ACCOUNTANCY - XII 2024-25

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SUMMER BREAK HOLIDAY HOMEWORK
ASSIGNMENT- 03 & 04
CHAPTER: CHANGE IN PROFIT SHARING RATIO
&
ADMISSION OF A PARTNER

GENERAL INSTRUCTIONS:
 ASSIGNMENTS NEEDS TO BE DONE IN THE ASSIGNMENT REGISTERS ONLY.
 DATE OF SUBMISSION IS 03RD OF JULY 2024.

CHAPTER -03 [CHANGE IN PROFIT SHARING RATIO]

LEARNING OBJECTIVES:
⇒ I can understand the meaning of Reconstitution of a Partnership firm.

⇒ I can determine the sacrificing and the gaining ratio.

⇒ I can understand the Accounting of goodwill.

⇒ I can understand the Accounting treatment of Reserves, Accumulated Profits and Accumulated Losses.
⇒ I can revalue the Assets and Re-assess all Liabilities.
⇒ I can learn the preparation of Revaluation Account, Partner’s capital and Balance sheet.

PRACTICAL PROBLEMS:
1. A, B and C were in partnership sharing profits in the ratio of 4:3:1. The partners agreed to share future profits
in the ratio of 5:4:3. Calculate each partner’s gain or sacrifice due to change in ratio.
[Ans – A sacrifices 2/24, B sacrifices 1/24 and C gains 3/24]

2. P, Q and R are partners sharing profits equally. They decided that in future R will get 1/5 th share in profits. On
the day of change, firm’s goodwill is valued at ₹3,00,000. Make the necessary journal entry.

3. X, Y and Z are partners sharing profits in the ratio of 4:3:2. From April 1, 2022, they decided to share the
profits equally. On that date their books showed the following items:
Profit & Loss Account (Cr.) - ₹1,20,000
General Reserve - ₹45,000
Workmen compensation reserve - ₹60,000
Advertisement suspense account (Dr.) - ₹90,000
Pass necessary journal entries.
4. Hari and Ravi are partners in a firm sharing profits in the ratio of 5:3. On march 31, 2020, their Balance sheet
showed a general reserve of ₹80,000, On 1st April 2020, they decided to admit Mohan as a new partner. The
new profit sharing ratio between Hari, Ravi and Mohan will be 5:3:2.
Record the necessary Journal entry in the books of the firm in the following cases:
(i) When they want to distribute the general reserve.
(ii) When they do not want to distribute general reserve.

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5. Dinesh, Ramesh and Suresh are partners in a firm sharing profits and losses in the ratio of 3:3:2. From 1st
April, 2018 they decided to share the future profits equally. On this date, the General reserve showed a
balance of ₹1,60,000; Revaluation of fixed assets resulted into a gain of ₹1,02,000 and stock resulted into a
loss of ₹22,000. On this date the goodwill of the firm was valued at ₹3,60,000.
Pass necessary journal entries for the above transactions on reconstitution of the firm.

6. A, B and C sharing profits and losses in the ratio of 4:3:2, decide to share profits and losses in the ratio of
2:3:4 with effect from 1st April, 2021. Following is an extract of their balance sheet as at 31st march, 2021:
Liabilities ₹ Assets ₹
Investment Fluctuation Reserve 54,000 Investments (at cost) 6,00,000
Show the accounting treatment under the following alternative cases:
(i) If the market value of investments is ₹5,28,000.
(ii) If the market value of investments is ₹6,60,000.

7. P, Q and R were partners sharing profits in the ratio of 1:3:2. Following was their Balance sheet as at 31st
march, 2022:
Liabilities ₹ Assets ₹
Sundry creditors 2,80,000 Land and Building 5,00,000
Outstanding Expenses 15,000 Investments (M.V - ₹1,10,000) 1,25,000
Workmen Compensation Reserve 60,000 Stock 2,20,000
Investment Fluctuation Reserve 45,000 Sundry Debtors 3,20,000
Capital Accounts: Bank balance 1,60,000
P - 2,00,000 Advertisement Suspense 75,000
Q – 5,00,000
R – 3,00,000 10,00,000
14,00,000 14,00,000
st
On 1 April, 2022 they decided to share future profits in the ratio of 4:6:5. It was agreed that:
(i) Claim for Workmen Compensation has been estimated at ₹1,00,000.
(ii) A motor cycle valued at ₹30,000 was unrecorded and is now to be recorded in the books.
(iii) Outstanding expenses were not payable anymore.
(iv) Value of stock be increased to ₹2,90,000.
(v) A provision for doubtful debts be created @5% on sundry debtors.
(vi) Goodwill is valued at ₹1,00,000.
(vii) The work of reconstitution was assigned to firm’s auditors. They were paid ₹20,000 for this
work.
Pass Journal entries and prepare Revaluation Account. [Ans – Gain on Revaluation - ₹39,000]

8. Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1 . From 1st April,
2018, they decided to share profits and losses equally. The Partnership Deed provides that in the event of any
change in the profit-sharing ratio, the goodwill shall be valued at three years' purchase of the average profit
of last five years . The profits and losses of the past five years are:
Profit—Year ended 31st March, 2014—₹ 1,00,000; 2015—₹ 1,50,000; 2017—₹ 2,00,000; 2018—₹
2,00,000;
Loss—Year ended 31st March, 2016—₹ 50,000.
Pass the journal entries showing the working. [Goodwill - ₹3,60,000; Abbas (Dr.) - ₹60,000 , Mandeep (Cr.) -
₹60,000]

9. A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 . They decided to share profit w.e.f. 1st
April, 2018 in the ratio of 5 : 3 : 2 . They also decided not to change the values of assets and liabilities in the
books of account . The book values and revised values of assets and liabilities as on the date of change were as
follows:
Book value (₹) Revised value (₹)
Machinery 2,50,000 3,00,000
Computers 2,00,000 1,75,000
Sundry Creditors 90,000 75,000
Outstanding Expenses 15,000 25,000
Pass an adjustment entry. [Ans – Gain on Revaluation ₹30,000]

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10. Balance Sheet of X and Y , who share profits and losses as 5 : 3 , as at 1st April, 2017 is :

Liabilities ₹ Assets ₹
X's Capital 52,000 Goodwill 8,000
Y's Capital 54,000 Machinery 38,000
General Reserve 4,800 Furniture 15,000
Sundry Creditors 5,000 Sundry Debtors 33,000
Employees' Provident Fund 1,000 Stock 7,000
Workmen Compensation Reserve 10,000 Bank 25,000
Advertisement Suspense A/c 800

1,26,800 1,26,800

On the above date, they decided to change their profit-sharing ratio to 3 : 5 and agreed upon the following :
(a) Goodwill be valued on the basis of two years' purchase of the average profit of the last three years .
Profits for 2014-15—₹ 7,500; 2015-16—₹ 4,000; 2016-17—₹ 6,500.
(b) Machinery and Stock be revalued at ₹ 45,000 and ₹ 8,000 respectively.
(c) Claim on account of workmen compensation is ₹ 6,000.
Prepare Revaluation Account Partners' Capital Accounts and the Balance Sheet of the new firm .
[Ans – Gain on Revaluation - ₹8,000; Partners capital – X - ₹60,000 , Y - ₹54,000; Balance sheet - ₹1,26,000]

CHAPTER -04 [ADMISSION OF A PARTNER]

LEARNING OBJECTIVES:
⇒ I can understand the effects of Admission of a partner.

⇒ I can calculate the new profit-sharing ratio, sacrificing ratio and the gaining ratio.

⇒ I can demonstrate the valuation and accounting of goodwill as per Accounting Standard-26.
⇒ I can illustrate the Accounting treatment of Reserves, Accumulated Profits and Accumulated Losses.
⇒ I can develop an understanding on Adjustment of capital and its accounting treatment.
⇒ I can learn the preparation of Revaluation Account, Partner’s capital and Balance sheet of the reconstituted
firm.

PRACTICAL PROBLEMS
1. Atul and Neera were partners in a firm sharing profits in the ratio of 3:2. They admitted Mitali as a new partner.
Goodwill of the firm was valued at ₹2,00,000. Mitali brings her share of goodwill premium of ₹20,000 in cash,
which is entirely credited to Atul’s capital Account. Calculate the new profit sharing ratio.
[Ans – NPR = 5:4:1]

2. S, T and U were partners in a firm. They admitted V as a new partner. S and T sacrificed 1/3 rd and 1/4th of their
share respectively in favour of V. Calculate the new profit sharing ratio of S,T,U and V.
[Ans – NPR = 8:9:12:7]

3. A and B are partners sharing profits and losses in the ratio of 4:1. They admit C into partnership for 1/6 th share
for which he pays ₹20,000 for goodwill. A, B and C decide to share future profits in the ratio of 3:2:1 respectively.
Give the necessary journal entries.

