6.

PARTNERSHIP ACCOUNTING
AMALGAMATION OF FIRMS AND CONVERSION TO A COMPANY
a.
b.
c.
d.

When two or more sole proprietors forms new partnership firm;

When one existing partnership firm absorbs a sole proprietorship;
When one existing partnership firm absorbs another partnership firm;
When two or more partnership firms form new partnership firm.

I: Calculation of Purchase Consideration

Calculation of Purchase Consideration
Agreed values of assets taken over

Less: Agreed values of liabilities assumed

Purchase consideration

II: When the sole proprietors form or a partnership firm is closed

Steps to be taken for the existing books
Step 1: Prepare the Balance Sheet of the business on the date of dissolution.
Step 2: Open a Realization Account and transfer all assets and liabilities, except cash in hand and cash
at bank, at their book values. However, cash in hand and cash at bank are transferred to Realization
Account only when they are taken over by the new firm.
Step 3: Credit Realization Account by the amount of Purchase Consideration.
Step 4: If there are any unrecorded assets or liabilities, they are to be recorded.
Step 5: The Profit or loss on realization (balancing figure of Realization Account) to be transferred to
the Capital Account of the proprietor.
Step 6: To ensure that all the accounts of the Sole Proprietors / Firms business are closed.
III: In the books of purchasing firm or company
Steps for incorporating the transaction relating to purchase
Step 1: Pass entry for purchase consideration payable
Step 2: Pass entry for taking assets and liabilities account
Step 3: Pass entry for settling the purchase consideration
Step 4: Prepare revised balance sheet incorporating all assets and liabilities taken over from transferee
Note 1: The Purchase Consideration is satisfied by the Company either in the form of cash or shares
or debentures or a combination of two or more of these. The shares may be equity or preference
shares. The shares may be issued at par, at a premium or at a discount. For the partnership, the issue
price is relevant which may form a part of the purchase consideration.
Note 2: In the absence of any agreement, share received from purchasing company should be
distributed among the partners in the same ratio as profits and losses are shared.

Financial Accounting

6.4.1

[CMA INTER J09, 10 Marks]

Question 38: Amalgamating sole trades and formation of firm: A and B carry on independent
business in provisions and their position on 31.12.2002 are reflected in the given Balance sheet:
Balance Sheet
Liabilities

Trade creditors
Sundry
Expenses

Creditors

Bills payable
Capital A/c

1,10,000

Assets

A
1,70,000

98,000

2,000 Sundry Debtors

89,000

37,000

12,500

---- Cash at bank

13,000

7,500

1,53,000

95,500 Cash in hand

987

234

2,750

1,766

513

----

for

750

47,000 Stock-in-trade

Furniture and Fixtures

Investments
2,76,250 1,44,500

2,76,250 1,44,500

Both of them want to form a partnership firm from 1.1.2003 on the following understanding:
a. The capital of the partnership firm would be 3,00,000 which would be contributed by them in the
ratio of 2:1.
b. The assets of the individual business would be evaluated by C at which values, the firm will take
them over and the value would be adjusted against the contribution due by A and B.
c. C gave his valuation report as follows:
1. Assets of A: Stock-in-trade to be written down by 15% and a portion of the sundry debtors
amounting to 9,000 estimated unrealisable not to be assumed by the firm; furniture and
fixtures to be valued at 2,000 and investments to be taken at market value of 1,000.
2. Assets of B: Stocks to be written up by 10% and sundry debtors to be admitted at 85% of their
value; rest of the assets to be assumed at their book values.
d. The firm is not to assume any creditors other than the dues on account of purchases made. You
are required to pass necessary journal entries in the books of A and B.
Also prepare the opening Balance Sheet of the firm as on 1st Jan 2003.
Answer:
Realization A/c
Particulars
To Stock

Particulars

98,000 By Creditors
purchases

for 1,10,000

89,000

37,000

for

Bank

1,30,000

7,500

Cash

987

234

2,750

1,766

Investment

513

Capital a/c

750

Debtors

Furniture

Partnership Accounting

1,70,000

Creditors
expenses
Bill payable
Purchase
consideration
Capital a/c Loss

750

B
47,000
2,000

12,500
1,18,987 101,750
34,763

6.4.2

Capital a/c [Crs. for

exp]

