Profit And Loss Account

Step 1: Interest on Drawings

Abhay: 10% of ₹6,00,000 = ₹60,000

Sujoy: 10% of ₹4,00,000 = ₹40,000

Step 2: Profit Available for Distribution

Net Profit = ₹6,50,000 + ₹60,000 + ₹40,000 = ₹7,50,000 (after charging drawings interest)

Step 3: Profit Sharing Ratio

Abhay : Sujoy = ₹80,00,000 : ₹60,00,000 = 4 : 3

Abhay's share = (4/7) × ₹7,50,000 = ₹4,28,571 (approx)

Sujoy's share = (3/7) × ₹7,50,000 = ₹3,21,429

Step 4: Check Guarantee Clause

Abhay's actual share (₹4,28,571) is more than the guaranteed amount (₹3,50,000), so no adjustment needed.

Profit and Loss Appropriation Account

Final Answer: Abhay gets ₹4,28,571, Sujoy gets ₹3,21,429; no guarantee adjustment needed.

Revaluation Account and Partners' Capital Accounts

1. Revaluation Account

Explanation:

• Fixed Assets Overvalued: Fixed Assets were overvalued by ₹1,40,000, so the asset value decreases which is debited to Revaluation A/c
• Creditors Paid: Creditors were paid ₹4,20,000 in full settlement, whereas the balance sheet show 4,90,000 so the value decreases by 70000 which is credited to Revaluation A/c.
• Bittu and Chintu's share for General Reserve: General Reserve will be distributed to the old partners by old ratio so 2,10,000 is credited to Revaluation A/c.
• Profit Distribution: The profit on revaluation (difference in total value) is distributed between Bittu and Chintu in their old profit-sharing ratio (4:3).

2. Partners' Capital Accounts

Explanation:

• Balances b/d: These are the opening balances from the balance sheet.
• Bittu and Chintu's share for Goodwill: Bittu gets the total amount from Diya because he has the sacrificing ratio so the amount of 5,60,000 is credited to Bittu's Capital account.
• Diya's Capital: Diya brings in ₹5,60,000 as capital, so credit it to her capital account.
• General Reserve: The balance sheet shows 2,10,000 divided by 4/7 and 3/7.
• Profit on Revaluation: This is the profit from the revaluation account distributed between Bittu and Chintu.
• Diya's proportionate capital:
  • Calculate the combined capital of existing partners after adjustments:
    • Bittu: 8,00,000 (Old Capital) + 1,20,000 (General Reserve) + 60,000 (Revaluation Profit) + 5,60,000 (Goodwill) = 15,40,000
    • Chintu: 6,00,000 (Old Capital) + 90,000 (General Reserve) + 45,000 (Revaluation Profit) = 7,35,000
  • Add these adjusted capitals: 15,40,000 + 7,35,000 = 22,75,000
  • Determine the combined profit share of Bittu and Chintu after Diya's admission: The new ratio is 3:3:1 for Bittu:Chintu:Diya. So Bittu and Chintu together have a share of 3/7 + 3/7 = 6/7.
  • Calculate the total capital based on Bittu and Chintu's combined capital and profit share: Total Capital = 22,75,000 / (6/7) = ₹26,54,166.67
  • Calculate Diya's proportionate capital: Diya's Capital = (1/7) * 26,54,166.67 = ₹3,79,166.67
• Balances c/d: This is the final balance in each partner's capital account.

Journal Entries for Dissolution of the Firm

Calculations:

• (i) Sachin took over stock: ₹80,000 - (10% of ₹80,000) = ₹80,000 - ₹8,000 = ₹72,000
• (ii) Virat agreed to take over creditors:
  • Creditor value = 70,000
  • Settlement Price = 65,000
  • Additional Payment for liability on Realisation account = 5,000
• (v) Land and Building sale:
  • Amount Received = 70,00,000
  • Commission amount = 70,00,000 × 5% = 3,50,000
  • Net amount = 70,00,000 - 3,50,000 = 66,50,000
• (vi) Realisation Loss:
  • Equal distribution for Sachin = 30,000 ÷ 3 = 10,000
  • Equal distribution for Virat = 30,000 ÷ 3 = 10,000
  • Equal distribution for Rohit = 30,000 ÷ 3 = 10,000

