STD 12th Book Keeping and Accountancy Smart Notes Commerce Question and Answer Book MH Board 1

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Preface
Lazy Bone Publications is a publication house founded and managed by Chartered Accountants. We started
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writing books with an aim that a student reading our books should enjoy, understand, grasp and remember
the content. We aim to take education to the next level and this book is a step forward.
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Book – Keeping & Accountancy is one of the most important subjects of Commerce stream. The knowledge
gained this year will help in building a strong foundation for years to come. Through this book we have
tried to explain theory in much simpler manner. This book is also filled with various practical problems.
We sincerely hope that this book helps you in understanding the subject easily. When you understand the
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subject, it will be easy for you to remember it as well. This year is extremely important to you and we
understand that. Smart Notes covers the entire syllabus and all possible questions that can be asked in your
board exams.
We take this opportunity to thank all the students and teachers who have provided their feedback,
suggestions and reviews. We thank our authors for their sincere efforts in enhancing the book.
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We are open to your suggestions to make the book more student-friendly.
Mail us at suggestions@lazybonepublications.in
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ii
Project + Viva – 20 marks
Total Marks = 100

Written Exam – 80 marks
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PAPER PATTERN
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Time – 3 hours (180 minutes)
Q.No. Particulars Total marks

1 Attempt any THREE of the following sub-questions 15
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(A) Answer the following questions in one sentence each: 5
(B) Write a word / term / phrase which can substitute each of the following 5
statements:
the statements:
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(C) Select the most appropriate alternative from those given below and rewrite
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(D) State whether the following statements are True or False: 5
(E) Prepare a specimen of a Bill of Exchange from the following information 5

2 Problem on Single Entry System 8
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OR
Theory question on Analysis of Financial Statements

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3 Problem on Admission / Retirement / Death of a Partner 10
OR
Problem on Admission / Retirement / Death of a Partner

4 Problem on Bills of Exchange (No Option) 10
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5 Problem on Dissolution of Partnership Firm 10
OR
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Problem on Accounting for Shares / Debentures

6 Problem on ‘Accounts of Not for Profit Concerns’ (No option) 12
7 Problem on Partnership Final Accounts 15
Total 80
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Index
Chapter no. Particulars Page Nos.
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1 Introduction to Partnership 1 - 1 to 1 - 12
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2 Partnership Final Accounts 2 - 13 to 2 - 75
3 Reconstitution of Partnership (Admission of a Partner) 3 - 76 to 3 - 119
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4 Reconstitution of Partnership (Retirement of a Partner) 4 - 120 to 4 - 144
5 Reconstitution of Partnership (Death of a Partner) 5 - 145 to 5 - 163
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6 Dissolution of Partnership Firm 6 - 164 to 6 - 210
8 Single Entry System

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Accounts of ‘Not For Profit’ Concerns 7 - 211 to 7 - 276
8 - 277 to 8 - 311
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9 Bills of Exchange (Trade Bill) 9 - 312 to 9 - 360
10 Company Accounts Part - I (Accounting for Shares) 10 - 361 to 10 - 394

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11 Company Accounts Part - II (Accounting for Debentures) 11 - 395 to 11 - 409

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12 Analysis of Financial Statements 12 - 410 to 12 - 421
Board Papers 422 - 434