2000

Capital a/c [Profit]

4,250

2,77,000 150,750

2,77,000 150,750

Purchase consideration a/c

Particulars
To

Particulars

Realization 118,987 101,750 By AB firm

118,987 101,750

118,987 101,750
118,987 101,750

AB Firm A/c
Particulars

Particulars

To Purchase consideration 118,987 101,750 By Capital

118,987 101,750

118,987 101,750
118,987 101,750

Capital A/c
Particulars

Particulars

To Purchase consideration 118,987 101,750 By Balance b/d

Realization (Loss)

34,763

153,000

95,500

750

4,250

Realization Profit
Realization

2,000

(Crs for exp)

153,750

Realization A/c
To Stock-in-trade A/c
To Sundry Debtors A/c
To Cash at bank A/c
To Cash in hand A/c
To Furniture & Fixture
To investments A/c
Creditors for Purchases
Creditors for Expenses
Bills Payable A/c
To Realization A/c

Realization A/c
To Stock-in-trade A/c
To

Sundry

In the books of Answer: Journal Entry

Dr. 276,250
3 New Firm A/c (Note 1)
170,000
To Realization A/c
9,000
13,000 4 Realization A/c
987
To Capital A/c
2,750
513 5 Capital A/c
To Realization a/c
Dr 110,000
Dr
750
6 Capital in New Firm
Dr
12,500
To New Firm A/c
123,250
7 Capital A/c
To Capital New Firm

Dr

In the books of B: Journal Entry

3 New Firm A/c (Note 1)
To Realization A/c
98,000

153,750 101,750

Dr.

118,987
118,987

Dr.

750
750

Dr

34,763
34,763

Dr

118,987
118,987

Dr

118,987
118,987

Dr

1,01,750
1,01,750

Debtors

Financial Accounting

6.4.3

A/c
To Cash at bank a/c
To Cash in hand A/c
To
Furniture
&
Fixture

37,000
7,500
234
1,766

5
2

Creditors for purchase

Creditors for Expenses
To Realization A/c

Dr
Dr

47,000
2,000
6

Realization A/c
To Capital A/c

Dr

Capital in New Firm

To New Firm A/c

Dr

Capital A/c

Dr

4,250
4,250

1,01,750
1,01,750
1,01,750

49,000
To Capital in New
Firm

1,01,750

Balance Sheet of New Firm as on 1st January, 2003

Liabilities

Assets

Capital Accounts:
Furniture & Fittings
3,766
A
2,00,000 Investments
1,000
B
1,00,000 Stock-in-trade
2,52,300
Creditors for purchases
1,57,000 Sundry Debtors
1,11,450
Bills payable
12,500 Cash at bank
99,763
(13,000+7500+81,013-1,750)
Cash in hand (987+234)
1,221
4,69,500
4,69,500
Working Notes: Calculation of Purchase Consideration
Particulars
A
Furniture
2,000
Investments
1,000
Stock-in-trade
1,44,500
Sundry Debtors
80,000
Cash at bank
13,000
Cash in hand
987
2,41,487
1,10,000
Less Sundry Creditors for purchases
Bills payable (Assumed arising out of credit purchases)
12,500
Net assets taken over by the new firm
1,18,987
Capital as per agreement
2,00,000
Net
assets
taken
over
1,18,987
Less
Cash to be introduced (+)/withdrawn (-)
(+)81,013

B
1,766
--1,07,800
31,450
7,500
234
1,48,750
47,000
---1,01,750
1,00,000
1,01,750
(-)1,750

[CA PE II M06]
Question 39: Amalgamation of Firms: Firm X & Co. consists of partners A and B sharing Profits
and Losses in the ratio of 3:2. The firm Y & Co. consists of partners B and C sharing Profits and
Losses in the ratio of 5:3.
On 31st March, 2006 it was decided to amalgamate both the firms and form a new firm XY & Co.,
wherein A, B and C would be partners sharing Profits and Losses in the ratio of 4:5:1.
Liabilities
Capital:

Partnership Accounting

Balance Sheet as at 31.3.2006

X & Co Y & Co
Assets
Cash in hand/bank

X & Co
40,000

Y & Co
30,000

6.4.4

A
B
C
Reserve
Creditors

1,50,000
--1,00,000
75,000
--50,000
50,000
40,000
1,20,000
55,000
4,20,000 2,20,000

Debtors
Stock
Vehicles
Machinery
Building

60,000
80,000
50,000
20,000
--90,000
1,20,000
--1,50,000
--4,20,000 2,20,000

The following were the terms of amalgamation:

1. Goodwill of X & Co., was valued at 75,000. Goodwill of Y & Co. was valued at 40,000.
Goodwill a/c not to be opened in the books of the new firm but adjusted through the Capital a/c of
the partners.
2. Building, Machinery and Vehicles are to be taken over at 200,000, 1,00,000 and 74,000
respectively.
3. Provision for doubtful debts at 5,000 in respect of X & Co. and 4,000 in respect of Y & Co. are
to be provided.
You are required to:
1. Show, how the Goodwill value is adjusted amongst the partners.
2. Prepare the B/S of XY & Co. as at 31.3.2006 by keeping partners capital in their profit sharing
ratio by taking capital of B as the basis. The excess or deficiency to be kept in the respective
Partners Current a/c.
Answer: (i) Adjustment for raising and writing off of goodwill
Raised in old profit sharing ratio

Total

Written off

Difference

Y & Co.5:3
in new ratio
--- 45,000 Cr.
46,000 Dr.

1,000 Dr.

A.

X & Co. 3:2

45,000

B.

30,000

25,000 55,000 Cr.

57,500 Dr.

2,500 Dr.

75,000

15,000 15,000 Cr.

40,000
1,15,000

11,500 Dr.
1,15,000

3,500 Cr.
Nil

Balance Sheet of X Y & Co.(New firm) as on 31.3.2006

Liabilities

Assets

Capital Accounts:
Vehicle
A
1,72,000 Machinery
B
2,15,000 Building
C
43,000 Stock
Current Accounts:
Debtors
A
22,000 Cash & Bank
C
18,000
Creditors
1,75,000
6,45,000

74,000
1,00,000
2,00,000
70,000
1,31,000
70,000

6,45,000

Working Notes:
1.

Balance of Capital Accounts at the time of amalgamation of firms (.)

Add

X & Co.Profit and loss sharing ratio 3:2

Balance as per Balance Sheet
Reserves

Financial Accounting

As Capital Bs Capital
1,50,000
1,00,000
30,000
20,000
6.4.5

Realisation profit (Building)

Less Realisation loss (Machinery)
Provision for doubtful debt.
Y & Co. Profit and loss sharing ratio 5:3
Balance as per Balance sheet
Add Reserves
Less Revaluation (vehicle)
Provision for doubtful debts

30,000
20,000
(12,000)
(8,000)
(3,000)
(2,000)
1,95,000
1,30,000
Bs Capital Cs Capital
75,000
50,000
25,000
15,000
(10,000)
(6,000)
(2,500)
(1,500)
87,500
57,500

Balance of Capital A/c in the balance sheet of the new firm as on 31.3.2006
A-
B-
C -
Balance b/d:
X & Co.
1,95,000 1,30,000
-Y & Co.
-87,500 57,500
1,95,000 2,17,500 57,500
Adjustment for goodwill
(1,000)
(2,500) 3,500
1,94,000 2,15,000 61,000
Total capital 430,000 (Bs capital as base)
to be contributed in 4:5:1 ratio.
1,72,000 2,15,000 43,000
Transfer to Current Account
22,000
--- 18,000
Realization A/c
Particulars

