SINGLE ENTRY SYSTEM - Karnataka · SINGLE ENTRY SYSTEM: A) In the year of formation: 1. Bharath a trader, does not maintain complete set of books of accounts. He started the business

SINGLE ENTRY SYSTEM:A) In the year of formation:

1. Bharath a trader, does not maintain complete set of books of accounts. He started the business on st

1 January 2010 with Cash 25,000 and Furniture 5,000.The position of his business on 31.12.2010 was as follows:Cash in office 3,000, Creditors 5,000, Cash at Bank 7,000, Bills (Dr.) 3,500, Sundry Debtors 15,000, Buildings 20,000, Stock 8,000, Furniture 9,000During the year he withdrew from the business for his domestic purposes Cash 4,000 and Goods 2,000. He also paid school fees of of his children from the business cash. He invested additional capital of 5,000 during the year 2010. He made addition to furniture on 30.6.2010. Charge depreciation on the opening Furniture at 10% p.a. and on Building (bought on 1.1.2010) at 5% p.a. Provide for doubtful debts at 10%. Salary incurred but not paid 2,000 and Commission earned but not received 1,000. Allow Interest on the opening capital at 5% p.a. Calculate the profit for the year ended 31.12.2010 and financial position as on that date.

Solution:

` `

` ` ` ` ` ` ` `

`` ̀ 2,000

`

` `

Books of BharathStatement of Affairs as on 31.12.2010

Liabilities Assets` `

Cash in OfficeCash at BankSundry DebtorsStockB/R or Bills (Dr.)BuildingsFurniture

3,000 7,00015,000 8,000 3,50020,000 9,000

Creditors

Capital - Balance

5,000

60,500

65,50065,500

Statement of Profit or Loss for the year ending 31.12.2010

Particulars

60,500

8,000

4,0002,0002,000

Closing CapitalAdd: Drawings: 1. Cash 2. Goods 3. School Fees paid

68,500- 5,000Less: Additional Capital

63,500

- 30,000

Adjusted Closing CapitalLess: Opening Capital: Cash

Furniture

Gross Profit 33,500

34,500

1,000

Add: 1. Non Cash Incomes: 2. Outstanding Incomes: Commission Receivable 3. Prepaid Expenses:

-

1,000-

25,0005,000

` `

Less: 1. Non Cash Expenses: a) RBD (15,000 x 10%) b) Depreciation: On Building (20,000 x 5%) On Opening Furniture (5,000 x 10%) c) Interest on Capital (30,000 x 5%) 2. Outstanding Expenses: Salary Payable 3. Income Received in Advance:

1,500

1,000 5001,500

2,000- - 6,500

34,500

28,000

(Revised) Statement of Affairs as on 31.12.2010


CreditorsCapital: Opening 30,000Add: 1. Additional Capital 5,000 2. Net Profit 28,000 3. Interest on Capital 1,500 64,500Less: Drawings - 8,000 Final Capital Salary Payable

5,000

56,500

63,500 63,500

Cash in OfficeCash at BankSundry Debtors 15,000Less: RBD - 1,500StockB/R or Bills (Dr.)Buildings 20,000Less: Depreciation - 1,000Furniture 9,000Less: Depreciation - 500Commission Receivale

3,000 7,000

13,5008,0003,500

19,000

8,5001,0002,000

NET PROFIT

st2. Manoj keeps his books on Single Entry System. His position on 1 April, 1999 was as follows:Statement of Affairs as on 1.4.1999


CreditorsB/PCapital

10,000 3,00080,000

Cash in hand Cash at bankB/RDebtorsStockFurniture MachineryBuildings

700 3,300 5,200 9,80020,000 4,00020,00030,00093,00093,000

stHis position on 31 March, 2000 was as follows:Creditors ̀ 8,000, Bills Payable ̀ 4,000, Cash in hand ̀ 1,000, Bills Receivable ̀ 4,000, Debtors `14,000, Stock ̀ 18,000, Machinery 20,000 and Building 30,000Manoj's drawings during the year were ̀ 10,000. Furniture and Machinery were to be depreciated by 10%. Interest on Capital is to be allowed at 5% p.a.Ascertain the Profit or Loss for the year ended on 31.3.2000 and redraft the Statement of Affairs as on that date. Solution:

` `

B. When the Opening Capital is given:

- 2 -

Books of Mr. ManojStatement of Affairs as on 31.3.2000


Cash in handB/RDebtorsStockFurniture MachineryBuildings

CreditorsB/P

Total Liabilities

8,000 4,000

12,000

1,000 4,00014,00018,000 4,00020,00030,000

91,00091,000

Capital - Balance 79,000

Statement of Profit or Loss for the year ended 31.3.2000

Particulars ` `

Closing CapitalAdd: Drawings Less: Additional Capital Adjusted Closing CapitalLess: Opening Capital Gross Profit

79,00010,000

89,000-

89,00080,000

9,000

Less: 1. Outstanding Expenses: 2. Income Received in Advance: 3. Non - Cash Expenses: a) Interest on Capital {80,000 x 5%} b) Depreciation On Furniture {4,000 x 10%} On Machinery {20,000 x 10%}

--

4,000

4002,000 - 6,400

2,600 NET PROFIT

(Revised) Statement of Affairs as on 31.3.2000


CreditorsB/PCapital:Opening 80,000Add:1. Interest on Capital 4,000 2. Net profit 2,600 86,600Less: Drawings - 10,000 Final Capital

8,000 4,000

76,600

Cash in handB/RDebtorsStockFurniture 4,000Less: Depreciation - 400Machinery 20,000Less: Depreciation 2,000Building

1,000 4,00014,00018,000

3,600

18,00030,000

88,600 88,600

- 3 -

3. From the following details of business of Mr. Chandan, ascertain the profit or loss for the year th

ended 30 June 2011 and financial position as on that date.

Particulars30.6.2011

`30.6.2010

`DebtorsCreditorsStockCash in officeBankFurniture Building Bills of Exchange

31,00020,00026,000 5,000

4,000 (Cr.)5,00040,000

8,000 (Dr.)

