Pass Journal entries for the following transactions at the time of dissolution of the firm:
(a) Loan of Rs. 10,000 advanced by a partner to the firm was refunded.
(b) X, a partner, takes over an unrecorded asset (Typewriter) at Rs. 300.
(c) Undistributed balance (Debit) of profit an Loss Account Rs. 30,000. The firm has three partners X, Y and Z.
(d) Assets of the firm realised Rs. 1,25,000.
(e) Y who undertakes to carry out the dissolution proceeding is paid Rs, 2,000 for the same.
(f) Creditors are paid Rs. 28,000 in full settlement of their account of Rs. 30,000.

Answer:

(a) Partner's Loan A/c              Dr.                     10000

              To Bank A/c                                                       10000

(Being payment of partner's loan)

(b) X's Capital A/c                   Dr.                     300

              To Realisation A/c                                        300

(Being unrecorded asset taken over by partner)

(c) X's Capital A/c                    Dr.                     10000

    Y's Capital A/c                     Dr.                     10000

     Z's Capital A/c                    Dr.                      10000

                To Profit and Loss A/c                                     30000

(Being debit balance of profit and loss distributed among partners)

(d) Bank A/C.....                             Dr.                   125000

                  To Realisation A/c                                          125000

(Being realisation of assets)

(e) Realisation A/c                   Dr.                      2000

                  To Y's Capital A/c                                         2000

(Being remuneration given to Y to carry out dissolution)

(f) No entry is passed since creditors are paid in full settlement of their account. 

The concept of 'Fund Based Accounting' refers to the accounting whereby receipts and income relating to a particular fund are credited to that fund any payments and expenses are debited to it. Credit balance of te Fund Account is show on the liabilities side of the Balance Sheet.

Format Cash Flow from Operating Activities

For the calculation of Proposed Dividend during the current year the proposed dividend account is to be prepared as follows:

Proposed Dividend Account

For the calculation of Provision for Taxation made during the current year the provision of Taxation account is to be prepared as follows:

Provision for Taxation Account

The type of plan that is time bound and linked with measurable outcomes is 'Objective'. The objectives define in quantitative terms the specific desired results that are to be achieved within a given period of time.

Interest on capital is an expense to the firm and is debited to the profit and loss appropriation account. Interest is payable to the partners and hence, the partner's capital account is credited with the amount of interest. In case of loss, no interest will be allowed on capital.

Average Profit Method: Under this method goodwill is calculated on the basis of the average profit of previous years. The average profit is multiplied by the number of year’s purchase.

Goodwill = Average Profit x Number of Years Purchase

Example: Calculate goodwill at twice the average profits of last four years’ profits. The profits of the last four years were:

1. Rs. 27,000

2. Rs. 39,000

3. Rs. 16,000 (Loss)

4. Rs. 40,000

Solution: Total Profit for last four years = Rs. 27,000+ Rs. 39,000-Rs. 16,000+Rs. 40,000 = Rs. 80,000

Average Profit = Rs. 80,000/4 = Rs. 20,000.

Goodwill = Rs. 20,000 x 2 = Rs. 40,000.

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Called-up capital According to Section 2(15) of the Companies Act, 2013, ‘called-up capital’ means such part of the capital, which has been called for payment. Thus, it means the amount of nominal (face) value called-up by the company to be paid by the shareholders towards the share capital.

Sacrificing ratio is the ratio where the old partners give their consent to forego their share of gains into the new partner. The forego (sacrifice) by a partner is equivalent to:

Sacrificing ratio is computed during the time of addition or admission of a new associate partner. It is the portion in which old partners forego their share to the new associate.

A new partner is needed to :

• Recompense the old partners for their forfeiture of share in the gains of the enterprise for which he gets in a supplement amount known as goodwill or premium

This ratio is normally given as consented among the partners which can be the old ratio, equal amount of sacrifice or a defined ratio. The difficulty appears where the ratio in which the novice partner obtains his share from the old partners is not defined. Rather, the NPSR (new profit sharing ratio) is provided. In such a scenario, the sacrificing ratio is to be functioned out by subtracting each associate partner’s new share from his old share.

Paid-up share capital According to Section 2(64) of the Companies Act, 2013, ‘paid-up share capital’ or ‘share capital paid-up’ means the amount that the shareholder has paid and the company has received against the amount ‘called up’ against the shares towards share capital.