X & Co Y & Co

To Cash

Particulars

X & Co Y & Co

40,000

30,000 By Creditors

Debtors

60,000

80,000

Stock

50,000

20,000

Machinery

120,000

Realization Loss

Building

150,000

Bs Capital

12,500

Vehicles

90,000

Cs Capital

7,500

Purchase Consideration

120,000

55,000

325,000

145,000

Realization Profit
As Capital

15,000

Bs Capital

10,000
445,000 220,000

445,000

220,000

Purchase consideration a/c

Particulars X & Co Y & Co
To

Realization

Partnership Accounting

Particulars X & Co Y & Co

325,000 145,000 By AB firm

325,000 145,000

325,000 145,000

325,000 145,000

6.4.6

XY Firm A/c
Particulars

X & Co Y & Co

To Purchase consideration

Particulars

X & Co Y & Co

325,000 145,000 By As Capital

195,000

Bs Capital

130,000

Cs Capital

87,500
57,500

325,000 145,000

325,000

145,000

Capital A/c
X & Co

To

Y & Co

Particulars

XY Firm

195,000

130,000

87,500

57,500

12,500

7,500

Realization

195,000

130,000

100,000

X & Co

By

Y & Co

Particulars

Balance b/d

150,000

100,000

75,000

50,000

30,000

20,000

25,000

15,000

15,000

10,000

195,000

130,000

100,000

65,000

Reserve

65,000

[PE II N06]
Question 40: Conversion of Partnership Firm into Company: X and Y carrying on
business in partnership sharing Profits and Losses equally, wished to dissolve the firm and sell
the business to newly formed X Limited Company on 31-3-2006, when the firms position was
as follows:
Balance Sheet
Liabilities

Xs Capital

1,50,000 Land and Building

Ys Capital

1,00,000 Furniture

Sundry Creditors

Assets

60,000 Stock

1,00,000
40,000
1,00,000

Debtors

66,000

Cash
3,10,000

4,000
3,10,000

The arrangement with X Limited Company was as follows:

1. Land and Building was purchased at 20% more than the book value.
2. Furniture and stock were purchased at book values less 15%.
3. The goodwill of the firm was valued at 40,000.
4. The firms debtors, cash and creditors were not to be taken over, but the company agreed to
collect the book debts of the firm and discharge the creditors of the firm as an agent, for
which services, the company was to be paid 5% on all collections from the firms debtors and
3% on cash paid to firms creditors.
5. The purchase price was to be discharged by the company in fully paid equity shares of 10
each at a premium of 2 per share.

Financial Accounting

6.4.7

The company collected all the amounts from debtors. The creditors were paid off less by 1,000
allowed by them as discount. The company paid the balance due to the vendors in cash. Prepare
the Realization a/c, the Capital a/c of the partners and the Cash a/c in the books of partnership
firm.
Answer:
Realization Account
To Land & Building

1,00,000

Furniture

By Sundry Creditors

40,000

Stock

Purchase
consideration

66,000

X Ltd. Co.
Creditors

2,79,000

X Ltd. Company 66,000

Drs

1,00,000

Debtors

60,000

Less:
5%

Commission

3,300

62,700

S. 59,000

Less: Commission 3%

1,770

Xs Capital A/c:

17,465

Ys Capital A/c:

17,465

57,230
34,930
4,01,700

4,01,700

Capital Accounts
X
To Shares in X Ltd.
Co.
To Cash

Payment

1,63,980 1,15,020 By

Final

3,485

Balance b/d

2,445 By

Realization
Profit

1,50,000 1,00,000
A/c

1,67,465 1,17,465

17,465

17,465

1,67,465 1,17,465

Cash Account
To

Balance b/d

4,000 By

As Capital A/c: payment

3,485

To

X Ltd. Co. (Drs Crs)

1,930 By

Bs Capital A/c: Payment

2,445

5,930

5,930

WN1: Calculation of Purchase consideration:

Land & Building

1,20,000

Furniture

34,000

Stock

85,000

Goodwill

40,000
2,79,000

Partnership Accounting

6.4.8

WN2: The shares received from the company have been distributed between the two partners A
& B in the ratio of their final claims i.e., 167,465: 117,465 .
Number of shares received from the company = 279,000/12 =23,250
A gets = 23,250 167,465/284,930 shares valued at 13,665 12 = 163,980. B gets the remaining
9,585 shares, valued at 115,020 (9,585 12)
WN3: Calculation of net amount received from X Ltd on account of amount
realized from debtors less amount paid to creditors.
Amount realized from Debtors
66,000
Less:

Commission for realization from debtors (5% on 66,000)

3,300
62,700

Less:

Amount paid to creditors

59,000
3,700

Less:

Commission for cash paid to creditors (3% on 59,000)

Net amount received

1,770
1,930

Question 41: Sale to a Company: S and T were carrying on business as equal partners. Their
Balance Sheet as on 31st March, 2007 stood as follows:
Balance Sheet
Liabilities
Assets
Capital accounts:
Stock
S
6,40,000
Debtors
T
6,60,000 13,00,000 Furniture
Creditors
3,27,500 Joint life policy
Bank overdraft
1,50,000 Plant
Bills payable
62,500 Building
18,40,000

2,70,000
3,65,000
75,000
47,500
1,72,500
9,10,000
18,40,000

The operations of the business were carried on till 30th September, 2007. S and T both withdrew in
equal amounts, half the amount of profits made during the current period of 6 months after 10% p.a.
had been written off on building and plant and 5% p.a. written off on furniture. During the current
period of 6 months, creditors were reduced by 50,000, Bills payables by 11,500 and bank overdraft
by 75,000. The Joint life policy was surrendered for 47,500 on 30th September, 2007. Stock was
valued at 3,17,000 and debtors at 3,25,000 on 30th September, 2007. The other items remained the
same as they were on 31st March, 2007.
On 30th September, 2007 the firm sold its business to ST Ltd. The goodwill was estimated at
5,40,000 and the remaining assets were valued on the basis of the balance sheet as on 30th
September, 2007. The ST Ltd. paid the purchase consideration in equity shares of 10 each. You
are required to prepare a Realization account and Capital accounts of the partners.
Answer:

In the above situation, shares received from X Ltd. Company have been distributed between two partners A and
B in the ratio of their final claims. Alternatively, shares received from X Ltd. can be distributed among the
partners in their profit sharing ratio i.e. 2,79,000 = 1,39,500 each. In that case, firm will pay cash
amounting 27,965 to A and will receive cash 22,035 from B.

Financial Accounting

6.4.9

Realization Account
Particulars
To Sundry
assets:
Stock
Debtors
Plant
Building
Furniture
Capital:
S
T

Particulars
By Creditors

3,17,000
3,25,000
1,63,875
8,64,500
73,125
2,70,000
2,70,000

Bills payables
Bank overdraft
Shares in ST Ltd.

5,40,000
22,83,500

2,77,500
51,000
75,000
18,80,000

22,83,500

Capital Accounts
Date
1.4.08
30.9.08

To Cash
Drawings
Shares in ST

S
20,000

T
Date
20,000 1.4.08

Balance b/d

S
T
6,40,000 6,60,000

9,30,000 9,50,000 30.9.08 Profit

W.N.2)
Realization

40,000

40,000

2,70,000 2,70,000

9,50,000 9,70,000

9,50,000 9,70,000

WN1: Ascertainment of total capital

Balance Sheet as at 30th September, 2007
Liabilities

Assets

Sundry creditors
2,77,500 Building
9,10,000
Bills payable
51,000 Less: Depreciation
45,500 8,64,500
Bank overdraft
75,000 Plant
1,72,500
Total capital (balance)
13,40,000 Less: Depreciation
8,625 1,63,875
Furniture
75,000
Less: Depreciation
1,875
73,125
Stock
3,17,000
Debtors
3,25,000
17,43,500
17,43,500
WN2
Add
Less

S
T
Total
Capital opening 640,000 660,000
1,300,000
Net Profit
40,000 40,000
80,0001
Drawings
20,000 20,000
40,000
Closing Capital 660,000 680,000 1,340,000 WN1

(Net Profit Drawings) = (Closing Capital Opening Capital) = 40,000

Drawings = 0.5 Net Profit [given], hence
Net Profit 0.5 Net Profit = 40,000
Net Profit = 80,000

Partnership Accounting

6.4.10

WN3 Purchase consideration

Net Worth (Capital)WN1
Add

Goodwill

1,340,000
540,000
1,880,000

[CMA INTER J02, 16 Marks]

Question: Conversion into company: A and B were carrying on business as equal partners. The
firms Balance Sheet as on 31st December 2000 was as follows:
Liabilities
Capital Accounts :
A
B
Bank Loan
Current Liabilities :
Sundry Debtors
Bills Payable