21,00014,00018,000 3,000 3,000 (Dr.) 5,00040,000 5,000 (Cr.)

He invested further Capital on 30.9.2010 . On 1.1.2011, he sold his wife's Jewellery for 20,000 and invested ̀ 15,000 in the business.He withdrew cash ̀ 1,000 p.m. from his business for his personal uses and Goods of ̀ 3,000 during the year.Adjustments:1. Depreciate Furniture by 20% and Buildings by 5%.2. Create RDC as 3% on Creditors.3. Debts include irrecoverable debts ̀ 1,000 4. Provide for Doubtful Debts at 5% and Discount on Debtors at 2%5. A bill of ̀ 1,000 was considered Doubtful, for it was decided to be provided6. Interest on Bank Overdraft was outstanding for 2 months at 15% interest p.a.7. Commission of ̀ 1,000 received in advance from a manufacturer.8. Allow Interest on Capital at 6% p.a.Solution:

`10,000 `

- 4 -

Books of Mr. Chandan Statements of Affairs

Liabilities Assets

Total Liabilities

Capitals - Balance

30.6.10`

30.6.10`

30.6.11`

30.6.11`

Cash Bank (Dr.)Bills (Dr.)DebtorsStockFurniture Buildings

Bank (Cr.)Bills (Cr.)Creditors

- 5,00014,000

4,000-

20,000

3,000 3,000

-21,00018,000 5,00040,000

5,000-

8,00031,00026,000 5,00040,000

90,00090,000 1,15,000 1,15,000

19,000

71,000

24,000

91,000

Statement of Profit or Loss for the year ended 30.6.2011

Particulars ` `

Adjusted Closing Capital

Less: Opening Capital

GROSS PROFIT

Closing CapitalAdd: Drawings: 1. Cash withdrawn {Rs. 1,000 x 12} 2. Goods

91,000

15,00012,000 3,000

Less: Additional Capital: 1. Cash brought on 30.9.2010 2. Sale proceeds of wife's Jewellery invested on 1.1.2011

1,06,000

- 25,000

10,00015,000

81,000- 71,000

10,000Add: 1. Non - Cash Income: RDC {20,000 x 3%} 2. Outstanding Incomes: 3. Prepaid Expenses:

600-- 600

10,600Less: 1. Non - Cash Expenses: Bad Debts RBD {31,000 - 1,000 = 30,000 x 5%} RDD {30,000 - 1,500 = 28,500 x 2%} Reserve for Doubtful Bill Depreciation: Furniture {5,000 x 20%} Building {40,000 x 5%] Interest on Capital: On Opening Capital {71,000 x 6%} 4,260 On Additional Capital: On Rs. 10,000 for 9 months {10,000 x 6% x 9/12} 450 On Rs. 15,000 for 6 months {15,000 x 6% x 6/12} 450 2. Outstanding Expenses: Interest on BOD for 2 months {4,000 x 15% x 2/12} 3. Income Received in Advance: Commission received in advance

1,0001,500 5701,000

1,0002,000

5,160

100

1,000

NET LOSS

- 13,230

- 2,730

- 5 -

Liabilities Assets ` `

Creditors 20,000Less: RDC - 600

Bank Overdraft 4,000Add: Interest 100

Commission Received in Advance

Cash StockFurniture 5,000Less: Depreciation - 1,000

Building 40,000Less: Depreciation - 2,000

B/R 8,000Less: Reserve - 1,000

Debtors 31,000Less: 1. Bad Debts - 1,000 30,000 2. RBD - 1,500 28,500 3. RDD - 570

5,00026,000

4,000

38,000

7,000

19,400

4,100

1,000

(Revised) Statement of Affairs as on 30.6..2011

Capital: Opening 71,000Add: 1. Additional 25,000 2. Interest on Capital 5,160 1,01,160Less: 1. Drawings - 15,000 86,160 2. Net loss - 2,730

83,43027,930

1,07,930 1,07,930

ADMISSION OF A PARTNER:

1. Anil and Sunil are equal partners in a firm. Their Balance Sheet as on 31.12.1999 was as follows:

Bills PayableSundry CreditorsReserve FundCapital Accounts Anil Sunil

8,0003,0004,000

30,00020,000

Cash Sundry Debtors Stock FurnitureBuildings

2,00015,00016,0004,000

28,000

Liabilities ` Assets `

On 1.1.2000 they want to admit Rahul for ¼ share in future profit under the following conditions:a. He should bring in Cash Rs. 20,000 for Capital and Rs. 16,000 for Goodwill.b. Half of the Goodwill amount shall be withdrawn by old partners.c. Stock and Furniture be written off by 10% each.d. Provide R.B.D. at 5% on Debtors.e. Make a provision for Legal Charges Rs. 250.f. Buildings are revalued at Rs. 33,000

Prepare:i) Revaluation Account, ii) Capital Accounts of Partners, iii) New Balance Sheet of the firm

- II PUC April 2000Solution:

65,00065,000

Case - A Cash for Goodwill brought by the New Partner and withdrawn by the Old Partner:

To Stock A/c {16,000 x 10% }To Furniture A/c {4,000 x 10%}To RBD A/c {15,000 x 5%}To Provision for Legal Charges A/cTo Old Partners' Capital A/cs: - Profit on Revaluation Anil 1,000 Sunil 1,000

1,600 400

750250

2,000

By Building A/c {33,000 - 28,000} 5,000

Particulars ` `

Dr. Revaluation A/c Cr.

Particulars

Dr. Partners’ Capital A/c Cr.

