Page 140 - MA12

M.46 Management Accounting (Section B)—ISC XII

On 1st April, 2020, Amal retired from the firm and the remaining partners decided to carry
on the business. It was agreed to revalue the assets and reassess the liabilities as follows:
(i) Building to be appreciated by 30%.
(ii) Machinery be reduced by 20%.
(iii) There were bad debts of ` 17,000.
(iv) The claim on account of workmen compensation was ` 8,000.
(v) Goodwill of the firm was valued at ` 1,40,000 and Amal’s share of goodwill be adjusted
against the Capital Accounts of the continuing partners Bimal and Kamal who have
decided to share future profits in the ratio of 4 : 3.
(vi) Capital of the new firm will be the same as it was before the retirement of Amal and
will be in the new profit-sharing ratio of the continuing partners.
(vii) Amount due to Amal be settled by paying ` 50,000 in cash and the balance by
transferring to his Loan Account to be paid later.
Prepare Revaluation Account, Capital Accounts of partners and Balance Sheet of the
firm after Amal’s retirement. [12]
8. Following is the Balance Sheet of Ram, Mohan and Sohan as at 31st March, 2020, who
share profits and losses in the ratio of 3 : 1 : 1:

Liabilities ` Assets `
Sundry Creditors 60,000 Cash at Bank 32,000
Loan from Mrs. Mohan 15,000 Debtors 2,42,000
General Reserve 1,00,000 Less: Provision for Doubtful Debts 12,000 2,30,000
Capital A/cs: Stock 78,000
Ram 2,45,000 Investments 1,70,000
Mohan 90,000 Fixed Assets 10,000
Sohan 60,000 3,95,000 Advertisement Suspense A/c 50,000
5,70,000 5,70,000
The firm was dissolved on the above date on the following terms:
(a) ‘Ram’ is to take all the fixed assets at ` 2,000 less, Debtors amounting to
` 2,00,000 at ` 1,72,000. The creditors of ` 60,000 to be assumed by ‘Ram’ at that value.
(b) ‘Mohan’ is to take entire stock at ` 70,000 and certain investments at ` 72,000
(being book value less 10%).
(c) ‘Sohan’ is to take remaining investments at 90% of the book value less ` 1,000
allowances and to assume responsibility for the discharge of Mrs. Mohan’s loan,
together with accrued interest of ` 300 which has not been recorded in the books
of the firm.
(d) The remaining debtors were sold to a debt collecting agency for 50% of book values.
(e) Firm had an unrecorded asset of ` 5,000 which was given in settlement of an
unrecorded liability of ` 6,000.
(f) Ram was to get ` 2,700 as remuneration for completing the dissolution
work and was to bear the realisation expenses. The expenses of realisation
` 1,700 were paid by Ram out of his private funds.
Prepare Realisation Account, Bank Account and Partners’ Capital Accounts. [12]