undefined | unit 2 accounting for consignment and joint venture

Unit II

Accounting for Consignment

Question Bank

Q.1.) RAWAL RATAN SINGH of Chittorgarh consigned 1000 units of 100 each to RANI PADMAVATI of SINGHAL. Expense made by RAWAL RATAN SINGH in such consignment are Rs. 20,000.

RANI PADMAVATI paid unloading charges Rs. 5,000 and Rs.2 P.U. selling expenses.

She sold all the goods at Rs.140 each and deducted 5% as commission and remitted draft for the balance. Prepare Ledger accounts in the books of Consignor.

A1) -

Ledger of Rawal Ratan Singh(Consignor)

Dr. CONSIGNMENT A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Goods sent on Consignment (1000 X 100)	1,00,000	By Padmavati (Sales-1000 X 140)	1,40,000
T0 Cash (1000 X 20)	20,000
To Padmavati Non selling exp (1,000 X 5) Selling exp (1,000 X 2)	5,000 2,000
To Padmavati (Comm-1,40,000 X 5%)	7,000
To P&L (Bal.Fig)	6,000

TOTAL	1,40,000	TOTAL	1,40,000

Dr. PADMAVATI A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment	1,40,000	By Consignment	6,600
		By Consignment	5,600
		By Bank (Bal.Fig)	1,27,800

TOTAL	1,40,000	TOTAL	1,40,000

Dr. Goods Sent On Consignment A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
		By Consignment	1,00,000
To Trading (transfer)	1,00,000
TOTAL	1,00,000	TOTAL	1,00,000

Q.2.) On 15 Jan, 2013 J&K Co. of Mumbai sent to Muku & Co. of Kolkata 400 bicycle at an invoice price of Rs.100 per bicycle to be sold on commission. Freight and insurance were Rs.600.

Accounts sale was received from consignee as follow: -

15 March - 100 per bicycle were sold @ Rs.145 on which 5%. Commission and Rs.375 for expenses were deducted.

10 April - 150 per bicycle were sold @ Rs.140 on which 5%. Commission and Rs.290 for expenses were deducted.

From the above information prepare Consignment A/c in the books of J&K Co. and close it on 30 April, 2013 keeping in mind that no salves were made afterwards. Also show accounts in the books of Muku & Co.

A2) : -

Ledger of J&K CO. (Consignor)

Dr. CONSIGNMENT A/c Cr.

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
2013			2013
Jan 15	To GSOC	40,000	Mar. 15	By Muku (sales)	14,500
Jan 15	To Cash/Bank (J&K exp.)	600	Apr. 10	By Muku (sales)	21,000
Mar. 15	To Muku (exp.)	375	Apr. 30	By Stock on Consignment	15,225
Mar. 15	To Muku (commission)	725
Apr. 10	To Muku (exp.)	290
Apr. 10	To Muku (commission)	1,050
Apr. 30	To P&L (Bal. Fig.)	7,685

	TOTAL	50,725		TOTAL	50,725

Dr. MUKU’s A/c (Consignee) Cr.

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
2013			2013
Mar. 15	To Consignment (Sales)	14,500	Mar. 15	By Consignment (expense)	375
Apr. 10	To Consignment (Sales)	21,000	Mar. 15	By Consignment (Commission)	725
			Apr. 10	By Consignment (expense)	290
			Apr. 10	By Consignment (Commission)	1,050
			Apr. 30	By Balance c/d	33,060
	TOTAL	35,500		TOTAL	35,500

Dr. Goods sent on Consignment A/c Cr.

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
2013				2013
Apr. 30	To Trading A/c (transfer)	40,000	Jan. 15	By Consignment	40,000

	TOTAL	40,000		TOTAL	40,000

LEDGER OF MUKU & CO. (Consignee)

Dr. J&K Co. A/c Cr.

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
2013			2013
Mar. 15	To Cash/Bank (expense)	375	Mar. 15	By Cash/Bank (Sales)	14,500
Mar.15	To Commission	725	Apr. 10	By Cash/Bank (Sales)	21,000
Apr. 10	To Cash /Bank (expense)	290
Apr. 10	To Commission	1,050
Apr. 30	To Balance c/d	33,060

	TOTAL	34,500		TOTAL	34,500

Dr. COMMISSION A /c Cr.

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
2013			2013
Apr. 30	To P&L (Bal.Tfd.)	1,775	Mar.15	By J&K (14,500 X 5%)	725
			Apr. 10	By J&K (21,000 X 5%)	1,050

	TOTAL	34,500		TOTAL	34,500

Working note: -

Closing Stock

Cost of Goods Sent.

 Quantity sent 400

Cost of Goods (400 X 100) 40,000

Add: - J&K Co. Expense 600

b) Total Cost 40,600

c) Quantity Sold 250

d) Quantity in stock 150

e) Closing Stock - Cost

= Total Cost X Quantity in Stock / Quantity Sent

= 40,600 X 150/400

= 15,225

Note: - It is assumed that the consignee's expenses are incurred after the goods have reached their godown and hence not included in valuation of stock.

Q.3). On 1st November,2015, A of Calcutta sends goods costing Rs.1,00,000 to B of Delhi on Consignment basis. A paid Rs. 5,000 as freight and Rs. 2,000 as insurance.

On 31st December,2015, an Account Sales was received from B disclosing that the entire quantity of goods were sold for Rs.1,50,000 out of which Rs. 30,000 was sold on credit A customer who purchased goods for Rs. 5,000 failed to pay and the debt proved bad. All other debts were collected by B in full. As per the agreement, B is allowed a commission @ 10% on sales. B sends the amount due to A by cheque.

Prepare necessary Ledger accounts in the books of A & B.

A3) : -

LEDGER OF A

Dr. CONSIGNMENT A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Goods sent on Consignment	1,00,000	By B’s (Cash sales)	1,20,000
To Cash/Bank Freight. 5,000 Insurance. 2000	7,000	By B’s (Cr. Sales)	30,000
To B's (commission) (10% of 1,50,000)	15,000
To B's A/c (Bad debt)	5,000
To P&L A/c (bal.fig.)	23,000

TOTAL	1,50,000	TOTAL	1,50,000

Dr. B's A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment (Cash sales)	1,20,000	By Consignment (commission)	15,000
To Consignment (Cr. Sales)	30,000	By Consignment (bad debts)	5,000
		By Bank A/c (Remittance)	1,30,000

TOTAL	1,50,000	TOTAL	1,50,000

Dr. Goods sent on Consignment A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Trading A/c (transfer)	1,00,000	By Consignment A/c	1,00,000
TOTAL	1,00,000	TOTAL	1,00,000

LEDGER OF B

Dr. A's A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Commission	15,000	By Cash/ Bank (Sales)	1,20,000
To Consignment Debtors (Bad debts- no del credere comm)	5,000	By Consignment Debtors (Cr. Sales)	30,000
To Cash/Bank (Remittance)	1,30,000
TOTAL	1,50,000	TOTAL	1,50,000

Dr. CONSIGNMENT DEBTORS A/c Cr.

