question_answer

S, Q and V are partners sharing profit in the ratio of 6 : 4 : 2. They have decided to share equally since 1st April, 2017. They decided that the following transactions should be recorded in the books.

(i) Contingent liability worth Rs. 7,000 proved to be actual liability and was to be paid by the firm.

(ii) Bill of Rs. 2,000 discounted with the bank has been dishonoured by the drawee.

(iii) Contingent liability worth Rs. 25,000 was undertaken by Q for Rs. 15,000.

(iv) An employee met with an accident in the factory and suffered serious injuries. The firm has been ordered by the court to pay a compensation of Rs. 20,000 to the employee. The firm has made the payment.

(v) Claim for damages by the customer amounting to Rs 8,000 was admitted by the firm and paid.

(vi) The firm lost a litigation case and was ordered to pay a penalty of Rs. 16,000 which was paid.

Answer:

                                                                                    JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
(i)	Revaluation A/c	Dr		7,000
	To Liability A/c				7,000
	(Being contingent liability due)
(ii)	Revaluation A/c	Dr		2,000
	To Liability for Bill Dishonoured A/c				2,000
	(Being bill discounted dishonoured)
(iii)	Revaluation A/c	Dr		25,000
	To Liability A/c				25,000
	(Being contingent liability due)
	Liability A/c	Dr		15,000
	To Q's Capital A/c				15,000
	(Being contingent liability paid)
(iv)	Compensation to Employee A/c	Dr		20,000
	To Bank A/c				20,000
	(Being compensation paid to employees)
(v)	Claim for Damages A/c	Dr		8,000
	To Bank A/c				8,000
	(Being claim for damages paid by the firm)
(vi)	Litigation Case A/c	Dr		16,000
	To Bank A/c				16,000
	(Being penalty of Rs. 16,000 paid by the firm)
(vii)	Revaluation A/c	Dr		34,000
	To S's Capital A/c				17,000
	To Q's Capital A/c				11,333
	To V's Capital A/c				5,667
	(Being profit on revaluation account Rs. 34,000 (7,000+2,000+25,000) is distributed in profit sharing ratio 6 : 4 : 2)