To Cash A/c - ½ of Goodwill withdrawnTo Balance b/d

4,000

37,000

ParticularsAnil`

ParticularsSunil

`Rahul

`30,000 1,000 2,000

- 8,000

4,000

27,000

-

20,000

By Balance b/dBy Revaluation A/cBy Reserve Fund A/cBy Cash A/cBy Goodwill A/c

20,000 1,000 2,000

- 8,000

---

20,000-

Anil`

Sunil`

Rahul`

Balance Sheet of the New Firm as on 1.1.2000

B/PCreditorsCapital A/cs: Anil Sunil RahulProvision for Legal Charges

8,000 3,000

37,00027,00020,000 250

CashDebtors 15,000Less: RBD - 750Stock 16,000Less: Written off - 1,600Furniture 4,000Less: Depreciation - 400Buildings 28,000Add: Appreciation 5,000

30,000

14,250

14,400

3,600

33,000


Working Notes: Goodwill A/c and Entries regarding Goodwill:

To Old Partners' Capital A/cs: Anil Sunil - Goodwill transferred eqally

8,0008,000

By Cash A/c - Goodwill brought by Rahul

16,000

Particulars ` `

Dr. Goodwill A/c Cr.

Particulars

5,0005,000

37,000 27,000 20,00041,000 31,000 20,00020,00031,00041,000

By Balance b/d

95,250 95,250

16,000 16,000

1. Cash brought for Goodwill 2. Transfer of Goodwill 3. Goodwill withdrawn

Cash A/c Dr. To Goodwill A/c Rs. 15,000

Goodwill A/c Dr. To Old Partners’ Capital A/cs Anil 8,000 Sunil 8,000

Old Partners’ Capital A/cs Dr.Anil 4,000Sunil 4,000 To Cash A/c 8,000

- 7 -

Case - B Cash for Goodwill brought by the New Partner but retained:

- 8 -

2. Doctor and Vaidya were partners in a firm sharing equally. Their Balance sheet was as follows on

Sundry CreditorsAcceptancesGeneral ReserveCapitals: Doctor Vaidya

12,000 4,5008,000

60,40050,400

Cash StockBills (Dr.)DebtorsVehicleMachinveryBuildings

13,00026,500 8,00010,000 7,80030,00040,000


1,35,3001,35,300

On 1.4.2011, Mr. Surgeon joined the firm on the following terms:1. Machinery to be valued 10% less.2. Building to be valued 20% more3. Vehicle to be valued at ̀ 9,0004. Create provision for bad debts by10%5. Stock to be valued at ̀ 21,0006. Goodwill of the firm to be valued at 2 years purchase of average profit of the last 3 years. The

profits of the firm for the last three years were - ̀ 23,000, ̀ 27,000 and ̀ 40,000. 7. Surgeon to bring `45,000 as his capital and the required amount towards goodwill for 1/3

share in the firm. Prepare:1. Revaluation A/c, 2. Partners' Capital A/cs, c and 3. New Balance Sheet.

To Plant A/c {30,000 x 10%}To RBD A/c {10,000 x 10%}To Stock A/c {as given}

3,0001,0005,500

By Building A/c {40,000 x 20%}By Vehicle A/c {9,000 - 7,800}By Old Partners' Capital A/cs: - Net Loss transferred equally Doctor 150 Vaidya 150

8,0001,200

300

Particulars ` `Particulars


Dr. Partners’ Capital A/cs Cr.

To Revaluation A/c - Net Loss To Balance c/d

15074,250

Particulars Doctor `

ParticularsVaidya`

Surgeon`

60,4004,000

- 10,000

15064,250

-

45,000

By Balance b/d By General Reserve A/cBy Cash A/cBy Goodwill A/c

50,4004,000

-10,000

--

45,000-

Doctor `

Vaidya`

Surgeon`

9,500 9,500

74,400 64,400 45,000By Balance b/d 74,250 64,250 45,000

74,400 64,400 45,000


Sundry Creditors B/P or Acceptances

Capital Accounts: Doctors Vaidya Surgeon

12,000 4,500

74,25064,25045,000

Cash Stock 26,500Less: Written off - 5,500B/R or Bills (Dr.)Debtors 10,000Less: RBD - 1,000Motor Car 7,800Add: Appreciation 1,200Plant 30,000Less: Depreciation -3,000Building 40,000Add: Appreciation 8,000

78,000

21,000 8,000

9,000

9,000

27,000

48,000


2,00,000 2,00,000Working Notes:

To Old Partners' Capital A/cs: Doctors Vaidya

10,00010,000

By Cash A/c - Goodwill brought by Surgeon 20,000

Particulars ` `

Dr . Goodwill A/c Cr.

Particulars

20,00020,000

So Goodwill = 30,000 x 2 = ̀ 60,000Surgeon's share of Goodwill = 60,000 x 1/3 = ̀ 20,000Rs. 20,000 brought by Mr. Surgeon should be divided equally between Doctor and Vaidya.

1. Goodwill brought by Surgeon:Total Goodwill = Average Profit X No. of years' purchaseAverage Profits = Total Profits / No. of Years

= 23,000 + 27,000 + 40,000 3 Years

= 30,000`

1. Cash for Goodwill brought 2. Goodwill transferred equally

Cash A/c Dr. 20,000 To Goodwill A/c 20,000{Being Goodwill brought by Surgeon}

Goodwill A/c Dr. 20,000 To Old Partners’ Capital A/cs: Doctor {20,000 x 1/2} 10,000 Vaidya {20,000 x 1/2} 10,000{Being Goodwill transferred in 3 : 2}

Entries regarding Goodwill brought and transferred to the Old Partners’ Capital A/cs:

To Balance b/dTo Surgeon's Capital A/cTo Goodwill A/c

15,00045,00020,000

By Balance c/d 78,000

` `Particulars Particulars

Dr. Cash A/c Cr.