PARTICULAR	AMOUNT	PARTICULAR	AMOUNT
To A's	30,000	By Cash/Bank (collection)	25,000
		By A's (Bad debts no del cr. commission)	5,000
TOTAL	30,000	TOTAL	30,000

Q.4) Refer to question 3. Prepare the necessary ledger account, if in the above question the consignee is given a del credere commission of 5% on sales (In addition to ordinary commission)—other things remaining the same.

A4) -

LEDGER OF A

Dr. CONSIGNMENT A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To GSOC	1,00,000	By B’s (Cash sales)	1,20,000
To Cash/Bank Freight. 5,000 Insurance 2000	7,000	By B's (Cr. Sales)	30,000
To B's (commission) (10% of 1,50,000)	15,000
To B's (Del-Credere Commission)	7,500
To P&L (bal.fig.)	23,000
TOTAL	1,50,000	TOTAL	1,50,000

Dr. B's A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment (Cash sales)	1,20,000	By Consignment (commission)	15,000
To Consignment (Cr. Sales)	30,000	By Consignment (Del-cr. commission)	7,500
		By Cash/Bank(Remittance)	1,27,500
TOTAL	1,50,000	TOTAL	1,50,000

Dr. Goods sent on Consignment A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Trading A/c (transfer)	1,00,000	By Consignment A/c	1,00,000
TOTAL	1,00,000	TOTAL	1,00,000

LEDGER OF B

Dr. A's A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To commission	15,000	By Cash/ Bank (Sales)	1,20,000
To Del credere commission	7,500	By Consignment Debtors (Cr. Sales)	30,000
To Cash/Bank (Remittance)	1,27,500
TOTAL	1,50,000	TOTAL	1,50,000

Dr. CONSIGNMENT DEBTORS A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To A's	30,000	By Cash/Bank (collection)	25,000
		By A's (Bad debts Adjusted)	5,000
TOTAL	30,000	TOTAL	30,000

Dr. Del Credere Commission A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment Debtors (Bad Debts)	5,000	By A's	7,500
To P&L (Bal. Fig)	2,500
TOTAL	7,500	TOTAL	7,500

Dr. COMMISSION A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To P&L (Bal. Fig)	15,000	By A's	15,000
TOTAL	15,000	TOTAL	15,000

Dr. PROFIT & LOSS ACCOUNT Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Profit c/d to B/S	17,500	By Commission	15,000
		By Del Credere Commission (Net trfd.)	2,500
TOTAL	17,500	TOTAL	17,500

Q.5) Amit of Mumbai consigned 100 sewing machines to Sanjay of Surat to be sold on his risk. The cost of one machine was Rs.150, but the invoice price was Rs.200. Amit paid freight Rs. 600 and insurance in transit Rs.200

Sanjay sent a draft to Amit for Rs. 10,000 as advance and later sent an account sales showing that 80 machine were sold at Rs.220 each. Expenses incurred by Sanjay were carriage inward Rs. 25, Octroi Rs.75, godown rent Rs.500 and advertisement Rs.300. Sanjay is entitled to a commission of 5% on sales.

Journalize the above transaction in the books of Amit and Sanjay.

A5) -

LEDGER OF AMIT

Dr. CONSIGNMENT A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To GSOC	20,000	By Sanjay (Sales)	17,600
To Cash/Bank (Amit expenses)	800	By Stock on Consignment	4,180
To Sanjay (Expenses)	900	By GSOC (Load)	5,000
To Sanjay (Commission)	880
To Stock Reserve c/d	1,000
To P&L(bal.fig.)	3,200
TOTAL	26,780	TOTAL	26,780

Dr. SANJAY A/c. Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment (Cash Sales)	17,600	By Cash/ Bank (Advance)	10,000
		By Consignment (Expenses)	900
		By Consignment (Commission)	880
		By Balance c/d	5,820
TOTAL	17,600	TOTAL	17,600

Dr. Goods sent on Consignment A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment	5,000	By Consignment A/c	20,000
To Trading A/c (transfer)	15,000
TOTAL	20,000	TOTAL	20,000

LEDGER OF SANJAY

Dr. AMIT A/c Cr.

PARTICULAR	AMOUNT	PARTICULAR	AMOUNT
To Cash/ Bank (Advance)	10,000	By Cash/ Bank	17,600
To Cash/ Bank (Expenses)	900
To Commission	880
To Balance c/d	5,820
TOTAL	17,600	TOTAL	17,600

Q.6) On 1st July,2016, Rustom House of Ahmedabad consigned 100 keyboards to TCS of Mumbai. The cost of each keyboard was Rs.450 but the pro forma invoice price was Rs.600. Rustom House paid Rs.3000 for freight and insurance. On 7th July,2016, TCS accepted a 3 months’ bill drawn upon them by Rustom House for Rs. 30,000. TCS paid Rs. 1,200 as rent and Rs.750 for advertisement and up to 31st December,2016(On which Rustom House closes their books) they sold 80 keyboards @ 615 each. TCS were entitled to a commission of 5% on sales.

Show the ledger accounts recording the above transaction in the books of Rustom House and TCS

A6) -

LEDGER OF Rustom House

Dr. CONSIGNMENT A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To GSOC	60,000	By TCS (Sales)	49,200
To Cash/Bank (Rustom House expenses)	3,000	By Stock on Consignment	12,600
To TCS (Expenses)	1,950	By GSOC (Load)	15,000
To TCS (Commission) (49,200 X 5%)	2,460
To Stock Reserve (Load)	3,000
To P&L(bal.fig.)	6,390
TOTAL	17,600	TOTAL	17,600

Dr. TCS A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Consignment (Cash Sales)	49,200	By Bills Receivable (Advance)	30,000
		By Consignment (Expenses)	1,950
		By Consignment (Commission)	2,460
		By Balance c/d	14,790
TOTAL	49,200	TOTAL	49,200

Dr. Goods sent on Consignment A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Trading A/c (transfer)	45,000	By Consignment A/c	60,000
To Consignment	15,000
TOTAL	60,000	TOTAL	60,000

LEDGER OF TCS

Dr. Rustom House A/c Cr.

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
To Bills Payable (Advance)	30,000	By Cash/ Bank(Sales)	49,200
To Cash/ Bank (Expenses)	1,950
To Commission	2,460
To Balance c/d	14,790
TOTAL	49,200	TOTAL	49,200

Q.7) D. Dogra of Delhi sent to his agent, M. Monga of Madras, 500 articles costing Rs.15/- per article at an invoice price of Rs.20 per article. The following payments were made by D. Dogra in this connection: freight and carriage Rs. 450, miscellaneous exp. Rs. 50. M. Monga sent a bank draft for Rs. 3,000 as an advance against the Consignment M. Monga sold 300 articles at a flat rate of Rs.28 per article and sent an Account Sales showing deduction for storage charges Rs.550 insurance Rs.550 and his Commission of 3% plus 2% Del Credere on gross sale proceeds, and remitted the amount due on consignment. M. Monga also informed D. Dogra that 50 articles were damaged in transit and thus they were valued at Rs.550. Journalise the above transactions in the books of the consignor and consignee.