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CHAPTER 5: RECONSTITUTION OF PARTNERSHIP
(DEATH OF PARTNER)
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Sr. No. Particulars Page No.
1. Theory 5 - 146
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2. Section I :
Textbook Problems 5 - 147
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3. Section II :
Board Problems 5 - 156
4. Section III :
Homework Problems 5 - 157
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5. Section IV :
Objective Type Questions 5 - 162
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5 - 145
S.Y.J.C. Book-keeping and Accountancy
A partner retires from the firm voluntarily. His retirement can be planned and he can decide to cease to be a partner from a specified
date. But when it comes to death of a partner, it comes unplanned. It may happen on any date and even in the middle of the
accounting period. On a partner’s death, he no longer remains a partner and it therefore leads to his compulsory retirement from
the firm. Such a partner is called the deceased partner. The legal effects of a partner’s death are similar to his retirement in some
cases. As far as accounting treatment is concerned, it remains same to a great extent to that in the case of retirement.
The following are aspects which are similar:-
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1. New Profit sharing ratio
Profit sharing ratio may remain the same after the death of one of the partners or they may mutually agree to change
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the profit sharing ratio to a new one. Sometimes, the partnership deed may provide for the new ratio in case of death.
2. Gain / Benefit Ratio
Just as we calculated the gain ratio in retirement, we need to compute the gain ratio in case of death of a partner. If the
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new ratio remains the same as old ratio or is not mentioned, then the gain ratio is same as old ratio. If the new ratio is
different than the old ratio, then the gain ratio changes and needs to be computed.
Gain Ratio = New Ratio – Old Ratio
3. Revaluation of Assets and Liabilities
Again, repeating the procedures followed during retirement of a partner, we may have to revalue assets and liabilities
on death of a partner. The surplus or deficit is then transferred to all partners’ capital accounts including the deceased
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partner’s account.
4. Amounts that are due to a deceased partner’s executor /nominee /administrator
a. Capital amount

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The amount of capital that the partner has brought in now needs to be returned. The capital is calculated from the
amount obtained from the last balance sheet provided and after adding/subtracting the following amounts.
b. Amount in Current Account
Just as the capital contribution needs to be returned, so also the amount that the capital has in his current account
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needs to be returned. In case of a debit balance, the same needs to be recovered.
c. Interest on Capital
If the partnership deed provides for interest on capital, we need to calculate and credit the partner’s account. We
have to calculate the same for the period from the date of the last balance sheet till the date of death.
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d. Drawings
If the deceased partner had made any drawings from the date of the last balance sheet till his death, we need to
debit his capital account for the same.
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e. Interest in Drawings
In case there are drawings and the deed provides for interest on drawings, we need to calculate the same till the
date of his death and debit his account.
f. Undistributed Profits/Accumulated Losses
These are distributed to all the partners including the deceased partner in their old ratio.
g. Share in Revaluation of Assets/Liabilities
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Similar to the procedure during a partner’s retirement, assets and liabilities may be revalued. The surplus or deficit
needs to be credited or debited respectively to the deceased partner’s capital account.
h. Share in Goodwill
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The deceased partner’s share in goodwill, if any, has to be credited to his account.
i. Salary to the Partner
Salary is provided if the partnership deed mentions it. It has to be credited to the deceased partner’s account till
the date of his death.
j. Profits earned till date of death
Profits are finally calculated for the entire year. But, a partner may die at any time during the year. His share of
profit is calculated till the date of his death by estimating a certain rate of profit. It may be computed based on
previous years’ average profits. This is then credited to his account.
5 - 146
Reconstitution of Partnership
(Death of Partner)
Section I : Textbook Problems
Q1. Following is the financial position of Vishal, Sagar & Amar who were equal partners. (S)
Balance Sheet as on 31st March, 2012
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
Capital Goodwill 6,000
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Vishal 12,000 Machinery 16,000
Sagar 9,000 Stock 11,000
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Amar 8,000 Debtors 9,000
Creditors 6,000 Bank 8,000
Reserve Fund 9,000
Profit & Loss 6,000
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50,000 50,000
On 1st October, 2012 Amar died and following adjustments were made
1) Goodwill of the firm was appreciated by Rs. 3,600, however only Amar’s share in the appreciated value was raised
in the books.
2) RDD was maintained at 5% on debtors.
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3) Stock is valued at Rs. 10,000 & machinery at Rs. 14,900.
4) Amar was to be given his share in the profit upto the date of death on the estimated profit based on previous year’s
profit Rs. 12,000.
Prepare:
1) Profit and Loss Adjustment Account
2) Balance Sheet of Vishal and Sagar.
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5) Amount due to Amar was transferred to his executor’s loan account.
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Answer:
 P & L Adjustment A/c: Rs. 2,550 (loss)  Executor’s Loan A/c: Rs. 15,350
 Balance Sheet Total: Rs. 50,650
Q2. Rajendra, Sangita and Sandhya were partners sharing profits and losses in the ratio of 2:2:1. Their Balance sheet as on
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31st March, 2012 was as follows: (S)

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Capital:
Rajendra 40,000 Machinery 45,000
Sangita 30,000 Stock 22,000
Sandhya 20,000 Investment 24,000
Creditors 18,000 Debtors 18,800
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Bills Payable 22,000 Less: R.D.D 800 18,000

Cash 21,000
1,30,000 1,30,000
Sangita died on 30th June, 2012. The following adjustments were made in the books of the firm.
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1) Stock was revalued at Rs. 26,000.