78,00078,000

78,000To Balance b/d

- 9 -

Case - C Raising or Creation of Goodwill:

- 10 -

3. Journal and Ledger are partners in a firm. They share in the ratio of 2 : 3. The Balance Sheet of their firm as on 1.7.2011 was as follows:

Trade CreditorsBank Loan Profit and Loss A/c

Capital A/cs: Journal Ledger

19,00020,000 5,000

30,00040,000

Plant and Machinery Furniture InvestmentStockDebtors 31,000Less: RBD - 2,000Cash at Bank

40,00015,000 5,00020,000

29,000 5,000


1,14,000 1,14,000

They took Mr. Clerk as a partner for 1/5 share of profit on the following terms:1. Clerk to bring ̀ 40,000 as his share of capital.2. Goodwill of the firm created at ̀ 30,0003. Assets were revalued as:

Plant ̀ 38,000, Furniture ̀ 17,000, Investments ̀ 6,000, and Stock ̀ 23,0004. Maintain RBD at 10%.5. A credit purchase of goods ` 1,000 is not recorded but the goods are already included in the

Stock. 6. Commission of 1,000 earned but not received7. Salary ̀ 2,000 for June 2011 due but unpaid.Prepare Revaluation A/c, Capital A/cs and the Balance Sheet of the new firm.Solution:

`

To Machinery A/c {40,000 - 38,000}To RBD A/c New at 10% 3,100 Less: Old RBD 2,000To Outstanding Salary A/cTo Creditors A/c - Unrecorded To Old Partners' Capital A/cs: - Revaluation profit transferred in 2 : 3 Journal 360 Ledger 540

2,000

1,1002,0001,000

900

By Furniture A/c {17,000 - 15,000}By Investment A/c {6,000 - 5,000}By Stock A/c {23,000 - 20,000}By Commission Receivable A/c

2,000

1,000

3,000

1,000



7,000 7,000

To Old Partners' Capital A/cs: - Creation of Goodwill Rs. 30,000 in 2 : 3 Journal (30,000 x 2/5) Ledger (30,000 x 3/5)

12,00018,000

By Balance c/d 30,000

Particulars ` `


Particulars

30,000 30,000

Dr. Partners Capital A/cs Cr.

To Balance c/d 44,360

Particulars Journal

`Particulars

Ledger`

Clerk`

30,000 360

2,000

-12,000

61,540 By Balance b/dBy Revaluation A/c - Revaluation ProfitBy Profit & Loss A/c {5,000 in 2 : 3}By Cash A/cBy Goodwill A/c - Creation of goodwill

40,000 540

3,000

-18,000

--

-

40,000-

40,000

Journal

`Ledger

`Clerk

`

44,360 61,540 40,000

44,360 61,540 40,000

44,360 61,540 40,000By Balance b/d

- 11 -


Trade Creditors 19,000Add: Unrecorded Purchases 1,000 Bank Loan Salary unpaid

Partners’ Capitals: Journal Ledger Clerk

20,000

16,000 2,000

44,36061,54040,000

Goodwill Plant and Machinery 40,000Less: Depreciation - 2,000Furniture 15,000Add: Appreciation 2,000Investments 5,000Add: Increase 1,000Stock 20,000Add: Appreciation 3,000

Debtors 31,000Less: RBD - 3,100

Cash at bank (1,000 + 40,000)

Commission Receivable

30,000

38,000

17,000

6,000

23,000

27,900

41,000

1,000


1,83,900 1,83,900

Case - D Creation of Goodwill and written off:

Capital Accounts: Earth Moon Profit and Loss Appropriation A/cCreditorsB/P

30,00025,000

5,00012,000 8,00080,000

BuildingsMachinery InvestmentsStockDebtors 16,000Less: RBD - 1,200Cash

25,000 9,000 15,00015,200

14,800 1,00080,000


4. Earth and Moon are partners sharing in the ratio of 3 : 2. Following is the Balance sheet of their firm on 31.3.2011.

To Machinery A/c (9,000 - 7,000)To Stock A/cTo Partners' Capital A/cs: - Net Profit transferred in 3 : 2 Earth 3,000 Moon 2,000

2,000

1,400

5,000

By Buildings A/c {32,000 - 25,000}By RBD A/c: Old RBD 1,200 Less: New {i.e. 16,000 x 5%) 800By RDC A/c

7,000

4001,000



Dr. Partners’ Capital A/cs Cr.

To Goodwill A/c - written offTo Balance c/d

11,250

39,750

ParticularsEarth

`Particulars

Moon`

Sun`

30,000 3,000 3,000

--

15,000

7,500

31,500

By Balance b/dBy Revaluation A/cBy Profit & Loss A/c By Cash A/cBy Investments A/cBy Goodwill A/c - Created

25,000 2,000 2,000

--

10,000

---

26,000 4,000

-

6,250

23,750

Earth `

Moon`

Sun `

8,400 8,400

51,000 39,000 30,00023,75031,50039,750By Balance b/d

51,000 39,000 30,000


Capital Accounts: Earth Moon Sun

Creditors 12,000Less: RDC - 1,000

B/P

39,75031,50023,750

11,000

8,000

Buildings 25,000Add: Appreciation 7,000Machinery 9,000Less: Depreciation - 2,000Investments 15,000Add: Brought by Sun 4,000Stock 15,200Less: Reduction - 1,400Debtors 16,000Less: RBD - 800Cash

32,000

7,000

19,000

13,800

15,20027,000


1,14,000 1,14,000

- 12 -

On 1.4.2011, they admitted Sun into the firm for ¼ share of future profit. The terms were:1. Sun to bring Cash of 26,000 and Investments of 4,000 as his capital.2. Goodwill of the firm to be value at 25,0003. Goodwill to be written off immediately4. Buildings and Machinery are to be valued at 32,000 and 7,000 respectively5. Stock to be written down by 1,4006. RBD to maintained at 5% on debtors7. Creditors agreed to allow discount of 1,000.8. The partners agreed to share in the ratio of 9 : 6 : 5.Prepare Revaluation A/c, Partners' Capital A/cs and Balance Sheet of the new firm.Solution:

` ` `

` ` `

`

To Old Partners' Capital A/cs: {Goodwill created in the old ratio of 3 : 2} Earth Moon

15,000

10,000

By All Partners' Capital A/cs: - written off in the new ratio of 9 : 6 : 5 Earth Moon Sun

11,250 7,500 6,250

Particulars ` ` Dr. Goodwill A/c Cr.