A7: -

Books of Dogra (Consignor)

Journal

				Dr.	Cr.
				Rs.	Rs.
(1)	Consignment to madras A/c Dr			7,500
	To Goods sent on Consignment A/c				7,500
(500 articles sent to M. Monga, Agent, Cost being Rs.15 per article).
(2)	Consignment to Madras A/c Dr			500
	To Bank Account				500
(Expenses incurred on the Consignment)
	Freight & Carriage	Rs.	450
	Miscellaneous Exp.	Rs.	50
			500
(3)	Bank Account Dr			3,000
	To M. Monga				3,000
(Advance received from the Agent in the form of Bank Draft.)
(4)	M. Monga Dr			8,400
	To Consignment to Madras A/c				8,400
(Sales affected by M. Monga as per Account Sales.)
(5)	Consignment to Madras A/c Dr			570
	To M. Monga				570
(Expenses incurred by M. Monga Rs.150 and Commission due to him, Rs.550 (5% of Rs. 8,400).
(6)	Bank Account Dr			4,830
	To M. Monga				4,830
(Amount due from the consignee received.)
(7)	P & Loss A/c Dr			350
	To Consignment to Madras A/c				350
(Abnormal Loss on 50 damaged Articles)
(8)	Stock on Consignment A/c Dr			2,850
	To Consignment to Madras A/c				2,850
	(Value of stock unsold at Madras)		Rs.
	150, goods articles, @ Rs.20		2,250
	Add: Expenses Rs.150		150
	50 damaged articles		450
			2,850
(9)	Consignment to Madras A/c Dr			3,030
	To Profit & Loss Account				3,030
(Profit on consignment transferred to Profit & Loss Account)
(10)	Goods sent on Consignment A/c			7,500
	To Trading A/c				7,500
(Goods sent on consignment A/c closed by transfer to trading Account)

Books of M. Monga (Consignee)

Journal

			Dr.	Cr.
			Rs.	Rs.
(1)	D.Dogra A/c Dr		3,000
	To Bank A/c			3,000
(Advance sent to the Consignor against consignment)
(2)	D. Dogra A/c Dr		150
	To Bank A/c			150
(Expenses incurred on the Consignment on behalf of D. Dogra
	Storage	50
	Insurance	100
		150
(3)	Bank A/c Dr		8,400
	To D. Dogra A/c			8,400
(Sale of 300 articles @ Rs.28 each out of the Consignment.)
(4)	D. Dogra A/c Dr		420
	To Commission A/c			420
(5% Commission on Sales made on half of D. Dogra; 3% Commission + 2% Del Credere)
(5)	D. Dogra A/c Dr		4,830
	To Bank A/c			4,830
(Amount due to D. Dogra remitted).

Q.8) Philips Radio of Calcutta despatched 1,000 transistors at Rs.700 each to Mohan Bros. of Delhi, the consignors paid freight Rs.7,500, cartage Rs.500 and insurance Rs.2,500 Mohan Bros. received only 900 sets and incurred he following expenses.

Rs.

Octroi and other Expenses 1,00,000

Cartage 5,000

Sales expenses 6,000

The consignee sold 600 sets only. You are required to calculate the value of closing stock.

A8) -

Calculation of value of unsold stock

Particulars	Units
Sets Received	900
Sets Sold	300
Unsold Stock	600

Particulars	Rs.
Cost of Unsold Stock (300 x 700)	2,10,000
Add: Proportionate expenses of Consignor (7500 + 500 + 2500) x 300/1000	3,150
Add: Proportionate expenses of Consignee (Octroi & Cartage) (1,00,000 + 5000) x 300/900	35,000
	2,48,150

Q.9) Deepak sold goods on behalf of Geep Sales Corporation on consignment basis. On 1 January 2002 he had with him a stock of Rs.20,000 on consignment. During the year he received goods worth Rs.2,00,000.

Deepak had instructions to sell goods at cost plus 25% and was entitled to a commission of 4% on sales in addition to 1% del credere commission.

During the year ended 31 December 2002 cash sales were Rs.1,20,000; credit sales Rs.1,05,000; Deepak’s expenses relating to consignment Rs.3,000 being salaries and insurance bad debts amounted to Rs.3,000.

Prepare necessary accounts in the books of Geep Sales Corporation.

A9) -


In the books of Geep Sales Corporation
Consignment Account
Dr.			Cr.
	Rs.		Rs.
To Consignment Stock b/d	20,000	By Deepak
To Goods sent on Consignment Account	2,00,000	Cash Sales 1,20,000
To Deepak (Commission)	9,000	Credit Sales 1,05,000	2,25,000
To Deepak (Commission)	2,250	By Consignment Stock c/d	40,000
To Deepak (expenses)	3,000
To Profit & Loss Account
(Profit)	30,750
	2,65,000		2,65,000
Deepak’s Account
Dr.			Cr.
	Rs.		Rs.
To Consignment account (Sales)	2,25,000	By Consignment account
		(Commission)	9,000
		By Consignment Account
		(Commission)	2,250
		By Consignment Account
		(Exp.)	3,000
		By Balance c/d	2,10,750
	2,25,000		2,25,000

Working Notes:

(1) Calculation of Consignment Stock Sale Price = 100 + 25 = 125

Cost of Sales = Sales × 100/125

= 2,25,000 × 100/125

= Rs.1,80,000

Cost of the goods available for sale = Rs. 20,000 + Rs. 2,00,000 = Rs.2,20,000. Hence stock at the end = Rs. 2,20,000 - Rs. 1,80,000 = Rs. 40,000

(2) Since Deepak is paid del-credere commission, bad debts of Rs. 3,000 would be borne by him.

Q.10) S of Bombay consigned 10,000 kg. of oil to D of Calcutta. The cost of oil was Rs.2 per kg. S paid Rs. 5,000 as freight and insurance. During transit 250 kg were accidentally destroyed for which the insurers paid directly to the consignors Rs.450 if full settlement of the claim.

D reported that 7,500 kg were sold @ Rs.3 per kg. The expenses being on godown rent Rs. 200 on advertisement Rs. 1,000 and on salesman salary Rs. 2,000 D. is entitled to a commission of 3% plus 1.5% del credere. D reported a loss of 100 kg. due to leakage. D. settled the accounts by bank draft. Prepare the accounts is the books of S.

