e c u r e d Loans
* * * * * 5,00,000
Creditors/ Trade Payables ****
*** *** *** 9,64,000

Total
*** **' ** *** ***

8,10,000
 Pnanctal dccownting (7ER.Com. :SEM.

. A8BET
Net Fixed ANaet 4,50,000
kventorie 2,70,000
Debtua 1rade Recalvables 90,000
Total 8,10,000
Shedules /Notes tAecounte
1. Contritbutlon
Ranjit 72,000
Manjit 72,000
Paramjit 72,000
Total
2. Net Flxed
*** *** ** ** ***

2,16,000
Auseti
Tangible
Land 1,50,000
Bullding 50,000
Plant and Machinery 2,50,000
Total 4,50,000
Working Notes
1. Calculatlon of Purchase Conslderatlon

Particulers
Assete taken over:
Land 1,50,000
Building R 70,000 20.000) 50,000
Plant and Machinery 2,50,000
Stock *** **" ** ** "
2.70,000
Debtors(1,00.000-10,000) 90,000
(A) 8,10 ,000
Less: Llablltles tak en over:
Loan from Bank ** ** **
5,00,000
"*
Creditors (R 1,00,000 6,000) 94,000
(B) 5,94,000
Purchase Conslder atlon ( Capltals td.) (A B) 2,16,000
2. Diecharge of Puirchase Conslderatlon by Credit to Captals
Ranjit 72,000
Manjit 72,000
Paramjit 72.000
Totat 2.16.0000
llustratlon 23
A, B and C who are partners in a fim sharing profits and losses in the ratio of 2:2 :1
decided to convert th elr tim into X LLP. The Balance Sheet of the fim on respectively
the date of conversion
shows the following fosition.
Balance Sheet as of M/s A, B and C as on 31-3-2019
Liablitles Assets
Sundry Creditors 12,000| Building 15,000
Bills Payable
General Roserve
750 Plant and Machinery 9,000

3,000 Motor Van 6,000

Capttal Accounts Furniture 1,250

B 15,000 Stock 2,350

C 14,000 Sundry Debtors 13,000

8,500 Investment 3,000

Cash at Bank 3,650

53,250 53,250