Particulars

25,000 25,000

Retirement of a Partner:

1. Anjan, Bharath and Chandra were partners in a firm. They shared in the ratio of 2 : 2 :1. Their Balance Sheet on 31.3.2009 was as follows:

`Liabilities ` Assets

Capitals: Anjan Bharath ChandraGeneral Reserve Creditors B/PBank Loan

BuildingsFurniture StockDebtorsPrepaid Salary Cash

35,00034,00031,00010,00015,000 5,00010,000

40,00015,00030,00045,000 2,000 8,000

1,40,000 1,40,000

On the above date, Anjan retired from the firm on the following conditions: 1. Anjan's share of Goodwill ̀ 16,000 to be considered.2. Building was under valued by ̀ 6,000.3. Furniture to be valued 10% less4. Stock to be valued at ̀ 33,0005. Create Reserve for Doubtful Debts at 10%.6. Create Reserve for Discount on Creditors at 10%.7. Anjan to be paid `6,800 immediately on retirement and the balance in two yearly instalments

with interest at 15% p.a.Prepare Profit and Loss Adjustment A/c, Partners’ Capital A/cs and the Balance Sheet of the new firm.Solution:

Case A Creation of Retiring Partner’s Share of Goodwill:

- 13 -

Dr. Profit and Loss Adjustment A/c Cr.


To Furniture A/c {15,000 x 10%}To RBD A/c {45,000 x 10%}To Partners' Capital A/cs: - Net Profit transferred Anjan 1,800 Bharath 1,800 Chandra 900

By Buildings A/cBy Stock A/c {33,000 - 30,000}By RDC A/c {15,000 x 10%}

1,5004,500

4,500

6,0003,0001,500

10,500 10,500

Dr. Partners' Capital A/cs Cr.

Particulars Anjan

Ànjan

`

Bharath

`Bharath

`Chandra

`Chandra

`

By Balance b/dBy Revaluation A/cBy Reserve A/cBy Goodwill A/c

To Cash A/c - part payment To Anjan's Loan A/c - Balance transferred To Balance c/d

6,800

50,000

-

-

-

39,800

-

-

33,900

56,800 56,80039,800 39,80033,900 33,900

By Balance b/d 39,800 33,900

35,000 1,800 4,00016,000

34,000 1,800 4,000

-

31,000 900 2,000

-

-


Liabilities Assets ` `Capital A/cs: Bharath Chandra

15% Anjan's Loan Creditors 15,000Less: RDC - 1,500

B/PBank Loan

Goodwill Building 40,000Add: Under valued 6,000Furniture 15,000Less: Reduction - 1,500Stock 30,000Add: Appreciation 3,000Debtors 45,000Less: RBD - 4,500Prepaid Salary Cash

39,80033,900

50,000

13,500

5,00010,000

16,000

46,000

13,500

33,000

40,500 2,000 1,200

1,52,200 1,52,200

Goodwill A/c

Particulars Particulars ` `

Dr. Cr.

To Anjan’s Capital A/c - Anjan’s Share of Goodwill

16,000 16,000

16,000 16,000

By Balance c/d

16,000To Balance b/d

- 14 -

Case 2: Considering only the Retiring Partner's share of Goodwill and written off:

2. Anna, Monna and Kanna were partners sharing profits in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as on 31.3. 1993 was as follows:


Capital: Anna Monna KannaReserve FundCreditors

40,00030,00025,00012,00024,000

Cash in hand DebtorsStockMotor VanMachineryBuilding

2,50015,50025,000 8 ,00035,00045,000

1,31,000 1,31,000

Monna retires on the date and the following adjustments were made:I) Monna's share of Goodwill was valued at 6,000. It was decided to write off the Goodwill.ii) Machinery and Motor vans were reduced by 10% and 5% respectively.iii) Stock and Building were appreciated by 20% and 10% respectively.iv) The provision on debtors was to be created at 1,100 for bad debts.Prepare Revaluation Account, Capital Accounts and Balance Sheet of the Continuing Partners.

- II PUC Sept. 2001Solution:

`

`



To Machinery A/c {35,000 x 10%}To Motor Vans A/c {8,000 x 5%}To Provision for Bad Debts A/cTo Partners' Capital A/cs: - Profit transferred in 3 : 2 : 1 Anna 2,250 Monna 1,500 Kanna 750

3,500 4001,100

4,500

By Stock A/c {(25,000 x 20%}By Building A/c {45,000 x 10%}

5,0004,500

9,500 9,500


Particulars

By Balance b/d

Anna `

Anna `

Monna `

Monna `

Kanna `

Kanna `

To Goodwill A/c - written offTo Monna's Loan A/c - transferredTo Balance c/d

4,500

-43,750

-

41,500-

1,500

-26,250

By Balance b/dBy Revaluation A/cBy Reserve Fund A/cBy Goodwill A/c

40,000 2,250 6,000

-

30,000 1,500 4,000 6,000

25,000 750 2,000

-

48,250 48,250 41,50041,500 27,750 27,750

43,750 - 26,250

- 15 -

Particulars ` Particulars `


To Monna's Capital A/c - Created

By Continuing Partners' A/cs Anna Kanna - written off in 3 : 1

6,000

6,000 6,000

4,5001,500

Gain Ratio: As only the Old Ratio is given and the Retiring Partner’s share of Goodwill is writtenoff, the Old Ratio of the Continuing Partners should be taken as the Gain Ratio. Therefore the Gain Ratio is 3 : 1.


