Illustration 1

Ranjit, Manjit and Paramjit are equal partners of M/s. Hindal & Co. The Balance Sheet of the firm as on 31.12.2017:
was
as follows
Liabilities Assets
Capital Account: Fixed Assets
Ranjit 50,000 Land 50,000
Manjit 1,00,000 Building 70,000
Paramijit (Debit Balance) (30,000) 1,20,000 Plant and Machinery 2,00,000 3,20,000
Loan from Bank 5,00,000 Current Assets:
Creditors 1,00,000 Stock 3,00,000
Debtors 1,00,000 4,00,000
7,20,000 7,20,000
On that date, it is decided to convert the partnership into Limited Company called Hindal Limited on the following
terms
(1) Land to be revalued at 7 1,50,000.
(2) Plant and Machinery to revalued
be at
2,50,000.
Depreciation amounting to T 20,000 to be written off on building.
(3)
(4) A provision of 10% of book value to be made for obsolete stocks.
(5) A provision for doubtful debts to be made at 10% of the debtors.
(6) A discount of 6% would be earned on creditors when paid out.
(7) The new company will issue 12,000 equity shares ofT 10 each credited as fully paid up, such share captalbeun
valued at R1,50,000 and the balance.payable is to be discharged by issue of 10% debentures of7 100eacn.
Show the necessary Ledger Accounts to close the books of Hindal & Co and show the opening Balance Sheet or
new Company. All partners are solvent and have sufficient cash resources as may be necessary to settle the respec

accounts, shares and debentures are divided equaly among the partners.
llustration 2
Nandan and Parijat were partners in a firm sharing profits and losses
in the ratio of 3 : 2. The firm was following calendar
2017:
its accounting The following is the Balance Sheet of the firm on 31st December,
year as year.
Assets
LiabilitiesS
Partners' Capital: Goodwill 30,000
Nandan 2,40,000Land and Buildings 1,00,000
Parijat 2,18,000 Plant and Machinery 2,10,00
Bills Payable 35,000 Furmiture and Fittings 1,00,000
Creditors for Goods 25,000 Stock-in-trade 65,000
Creditors for Expenses 40,000 Debtors 25,000
Cash and Bank Balance 28,000
5,58,000 5,58,.000
On 1st January, 2018 a new company, Nap Ltd. wasformed to take over the business ofthe firm on the following terms:
(a) The company would not take over creditors for expenses to the extent of R 17,000.
(b) Assets are to be valued as follows
Goodwill 50,000; Land and BuildingsR 1,68,000; Plant and Machinery 7 50,000 above book value; Furniture
and fittings to be depreciated by 10%; { 5,000 of Debtors to be treated as bad and of the balance 59% is to be
treated as doubtfül of recovery. Cash and Bank balance to be taken over in full except to meet the creditors Ior
expenses not taken over by the company.
(c) The purchase consideration is to be satisfied by issuing 20,000 equity shares of7 10 each at a premium oI Z070,
1,50,000 by issuing 8% preference shares of 100 each at par and the balance in the form
issued at 5% discount. of 6% debenu
Pass necessary journal entries in the books of the
company and prepare the Balance Sheet after acquisition.
Solutign In the ba
Ilustration 4
A.B and C were partners in business sharing profit and losses in the ratio of 2:1:1. Their Balance Sheet as at 31.3.2018
is as follows
Balance Sheet as at 31.3.2018
Liabilities Assets
Fixed Capital Fixed Assets 3,00,000
2,00,000 Investments 50,000
A
B 1,00,000 Current Assets
C 1,00,000 4,00,000 Stock 1,00,000
Current Accounts Debtors 60,000
40,000 Cash & Bank 1.50,000 3,10,000
B 20,000 60,000
Unsecured Loans 2,00,000
660,000 6,60,000
with B and C having each taken
On 1.4.2018, it is agreed among the partners that BC (P) Ltd, a newly formed company
as a going concem including goodwill but excluding
cash and bank
up 100 shares of 10 each will take over the firm
balances. The following points are also agreed upon
(a) Goodwill will be valued at 3 years purchase super profits.
of
valuation will be R 1,00,000.
(6) The actual profit for the purpose of goodwill
on fixed capital.
(C) Nomal rate of return will be 15% over at book values.
All other assets and liabilities will
be taken
(d) 10 cach and partly in cash. Payment in cash being
(e) The purchase consideration will be payable partly of in shares
who has agreed to retire.
to meet the requirement to discharge A,
interest in the new company.
Band C are to acquire capital
) Expenses ofliquidation 40,000.
to prepare the necessary Ledger Accounts.
IOu are required Firm
Solutinnn In the book of the n t Cr.
llustration 5
Star and Moon had been carrying on business independently. They agreed to amalgamate and form a new company Neptune
e
Ltd with an authorised share capital of 2,00,000 divided into 40,000 equity shares of R 5 each.
On 31st December, 2017, the respective Balance Sheets of Star and Moon were as follows
Particulars Star () Moon (
Fixed Assets 3,17,500 1,82,500
Curent Assets 1,63,500 83,875
4,81,000 2,66,375
Less: Curent Liabilities 2,98,500 90,125
Representing Capital 1,82,500 1,76,250
Additional information:
(a) Revalued figures of Fixed and Current Assets were as follows
Particulars Star ( Moon
Fixed Assets 3,55,000 1,95,000
Curent Assets 1,49,750 78,875