A10) -

Consignment to Calcutta A/c
Dr.				Cr.
		Rs.		Rs.
To Goods on Consignment A/c		20,000	By Bank (Ins. Co.)	450
To Bank—Freight & Insurance		5,000	By P & L A/c (abnormal loss	175
To D—Expenses		3,200	By D— (Sale proceeds)	22,500
To D—Commission
Ordinary 3%	675		By Consignment Stock A/c	5,431
Del Credere 1.5%	338	1,013	By P & L A/c—Loss	657


		29,213		29,213
Goods Sent on Consignment A/c
Dr.				Cr.
		Rs.		Rs.
To Trading A/c		20,000	By Consignment to Calcutta A/c	20,000
Consignment Stock A/c
Dr.				Cr.
		Rs.		Rs.
To Consignment Calcutta A/c		5,431	By Balance c/d	5,431
D’s A/c
Dr.				Cr.
		Rs.		Rs.
To Consignment to Calcutta A/c			By Consignment to Calcutta A/c
—(sale proceeds)		22,500	(Exp.)	3,200
			By Consignment to Calcutta A/c
			(commission)	1,013
			By Bank	18,287
		22,500		22,500
Working Notes:
(A) Cost of Goods destroyed			Rs.
Cost of 10,000 kg.@Rs.2			20,000
Freight			5,000
Total cost of 10,000 kg.			25,000

(B) Value of Stock still unsold
Quantity received by D (Excluding accidental loss)			9,750
Less: Normal Leakage			(100)
			9,650
Cost of 9,650 kgs (25,000-625)			Rs. 24,375
Cost of 2,150 kgs (24,375 / 9650 x 2150)			Rs. 5,431

Q11) What is Joint Venture?

A11) Joint Venture is a temporary form of business, where two or more persons join together to meet the short term objectives. It is quiet similar to Partnership firm, but established without name or registration separately under any law.

Q12) Who are Co-Ventures?

A12) The two or more people who start Joint Venture to achieve the short term objectives and ready to share the risk and return in the venture, are called Co-Ventures. They are similar to Partners in the Partnership firm.

Q13) State any four features of Joint Venture.

A13) The following are the important features of Joint Venture.

Joint is a temporary business arrangement.

It is quiet similar to the form of partnership.

Two or more people join together to meet the short term objectives.

It does not have any name or registration separately under any law.

Q14) State any two differences between Joint Venture and Partnership.

A14) Joint Venture is a temporary partnership; partnership is a long term Joint Venture. The following are the differences between Joint Venture and Partnership.

BASIS	JOINT VENTURE	PARTNERSHIP FIRM
1. Name of the Venture	Joint Venture does not have any name of running business.	Partnership has its own name of running business.
2. Nature of members	Members in Joint Venture are Co-Ventures	Members in Partnership firm are partners
3. Nature of objectives	Temporary / short term objectives are set in joint venture	Long term objectives are set in partnership firm.
4. Registration of firm	No registration of business under any law	Registration is optional, but available.
5. Books of accounts	No separate set of books are maintained in the books of joint venture.	Separate set of books are maintained in the books of partnership firm.
6.Freedom for additional business	Co-ventures have freedom to do similar business and complete.	Partners do not have freedom to do similar business and complete.
7.DisA	Joint venture is dissolved as soon	Partnership is dissolved only at

	as its work has been completed.	the mutual opinion of partners.
8. Maintenance of separate set of books	Not necessary	Mandatory
9. Status of Minor	A minor cannot become a co- venturer.	A minor can become a partner to the benefits of the firms.
10. Governing Act	There is no such specific act.	The partnership is governed by the Indian Partnership Act, 1932.

Q15) State any two differences between Joint Venture and Consignment.

A15) the following are the important differences between Joint Venture and Consignment.

BASIS	JOINT VENTURE	CONSIGNMENT
1. Nature of parties	The parties of Joint Venture are Co-Venturers.	The parties of Consignment are Consignor and Consignee.
2. Nature of relationship between parties	Relationship of Parties in Joint Venture are called partners	Relationships of Parties in consignment are Principal and Agent.
3.Powers to Parties	Co-venturers have full powers to purchase and sale of assets, collection of dues.	Consignee has to act like an agent to consignor and has limited power.
4. Law applicability	Partnership act is applicable to joint venture	Law of agency is applicable.
5. sharing of profits or loss	Co-ventures have right to share profit or loss of venture.	Consignor and consignee do not share the profit or loss of consignment.
6. scope of business	There is a wide scope for joint venture business. It includes different ventures.	The scope of consignment is narrow. It is concerned with the sale of movable goods.
7. Number of persons	More than two persons are possible in joint venture.	One consignor, but more than two consignees in consignment.

Q16) State the methods of accounting for Joint Venture.

A16) The accounting treatment for Joint Venture has been studied under two board classifications they are.

When separate set of books are maintained for Joint Venture.

When no separate set of books are maintained for Joint Venture.

Q17) Why do you prepare Joint Venture Account?

A17) It is a normal ledger account, incorporates transactions made exclusively in Joint venture to find out its profit of loss. It is maintained from the starting date of Joint venture to the date of disA.

Q18) What is joint bank account?

A18) It is similar to normal bank account. It records all expense in the credit side and all incomes in the debit side. The contribution of cash made by co-venture’s, income through sale of goods etc., are debited and expenses of joint venture, purchase of goods are credited.

Q19) What is memorandum joint venture account?

A19) It is not an account prepared under double entry principles of accounts. All the expenses paid by each co-venture are debited and income (sales) made by each co-venture are credited in the respective co-ventures name. it is prepared to find out the profit or loss of joint venture.

Q20) State the feature of joint ventures.

A20)

Joint venture is a temporary business arrangement

It is quite similar to the form of partnership.

Two or more people join together to meet the short-term objectives.

It does not have any name or registration separately under any law.

The people, who are starting the joint venture and sharing the risk, return, are called co- ventures.

The profit of loss of joint venture is ascertained at the time of closing the business.

Co-ventures have unlimited liability if there is a huge loss in the venture.

All the assets are received in cash and all liabilities are paid in cash.

Joint venture is a special partnership without a firm name.

Q 21) Kumar, Shy am and Ratan were partners of companies that each shared profit in a 5: 3: 2 ratios. We have decided to dissolve the company from April 1, 2013. On the day, the company's balance sheet is as follows on As of April 1, 2013.

Liabilities	Amount	Assets	Amount
Creditors	1,20,000	Plant	80,000
Capital A / cs Kumar 68,000 Siamese 50,000 Rattan 27,000	1,45,000 ________ 2,65,000	Stock Motor van furniture Debtor Cash	30,000 25,000 45,000 71,000 14,000 _______ 2,65,000

The following results were obtained due to the disA

Rs 40,00 for plant. It was taken over by Kumar with an agreed value of 40,000 rupees. 45,000 and the rest of the plants achieved Rs. 50,000.

Furniture has realized Rs. 40,000.

The motor van was taken over by Siam. 30,000.

The debtor has realized Rs. Less than 1,000.