Liabilities ` Àssets

Capital A/cs: Anna Kanna

Monna's Loan A/cCreditors

43,75026,250

41,50024,000

Cash in handDebtors 15,500Less: RBD - 1,100Stock 25,000Add: Appreciation 5,000Motor Van 8,000Less: Reduction - 400Machinery 35,000Less: Reduction - 3,500Building 45,000Add: Appreciation 4,500

2,500

14,400

30,000

7,600

31,500

49,500

1,35,500 1,35,500

Working Notes:

Case 3: Creation of Total Goodwill of Firm :

3. Bull, Bear and Stag were partners in a firm and they were sharing in the ratio of 2 : 3 : 5. Stag retired on 31.3.2011 due to differences with his co-partners. The Balance Sheet of the firm as on that date was as follows:


Capitals: Bull Bear Stag

General Reserve Profit and Loss A/cCreditorsB/P

15,00025,00040,000 8,000 7,00025,000 5,000

Land and Building StockDebtors 16,000Less: RBD - 1,000B/RFurniture Cash at Bank

55,00010,000

15,000 5,00025,00015,000

1,25,000 1,25,000

The agreements were:1. Goodwill of the firm to be valued at 50,000 and to be created fully.2. Land and Building to be valued at 65,0003. Furniture and Stock to be written down by 10% and 5% respectively.4. RBD to be maintained at 1,500

``

`

- 16 -

5. An investment of 3,000 made on Government Securities was recorded in the Invoice Book of the Last Year. This is to be valued at 4,000

6. Salary of 500 due but not paid. Prepare Revaluation A/c, Partners’ Capital A/cs and prepare the Balance Sheet of the new firm.Solution:

``

`

- 17 -


` `Particulars Particulars To Furniture A/c { 25,000 x 10%} To Stock A/c {10,000 x 5%} To RBD A/c {1,500 - 1,000} To Outstanding Salary A/c To Partners’ Capital A/cs: Bull Bear Stag

By Land and Building A/c {65,000 - 55,000}By Investment A/c - Present Value

14,000

10,000

4,000

2,500 500 500 500

10,0002,0003,0005,000 14,000


Particulars

By Balance b/d

Bull `

Bull`

Bear `

Bear `

Stag `

Stag `

Particulars

To Stag's loan A/c - TransferredTo Balance c/d

-

30,000

-

47,500

77,500

-

By Balance b/dBy Revaluation A/cBy Reserve A/cBy Profit & Loss A/cBy Goodwill A/c

15,000 2,000 1,600 1,40010,000

25,000 3,000 2,400 2,10015,000

40,000 5,000 4,000 3,50025,000

30,00030,000 47,500 47,500 77,50077,500

30,000 47,500 -


Liabilities ` Àssets

Capitals: Bull Bear

Stag's LoanCreditorsB/POutstanding Salary

30,00047,500

77,50025,000 5,000 500

Goodwill Land and Building 55,000Add: Appreciation 10,000Furniture 25,000Less: Depreciation - 2,500Investment Stock 10,000Less: Reduction - 500Debtors 16,000Less: RBD - 1,500B/RCash

50,000

65,000

22,500 4,000

9,500

14,500 5,00015,000

1,85,500 1,85,500

- 18 -

Case 4: Creation of Total Goodwill and written off :4. The Balance Sheet as on 31.12.1997 of M, N & O who were sharing in the ratio of 3 : 2 : 1 as follows:


Creditors Capitals A/cs: M N O Profit and Loss A/c

Cash in hand Bills Receivables Debtors Stock Furniture Machinery Building

18,900

40,00025,00020,000 4,500

25,650 5,40017,80022,300 3,500 9,75024,000

1,08,400 1,08,400

M retired from the business on 1.1.1996 the adjustments to be made are as follows:1. Assets to be valued as: Stock 20,000, Furniture 3,000, Machinery 9,000 & Building

20,0002. 850 to be provided for doubtful debts3. The Goodwill of the firm is agreed to be valued at 6,000 and it is decided to write off the

Goodwill4. M is to be paid 11,050 is cash on retirement.Show the necessary ledger A/cs and prepare the Balance Sheet of Continuing Partners.

- II PUC April 1997 Solution:

` ` ` `

` `

`



To Stock A/c {22,300 - 20,000}To Furniture A/c {3,500 - 3,000}To Machinery A/c {9,750 - 9,000}To Building A/c {24,000 - 20,000}To RBD A/c {as given}

By Partners' Capital A/cs: - Net Loss transferred in 3 : 2 : 1 M 4,200 N 2,800 O 1,400

8,4002,300 500 7504,000 850

8,400 8,400


Particulars

By Balance b/d

M `

M `

N`

O`

N`

O`

To Revaluation A/cTo Goodwill A/c - Written off To Cash A/c - Part paymentTo M’s Loan A/c - TransferredTo Balance c/d

By Balance b/dBy Profit & Loss A/cBy Goodwill A/c - Created

4,200-

11,050

30,000

-

2,800 4,000

-

-

21,700

1,400 2,000

-

-

18,350

40,000 2,250 3,000

25,000 1,500 2,000

20,000 750 1,000

45,250 45,25028,500 28,50021,750 21,750

21,700- 18,350

Particulars


Balance Sheet as on 31st December 1996

Creditors M's Loan Capital A/cs: N O

Cash in hand 25,650Less: Paid to M - 11,050Bills Receivables Debtors 17,800Less: RBD - 850Stock 22,300Less: Reduction - 2,300Furniture 3,500Less: Depreciation - 500Machinery 9,750Less: Depreciation - 750Building 24,000Less: Depreciation - 4,000

18,90030,000

21,70018,350

14,600 5,400

16,950

20,000

3,000

9,000

20,000

88,950 88,950

Particulars ` Particulars `

Goodwill A/cDr. Cr.

To All Partners' Capital A/cs: M N O

By Continuing Partners' Capital A/c: N O - written off in 2 : 1

3,0002,0001,000

4,0002,000

6,000 6,000

} - created in 3 : 2 : 1

Working Note:

Dissolution of a firm:

- 19 -

1. Anil, Vimal and Sunil are partners sharing profits in the ratio of 1 : 2 : 1. Their Balance Sheet as at 31. 12. 1996 was as follows:

Liabilities Assets `

CreditorsB/PBank LoanMrs. Sunil's LoanGeneral ReserveCapital A/cs Anil Vimal Sunil

5,00015,00018,00012,00020,00060,000

`

Cash DebtorsStockFurnitureMachinery Buildings

10,000 6,000 4,000 5,000 8,000

42,00035,00020,000

1,30,000 1,30,000

On the aforesaid date, they decide to wind up the business.I) The Debtors realised less 10%; the Stock realised 10% more than book value; Buildings realised

