Class xii accountancy - Partnership

Class XII Accountancy

Unit : PartnershipChapter : Admission of Partner

By Mamta Narula

Treatment of Accumulated profits and Accumulated losses

Topics to be covered

Workmen compensation Fund Investment Fluctuation Fund

Treatment ofAccumulated profits and Accumulated losses

Liabilities Amount Assets Amount

P & L Account (Cr. Balance)General ReserveContingency ReserveWorkmen compensation FundInvestment Fluctuation Fund

******************************

P & L Account (Dr. Balance)Deferred Revenue Expenditure

************

Balance Sheet

Treatment ofAccumulated profits and Accumulated losses

Accumulated Profits

• Credited in the old partner’s capital

Accumulated

Losses

• Debited in the old partner’s capital

InOld

Ratio



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************

Balance Sheet

Particulars Amount Particulars Amount


******************************


******************************************

Partner’s Capital AccountsDr. Cr.

Journal Entries

For distribution of undistributed profit and reserve.

For distribution of loss

Reserves A/c DrProfit & Loss A/c(Profit) Dr.

To Old Partner’s Capital A/c[individually]

Old Partner’s Capital A/c Dr. [individually]To Profit and Loss A/c [Loss]

InOld

Ratio

Mohan and Sohan are partners sharing profit in the ratio of 2:1. On 1st April2013 they admit Meena as new partner for 1/4 shares in profits. On that date the balance sheet of the firm shows a balance of Rs.30,000 in general reserve and debit balance of Profit and Loss A/c of Rs.6,000. Make the necessary journal entries.

Mohan Sohan

Meena

Profit sharing ratio 2:1

Journal EntriesFor distribution of general reserve For distribution of Profit and Loss A/c

Reserves A/c Dr 30,000To Mohan’s Capital A/c 20,000To Sohan’s Capital A/c 10,000

Mohan’s Capital A/c 4,000Sohan’s Capital A/c 2 ,000

To Profit and Loss A/c 6,000


General Reserve 30,000************************

P & L Account (Dr. Balance) 6000******

Balance Sheet

Treatment ofWorkmen Compensation Fund

Workmen compensation

Fund is made to face the loss due to

payment of compensation due to injury suffered by worker during

work

Treatment ofWorkmen Compensation Fund

Different

Cases

Claim

Is

40,000

Claim

Is

70,000

There is

no

Claim

Claim

Is

1,00,000

Particulars Amount Assets Amount

Workmen compensation Fund 70,000

Mohan and Sohan are partners sharing profit in the ratio of 2:1. On 1st April2013 they admit Meena as new partner for 1/4 shares in profits. On that date the balance sheet of the firm shows a balance of Rs.70,000 in workmen compensation fund .Make the necessary journal entries.

Mohan Sohan

Meena

Profit sharing ratio 2:1

Treatment of Workmen Compensation Fund

Case - 1 Claim

Is

40,000



Keep 40,000 aside

Distribute remaining among old partners in

old ratio

Case - 1 Claim

Is

40,000



Workmen compensation Reserves A/c Dr 70,000To claim for workmen compensation A/c 40,000To Mohan’s Capital A/c 20,000To Sohan’s Capital A/c 10,000

Journal Entries

Old partners Old

Ratio


Case - 2 Claim

Is

70,000

Particulars Amount Assets Amount


Keep 70,000 aside

Nothing is left to Distribute among old

partners

Case - 2 Claim

Is

70,000



Workmen compensation Reserves A/c Dr 70,000To claim for workmen compensation A/c 70,000

Journal Entries


Case - 3 There

Is

No Claim



No need to Keep

Anything aside

Distribute whole amount among old partners in

old ratio

Case - 3 There

Is

No Claim



Workmen compensation Reserves A/c Dr 70,000To Mohan’s Capital A/c 46667To Sohan’s Capital A/c 23333

Journal Entries

Old partners Old

Ratio


Case - 4 Claim

Is

1,00,000



Keep aside100,000

• Nothing is left to be distributed

• Old partner will have to bear loss of 30,000

Case - 4 Claim

Is

1,00,000



Workmen compensation Reserves A/c Dr 70,000Revaluation A/c Dr. 30,000

To claim for workmen compensation A/c 100,000

Mohan’s Capital A/c Dr. 20,000Sohan’s Capital A/c Dr. 10,000

To Revaluation 30,000

Journal Entries

Old partners Old

Ratio

Point to

remember Workmen Compensation Fund is used

WHEN

Claim on account of workmen compensation has arise

Claim for workmen Compensation is shown in

New Balance sheetLiability side

Treatment of Investment Fluctuation Fund

Investment

value

increases

Investment

value

decreases

Investment Fluctuation Fund is made to face the

loss due to decrease in value of Investment


Different

Cases

Market value of

Investment

Is

27,000

Market value of

Investment

Is

32,000

Market value of

Investment

Is

30,000


Investment Fluctuation Fund 21,000 Investment 30,000


Case 1Market value of

Investment

Is

27,000



Don’t Worry

We haveArrangement

We will use 3,000 out of

21,000



Investment

Is

27,000



What about

remaining 18,000 We will distribute

18,000 among old partners in old ratio


Investment

Is

27,000



Investment Fluctuation Fund A/c Dr 21,000To Investment A/c 3,000To Mohan’s Capital A/c 12,000To Sohan’s Capital A/c 6,000

Journal Entries

Old partners Old

Ratio



Investment

Is

32,000



No need to use

This fund

We will distribute 21,000 among old partner in old ratio


Investment

Is

32,000



Investment Fluctuation FundA/c Dr 21,000To Mohan’s Capital A/c 14000To Sohan’s Capital A/c 7000

Journal Entries

Old partners Old

Ratio



Investment

Is

30,000



What to do with this fund

We will distribute 21,000 among old partner in old ratio


Investment

Is

30,000



Investment Fluctuation FundA/c Dr 21,000To Mohan’s Capital A/c 14000To Sohan’s Capital A/c 7000

Journal Entries

Old partners Old

Ratio

Point to

rememberInvestment Fluctuation Fund is used

WHEN

Market

value

Book

value

Market value of

Investment

Bookvalue of

Investment

Documents

Class xii accountancy - Partnership