Rupee creditor. 20,000 were untraceable and the remaining creditors were paid in full.

The realization cost has reached rupees. 5,000.

Prepare realization accounts, partner capital accounts, and company bank accounts.

A21)

		Realisation Account			Cr
Particulars		Amount	Particulars		Amount
To miscellaneous goods assets A / c Plant Furniture Motor van Inventory Debtor To Cash A / c (Creditor WN2) To Cash A/c Expenses	80,000 45,000 25,000 30,000 71,000 _______	2,51,000 1,00,000 5,000 _______ 3,56,000	By Miscellaneous goods liabilities A / c(creditors) By Kumar ’s Capital A / c (taken over by the plant) By Shyam ’s Capital A / c (taken over by motor van) By Cash A/c Plants Furniture Debtor (71,000 – 1,000) By realized loss transferred to (WN1) to cash A / c (cost) Kumar's capital A / c Siamese capital A / c Rattan Capital A / c	50,000 40,000 70,000 500 300 200	1,20,000 45,000 30,000 1.60,000 ________ 1,000 _______ 3,56,000

Note: If there is no information about the realization of an asset, it is assumed that nothing will be realized from that asset (such as a stock in this case).

Dr	Partners’ Capital Account							Cr
Particulars	Kumar Rs	Shyam Rs	Ratan Rs	Particulars	Kumar Rs	Shyam Rs	Ratan Rs
To realization A / c (inherited asset	45,000	30,000	-----	By balance b / d	68,000	50,000	27,000
To Realization A / c (Loss of Realization	500	300	200
To Cash A / c (final payment)	22,500	19,700	26,800
	68,000	50,000	27,000		68,000	50,000	27,000

Dr		Cash Account			Cr
Particulars	Amount		Particulars	Amount
To balance b / d	14,000		By Realized A / c (creditors	1,00,000
To Realization A / c (realization of plants, furniture, debtors)	1,60,000		By Realization A / c (cost)	5,000
			Kumar's capital A / c (final payment) Shyam ’s Capital A / c (final payment) Ratan ’s Capital A / c (final payment)	22,500 19,700 26,800
	1,74,000			1,74,000

Working Note:

1. Realized loss = 1,000

Realized loss transferred to Kumar's capital account = 1,000 x 5/10 = 500

Realized loss transferred to Shyam's capital account = 1,000 x 3/10 = 300

Realized loss transferred to Rattan's capital account = 1,000 × 2 = 200

2. Creditor = 1,20,000

20,000 of them were untraceable

Therefore, the creditor was paid in full payment of 1,20,000 – 20,000 = 1,00,000.

Q 22) The Ravi and Mohan companies were dissolved on January 3, 2013. According to the agreement, Rabbi agreed to carry out the disA work with the agreed reward of 2,000 rupees and to bear all the realization costs. The disA cost was rupees. The same as 1,500 was paid by the company. Pass the journals required to pay the disA fee.

A22)

Realization A / c …… .. Dr 1,500

to cash A / c 1,500

(The cost of realization will be paid.)

ii. Realization A / c …… .. Dr. 600

To Mohan's capital A / c 600

(The cost of realization will be borne by the partner.)

iii. Realization account …… .. Dr 2,000

To the capital of Mohan, A / c 2,000

(The cost of realization will be paid to Mohan.)

no entry

Q23) How are undistributed profits such as general reserves and income statement credit balances treated when the company is dissolved?

A23) The court may order the dissolved of a partnership company in the event of bankruptcy of all partners or all but one partner.

Q 24) What is a partnership breakup?

A24) According to Section 39 of the Indian Partnership Act of 1932, the dissolution A of a partnership between all partners of a company is called the dissolution A of the company. The dissolution A of the company is a complete collapse of the partnership and the partners will not continue the company.

Dissolution A of a partnership means the restructuring of the company due to the retirement of a partner, and the remaining partners will provide the survival of the company in accordance with an explicit or implied agreement to that effect. When the company dissolves, the company is closed, so the company's assets are realized and the debt is exempted.

On the other hand, when the partnership is dissolved, the share of the seconded partner will be confirmed and the company will not be closed. Modes of DisA of a Company: Sections 40-44 of the Indian Partnership Act of 1932 deal with various methods by which a company may dissolve.

Q25) Identify situations in which the court may order the disA of the partnership company.

Pass the journal if:

Realization cost Rs. 1,500

Realization cost Rs. 600, but paid by partner Mohan,

Mohan, one of the company's partners, was asked to investigate the disA of the company he was allowed to charge for Rs. 2,000.

A car with a book value of 50,000 taken over by a creditor with a book value of Rs. 40,000 for final payment.

A25)

iv. Realization A / c …… .. Dr 1,500

to cash A / c 1,500

(The cost of realization will be paid.)

v. Realization A / c …… .. Dr. 600

To Mohan's capital A / c 600

(The cost of realization will be borne by the partner.)

vi. Realization account …… .. Dr 2,000

To the capital of Mohan, A / c 2,000

(The cost of realization will be paid to Mohan.)

vii. no entry

Q 26) A and B share profits and losses in a 5: 2 ratios. They decided to dissolve the company. Assets and external debt have been transferred to Realization A/C. Pass in the journal entries that affect:

Rupee bank loan. 12,000 will pay off.

A was to bear all the costs of the realization he was given to the Rs fee. 400.

The postponed advertising costs A / c appeared in the Rs book. 28,000.

Stock equivalent to Rs. It was taken over by B for 1,600 rupees. 1,200.

Just as an unrecorded computer realized Rs. 7,000.

I had an unpaid invoice for a rupee repair. 2,000. It was rewarded.

A26)

Realization A / c Dr. 12,000

To bank A / c 12,000

(Repaying bank loan) …… 12,000

2. Realization A / c Dr. 400

To A / c, the capital of A 400

(Commission to A credited to A's capital account)

3. Capital of A A / c Dr. 20,000

B ’s Capital A / c Dr. 8,000

To postponed advertising expenses A / c 28,000

(Deleted advertising costs, or profit-sharing ratio, cancelled by debiting the partner's capital account at a ratio of 5: 2). 28,000

4. B's Capital A / c Dr. 1,200

To Realization A / c 1,200

(The shares have been taken over by B for 1,200 rupees at the agreed value)

5. Bank A / c Dr. 7,000

To Realization A / c 7,000

(Unrecorded computer sells for 7,000 rupees)

6. Realization A / c Dr. 2,000

To bank A / c 2,000

(It must be an unpaid invoice paid for repair)

Q 27) A, B, and C operate in partnerships that share profits and losses in proportions of 1/2, 3/8, and 1/8, respectively. On March 31, 2012, they agreed to sell their business to a limited liability company.