`62,000; Vehicle, which was, unrecorded also realised ̀ 4,000 and Machinery at Book value.ii) Furniture was taken over by Anil at a valuation of ̀ 9,000iii) Creditors to be settled at less 10% and Interest on overdraft due ̀ 400 also to be paid off.iv) Sunil took over his wife's Loanv) Realisation Expenses amounted to ̀ 3,000Prepare:a) Realisation A/c, b) Capital Accounts of the partners, and c) Cash A/c

Dr. Realisation A/c Cr.`Particulars Particulars `

By Creditors A/cBy B/P A/cBy Bank O.D A/cBy Mrs. Sunil's Loan A/cBy Cash A/c: Debtors {15,000 - 1,500} Stock {18,000 + 1,800} Buildings Vehicle Machinery

By Anil's Capital A/c: Furniture

10,000 6,000 4,000 5,000

13,50019,80062,000 4,00020,000

9,000

To Debtors A/cTo Stock A/cTo Furniture A/cTo Machinery A/cTo Buildings A/cTo Cash A/c: Creditors {10,000 - 1,000} B/P Bank Overdraft {4,000 + 400}To Sunil's Capital A/c: Mrs. Sunil's Loan To Cash A/c: Realisation ExpensesTo Partners' Capital A/c: - Net Profit transferred Anil 225 Vimal 450 Sunil 225

15,00018,00012,00020,00060,000

9,0006,0004,400

5,000

3,000

900

1,53,300 1,53,300


ParticularsAnil `

Vimal `

Vimal `

Sunil`

Sunil`

Anil `

To Realisation A/c: Furniture To Bank A/c - Final payments

By Balance b/dBy Realisation A/c: Mrs. Sunil's loan Realisation profitBy Reserve A/c

9,000

35,225

-

39,450

-

27,225

42,000

- 225 2,000

35,000

- 450 4,000

20,000

5,000 225 2,000

44,225 44,22539,450 39,45027,225 27,225

Particulars

Dr. CashA/c Cr.

Particulars Particulars` `

By Realisation A/c: Creditors B/P Bank overdraft Realisation Expenses By Partners' Capital A/cs: Anil Vimal Sunil

9,0006,0004,4003,000

35,22539,45027,225

5,000

13,50019,80062,000 4,00020,000

To Balance b/dTo Realisation A/c: Debtors Stock Buildings Vehicle Machinery

1,24,300 1,24,300

Working Notes: 1. Settlement of B/P:

There is no information regarding the settlement of B/P. So B/P has been taken as paid fully.

- 20 -

Case 1. Goodwill is given in the Balance Sheet and the Adjustment:

2. The following is the Balance Sheet of Black, White and Green as on 30.6.1993


Cash DebtorsInvestmentsStockFurnitureBuilding Goodwill

530 8,60010,00013,700 5,07012,90010,000

15,000 1,800

22,00012,00010,000

Sundry CreditorsBills PayableCapital Accounts:

BlackWhiteGreen

60,800 60,800

It was decided to dissolve the partnership on the following terms:I) Black took over Goodwill at ̀ 12,000 , Building ̀ 15,750 and Furniture for ̀ 4,500ii) Green took over Bills payable at book value.iii) The other assets realised as :

Debtors ̀ 8,000, Stock ̀ 15,600, Investments ̀ 8,950iv) Realisation Expenses amounted to ̀ 600Prepare Realiation A/c, Partners’ Capital A/cs and Cash A/cSolution:

Dr. Realisation A/c Cr. `Particulars Particulars `

By Sundry Creditors A/cBy Bills Payable A/cBy Realisation A/c: Debtors Stock InvestmentsBy Black's Capital A/c: Goodwill Furniture Building

8,60010,00013,700 5,07012,90010,000

15,000

1,800

600

3,930

15,000 1,800

8,00015,600 8,950

12,000 4,50015,750

To Debtors A/cTo Investments A/cTo Stock A/cTo Furniture A/cTo Building A/cTo Goodwill A/cTo Cash A/c: Creditors To Green's Capital A/c: B/PTo Cash A/c: Realisation ExpensesTo Partners Capital A/cs: - Net Profit transferred equally Black 1,310 White 1,310 Green 1,310

81,600 81,600

- 21 -

Working Notes:1. Goodwill given in the Balance Sheet:

Goodwill 10,000 given in the Balance Sheet has been transferred to the Debit side of Realisation A/c.2. Goodwill given in the adjustment:

Goodwill ̀ 12,000 given in the adjustment as taken over by Black is recorded as:

`


ParticularsBlack

`Black

`

White`

Green`

White `

Green`

To Realisation A/c: Goodwill Furniture Building To Cash A/c - Final payment

Particulars

12,000 4,50015,750 -

---

13,310

---

13,110

By Balance b/dBy Realisation A/c: B/PBy Realisation A/c: Realisation Profit By Cash A/c

22,000

-

1,3108,940

12,000

-

1,310-

10,000

1,800

1,310-

32,250 32,25013,310 13,31013,110 13,110

Dr. Cash A/c Cr.


By Realisation A/c: Creditors By Realisation A/c: Dissolution ExpensesBy Partners' Capital A/c: White

Green

15,000

600

13,31013,110

530

8,00015,600 8,950 8,940

To Balance b/dTo Realisation A/c: Debtors Stock InvestmentsTo Black’s Capital A/c

42,020 42,020

Black’s Capital A/c Dr. To Realisation A/c (Goodwill taken over by Mr. Black)

12,000

12,000

Case 2: Goodwill is given only in the Balance Sheet


Cash at BankInvestmentsB/RDebtorsStockMachineryFurnitureBuilding Goodwill

5,000 5,00010,00020,00015,00015,000 5,00020,00010,000

10,00010,000 5,00010,000

30,00040,000

Sundry CreditorsBills PayableApoorva's LoanReserve FundCapital A/cs: Apoorva Suparva

1,05,000 1,05,000

3. Apoorva and Suparva are partners sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as on 31.12.1990 is as follows:

- 22 -

On the above date the firm was dissolved and the assets realised as follows:B/R ̀ 7,500, Sundry Debtors and Stock 10% less than the book value, Machinery 5% more than the book value. Building realised `12,000. Goodwill is considered worthless. Furniture and Investments were taken over by Apoorva and Suparva @ ̀ 4,000 each respectively. Dissolution expenses were ̀ 600. All the liabilities were discharged in full.Show the necessary ledger accounts. - II PUC Sept. 1991, Oct. 2004

Dr. Realisation A/c Cr.