(b) The debtors and creditors include T 21,675 owned by Star to Moon.
The purchase consideration is satifsied by issue of the following shares and debentures:
i) 30,000 equity shares of Neptune Ltd, to Star and Moon in the proportion to the profitability of their respective
business based on the average net profit during the last three years which were as follows:
Particulars Star ( Moon )
2009 Proft 2,24,788 1,36,950
2010 (Loss)/ Profit (1,250) 1,71,050
2017 Profit 1,88,962 1,79,500

i) 15% debentures in Neptune Ltd, at par to provide an income equivalent to 8% return on capital employed in e
respective business as on 31st December, 2017 after revaluation of assets.
You are
requested to
(1) Compute the amount of debentures and shares to be issued to Star and Moon.
(2) A Balance Sheet of Neptune Ltd, showing the position immediately after
Amnuto+ion cf A P amalgamation.
 /8,8, Z1,6/5S ,000

Illustration 6
Avinash, Rohit and Madwesh were carrying on business in partnership sharing profits and losses in the ratio of5:4-1
respectively. The Trial Balance ofthe firm as on 31st March, 2018 was the following :
Particulars Dr. Cr.
Plant and Machinery at cost 1,05,000
Stock 60,200
Sundry Debtors 85,000
Sundry Creditors 1,05,200
Capital A/cs
Avinash
Rohit
70,00O
50,000
Madwesh
30,CCO
Drawings Alc:
Avinash
Rohit 30,000
Madwesh
25,000
Depreciation on Plant and Machinery 20,000
Trading Profit for the year 35,.0C0
Cash at Bank 1.29.800
94,800
4,20,000 4.20,000
Additional Information:
(a) Interest on Capital Accounts at 10% the amount standing to the credit of
on

beginning of the year was not Partners Capital Accounts at the

provided before preparing the above Trial Balance.
(b) On 31st March, 2018 they formed a Private Limited
business. Company Anagha (P) Ltd. to take over the partnersap
(c)
(c) You are further informed as under:
(1) Plant and Machinery is to be transferred at 7 80,000.
(ii) Equity Shares ofR 10 each of the
company are to be issued to the partners at par in such
that by reason of their share holdings
alone, they will have the numbers to es
same rights of sharing profits and loseo *
 they had in the partnership. Balance, if any in their Capital Accounts, will be settled by giving 7.5%
Preference Shares at par.
ii) Before transferring the business, the partners withdrew by cash from partnership the following amounts
over and above the drawings as shown in theTrial Balance

(a) Avinash- 20,000; (b) Rohit-7 10,600; (c) Madwesh-7 14,200.

(v) All assets and liabilities except Plant and Machinery and the Bank Balance are to be transferred at their
value in the books of the partnership as at 31st March, 2018.
You are required to prepare:
(a) Profit and Loss Adjustment Account for the year ending 31st March,2018.
(b) Capital Accounts showing all the adjustments required to dissolvethe partnership.
(c) A statement showing the number of shares of each class to be issued by the company to each of the partners to
settle their accounts.
(d) Balance Sheetof the company Anagha (P) Ltd. as on 31.03.2018 after take overofthe business.
Salution In the book of the Firm
 llustration 8
P. Q, Rand S were partners in a firm sharing profits and losses in the ratio of 5:3:2:2. Their Balance Sheet as on 31st
March,2015stood as follows
Liabilities Assets
CapitalAccounts Goodwill 20,000
P 60,000 Machinery 90,000
40,000 Debtors 16,000
R 6,000 Stocks 8,000
Creditors 10,000 Capital Accounts:
Accounts Payable 20,000 S 2,000
1,36,000 1,36,000
S did not have any private assets or liabilities. The firm was dissolved and the partners agreed to sell the fixed assets
15,000. Stock and Debtors were realised at book value and the costofrealisation amounted to 2,500. R was settled off
in cash and P and Q were distributed shares in ABC Ltd in their capitalratio.
Prepare Ledger Accounts to close the books of thefirm.
llustration 10
Som and D. Som 31st March,
Somsons Ltd. agreed to purchase the business of a firm consisting of two brothers, K. as on

2018. The Balance Sheet of the firm on that date was as follows:
Liabilities Assets
Capital Account: Land and Building 47,000
K. Som 76,000 Plant and Machinery 28,000
D. Som 58,000 Fumiture and Fixtures 7,000
General Reserve 30,000 Stock-in-Trade 62,000
Sundry Creditors 37,000 Sundry Debtors 55,000
Outstanding Expenses 3,000 Cash 5,000
2,04,000 2,04,000
The company agreed to take over the liabilities and all the assets with the exception of cash, the agreed purchase price
as to 1/4 in cash and 3/4
by the issue of fully paid equity shares of ? 10 each at an agrecd
value80,000
being tobeshare.
of 12.50 per satisfied
The company made the following revaluations of the assets taken over
when bringing them into books : Land and
BuildingT 62,000; Plant and Machinery 25,000; Furniture and Fixtures 5,000; Stock-in-trade 58,000; Sundry Debtos
T 50,000.
Give the entries necessary to record the acquisition of the business in
the books of the company.