Their position on the day was:

	₹		₹
A’s capital	40,000	Machinery	48,000
B’s capital	30,000	Furniture	42,000
C’s capital	26,000	Stock	23,000
Loan on mortgage	16,000	Book debts	15,000
Sundry creditors	18,000	Cash	2,000

	1,30,000		1,30,000

The company took the following assets at the valuation shown below-

	₹
Machinery	61,000
Furniture	31,800
Stock	22,000
Book debts	14,000
Goodwill	10,000

The company also agreed to pay the creditors which was agreed at 17,700. The company paid ₹ 67,000 in fully paid shares of ₹ 10 each and the balance in cash. The expenses amounted to ₹ 1,500.

Prepare ledger accounts in the books of the firm.

A27)

Dr. Realization account Cr.

		₹			₹
2012			2012
March 31	To sundry assets-		March 31	By loan on mortgage
	Machinery 48,000		March 31	By sundry creditors
	Furniture 42,000		March 31	By ltd’s company a/c
	Stock 23,000			Machinery 61,000
	Book debts 15,000	1,28,000		Furniture 31,800
March 31	To cash - expenses	1,500		Stock 22,000
March 31	To cash – loan paid	16,000		Book debts 14,000
March 31	To profits transferred to:			Goodwill 10,000
	A’s capital 4,800			1,38,800
	B’s capital 3,600			Less – creditors 17,700
	C’s capital 1,200	9,600			1,21,100

		1,55,100			1,55,100

Dr. Limited company’s account Cr.

		₹			₹
2012			2012
March 31	To realisation a/c		March 31	By shares in ltd.	67,000
	-consideration	1,21,100	March 31	By cash	54,100
		1,21,100			1,21,100

Dr. Cash account Cr.

		₹			₹
2012			2012
March 31	To balance b/d	2,000	March 31	By realisation a/c
March 31	To ltd. company	54,100		Expenses	1,500
				Loan	16,000
			March 31	By capital a/c
				A 16,380
				B 12,280
				C 9,940	38,600
		56,100			56,100

Dr. Share in Ltd. Company a/c Cr.

		₹			₹
2012			2012
March 31	To ltd. company	67,000	March 31	By A’s capital a/c	28,420
			March 31	By B’s capital a/c	21,320
			March 31	By C’s capital a/c	17,360

		67,000			67,000

Dr. Capital account Cr.

Particulars	A	B	C	Particulars	A	B	C
	₹	₹	₹		₹	₹	₹
To shares in ltd. company	28,420	21,320	17,360	By balance b/d	40,000	30,000	26,000
To cash settlement, balancing figure	16,380	12,280	9,940	By realisation a/c - profits	4,800	3,600	1,200


	44,800	33,600	27,200		44,800	33,600	27,200

Note – total number of shares received from the limited company is 6,700. These have been divided among A, B and C in the ratio 448,336 and 272 or 28, 21 and 17 respectively. Namely, in the ratio of the amount finally due to them. Hence

A gets or 2,842 shares of ₹ 28,420 ;

B gets or 2,132 shares of ₹ 21,320 ; and

C gets or 1,736 shares of ₹ 17,360 ;

Q28) Mr. B and Mr. E are partners who share profits and losses in a 3: 2 ratio, respectively. On September 30, 2010, they recognized Mr. C as a partner and the new profit-sharing ratio is 2: 2: 1. C brings in equipment Rs 3,000 and cash Rs 10,000, and goodwill is (i) B and E Rs 20,000 and (ii) C Rs 10,000, but neither number is on the books.

On March 31, 2011, the partnership was dissolved, B retired, and the other two partners were EC (Pvt.) Ltd with equal capital. Formed a company called, taking over all the remaining assets and liabilities, goodwill agreed at Rs 40,000, the company's book. B agrees to take over the scooter for Rs 3,700. A machine with a book value of 4,000 rupees was sold for 3,000 rupees, exceeding the requirement.

It was agreed that the profits for the last two years were 17,200 rupees and 19,000 rupees, respectively, and the net profit for the half year ending September 30, 2010 would be equal to the average for the last two years and the current year.

When C was entered, no entry was made except for the cash received. EC (Pvt.,) Company Ltd., B has agreed to lend the company a loan of 50,000 rupees secured by 10% corporate bonds.

The trial balance as of March 31 is as follows. 2011:

	Debit (₹)	Credit (₹)
Capital accounts
B		35,000
E		20,000
C		10,000
Drawing accounts
B	6,000
E	5,000
C	2,800
Debtors and creditors	31,000	12,000
Machines	23,000
Fixtures	7,000
Scooter	2,700
Stock as on 31st march 2011	13,000
Bank	16,300
Profit and loss account for the year		29,800
	1,06,800	1,06,800

Prepare :

(i) Goodwill Adjustment Account

(ii) Capital accounts of the partners

(iii) Profit and Loss Appropriation Account

(iv) Balance Sheet of EC (Pvt.) Ltd. as on 318 March, 2011.

A28)

Dr. Goodwill adjustment account Cr.

2011		₹	2011		₹
March 31	To partner’s capital account (to raise goodwill of all partners as on 30th September 2010)		March 31	By partner’s capital account (to write off total goodwill as on 30th September 2010)
	B (3/5 of ₹ 20,000)	12,000		B (2/5 of ₹ 30,000)	12,000
	E (2/5 of ₹ 20,000)	8,000		E (2/5 of ₹ 30,000)	12,000
	C	10,000		C (2/5 of ₹ 30,000)	6,000
March 31	To partner’s capital account (firm’s goodwill as on 31st March 2011):		March 31	By goodwill account (account closed by transfer to goodwill account as the amount appear in the books of the company)	40,000
	B (2/5 of ₹ 40,000)	16,000
	E (2/5 of ₹ 40,000)	16,000
	C (2/5 of ₹ 40,000)	8,000
		70,000			70,000

Dr. Capital account Cr.

2011 March 31	B	E	C	2011 March 31	B	E	C
	₹	₹	₹		₹	₹	₹
To Drawings	6,000	5,000	2,800	By balance b/d	35,000	20,000	10,000
To Goodwill Adjustment Account—written off	12,000	12,000	6,000	To Goodwill Adjustment Account— raised	12,000	8,000	10,000
To scooter	3,700	400	200	To Goodwill Adjustment Account—raised	16,000	16,000	8,000
To machines – loss on sale	400			By fixtures – not recorded earlier			3,000
To loan from account*	50,000			By profit and loss - Appropriation account - Profit up to 30th September, 2008		13,200	8,800
To bank – settlement	7,620			By profit and loss Appropriation account - Profit of the new firm	3,120	3,120	1,560
To bank – to make capital equal		7,580		By scooter – profit on takeover	400	400	200
To share capital account - transfer		31,340	31,340	By bank – to make capitals equal			7,580

	79,720	56,320	40,340		79,720	56,320	40,340

Profit and loss appropriation account for the year ended on 31 march 2011

	₹		₹
To partner’s capital accounts (distribution of profit upto 30th september 2010)		By profit and loss account – net profit for the year b/d	29,800
B (3/5 of ₹ 22,000)	13,200
E (2/5 of ₹ 22,000)	8,800
To partner’s capital account (distribution of profits pertaining to new firm):
B (2/5 of ₹ 7,800)	3,120
E (2/5 of ₹ 7,800)	3,120
C (1/5 of ₹ 7,800)	1,560
	29,800		29,800

Dr. Balance sheet of EC (pvt.) ltd. Cr.