2) Machinery was depreciated by 10%.
3) R.D.D is no longer necessary
4) Goodwill of the firm raised at Rs. 25,000.
5) 50% of the investment was taken over by Sandhya at book value and other 50% was sold at a Profit of Rs. 3,000.
6) The deceased partner’s share in profit upto the date of death was to be calculated on the basis of average profits
of last two years. Profit figures of last two years were Rs. 19,000 and Rs. 17,000.
5 - 147
Prepare:
1) Revaluation A/c.
2) Partner’s Capital A/c.
3) Balance Sheet as on 1st July, 2012.
Answer:
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 Revaluation A/c: Rs. 3,300 (Profit)  Legal heir’s loan A/c: Rs. 43,120
 Balance Sheet Total: Rs. 1,48,100
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Q3. Shrikant, Anita, Pardeshi were equal partners. Their Balance Sheet as on 31st March, 2012 was as under. (S)
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Capital Machinery 20,000
Shrikant 15,000 Stock 9,000
Anita 12,000 Goodwill 10,000
Pardeshi 8,000 Debtors 12,000
Creditors 14,000 Less: R.D.D 1,000 11,000
Reserve Fund 9,000 Bank 14,000
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Profit and Loss A/c 6,000
64,000 64,000
On 1st Oct, 2012, Pardeshi died and the following adjustments were made in the books.
2) R.D.D was maintained at Rs. 4,000.

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1) Machinery revalued at Rs. 19,000 and stock Rs. 8,500.
3) Goodwill of the firm was appreciated by Rs. 3,000 however only Pardeshi’s share in the appreciated value was
raised in the books.
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4) Pardeshi was given his share of profit upto the date of death on the basis of estimated profit which was Rs. 3,600/-
for the year 2012-2013.
5) Reserve fund of Shrikant and Anita kept in the business.
6) Amount due to Mr. Pardeshi was to be transferred to his executor’s loan account.
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Prepare:
1) Profit and Loss Adjustment A/c.
2) Partner’s Capital Accounts.
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3) Balance Sheet of Shrikant & Anita.

Answer:
 P & L Adjustment A/c: Rs. 4,500 (loss)  Executor’s loan A/c: Rs. 13,100
 Balance Sheet Total: Rs. 61,100
Q4. Sudhakar, Madhukar and Raghunath were partners in a business sharing profit and losses in the ratio of 3:1:1 respectively.
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Their Balance Sheet as on 31st March, 2012 was as under. (S)

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Sudhakar 40,000 Machinery 40,000

Madhukar 30,000 Furniture 30,000
Raghunath 20,000 Debtors 30,000
Creditors 16,000 Cash 11,000
General Reserves 5,000
1,11,000 1,11,000
5 - 148
(Death of Partner)
Raghunath died on 31st December, 2012
1) Machinery was to be revalued to Rs. 46,000 and furniture at Rs. 29,000/-.
2) The drawings of Raghunath upto the date of death amounted to Rs. 12,000/-.
3) Interest on capital was to be allowed at 10% p.a.
4) Interest on drawings was to be charged at 6% p.a.
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5) His share of goodwill to be calculated on the basis of two years purchase of last four years average profit.
His share of profit up the date of his death to be based on the profit of the previous year.
Previous Profit figures = Rs. 70,000, Rs. 60,000, Rs. 30,000, Rs. 40,000
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Prepare:
1) Raghunath’s Capital account showing the amount payable to his legal heir
2) Give the working of goodwill and profit.
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Answer:
 P & L Adjustment A/c: Rs. 5,000 (Profit)  Legal heir’s loan A/c: Rs. 36,960
 Raghunaths share in Goodwill: Rs. 20,000  Raghunaths share in Profit: Rs. 6,000
Q5. Parag, Siddhesh, Nishu were partners sharing profit and losses in the ratio of 4:3:3. Their balance sheet was as follows:
(S)
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Capital Sundry Assets 80,000
Parag 40,000 Stock 30,000
Siddhesh
Nishu
Creditors
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30,000
22,000
Debtors
Less: R.D.D
Cash
40,000
2,000 38,000
12,000
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General Reserve 12,000
Profit and Loss Account 16,000
1,60,000 1,60,000
Nishu died on 1st July, 2012 and the following adjustments were agreed
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1) Sundry assets revalued to Rs. 90,000/-.