Explanation:

• Taking over assets/liabilities: When a partner takes over an asset or agrees to pay a liability, their capital account is adjusted. The Realisation account is used to reflect the transaction.
• Sale of Assets: Money Received is credited to realisation and deducted from brokers commission (if they charge brokerage commission).
• Distribution of Realisation Loss: The loss is distributed between the partners in their profit-sharing ratio (stated as equal in the given question), which reduces their capital balances.

1. Calculation of Interest on Capital: Period = 6 months (from 1^st Oct 2023 to 31^st March 2024)
Interest for Aakash = ₹ 80,00,000 × 10% × (6/12) = ₹ 4,00,000
Interest for Baadal = ₹ 60,00,000 × 10% × (6/12) = ₹ 3,00,000
Total interest = ₹ 7,00,000
2. Remaining profit after interest: Net profit = ₹ 13,00,000 Less: Interest on capital = ₹ 7,00,000 Balance Profit = ₹ 6,00,000
3. Distribution of Balance Profit equally: Each partner’s share = ₹ 3,00,000 Total for Baadal = ₹ 3,00,000 (profit) + ₹ 3,00,000 (interest) = ₹ 6,00,000 Baadal’s guaranteed minimum = ₹ 7,00,000 Shortfall = ₹ 1,00,000 This shortfall shall be borne by Aakash.
Final Allocation: Aakash’s share = ₹ 3,00,000 – ₹ 1,00,000 = ₹ 2,00,000
Baadal’s share = ₹ 7,00,000
Profit and Loss Appropriation Account table { width: 80%; margin: 20px auto; border-collapse: collapse; font-family: Arial, sans-serif; } th, td { border: 1px solid black; padding: 10px; text-align: left; } th { background-color: #f2f2f2; } .total { font-weight: bold; } .note { width: 80%; margin: 10px auto; font-family: Arial, sans-serif; font-size: 14px; }

Profit and Loss Appropriation Account

Note: There’s a deficiency of ₹ 3,00,000 in the P&L Appropriation A/c due to the guarantee adjustment. Here the deficiency of ₹ 1,00,000 is adjusted only between partners. The account technically shows the final appropriations.
Final Answer: Profit distribution completed as per guarantee.

Let's calculate the Opening and Closing Trade Receivables.

1. Calculate Revenue from Operations (Credit Revenue):

Gross Profit Ratio = 20%
Cost of Revenue from Operations = Rs 6,40,000
Revenue from Operations = Cost of Revenue from Operations / (1 - Gross Profit Ratio)
Revenue from Operations = Rs 6,40,000 / 0.80 = Rs 8,00,000
Cash Revenue = (1/3) * Credit Revenue
Total Revenue from Operations = Cash Revenue + Credit Revenue
Rs 8,00,000 = (4/3) * Credit Revenue
Credit Revenue = Rs 8,00,000 * (3/4) = Rs 6,00,000

2. Calculate Average Trade Receivables:

Trade Receivables Turnover Ratio = Credit Revenue / Average Trade Receivables
4 = Rs 6,00,000 / Average Trade Receivables
Average Trade Receivables = Rs 6,00,000 / 4 = Rs 1,50,000

3. Let's denote Opening Trade Receivables as X:

Closing Trade Receivables = X + Rs 20,000
Average Trade Receivables = (Opening + Closing Trade Receivables) / 2
Rs 1,50,000 = (2X + Rs 20,000) / 2
Rs 3,00,000 = 2X + Rs 20,000
2X = Rs 2,80,000
X = Rs 1,40,000

4. Calculate Opening and Closing Trade Receivables:

Opening Trade Receivables = Rs 1,40,000
Closing Trade Receivables = Rs 1,40,000 + Rs 20,000 = Rs 1,60,000

Answer:

Opening Trade Receivables: Rs 1,40,000
Closing Trade Receivables: Rs 1,60,000