As on 31st March, 2011

Liabilities	₹	Assets	₹
Share capital:		Fixed assets
Authorised	?	Goodwill	40,000
Issued and subscribed	62,680	Machines	19,000
(all the shares have been allotted as fully paid up personant to a contract without payments being received in cash)		Fixtures	10,000
Secured loans:		Current assets , loans and advances
Loan from B	50,000	(A) Current assets
10% debentures 50,000		Stocks	13,000
Less: debentures suspense account (50,000)	NIL	Debtors	31,000
		Cash at bank	11,680
		(B) Loans and advances	NIL
Current liabilities and provisions:
A) Current liabilities
Creditors	12,000
B) Provisions	NIL
	1,24,680		1,24,680

Working Notes :

(i) Break-up of total net profit for the year : ₹

Profits for the preceding two years = ₹ (17,200 + 19,000) 36,200

Add ; Current year’s profit 29,800

Total profit for the three years 66,000

Average =

Profit upto 30th September, 2010 = ₹ 22,000

Profit for the remaining six months i.e., profit pertaining to the new firm

= ₹ 29,800 - ₹ 22,000 = ₹ 7,800.

(ii) Scooter account

	₹		₹
To balance b/d	2,700	By B’s capital account – scooter taken over by B	3,700
To partner’s capital account (transfer of profit on take-over)
B (2/5 of ₹ 1,000)	400
E (2/5 of ₹ 1,000)	400
C (1/5 of ₹ 1,000)	200

	3,700		3,700

(iii) Machines account

	₹		₹
To balance b/d	23,000	By bank (sale, book value ₹ 4,000)	3,000
		By partner’s capital account (transfer of loss on sale)
		B (2/5 of ₹ 1,000)	400
		E (2/5 of ₹ 1,000)	400
		C (1/5 of ₹ 1,000)	200
		By balance c/d	19,000
	23,000		23,000

Alternatively, a realization account may be opened to transfer the profits from the scooter takeover and the losses from the sale of the machine. There is no transfer to the capital account because the realized account does not show profit or loss.

(iv) Adjustments to be made in the capitals of E and C : ₹

E's capital before adjustment 38,920

C's capital before adjustment 23,760

Total 62,680

E and C are to have equal capital.

Thus, each must have a capital of ₹ 31,340

C will being in ₹ (31,340-23,760) or ₹ 7,580 to make his capital equal to ₹ 31,340.

E will withdraw ₹ (38,920-31,340) or ₹ 7,580 to leave a balance of ₹ 31,340 in his capital account.

(v) Cash Book (Bank Columns)

	₹		₹
To balance b/d	16,300	By B’s capital - settlement	7,620
To machines a/c – sale	3,000	By E’s capital – amount withdrawn	7,580
To C’s capital a/c – amount brought in	7,580
		By balance c/d	11,680
	26,880		26,880

Q 29) W, S and T have partnered to share profits and losses in a 3: 2: 1 ratio, respectively. They split the approved equity capital of Rs. 6,00.000 into 45,000 shares of Rs. 10 and Rs. 15,000, respectively, a privately held company T & Co. , Ltd. Decided to establish.

The company was incorporated and took over the partnership's business, goodwill, and certain assets on March 31, 2012. The company's balance sheet for this date is as follows:

	₹		₹
Capital accounts		Fixed assets at cost less depreciation:
W 1,50,000		Machinery	65,000
S 1,00,000		Scooters	18,000
T 60,000	3,10,000	Furniture and fittings	6,000
Current accounts		Current assets:
W 29,250		Stock in trade	1,80,000
T 20,750		Debtors	52,000
50,000		Bank	86,000
Less: S overdrawn 21,000	29,000
W’s loan account	40,000
Creditors	28,000
	4,07,000		4,07,000

T owned free land that he had granted to the partnership and agreed to sell to the company for Rs 1,00,000. The consideration was issued to him for 10,000 rupees, 10% of the cumulative preferred stock of 10 rupees each.

Retired W was presented with one of the scooters by his partner and was valued at 6,000 rupees in the book. The remaining scooters were taken over by the company for 10,000 rupees. W also received certain furniture for which he was charged Rs 1,500. All debtors were considered good and were taken over by W, who agreed to repay the creditors.

The company took over the remaining furniture and accessories at a price of Rs 3,000, the machinery at its book value, the shares at an agreed price of Rs 1,66,000, and the bank's balance. The value of the partnership goodwill was agreed at Rs 40,000 for the purpose of the acquisition.

The company has agreed to repay W's loan for 3,000 rupees, 10% cumulative preferred stock, 10 rupees each and 10,000 rupees in cash.

The balance of consideration is to be issued by the company by issuing 30,000 shares of 10 rupees to the partner in proportion to the final balance of the total capital and checking account, and the balance is in cash. Will be paid. .. Calculate the consideration and show how it is discharged. Prepare the accounts needed to close the company's books.

A29)

Dr. Realisation account Cr.

2012		₹	2012		₹
March 31	To sundry assets:		March 31	By W’s capital a/c:
	Machinery 65,000			Furniture 1,500
	Scooters 18,000			Debtors 52,000	53,500
	Furniture etc. 6,000			By S’s capital a/c 4,000
	Stock in trade 1,80,000			By T’s capital a/c 2,000
	Debtors 52,000			(car presented to W by S and T)	6,000
	Bank 86,000	4,07,000		By T and Co. ltd – assets taken over	3,70,000
	To profit transferred to:
	W’s capital a/c (3/6) = 1,250
	S’s capital a/c (2/6) = 7,500
	T’s capital a/c (1/6) = 3,750	22,500
		4,29,500			4,29,500

Dr. T and co. ltd. Cr.

		₹			₹
2012			2012
March 31	To realisation a/c	3,70,000	March 31	By bank	40,000
				By equity shares in T and co. ltd.	3,00,000
				By 10% preference shares in T and co. ltd.	30,000

		3,70,000			3,70,000

Dr. Cash account Cr.

		₹			₹
2012			2012
March 31	To balance b/d	86,000	March 31	By realisation a/c	86,000
	To T and co. ltd	40,000		By W’s loan a/c	10,000
				By W’s capital a/c	15,000
				By S’s capital a/c	7,500
				By T’s capital a/c	7,500
		40,000			40,000

Dr. Sundry creditors account Cr.

		₹			₹
2012			2012
March 31	To W’s capital a/c – transfer	28,000	March 31	By balance b/d	28,000

		28,000			28,000

Dr. Equity shares in T and co. ltd Cr.