1,38,000
1,52,000
40,000
70,000
10,000
4,10,000

Assets

Fixed Assets :
Leasehold Building
80,000
Plant and Machinery 1,80,000
Furniture
20,000
Current Assets:
Stock
60,000
Book Debts
68,000
Cash at Bank
2,000
4,10,000

The business was carried on till 30th June, 2001. The partners withdrew in equal amounts half the
amount of profits made during the period of six months (from January to June 2001) after charging
depreciation on
Leasehold Building 10% per annum
Plant and Machinery 10% per annum
Furniture
10% per annum
Meanwhile Sundry Creditors were reduced by 15,000, Bills Payable by 2,500 and Bank Loan by
20,000. On 30th June stock was valued at 70,000, Book Debts were 75,000 and Cash at Bank was
2,500. On 30th June, 2001 the firm sold the business to a limited company for 4,00,000 payable in
Equity Shares of 10 each. The partners decided to take shares in the profit sharing ratio, any
difference to be settled in cash.
You are required to prepare:
1.
2.
3.
4.

Statement of Net Assets as on 30th June 2001;

Statement of Profit earned during the period six months ended on 30.06.2001:
Realisation Account;
Capital Accounts of the partners.
[WN1] Statement of Net Assets as on 30.06.01
Liabilities
Amount
Assets
Amount
Capital (Balancing Figure) 3,31,000 Lease Hold Building
76,000
Bills Payable
7,500 Plant & Machinery
1,71,000
Creditors (70,000 15,000)
55,000 Furniture
19,000

Financial Accounting

6.4.11

Bank loan

WN2
Add
Less

20,000 Stock
Cash at Bank
Debtors
4,13,500

70,000
2,500
75,000
4,13,500

A
B
Total
Capital opening 1,38,000 1,52,000
2,90,000
Net Profit
41,000
41,000
82,0001
Drawings
20,500
20,500
40,000
Closing Capital 1,58,500 1,72,500 3,31,000WN1
Realisation A/c
Amount
76,000 By
1,71,000
19,000
70,000
2,500
75,000

Particulars
To Lease Hold Building
Plant & Machinery
Furniture
Stock
Cash at Bank
Debtors
Profit
A
34,500
B
34,500

Particulars
Amount
Sundry Creditors
55,000
Bills Payable
7,500
Bank Loan
20,000
New Co. Ltd. (PC) 4,00,000

69,000
4,82,500

4,82,500

Partners Capital A/c

Particulars
A
B
Particulars
A
B
To Drawings A/c
20,500
20,500 By Balance b/d
1,38,000 1,52,000
Equity Share in Company 2,00,000 2,00,000
Realisation
on
34,500
34,500
Ltd.
Profit
Cash A/c
7000
Profit (6 months)
41,000
Cash
41,000
2,20,500 2,27,500
2,20,500 2,27,500

ADDITIONAL PROBLEMS
[CMA INTER D08, 10 Marks]
Question: Conversion into company: Suchandra, Ashmita and Kasturi were running partnership
business sharing Profit and Losses in 2:2:1 ratio. Their Balance Sheet as on 31.03.2008 stood as
following:

Liabilities
Fixed Capital:

( In 000s)
Assets

Fixed Assets

920

(Net Profit Drawings) = (Closing Capital Opening Capital) = 40,000

Drawings = 0.5 Net Profit [given], hence
Net Profit 0.5 Net Profit = 41,000
Net Profit = 82,000

Partnership Accounting

6.4.12

Suchandra
Ashmita
Kasturi
Current Account :
Suchandra
Kasturi
Unsecured Loan
Current Liabilities

690
Investment
115
460
Current Assets
230 1,380 Stock
230.00
Debtors
632.50
138
Cash at Bank
287.50 1,150
92
230
230
345
2,185
2,185

On 01.04.2008, they agreed to form new company Tata (P) Ltd. With Ashmita and Kasuri each taking
up 460 eq. share of 10 each, which shall take over the firm as going concern including Goodwill, but
excluding cash and bank balance.
The following are also agreed upon:
a) Goodwill will be valued at 3 years purchase of super profit.
b) The actual profit for the purpose of Goodwill valuation will be 4,60,000.
c) The normal rate of return will be 18% p.a. on Fixed Capital
d) All other assets and liabilities will be taken at Book Value.
e) Ashmita and Kasturi are to acquire interest in the new company at the ratio 3 : 2.
f) The purchase consideration will be payable partly in shares of 10 each and partly in cash.
Payment in cash being to meet the requirement to discharge Suchandra, who has agreed to retire.
g) Realisation expenses amounted to 1,17,300
You are required to close the books of the firm by passing necessary journal entries.
Answer:
a.

