Question adjustment of accumulated profits and losses
1. Adjustment of Accumulated Profits and Losses
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Question : I, O and P were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. On 1st
April, 2012, their balance sheet stood as:
BALANCE SHEET
As at 1st April, 2014
Liabilities Amount Assets Amount
Capital-I 1,00,000
Capital-O 30,000
Capital-P 20,000
General Reserve
Profit and Loss A/c
Investment Fluctuation Reserve
Machinery Replacement Fund
Workmen’s Compensation Reserve
Employees’ Provident Fund
Creditors
They admitted U into partnership for 1/5th share of profits on the above date. The claim on account of
workmen’s compensation is estimated at 13,000 only. Give the necessary journal entries to adjust the
accumulated profits and losses.
Solution:
Date Particulars F Dr. amount Cr. amount
Note:
Employee Provident fund is liability of firm towards employees ,therefore it is not distributed
Machinery Replacement Fund is same as accumulated depreciation , therefore it is not
distributed
1,50,000
25,000
35,000
20,000
17,000
23,000
30,000
1,00,000
Land and Building
Machinery
Investment (Market Value `-
28,000)
Furniture
Current Assets
Advertisement Expenditure
(Deferred Revenue)
1,50,000
50,000
30,000
27,000
1,18,000
25,000
4,00,000 4,00,000