Chapter-3 RECONSTITUTION OF FIRM

  1. What is meant by Reconstitution of a Firm? [1]
  2. What is meant by Change in Profit Sharing Ratio? [1]
  3. What are the main occasions on which reconstitution of partnership firm can take place?[1]
  4. What adjustments are required at the time of change in profit sharing ratio? [1]
  5. Why are “Reserves and Surplus” distributed at the time of reconsitution of the firm?[1]
  6. Why is it necessary to revalue the assets and liabilities of a firm on its reconstitution?Explain briefly.[1]
  7. Ram, Shyam and Mohan were partners sharing profits in the equal ratio. They have decided to share the profits in the ratio of 5 : 3 : 2 with retrospective effect. Calculate the sacrificing or Gain of the partners.[3]
  8. Gupta , Verma and Sharma were partner’s sharing profits in the ratio of 4 : 3 : 2. The partners decided to share profits and losses in the ratio of 2 : 2 : 1. Calculate each partner’s Gain or Sacrifice due to change in ratio.[3]
  9. A and B were partners sharing profits in the ratio of 3 : 2. They have decided to share profits in the ratio of 5 : 3. Calculate sacrifice or Gain ratio of the partner’s due to change in ratio.(3)
  10. A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. They have decided to share profits equally. Calculate Sacrifice or Gain of the partner.(3)
  11. Vinod and Kumar were partners in a firm sharing profits in 3:2 ratio. From 1st March, 2013 they decided to change it to 3:1. For this purpose the goodwill of the firm was valued at Rs.60,000. Give necessary journal entry for the treatment of goodwill.[3]
  12. X, Y and Z were partners sharing profits and losses in the ratio of 4:3:2. Goodwill does not appear in the books but it is worth Rs.72,000. The partners decided to share future profits in equal proportions. Give a journal entry to record the above change and show gain/loss of partners due to change in ratio.[3]
  13. A and B were partners in a firm sharing profits in the ratio of 3 : 2. With effect from 1st January 2004 they agreed to share profits equally. For this purpose the goodwill of the firm was valued at Rs.30,000. Pass the necessary Journal entry for the treatment of goodwill.[3]
  14. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3:2:1. In future they decided to share profits in the ratio of 6:5:2. For this purpose, the goodwill of the firm was valued at Rs.78,000. Pass necessary journal entry for the treatment of goodwill due to change in profit sharing ratio.[3]
  15. A, B and C are partners sharing profits in the ratio of 4/9 : 1/3 : 2/9. They have decided to share profits in the ratio of 1 : 1 : 1. Goodwill of the firm is valued at Rs.10,800. Give Journal entries to record the above arrangement.[3]
  16. A, B and C are partners sharing profits and losses in the ratio of 3 : 1 : 1. On 1st January 2014, they decided to share profits in equall ratio. The goodwill of the firm is valued at Rs.45,000. Give necessary journal entry due to the change in profit sharing ratio.[3]
  17. Akshita , Bakshi and Chanda were partners in a firm sharing profits in 3 : 2 : 1 ratio. They decided to share the future profits in 5 : 3 : 2 ratio. For this purpose the goodwill of the firm was valued at Rs.60,000. Pass an adjustment entry for the treatment of goodwill dueto change in the profit sharing ratio.
  18. Vinod, Mohan and Kumar are partners sharing profits in the ratio of 3:2:1 respectively. From 1st January, 2015, they decided to share profits in the ratio of 2:3:1. The partnership deed provides that in the event of any change in profit sharing ratio. , the goodwill should be valued at three years purchase of the average of five years profits. The Profits and losses of the preceding five years are: 2010 Rs.60,000 2011 Rs.1,50,000 2012 Rs.1,70,000 2013 Rs.1,90,000 Loss 2014 Rs.70,000 Showing the working clearly, give necessary journal entry to record the change.[6]
  19. Vinod, Gaurav and Swami are partners sharing profits equally. They decided that in future Swami will get 1/5th share in profits and remaining profit will be shared by Vinod and Gaurav in the equall ratio. On the day of change, firm’s Goodwill is valued at Rs.45,000. Give Journal entry due to change in profit sharing ratio.

 

  1. X, Y and Z were partners in a firm sharing profits in the ratio of 5:3:2. On 1st January, 2005, they decided to share the profits equally. It was also agreed that the change to be carried out retrospectively for the last 4 years. The profits for the last 5 years were: 2010 Rs.1,00,000 2011 Rs.80,000 2012 Rs.20,000 Loss 2013 Rs.1,20,000 2014 Rs.2,00,000 Pass the necessary adjustment entry.