2) R.D.D was maintained at 10% on Debtors.
3) A provision for outstanding expenses was to be made for Rs 1,000/-.
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4) His share of goodwill to be calculated on 3 years purchases of average profit of last 4 years.
Profits of last four years were – Rs. 20,000, Rs. 22,000, Rs. 18,000, Rs. 12,000.
5) The deceased partner to be given his share of profit to the date of his death on the basis of average profits of last
two years.
6) His drawings till the death amounted to Rs. 27,825.
Prepare:
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1) Nishu’s Capital account showing the amount payable to his legal heir
2) Give the working of goodwill and profit.
Answer:
 P & L Adjustment A/c: Rs. 7,000  Legal heir’s loan A/c: Rs. 30,000
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 Nishu’s Share in profit: Rs. 1,125  Nishu’s share in goodwill: Rs. 16,200
5 - 149
Q6. Vilas, Mangal, Guru were partners in a business sharing profits and losses in the ratio of 2: 1: 1 respectively. Their
Balance sheet as on 31st March, 2012 was as follows: (P)
Balance Sheet as on 31st March 2012
Capital Land and Building 6,000
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Vilas 6,000 Debtors 5,000
Mangal 7,000 Stock 3,000
Guru 3,400 Cash 6,000
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Creditors 2,000
20,000 20,000
Guru died on 1st July, 2012
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1) Land and Building was to be revalued to Rs. 7,000 and RDD was to be created of Rs. 200.
2) The drawing of Guru upto the date of his death amounted to Rs. 1,000/-.
3) Charge interest on drawing Rs. 100/-.
4) His share of goodwill should be calculated at ‘Three’ years purchase of the profits for the last four years which were
Rs. 15,000, Rs. 13,000, Rs. 7,000, Rs. 5,000.
5) The deceased partners share of profit upto the date of his death to be calculated on the basis of average profit of
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last two years.
Prepare:
1) Profit and Loss Adjustment A/c
2) Partners Capital A/c’s
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3) Balance Sheet of the continuing firm.
4) Give working of share of profit and goodwill.
Solution:
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Dr. Profit & Loss Adjustment A/c Cr.
Particulars Amt. (Rs.) Amt. (Rs.) Particulars Amt. (Rs.) Amt. (Rs.)
To RDD A/c 200 By Land & Building A/c 1,000
To Profit on Revaluation transferred By Interest on Drawings A/c 100
Vilas’ Capital A/c 450
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Mangal’s Capital A/c 225

Guru’s Capital A/c 225 900
1,100 1,100
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Dr. Partner’s Capital Account Cr.

Particulars Vilas Mangal Guru Particulars Vilas Mangal Guru
To Drawings A/c 1,000 By Balance b/d 6,000 7,000 3,400
To Interest on Drawings A/c 100 By Profit & Loss Adjustment A/c 450 225 225
To Guru’s Legal Heir’s Loan A/c 10,800 By General Reserve A/c 400
To Goodwill A/c 5,000 2,500 By Goodwill A/c 7,500
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To Balance c/d 1,450 4,725 By Profit & Loss Suspense A/c 375
6,450 7,225 11,900 6,450 7,225 11,900
Balance sheet as on 1st July, 2012
Liabilities Amt. (Rs.) Amt. (Rs.) Assets Amt. (Rs.) Amt. (Rs.)
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Capital A/c Land & Building 7,000

