P,Q and R were carrying on a business in partnership, sharing profits and losses in the ratio of 5:3:2 respectively. The firm earned a profit of $ 3,60,000 for the accounting year ended 31" March, 2014 on which date the firm's Balance Sheet stood as follows: BALANCE SHEET as on 31st March, 2014 Liabilities $ Assets Ps Capital Q's Capital R's Capital 7,00,000 Freehold Land and Building 4,30,000 Furniture & Fixtures 79,400 | Stock 4,900 Debtors Cash at Bank 8,00,000 3,50,000 1,02.000 2,98,800 1,60,000 73,500 Creditors Outstanding Expenses 17,84,300 17,84,300 P died on 31st August, 2014. According to firm's partnership deed, in case of death of a partner: (1) Assets and Liabilities have to be revalued by an independent valuer. Goodwill is to be calculated at two years' purchase of average profits for the last three completed accounting years and the deceased Partner's Capital Account is to be credited with his share of goodwill. The share of the deceased partner in the profits for the period between end of the previous (ii) (ii) accounting year and the date of death is to be calculated on the basis of the previous accounting year's profits. Post death of P, Q and R will share profit in the ratio of 3: 2. Profits for the accounting years 2011-2012 and 2012-13 were as follows : For the year ended 31st March, 2012 2,90,000 For the year ended 31st march, 2013 3,40,000 Drawings by P from 1st April 2014 to be date of his death totalled $ 46,000. On revaluation, Freehold Land and Building was appreciated by $ 1,00,000; Machinery was depreciated by $ 10,000 and a Provision for Bad Debts was created @5% on Debtors as on 31st March 2014. P's sole heir was given $ 5,00,000 immediately and the balance along with interest @ 12% per annum was paid to him on 31st March, 2015, Prepare Revaluation Account, P's Capital Account and P's Heir Account, giving important working notes.
P,Q and R were carrying on a business in partnership, sharing profits and losses in the ratio of 5:3:2 respectively. The firm earned a profit of $ 3,60,000 for the accounting year ended 31" March, 2014 on which date the firm's Balance Sheet stood as follows: BALANCE SHEET as on 31st March, 2014 Liabilities $ Assets Ps Capital Q's Capital R's Capital 7,00,000 Freehold Land and Building 4,30,000 Furniture & Fixtures 79,400 | Stock 4,900 Debtors Cash at Bank 8,00,000 3,50,000 1,02.000 2,98,800 1,60,000 73,500 Creditors Outstanding Expenses 17,84,300 17,84,300 P died on 31st August, 2014. According to firm's partnership deed, in case of death of a partner: (1) Assets and Liabilities have to be revalued by an independent valuer. Goodwill is to be calculated at two years' purchase of average profits for the last three completed accounting years and the deceased Partner's Capital Account is to be credited with his share of goodwill. The share of the deceased partner in the profits for the period between end of the previous (ii) (ii) accounting year and the date of death is to be calculated on the basis of the previous accounting year's profits. Post death of P, Q and R will share profit in the ratio of 3: 2. Profits for the accounting years 2011-2012 and 2012-13 were as follows : For the year ended 31st March, 2012 2,90,000 For the year ended 31st march, 2013 3,40,000 Drawings by P from 1st April 2014 to be date of his death totalled $ 46,000. On revaluation, Freehold Land and Building was appreciated by $ 1,00,000; Machinery was depreciated by $ 10,000 and a Provision for Bad Debts was created @5% on Debtors as on 31st March 2014. P's sole heir was given $ 5,00,000 immediately and the balance along with interest @ 12% per annum was paid to him on 31st March, 2015, Prepare Revaluation Account, P's Capital Account and P's Heir Account, giving important working notes.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
Transcribed Image Text:P,Q and R were carrying on a business in partnership, sharing profits and losses in the ratio of 5:3:2
respectively. The firm earned a profit of $ 3,60,000 for the accounting year ended 31* March, 2014 on
which date the firm's Balance Sheet stood as follows:
BALANCE SHEET
as on 31st March, 2014
Liabilities
$
Assets
P's Capital
Q's Capital
R's Capital
Creditors
Outstanding Expenses
7,00,000 Freehold Land and Building
5,70,000 Machinery
4,30,000| Furniture & Fixtures
79,400 | Stock
4,900 Debtors
8,00,000
3,50,000
1,02.000
2,98,800
1,60,000
73,500
Cash at Bank
17,84,300
17,84,300
P died on 31st August, 2014. According to firm's partnership deed, in case of death of a partner:
са
(i)
(ii)
Assets and Liabilities have to be revalued by an independent valuer.
Goodwill is to be calculated at two years' purchase of average profits for the last three
completed accounting years and the deceased Partner's Capital Account is to be credited
with his share of goodwill.
(iii)
The share of the deceased partner in the profits for the period between end of the previous
accounting year and the date of death is to be calculated on the basis of the previous
accounting year's profits. Post death of P, Q and R will share profit in the ratio of 3: 2. Profits
for the accounting years 2011-2012 and 2012-13 were as follows :
For the year ended 31st March, 2012 2,90,000
For the year ended 31st march, 2013 3,40,000
Drawings by P from 1st April 2014 to be date of his death totalled $ 46,000.
On revaluation, Freehold Land and Building was appreciated by $ 1,00,000; Machinery was depreciated
by $ 10,000 and a Provision for Bad Debts was created @ 5% on Debtors as on 31st March 2014. P's sole
heir was given $ 5,00,000 immediately and the balance along with interest @ 12% per annum was paid
to him on 31st March, 2015,
Prepare Revaluation Account, P's Capital Account and P's Heir Account, giving important working notes.
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