Page 39 - AAAXII

Model Test Papers M.35

Answers

PART A
1. Fixed Capital Account will not show a negative (i.e., debit) balance. In other words,
Fixed Capital Account always shows credit balance, while fluctuating Capital Account
can show credit or debit (negative) balance.
Or
Drawings against capital will be debited to Partners’ Capital Accounts.

2. Share Sacrificed = Old Share – New Share
-
4 7 87 1 3 4 64 2
-
A’s Sacrifice = - = = ; B’s Sacrifice = - = =
7 14 14 14 7 14 14 14
1 2
Thus, Sacrificing Ratio of A and B = : = 1: 2
1 2 3 14 14
Share of C = + = ◊
14 14 14
3. ADJUSTMENT ENTRY
Date Particulars L.F. Dr. (`) Cr. (`)

2018
April 1 P’s Current A/c ...Dr. 6,000
To Q’s Current A/c 6,000
(Being the interest on capital omitted in previous year, now rectified)

TABLE SHOWING ADJUSTMENT
Particulars P Q Total
(i) Interest on Capital to be Credited (Cr.) 24,000 36,000 60,000
(ii) It will result into loss of ` 60,000 for the firm. It will be shared by partners
in their profit Sharing Ratio, i.e., 1 : 1 (Dr.) 30,000 30,000 60,000
(iii) Net Effect 6,000 (Dr.) 6,000 (Cr.) ...

4. • Loan from Retired Partner Account.
• Deceased Partner’s Executors’ Loan Account.
5. No, they should not enter into Partnership Deed because it is a charitable activity.
Or
Change in Profit-sharing Ratio amounts to ‘Dissolution of Partnership’ as existing
agreement comes to an end and a new agreement comes into existence.
6. (i) Opening Cash and Bank Balances.
(ii) Closing Cash and Bank Balances.
(iii) Capital Receipts (e.g., Special Donations, Sale Proceeds of Fixed Assets, etc.).
Or
It will be added to the subscription received during the current year in the credit side
of Income and Expenditure Account. It will also be shown in the Assets side of the
current year’s Balance Sheet.