Vilas 1,450 Debtors 5,000
Mangal 4,725 6,175 Less: RDD 200 4,800
General Reserve 1,200 Stock 3,000
Guru’s Legal Heir’s Loan 10,800 Cash 5,000
Creditors 2,000 Profit & Loss Suspense A/c 375
20,175 20,175
5 - 150
(Death of Partner)
Working Notes :-
1) Dr. Cash/Bank A/c Cr.
Particulars Amt. (Rs.) Particulars Amt. (Rs.)
To Balance b/d 6,000 By Guru’s Drawings A/c 1,000
By Balance c/d 5,000
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6,000 6,000
2) Share in Goodwill
Average Profit = (15000 + 13000 + 7000 + 5000) / 4
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= Rs. 10,000
Goodwill = 3 years’ purchase of average profits
= 3 x Rs. 10000
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= Rs. 30,000
Guru’s Share in Goodwill = 1/4 x Rs. 30000
= Rs. 7,500
3) Share in Profits
Average profits of 2 years = (7000 + 5000 ) / 2
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= Rs. 6,000
Estimated Profit till date of death = 3/12 x Rs. 6000
= Rs. 1,500

Share of Guru = 1/4 x Rs. 1500
= Rs. 375 O
4) It is assumed that remaining General Reserve is continued in the business by remaining partners.
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Q7. Sheetal, Anjali, Rajendra were sharing profits and losses as 7: 5: 4. Their Balance sheet as on 31st March, 2012: (P)
Capital Furniture 17,000
Sheetal 23,000 Machinery 18,000
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Anjali 15,000 Building 16,000

Rajendra 12,000 Cash 37,000
Bills Payable 4,000
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Creditors 8,000
Loan 10,000
88,000 88,000
Rajendra died on 30th June 2012 and the following adjustments were agreed as per deed.
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1) Furniture, Machinery and Building are to be revalued at Rs. 16,700/-, Rs. 16,200/-, to Rs. 30,100.
2) Rajendra’s share is goodwill to be valued from firm’s goodwill which was valued at two times the average profit of
last three years. Profits of last three years Rs. 30,000, Rs. 25,000, Rs. 20,000/-.
3) His profit upto the date of death is to be calculated on the basis of last years profit.
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4) Rajendra was entitled to get a salary of Rs. 800/- per month.

5) Interest on capital at 10% be allowed.
6) Rajendra’s drawing upto date of death were Rs. 600 p.m.
Prepare:
1) Rajendra’s Capital A/c showing Amt payable to his executor.
2) Give working of share of goodwill and profit.
5 - 151
Solution:
Dr. Rajendra Capital A/c Cr.
To Drawings A/c 1,800 By Balance B/d 12,000
By Profit & Loss Adjustment A/c 3,000
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By Salary A/c 2,400
To Executor’s Loan A/c 33,650 By Interest on Capital A/c 300
By Goodwill A/c 12,500
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By General Reserve A/c 4,000
By Profit & Loss Suspense A/c 1,250
35,450 35,450
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To Furniture A/c 300 By Building A/c 14,100
To Machinery A/c 1,800
To Profit on Revaluation transferred
Sheetal’s Capital A/c 5,250
Anjali’s Capital A/c 3,750
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Rajendra’s Capital A/c 3,000 12,000
14,100 14,100
Working Notes

Goodwill
= Rs. 25,000
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Average profits = (30000 + 25000 + 20000) / 3

= 2 x Average profits
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= 2 x Rs. 25000
= Rs. 50,000
Rajendra’s Share = 4/16 x Rs. 50,000
= Rs. 12,500
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2) Share in current profits

Last year’s profit = Rs. 20,000
Estimated profit till date of death = Rs. 20000 x 3/12
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= Rs. 5000
Share in profit = 4/16 x Rs. 5,000
= 1250
Q8. The Balance sheet of Mohan, Subash & Babi as on 31st December, 2011 was as under. They were sharing profits and
losses in the ratio of 2: 1: 1. (P)
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Balance sheet as on 31st December, 2011

