question_answer

P, Q and R were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. On 1st April, 2017, their balance sheet stood as under: Balance Sheet as at 1st April, 2017

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
General Reserve		25,000	Land and Building	1,50,000
Profit and Loss A/c		35,000	Machinery	50,000
Machinery Replacement Fund		17,000	Machinery Replacement Fund Investments	17,000
Investments Fluctuation Reserve		20,000	Investments (Market value Rs. 28,000)	30,000
Workmen?s Compensation Reserve		23,000	Current Assets	1,18,000
Employees? Provident Fund		30,000	Advertisement Expenditure	25,000
Creditors		1,00,000	(Deferred revenue)
Capital A/cs
P	1,00,000
Q	30,000
R	20,000	1,50,000
		4,00,000		4,00,000

They admitted S into partnership for l/5th share of profits on the above date. A claim on account of workmen's compensation is estimated at Rs. 13,000 only. Give the necessary journal entries to adjust the accumulated profits and losses.

Answer:

                                                                        JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
2017
Apr 1	Investments Fluctuation Reserve A/c	Dr		2,000
	To Investments A/c				2,000
	(Being the value of investment brought down to market value)
Apr 1	Workmen?s Compensation Reserve A/c	Dr		13,000
	To Provision for Workmen?s compensation Claim A/c				13,000
	(Being the workmen?s compensation claim provided for)
Apr 1	General Reserve A/c	Dr		25,000
	Profit and Loss A/c	Dr		35,000
	Investments Fluctuation Reserve A/c	Dr		18,000
	[20,000 ? (30,000 ? 28,000)]
	Workmen?s Compensation Reserve A/c (23,000 ? 13,000)	Dr		10,000
	To P?s Capital A/c \[(88,000\times 3/5)\]				52,800
	To Q?s Capital A/c \[(88,000\times 1/5)\]				17,600
	To R?s Capital A/c \[(88,000\times 1/5)\]				17,600
	(Being the transfer of accumulated profits to old partners in their old profit sharing ratio)
Apr 1	P?s Capital A/c \[(25,000\times 3/5)\]	Dr		15,000
	Q?s Capital A/c \[(25,000\times 1/5)\]	Dr		5,000
	R?s Capital A/c \[(25,000\times 1/5)\]	Dr		5,000
	To Advertisement Expenditure A/c				25,000
	(Being the transfer of accumulated losses to old partners in their old profit sharing ratio)