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DNYANSAGAR ARTS AND COMMERCE COLLEGE
SUBJECT: FINANCIAL ACCOUNTING
SUBJECT CODE: 102
BY PROF. : MUBINA ATTARI
SYLLABUS1.Basic concept of financial accounting.
2.piecemeal distriBution of cash.
3.single entry system.
4.gst
fiXed assets
current assetsstocKs
current assets
deBtors
Bills receiVaBle
BanK Balance
cash realised
piecemeal distriBution of cash
Secured Liabilities
Taxes/ Govt. dues
Preferential Liabilities
Employees dues
Partner’s Loan Partner’s
capital
Realization expenses
Unsecured liabilities
piecemeal distriBution of cash
ORDER OF PAYMENT
liaBilities paid off
What is the order of payment?
order of payment
10 laKhs
1. realiZation eXpenses 1 laKhs2. reserVes for contingent liaBilities 1 laKh
contingent liaBilities: liaBilities Which are depends on some factors , it may arise or it may not Be
noW, partnership firm haVe 8 laKhs With them.
order of payment
8 laKhs
3. preferential liaBilities 2 laKhs
goVernments taXes 1 laKhemployees dues 1 laKh
noW partnership firm haVe 6laKh With them.
order of payment
6laKh
4. secured liaBilities
BanK loan 1 laKh
noW partnership firm haVe 5laKh With them.
order of payment
5laKh
5. unsecured liaBilities
creditors 1 laKhBills payaBle 1 laKhm/s a’s loan 1 laKh
noW partnership firm haVe 2laKh With them.
2 laKh
6 . partners capital
a’s capital B’s capital
1 laKh 1 laKh
FOLLOWING INFORMATION IS GIVEN IN THE QUESTION
1.CASH RECEIVED FROM THE SALE OF ASSETS.
2.DATE OF CASH REALIZATION
3.LIABILITIES PAID OFF.
4.PROFIT SHARING RATIOS.( ASSUMED EQUAL IF NOT GIVEN)
Balance sheet as on 31st march 2020Liabilities Assets
Capital Accounts 60000 Building 100000A 20000 Machinery 30000B 20000 Debtors 20000C 20000 Cash 50000Government Dues 10000Creditors 20000Secured Bank loan 90000
200000 200000
A, B, and C share profits and losses in equal ratio. Their balance sheet as on 31 st march is as follows.
CONTINUE.........THE FIRM WAS DISSOLVED AND IT WAS AGREED THAT THE NET REALIZATION SHOULD BE DISTRIBUTED IN THEIR DUE ORDER AT THE END OF EACH CALENDAR MONTH. THE GRADUAL REALIZATIONS WERE AS FOLLOWS:REALIZATION EXPENSES WAS RS 20000DATE AMOUNTAPRIL RS 50000MAY RS 75000JUNE RS 50000
PREPARE THE STATEMENT SHOWING ORDER OF PAYMENT.
ORDER OF PAYMENTMONTH AMOUNT LIABILITIES PAID OFFAPRIL 50000 1. REALIZATION EXPENSES 20000
(20000)
30000 2. GOVERNMENT DUES 10000(10000) 20000 3. SECURED BANK LOAN 20000(20000) (90000-20000)= 70000
0
MAY 75000 1. SECURED BANK LOAN 70000
(70000)
5000 2. CREDITORS 5000(20000-5000)= 15000
ORDER OF PAYMENT
MONTH AMOUNT LIABILITIES PAID OFF
JUNE 50000 1.CREDITORS 15000(15000)35000 EQUAL AMONG THREE PARTNERS
11666 11666 11666
distriBution of cash among the partners
DISTRIBUTION OF CASH AMONG THE PARTNERS
Surplus Capital methodMaximum loss method
SURPLUS CAPITAL METHOD
Prepare statement of excess capital: This statement is prepared in order to make the capital of partners equal so that all the partners are on same ground.
INFORMATION REQUIRED IN PREPARATION OF STATEMENT OF SURPLUS CAPITAL.
1.CAPITAL BALANCES OF PARTNERS.
2.PROFIT SHARING RATIO.
Practical Question
1. A, B and C are the partners sharing profit and losses in the ratio of 3:2:1 respectively. Their Balance Sheet as on 31-3-2020 is as follows:
The partnership firm dissolved and the assets are realized as follows:Instalments AmountFirst realization 10000Second realization 15000Third realization 24000
Show distribution of cash as per excess capital method.