Capital Investments 20,000
Mohan 25,000 Buildings 33,000
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Subash 15,000 Debtors 12,000

Babi 15,000 Stock 28,000
Creditors 30,000 Cash 8,000
Reserve 16,000
1,01,000 1,01,000
Babi died on 1st July, 2012 and partnership deed provided that in the event of death of the partner his executor will be
entitled to be paid out.
1) Capital to the credit at the date of last balance sheet.
5 - 152
(Death of Partner)
2) Proportion of reserves.
3) Proportion of goodwill to calculated twice the average profits of last three years.
4) His proportion of profits to the date of death based on the average profits of the last three year plus 20%.
5) The net profits for last 3 years Rs. 18,000, Rs. 18,000, and Rs. 16,500.
6) Babi had withdrawn Rs. 6,000/- to the date of her death.
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7) The investments were sold at par and the amount was paid off to Babi’s executor and the balance was transferred
to loan A/c.
Prepare:
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1. Babi’s Capital A/c only.
Solution:
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Dr. Babi’s Capital A/c Cr.
To Cash / Bank A/c 20,000 By Reserve A/c 4,000
To Loan A/c 4,375 By Profit & Loss Suspense A/c 2,625
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30,375 30,375
Working Notes:
1) Average Profits = (18000 + 18000 + 16500)/3

Goodwill

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= Rs. 17,500
= 2 x Average profits
= 2 x Rs. 17500
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= Rs. 35,000
Share in Goodwill = 1/4 x Rs. 35000
= Rs. 8,750
2) Average Profits = (18000 + 18000 + 16500)/3 = Rs. 17,500
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Estimated profit for current year = Rs. 17,500 + Rs. 17,500 x 20% = Rs. 21,000
Estimated profits till date of death = Rs. 21000 x 6/12 = Rs. 10,500
Share in profit = 1/4 x 10,500 = Rs. 2,625
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Q9. Minaxi, Ramesh and Poonam were partners sharing profits and losses in the proportion to their capitals. Their Balance
sheet of the firm on 31st March, 2012 was as under: (P)
Capital Land and Building 40,000
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Minaxi 30,000 Investment 20,000

Ramesh 20,000 Debtors 16,000
Poonam 10,000 Less: R. D. D. 2,000 14,000
Creditors 28,000 Stock 18,000
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Reserve 18,000 Cash 14,000

1,06,000 1,06,000
Poonam died on 1st August, 2012 and the following adjustments were made
1) Assets revalued as under- Land & Building Rs. 44,000, Investment Rs. 18,000, Stock Rs. 17,000.
2) All debtors were good.
3) Goodwill of the firm valued at two times the average profits of the last 4 years. No goodwill account to be shown
in the books of the firm.
5 - 153
4) Poonam’s share of profit upto her death to be calculated on the basis of average profits of last two year.
5) Profits were Rs. 6,000, Rs. 12,000, Rs. 7,000, Rs. 11,000.
Prepare:
1) Profits and loss adjustment A/c.
2) Balance sheet as on 1st August, 2012.
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Solution:
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To Investment A/c 2,000 By Land & Building A/c 4,000
To Stock A/c 1,000 By RDD A/c 2,000
To Profit on Revaluation transferred
Minaxi’s Capital A/c 1,500
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Ramesh’s Capital A/c 1,000
Poonam’s Capital A/c 500 3,000
6,000 6,000
Dr. Partner’s Capital A/c Cr.
Particulars Minaxi Ramesh Poonam Particulars Minaxi Ramesh Poonam
To Goodwill A/c 1,800 1,200 By Balance b/d 30,000 20,000 10,000
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To Poonam’s Legal Heir’s 17,000 By Reserve A/c 9,000 6,000 3,000
Loan A/c
By Profit & Loss 1,500 1,000 500
Adjustment A/c
To Balance c/d 38,700

O 25,800
By Minaxi’s Capital A/c
By Ramesh’s Capital A/c
By Profit & Loss Suspense A/c
1,800
1,200
500
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40,500 27,000 17,000 40,500 27,000 17,000
Balance sheet as on August 1, 2012
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Minaxi 38,700 Investment 18,000