4. E and F were partners in a firm sharing profits in the ratio of 3:1. They admitted G as a new partner on 1-3-2021
for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought ₹50,000 in cash and
machinery worth ₹70,000 for his share of profit as premium for goodwill. Showing your calculations clearly,
pass necessary journal entries in the books of the firm.

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5. X and Y were partners in a firm sharing profits and losses in the ratio of 3:2. Their Balance sheet as at 31 st
March, 2021 was as follows:
Liabilities ₹ Assets ₹
Creditors 42,000 Current assets 2,00,000
Employees provident fund 20,000 Investments 50,000
Contingency reserve 30,000 Furniture 20,000
Profit and Loss Account 45,000 Machinery 90,000
Workmen compensation Reserve 18,000 Advertisement Expenditure 20,000
Investment fluctuation reserve 25,000
Capitals:
X – 1,20,000
Y – 80,000 2,00,000
3,80,000 3,80,000
They admit Z into partnership on 1st April, 2021 and the new profit sharing ratio is agreed at 2:1:1. It is
estimated that:
(i) Claim on account of Workmen’s compensation is estimated at ₹10,000.
(ii) Market value of investments is ₹46,000.
Give necessary journal entries to adjust accumulated profit and losses.

6. P & K were partners in a firm. On March 31, 2017 their Balance sheet was as follows:

Balance sheet
as at march 31, 2017
Liabilities ₹ Assets ₹
Capitals: Bank 18,000
P – 3,00,000 Stock 19,000
Q – 2,00,000 5,00,000 Debtors 22,000
General reserve 1,00,000 Less: Provision for D.D. 1,500 20,500
Creditors 50,000 Unexpired Insurance 5,000
Outstanding expenses 8,000 Shares in K Limited 65,000
C’s loan 1,20,000 Plant & Machinery 1,45,500
Profit & Loss Account 55,000 Land & Building 5,60,000
8,33,000 8,33,000
On April 1, 2017, they decided to admit C as a new partner for 1/4th share in profits on the following terms:
(i) C’s Loan will be converted into his capital.
(ii) C will bring his share of goodwill premium by cheque. Goodwill of the firm will be calculated on
the basis of Average profits of the previous three years. Profits for the year ended March 31,
2015 and March 31, 2016 were ₹55,000 and ₹1,00,000 respectively.
(iii) 10% depreciation will be charged on Plant and machinery and land and building will be
appreciated by 5%.
(iv) Capitals of P & K will be adjusted on the basis of C’s capital. Adjustment be done through the
bank and if required, overdraft facility be availed.
Prepare Revaluation A/c, Partner’s capital A/c and pass necessary journal entry.

7. The following was the Balance sheet of Ram, Shyam and Mohan sharing profits and losses in the proportion
of 6/14: 5/14: 3/14 respectively:
Balance sheet
Liabilities ₹ Assets ₹
Creditors 18,900 Land and building 50,400
Bills payable 6,300 Furniture 7,350
Reserve 7,000 Stock 29,400
Capital Accounts: Debtors 26,460
Ram. 39,900 Cash at Bank 8,890
Shyam. 33,600
Mohan 16,800 90,300
1,22,500 1,22,500

They agreed to take Sohan into partnership and give him 1/8th share of profits on the following terms:
(i) Sohan brings in ₹16,000 as his capital.
(ii) That furniture be written down by ₹920 and stock be depreciated by 10%.

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 (iii) That a Provision of ₹1.320 be made for outstanding repair bills.
(iv) That the value of land and building be written upto ₹65,100.
(v) Sohan's share of goodwill was fixed at ₹8,820. Sohan brings this amount in cash.
(vi) That the capital’s of Ram, Shyam and Mohan be adjusted on the basis of Sohan’s capital by
opening the necessary current accounts.
Give the necessary journal entries, the Revaluation Account, Capital Accounts and also the Balance sheet of
the firm as newly constructed.
[Ans – NPR = 6:5:3:2; Revaluation Profit - ₹9,520; Capital A/c: Ram - ₹48,000 Shyam ₹40,000 Mohan
₹24,000 Sohan ₹16,000; Balance sheet ₹1,59,930]

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