 

  1. Why is it necessary to distribute Accumulated Reserves, Profits & Losses at the time of change in profit sharing ratio?[1]
  2. State the ratio in which the partners share all the accumulated profits, reserves, losses and fictitious assets in case of change in profit sharing ratio.[1]
  3. State any two occasions on which reconstitution of partnership firm can take place[1]
  4. A, B and C are partners in a firm sharing profits in the ratio of 3:3:2. They decided to share profits equally w.e.f. April 1, 2014. On that date, the profit and loss account showed the credit balance of Rs.24,000. Instead of closing the Profit and Loss Account, it was decided to record an adjustment entry reflecting the change in the profit sharing ratio. Record necessary journal entry to effect to the same.[3]
  5. Vinod, Sunita and Simran are partners in a firm sharing profits in the ratio of 3:2:1. They decided to share profits equally w.e.f April 1, 2014. On that date the profit and loss account showed the credit balance of Rs.60,000 and a balance of Rs.30,000 in general reserve. Instead of closing profit and loss account, it was decided to record an adjustment entry reflecting the change in the profit sharing ratio. Give necessary journal entry to give effect to the same.[3]
  6. Vinod and Kumar are partners in a firm sharing profits in the ratio of 3:2. They decided to share future profits equally. On the date of change in profit sharing ratio the profit and loss account showed a debit balance of Rs.20,000. Give necessary entry to give affect to the same.[3]
  7. EK, FK and GK are partners sharing profits in the ratio of 7:6:5. Their fixed capitals are Rs.1,40,000; Rs.80,000 and Rs.1,60,000 respectively. It is now decided that the total capital of the firm should be Rs.7,20,000 and should be in the profit sharing ratio of the partners. Calculate the amount of capital to be contributed by the individual partners and record necessary journal entry for the same.[3]
  8. Vinod and Kumar are partners in a firm sharing profits in the ratio of 5:3. On March 31,2013, their Balance Sheet showed a general reserve of Rs.40,000. On that date they decided to admit Mohan as a new partner. The new profit sharing ratio between Vinod,[6]

 

  1. Kumar and Mohan will be 5:3:2. Record the necessary entry when
  • They want to transfer the general reserve in their capital accounts
  • They don’t want to transfer general reserve in their capital account and prefer torecord an adjustment entry for the same.
  1. Ram, Shyam and Mohan were sharing profits and losses in the ratio of 5:3:2. They decided to share future profits and losses in the ratio of 2:3:5 with effect from 1.4.2013. They decided to record the effect of the following, without effecting their book values: (i) Profit and Loss Account Rs.48,000 (ii) Advertisement Suspense A/c Rs.24,000 Pass necessary adjusting entry.
  2. X, Y and Z were partners in a firm sharing profits in the ratio of 3:2:1. On 1st January, 2015, they decided to share the profits equally. Goodwill should be valued at 3 years purchase of last 5 years profits. The profits for the last 5 years were: 2010 Rs.1,20,000 2011 Rs.3,00,000 2012 Rs.3,40,000 2013 Rs.3,80,000 Loss 2014 Rs.1,40,000 Pass the necessary adjustment entry.
  3. What are accumulated profits? [1]
  4. What are accumulated losses? [1]
  5. What is sacrificing ratio? [1]
  6. What is the nature of Revaluation Account? [1]
  7. Give two circumstances in which sacrificing ratio may be applied. [3]
  8. Rajan and Suman are partners in a firm sharing profits in the ratio of 3:2. Their Balance
  9. Sheet as at March 31, 2003 was as follows:
  10. Liabilities Amount Assets Amount Capitals : Rajan 45,000 Suman 30,000 Creditors[4]
  11. X and Y are partners in a firm sharing profits in the ratio of 2:3. The Balance Sheet of the firm as on 31.03.2007 is given below :
  12. Liabilities Amount Assets Amount Capital Accounts : X 8,00,000 Y 12,00,000 Creditors Expenses outstanding[6]
  13. Johan, Micky and Peter were partners in a firm. They had no partnership deed. They have been in business for 4 years and their Profit and loss for this period was : Year ended 31st March 2004 Rs. 78,000, 31st March 2005 Rs.1,08,000, 31st March 2006 Rs.36,000 (Loss), 31st March 2007 Rs.1,50,000, During the year 2007-08, they agreed to share profits and losses in the ratio of 2 : 2 :1 with retrospective effect from the year 2003-04. It was also decided that an interest (charge) of 5% p.a. was to be provided on capitals (fixed). Their capitals were 1,60,000, 1,20,000 and 1,20,000 respectively. Pass necessary adjustment entry.

Author: Ravi Kashyap

Commerce Expert

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