Ramesh 25,800 64,500 Debtors 16,000
Poonam’s Legal Heir’s Loan A/c 17,000 Stock 17,000
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Creditors 28,000 Profit & Loss Suspense A/c 500

Cash 14,000
1,09,500 1,09,500
Working Notes
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Average Profits = (6000 + 12000 + 7000 + 11000) / 4

= Rs. 9,000
Goodwill = 2 x Rs. 9000
= Rs. 18,000
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Share in Goodwill = 1/6 x Rs. 18000

= Rs. 3,000
5 - 154
(Death of Partner)
2) Share in Profits
Average Profits of last 2 years = (7000 + 11000) / 2
= Rs. 9,000
Estimated Profit till date of death = Rs. 9000 x 4/12
= Rs. 3,000
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Share in Profit = 1/6 x Rs. 3,0 00
= Rs. 500
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Q10. Vishnu, Prabhakar and Krishna were partners in a business sharing profits and losses in the ratio of 3: 1: 1 respectively.
Their Balance Sheet as on 31st March, 2012 was as follows: (P)
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Capital Plant and Machinery 35,000
Vishnu 40,000 Stock 25,000
Prabhakar 30,000 Debtors 20,000
Krishna 25,000 Cash 30,000
Creditors 5,000
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Reserve fund 10,000
1,10,000 1,10,000
Krishna died on 1st October, 2012 and the partnership deed provided that:

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1) The deceased partner to be given his share of profit to the date of death on the basis of the profits of the previous year.
2) His share of goodwill will be calculated on two years purchase of average profit of the last 4 years.
The net profits for last 4 years were - Rs. 70,000, Rs. 55,000, Rs. 45,000, Rs. 30,000.
3) Plant and Machinery to be valued at Rs. 40,000. Reserve for doubtful debts of Rs. 2,000 to be created.
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4) The drawings of Krishna upto the death amounted to Rs. 20,000.
5) Interest on capital at 10% p.a. is to be allowed and 6% p.a. to be charged on drawings. Both the interest should be
calculated for 6 months.
Prepare:
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1) Krishna’s capital A/c and P/L Adjustment A/c.

Solution:
PL
To RDD A/c 2,000 By Plant & Machinery A/c 5,000
To Profit on Revaluation transferred to
Vishnu’s Capital A/c 1,800
Prabhakar’s Capital A/c 600
Krishna’s Capital A/c 600 3,000
M
5,000 5,000
Dr. Krishna’s Capital A/c Cr.
SA

To Interest on Drawings A/c 600 By Reserve Fund A/c 2,000
To Krishna’s Legal Heir’s Loan A/c 31,250 By Profit & Loss Suspense A/c 3,000
By Profit & Loss Adjustment A/c 600
By Interest on Capital A/c 1,250
51,850 51,850
5 - 155
Working Notes
Average Profits = (70000 + 55000 + 45000 + 30000) / 4 = Rs. 50,000
Goodwill = 2 x Average profits
= 2 x Rs. 50,000
T
= Rs. 1,00,000
Share in Goodwill = 1/5 x Rs. 1,00,000
= Rs. 20,000
N
2) Share in current profits
Last year’s profit = Rs. 30,000
Estimated profit till date of death = Rs. 30000 x 6/12 = Rs. 15,000
TE
Share in profit = 1/5 x Rs. 15,000 = Rs. 3,000
Section II : Board Problems