LIABILITIES AMOUNT ASSETS AMOUNTS
CAPITAL ACCOUNTS
ASSETS 80000
A 30000
B 30000
C 20000 80000
80000 80000
Solution :
In the books of M/S A,B and C Statement of Surplus Capital
PARTICULARS A’CAPITAL B’CAPITAL C’CAPITAL
CAPITAL BALANCE………1 30000 30000 20000
Profit sharing ratio ……2 3 2 1
Unit value(divide (1 ) by (2) 10000 15000 20000
Taking A’capital as Base(bcoz unit value is least in A) 30000 20000 10000
SURPLUS CAPITAL………(3) 0 10000 10000
Profit sharing ratio …………(4) 2 1
Unit value(divide (3) by (4) 5000 10000
Taking B’capital as Base(bcoz unit value is least in B) 10000 5000
Ultimate surplus 5000
STATEMENT SHOWING PIECEMEAL DISTRIBUTION OF CASHParticular Cash A’capital B’capital C’capital
Balances Due 30000 30000 20000
First Realisation 11000
Paid to C’capital (5000) (5000)
Amount left after 1st realisation 6000
Paid to B and C ( 2:1 ) (4000) (2000)
0
Second realization 15000
Paid to B and C (9000) (6000) (3000)
Amount left after 2nd realisation 6000
Paid to A, B and C in 3:2:1 (6000) 3000 2000 1000
0
Third realization 24000
Paid to A, B and C in 3:2:1 (24000) 12000 8000 4000
Realization Loss 15000 10000 5000
Practical Question
1. A, B and C are the partners sharing profit and losses in the ratio of 5:3:2 respectively. Their Balance Sheet as on 31-3-2020 is as follows:
LIABILITIES AMOUNT ASSETS AMOUNTS
CAPITAL ACCOUNTS
Other assets 1304000
A 50000 Cash 20000
B 34500
C 29500
General Reserve 10000
B’ loan 200000
Creditors 1000000
1324000 1324000
There is a bill for Rs 4000 due to on 1st
April 2020 under discount. Other Assets realized as follows:
1st
April 2020: 885000, 1st
May 2020:300000, 1st
June2020:8000, 1st
July 2020:5000 , 1st
August 2020 : 10000
The expenses of realization were expected to be 5000 but ultimately amounted to be 4000 only and were paid on 1
stAugust. The acceptor
of the bill under discount met the bill on to due date .Prepare a statement showing monthly distribution of cash according to Surplus capital method.
Solution :
In the books of M/S A,B and C Statement of Surplus Capital
PARTICULARS A’CAPITAL B’CAPITAL C’CAPITAL
CAPITAL BALANCE………1 55000 37500 31500
Profit sharing ratio ……2 5 3 2
Unit value(divide (1 ) by (2) 11000 12500 15750
Taking A’capital as Base(bcoz unit value is least in A) 55000 33000 22000
SURPLUS CAPITAL………(3) 4500 9500
Profit sharing ratio …………(4) 3 2
Unit value(divide (3) by (4) 1500 4750
Taking B’capital as Base(bcoz unit value is least in B) 4500 3000
Ultimate surplus 6500
STATEMENT SHOWING PIECEMEAL DISTRIBUTION OF CASHParticular Cash A’capital B’capital C’capital
Balances Due 50000 34500 29500
General Reserve 5000 3000 2000
First Realisation
Paid to C’capital
Amount left after 1st realisation
Paid to B and C ( 2:1 )
Second realization
Paid to B and C
Amount left after 2nd realisation
Paid to A, B and C in 3:2:1
Third realization
Paid to A, B and C in 3:2:1
Realization Loss
maXimum loss method
practical proBlem
After paying off the liabilities the assets of M/S P,Q,R and Co. realized as follows:First realization 02/10/2020 14000Second Realization 25-11-2020 18000Third Realization 31-12-2020 30000Fourth Realization 23-01-2020 30000
The Capital account of the partner P, Q, R showed credit balance of 10000, 40000, 60000 respectively. The partner shared the profit of the business in the ratio of 3:2:1Prepare a statement showing distribution of cash as per Maximum Loss Method.