		₹			₹
2012			2012
March 31	To T’s and co. ltd	3,00,000	March 31	By W’s capital a/c	1,50,000
				By S’s capital a/c	75,000
				By T’s capital a/c	75,000
		3,00,000			3,00,000

Dr. 10% Cumulative preference shares in T and co. ltd. Cr.

		₹			₹
2012			2012
March 31	To T and co. ltd.	30,000	March 31	By W’s loan	30,000

		30,000			30,000

Dr. W’s loan account Cr.

		₹			₹
2012			2012
March 31	To 10% cum. Pref. shares in T and co. ltd.	30,000	March 31	By balance b/d	40,000
	To bank	10,000
		40,000			40,000

Dr. Capital account Cr.

Particulars	W	S	T	Particulars	W	S	T
	₹	₹	₹		₹	₹	₹
To current a/c balance	21,000			By balance b/d	1,50,000	1,00,000	60,000
To realisation a/c				By current a/c (balances)	29,250		20,750
Furniture 1,500 Debtors 52,000	53,500			By sundry creditors (taken over)	28,000
To realisation a/c – scooter presented to W		4,000	2,000	By realisation a/c (profit)	11,250	7,500	3,750
To balance b/d	1,65,000	82,500	82,500

	2,18,500	1,07,500	84,500		2,18,500	1,07,500	84,500

To equity				By balance b/d	1,65,000	82,500	82,500
Shares in T and co. ltd (in the ratio of final claims)	1,50,000	75,000	75,000
To bank	15,000	7,500	7,500

	1,65,000	82,500	82,500		1,65,000	82,500	82,500

Q30) The equal partner sheets A and M as of March 31, 2011 are as follows:

Liabilities	₹	Assets	₹
Sundry creditors	55,500	Book debts	60,000
Bank overdraft	28,500	Stock in trade	42,000
Bills payable	10,500	Joint life policy – surrender value	7,500
A’s capital	33,000	Office furniture	1,500
M’s capital	52,500	Machinery and plant	18,000
		Leasehold property	22,500
		A’s drawing	9,000
		M’s drawings	3,000
		Profit and loss account	16,500

	1,80,000		1,80,000

The business continued until September 30, 2011, at which point a net profit of Rs 12,300 was obtained in half a year after the annual depreciation of 10% was amortized from the leasehold. On the other hand, general merchandise creditors were reduced by 12,000 rupees, bills payable by 2,925 rupees, and overdrafts by 3,000 rupees. Each partner's 6-month lottery reached 3,000 rupees. As of March 31, 2011, stock trading on September 30 was Rs 45,300, books and debt was Rs 46,200, and other assets that needed adjustments.

In December, the company took over the shares at a 5% discount and recorded debt at a 2.5% discount as of September 30th, based on G Ltd. I agree to sell my business to. The company pays 7,500 rupees. Profit for the period until December 31st, subject to a lottery of A for 2,000 rupees and M for 1,000 rupees for the three months until December 31st. The company does not take over joint life insurance. The company will take over all other assets and liabilities and pay 37,500 rupees for goodwill. The consideration is paid by paying 60,000 rupees in cash and the rest in preferred stock of 10 rupees each. Prepare an account to close the books.

A30)

Liabilities	₹	Assets	₹
Sundry creditors	43,500	Book debts	46,200
Bank overdraft	25,500	Stock in trade	45,300
Bills payable	7,575	Joint life policy – surrender value	7,500
A’s capital		Office furniture	1,500
Balance on April 1, 2009 33,000		Machinery and plant	18,000
Less: drawings 12,000		Leasehold property 22,500
= 21,000		Less: 10% depreciation For 6 months 1,125	21,375
Less: loss up to 30th September (1/2) 2,100	18,900
M’s capital
Balance on April 1, 2009 52,500
Less: drawings 6,000
= 46,500
Less: loss up to 30th September (1/2) 2,100	44,400
	1,39,875		1,39,875

Assets taken over -	₹
- Book debts - ₹46,200 less 2 ½ %	45,045
- Stock - ₹ 45,300 less 5%	43,035
- Office furniture	1,500
- Machinery and plant	18,000
- Leasehold property	21,375
- Goodwill	37,500
- Miscellaneous assets for profit up to 31st December Less: drawings (7,500 – 2,000 – 1,000)	4,500
	1,70,955
Less: liabilities taken over:
- Sundry creditors	43,500
- Bank overdraft	25,500
- Bills payable	5,575
	76,575
Net assets to be paid for	94,380

G Ltd. will pay ₹ 60,000 in cash and ₹ 34,380 in preference shares of ₹ 10 each, the number of shares being 3,438

Dr. Realisation account Cr.

2011		₹	2011		₹
Dec. 31	To sundry assets:		Dec. 31	By sundry creditors	43,500
	Stock 65,000			By bank overdraft	25,500
	Machinery 18,000			By bills payable	7,575
	Furniture 6,000			By G. ltd. – consideration	94,380
	Book debts 1,80,000			By bank (joint life policy realised)	7,500
	Joint life policy 52,000
	Leasehold property 86,000
	Misc. Assets 4,500	1,44,375
	To profit transferred to:
	A’s capital a/c 17,040
	M’s capital a/c 17,040	34,080
		1,78,455			1,78,455

Dr. Cash account Cr.

		₹			₹
2011			2011
Dec 31	To realisation a/c - transfer	3,70,000	Sept 31	By balance b/d	25,500
	To realisation a/c - joint life policy realised	7,500	Dec 31	By A’s capital	24,970
	To G ltd. – cash received	60,000		By M’s capital	42,530

		93,000			93,000

Dr. Preference shares in G ltd. account Cr.

		₹			₹
2011			2011
Dec 31	To G ltd.	34,380	Dec 31	By A’s capital	12,720
				By M’s capital	21,660

		34,380			34,380

Dr. G ltd. account Cr.

		₹			₹
2011			2011
Dec 31	To realisation a/c – net assets taken over	94,380	Dec 31	By bank	60,000
				By preference shares in G ltd.	34,380

		94,380			94,380

Date	Particulars	A	M	Date	Particulars	A	M
2011		₹	₹	2011		₹	₹
April 1	To drawings	9,000	3,000	Apr 1	By balance b/d	33,000	52,500
April 1	To P/L account	8,250	8,250	Sept 30	By P/L account	6,150	6,150
Sept 30	To drawings	3,000	3,000	Dec 31	By profit for 3 months up to Dec. 31	3,750	3,750
Dec 31	To drawings	2,000	1,000	Dec 31	By realisation a/c – profit	17,040	17,040
Dec 31	To balance b/d	37,690	64,190

		59,940	79,440			59,940	79,440

Dec 31	To preference shares in G ltd	12,720	21,660	Dec 31	By balance b/d	37,690	64,190
Dec 31	To bank	24,970	42,530

		37,690	64,190			37,690	64,190