Realisation A/c
To Fixed Assets A/c
To Investment A/c
To Stock A/c
To Sundry Debtors A/c
To Goodwill A/c
To Bank A/c (Realisation Expenses)
(Being transfer of Assets of Realisation A/c)

b. Unsecured loan A/c

Current Liabilities A/c
To Realisation A/c
(Being transfer of liabilities to Realisation A/c)
c.

Dr. 26,49,600
9,20,000
1,15,000
2,30,000
6,32,000
6,34,800
1,17,300

Dr.
Dr.

5,75,000

Suchandras Capital A/c

Dr.
Ashmitas Capital A/c
Dr.
Kastmiss Capital A/c
Dr.
To Realisation A/c
(Being transfer of realisation losses to partners Capital A/c)

d. Tata (P) Ltd. A/c (W.n.3)

To Realisation A/c
(Being purchase consideration due)
Financial Accounting

2,30,000
3,45,000

46,920
46,920
23,460
1,17,300

Dr. 19,57,300
19,57,300

6.4.13

e.

f.

Goodwill A/c (W.n.2)

To Suchandras Capital A/c
To Ashmitas Capital A/c
To Kasturis Capital A/c
(Being transfer of goodwill to parties Capital A/c)

Dr.

Suchandras Current A/c

Kasturis Current A/c
To Suchandras Capital A/c
To Kasturis Capital A/c
(Being transfer of Current A/c balances to Capital A/c)

Dr.
Dr.

6,34,800
2,53,900
2,53,900
1,26,900

1,38,000
92,000
1,38,000
92,000

g. Suchandras Capital A/c

To Bank A/c
(Being amount of Capital paid to Suchandra)

Dr. 10,35,000

h. Ashamitas Capital A/c

To Kasturis Capital A/c
(Being amount payable by Kasturi to Anshuitab
in order to make their Claim in new company as 3:2)

Dr.

i.

Dr. 8,64,800
Dr. 10,92,500

Bank A/c
Shares in Tata (P) Ltd. A/c
To Tata (P) Ltd. A/c
(Being amount received amount shares in Tata(P) Ltd.
Distributed for Purchase consideration)

10,35,000

11,500
11,500

19,57,300

Working Notes: 1
Anshuitab Capital A/c
Particulars
Amount
Particulars
To Realisation A/c
46,920 By Balance c/d
Kausturis Capital
11,500
Goodwill A/c
Balance c/d
6,55,500
7,13,920

Amount
4,60,000
2,53,920
7,13,920

Kausturis Capital A/c

Particulars
Amount
Particulars
To Realisation A/c
23,460 By Balance c/d
Balance c/d
4,37,000
Goodwill A/c
Current A/c
Anushmitas Capital A/c
4,60,460
Calculation of goodwill
Normal Ratio of return
18 % p.a. or fixed capital
Actual Profit
(-) Normal Profit

Amount
2,30,000
1,26,960
9,20,000
11,500
4,60,460

2.

Partnership Accounting

13,80,00018%

248,400
4,60,000
2,48,400

6.4.14

Super profit
Goodwill = 2,11,600 x 3 years of purchase of S.P
Suchandras Share
6,34,800 2/5
Ashmitras Share
6,34,800 2/5
Kusturis Share
6,34,800 1/5

2,11,600
6,34,800
2,53,920
2,53,920
1,26,960

3. Computation of Purchases Consideration

Investments
1,15,000
Fixed Assets
9,20,000
Stock
2,30,000
Debtors
6,32,500
Goodwill
6,34,800
25,32,300
Less: Unsecured Loan
2,30,000
Current Liabilities
3,45,000
19,57,300

Financial Accounting

6.4.15