`Particulars Particulars `

By Creditors A/cBy B/P A/cBy Bank A/c: B/R Stock (15,000 - 1,500) Debtors (20,000 - 2,000) Machinery (15,000 + 750) Building By Apoorva's Capital A/c: FurnitureBy Suparva's Capital A/c: InvestmentsBy Partners' Capital A/c: - Net Loss transferred in 3 : 2 Apoorva 15,510 Suparva 10,340

10,00010,000

7,50013,50018,00015,75012,000

4,000

4,000

25,850

To Investments A/cTo B/R A/cTo Debtors A/cTo Stock A/cTo Machinery A/cTo Furniture A/cTo Building A/cTo Goodwill A/cTo Bank A/c: Sundry Creditors 10,000 B/P 10,000

To Bank A/c: - Dissolution Expenses paid

5,00010,00020,00015,00015,000 5,00020,00010,000

20,000

600

1,20,600 1,20,600


Particulars

By Balance b/dBy Reserve Fund A/c - 10,000 in 3 : 2

Particulars

To Realisation A/c: Furniture Investment Realisation LossTo Bank A/c: - Final payment

Apoorva `

Apoorva `

Suparva `

Suparva `

4,000

-15,51016,490

-

4,00010,34029,660

30,000 6,000

40,000 4,000

36,000 36,00044,000 44,000

Dr. Bank A/c Cr.


To Balance b/dTo Realisation A/c: B/R Stock Debtors Machinery Building

By Realisation A/c: Creditors B/P Dissolution ExpensesBy Apoorva's Loan A/cBy Partners' Capital A/c: Apoorva Suparva

5,000

7,50013,50018,00015,75012,000

10,00010,000 600 5,000

16,49029,660

71,750 71,750

- 23 -

Case 3. Goodwill is given only in the Adjustment:

- 24 -

4. M, N and O are partners. They dissolved the firm. From the following information and Balance Sheet as on 30.6.2010, prepare the necessary dissolution accounts. The dissolution proceedings are:a) Plant and Machinery realised 90% of book valueb) Joint Life Policy realised 75%. c) Stock realised ̀ 27,000 and Debtors ̀ 20,000d) N agreed to take over Vehicle at ̀ 15,000e) M to take over Furniture at 10% less than the book value and Goodwill at ̀ 6,000f) An unrecorded investment of `12,000 not recorded in the books taken over by a Creditor at ` 8,000

and the balance paid at 10% discount.g) Bank Loan was paid with interest ̀ 2,000h) Liabilities on Bills discounted arised ̀ 2,000I) Dissolution Expenses amounted ̀ 2 00,0


Plant and Machinery Furniture Joint Life PolicyStock Debtors 25,000Less: RBD - 2,000 23,000Less: RDD 1,000VehicleCash at BankCash in handO's Capital A/c

40,00010,00020,00028,000

22,00018,000 1,450 1,55010,000

Capital A/c M NCreditorsB/PReserve FundBank LoanProfit and Loss A/c

33,00027,00028,00010,00015,00017,00021,000

1,51,000 1,51,000

Balance Sheet as on 30.6.2010


Particulars Particulars

To Balance b/dTo Realisation A/c: - Furniture - Goodwill - Vehicle - Realisation LossTo Bank A/c - Final payment

M `

M `

N `

N `

O `

O `

By Balance b/dBy Reserve A/c - 15,000 equally

By Profit & Loss A/c

-

9,0006,000

- 2,000

28,000

-

--

15,000 2,000

22,000

10,000

---

2,000

-

33,000

5,000

7,000

27,000

5,000

7,000

-

5,000

7,000

45,000 45,00039,000 39,00012,000 12,000

Solution:

Dr. Realisation A/c Cr.

`Particulars Particulars `

By RBD A/cBy RDD A/cBy Creditors A/c By B/P A/cBy Bank Loan A/c

By Bank : Plant & Machinery (40,000 - 4,000) Stock Debtors Joint Life PolicyBy M's Capital A/c: - Furniture (10,000 - 1,000) - GoodwillBy N's Capital A/c: - Vehicle By Partners' Capital A/c: - Loss transferred equally M 2,000 N 2,000 O 2,000

A/c

2,000 1,000 28,00010,00017,000

36,000

27,00020,00015,000

9,0006,000

15,000

6,000

40,00010,00020,00028,00025,00018,000

2,000 2,00010,000

18,000

19,000

To Plant and Machinery A/cTo Furniture A/cTo Joint Life Policy A/cTo Stock A/cTo Debtors A/cTo Vehicle A/cTo Bank : Liabilities on Bills Discounted Dissolution Expenses B/P Creditors 28,000 Less: Asset taken over - 8,000 20,000 Less: 10% Discount - 2,000

Bank Loan 17,000 Add: Interest on loan 2,000

A/c

1,92,000 1,92,000

Dr. Bank A/c Cr.


By Realisation A/c: Creditors Bank Loan + Interest Liabilities on Bill Discounted Dissolution Expenses B/PBy Partners' Capital A/cs: M N

18,00019,000 2,000 2,00010,000

28,00022,000

1,450 1,550

36,00027,00020,00015,000

To Balance b/dTo Cash A/c - Cash in hand deposited To Realisation A/c: Plant and Machinery Stock Debtors Joint Life Policy

1,01,000 1,01,000

- 25 -

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Documents

SINGLE ENTRY SYSTEM - Karnataka · SINGLE ENTRY SYSTEM: A) In the year of formation: 1. Bharath a trader, does not maintain complete set of books of accounts. He started the business