Q1. Pravin, Prakash and Paresh were partners sharing profits and losses in the proportion to their capitals. Their balance
sheet of the firm on 31st March, 2013 was as under. (March 2014)
Balance sheet as on 31st March, 2013
N
Liabilities Amount (Rs) Amount (Rs) Assets Amount (Rs) Amount (Rs)
Capital A/c Land and Building 80,000
Pravin 60,000 Investments 40,000
Prakash
Creditors
Reserve Fund
O 40,000
56,000
36,000
Debtors
Less: R.D.D.
Stock
32,000
-4,000 28,000
36,000
C
Cash 28,000
2,12,000 2,12,000
Paresh died on 1st August, 2013 and the following adjustments were made:
(1) Assets were valued as – Land and building Rs. 88,000, Investments Rs. 36,000 and Stock Rs. 34,000.
(2) All debtors were good.
E
(3) Goodwill of the firm valued at two times the average profit of the last 4 years’ profit.
(4) Paresh’s share of profit upto his death to be calculated on the basis of average profit of the last two years.
PL
(5) Profits for the last four years were: Rs. 12,000, Rs. 24000, Rs. 14000 and Rs. 22000.
Prepare: (i) Profit and Loss Adjustment Account.
(ii) Paresh’s Capital Account, showing the amount payable to his executor.
(iii) Give working of Paresh’s share in Goodwill and Profit
Q2.
Supriya, Surakha and Sujata were partners sharing profits and Losses in the ration of 2:2:1 respectively. Their Balance
M
Sheet as on 31st March, 2012 was as follows: (October 2014)

Liabilities Amount (Rs) Assets Amount (Rs)
Capital A/c Land and Building 50,000
SA
Supriya 40,000 Stock 30,000

Surekha 40,000 Debtors 37,500
Sujata 20,000 (-) R.D.D. 2,500 35,000
Reserve Fund 10,000 Furniture 10,000
Creditors 16,000 Cash at Bank 5,000
Outstanding Expenses 4,000
1,30,000 1,30,000
5 - 156
(Death of Partner)
Sujata died on 1st July, 2012 and the adjustments were agreed to as per the deed as follows:
(1) Land and Building to be valued at Rs. 60,000 and all debtors were good.
(2) Stock to be depreciated by 10%.
(3) The drawing of Sujata up to the date of her death amounted to Rs. 2,000.
(4) Interest on capital was to be allowed at 10% p.a.
T
(5) The deceased partner’s share of goodwill is to be valued at 2 years’ purchase of average profit of last 3 years.
The profits were:
N
2009 – 10 = Rs. 15,000
2010 – 11 = Rs. 17,000
2011 – 12 = Rs. 13,000
TE
(6) The deceased partner’s share of profit up to the date of her death should be based on average profit of the last
two years.
You are required to prepare:
(a) Profit and Loss Adjustment Account.
(b) Sujata’s Capital Account showing the balance payable to her Executor’s Loan Account.
(c) Working notes for calculation of (a) Goodwill and (b) Profit till the date of Sujata’s death
N
Section III – Homework Problems
Q1. Balance sheet as on 31st March, 2012
Capital A/c
Sheetal
Ashish
Liabilities O Amt. (Rs.) Amt. (Rs.)
20,000
20,000
Land & Building
Machinery
Vehicle
Assets Amt. (Rs.) Amt. (Rs.)
59,000
26,000
12,000
C
Neha 20,000 60,000 Stock 5,000
Sundry Creditors 65,000 Debtors 20,000
Bills Payable 13,000 Less: RDD 1,000 19,000
Cash/Bank 2,000
Profit & Loss A/c 15,000
E
1,38,000 1,38,000
Partners were sharing profits & losses equally.
Neha passed away on 1st July, 2012.
PL
1) Goodwill to be calculated as 3 years’ purchase of past 3 years’ average profits which were as follows Rs. 10,000,
Rs. 12,000 and Rs. 14,000.
Goodwill to be raised only for Neha’s share
2) Share in profits to be calculated as average of last 3 years’ profits plus 20%.
3) Interest on Neha’s capital to be provided at 10%pa.
4) Neha had made drawings of Rs. 5,000 till date of death.
M
5) Interest on drawings is Rs. 100 for the period on Neha’s drawings.

Prepare
1) Neha’s Capital A/c
SA
2) Working of Goodwill and Share in Profits.

Answer:
 Neha’s Legal heir’s loan A/c: Rs. 23,600/-  Goodwill of the firm: Rs. 36,000/-
 Share in Profit : Rs. 1,200/-
5 - 157

Capital A/c Factory 75,000
Heena 50,000 Furniture 35,000
Sheena 64,000 Investment 25,000
Leena 45,000 1,59,000 Stock 55,000
T
Debtors 45,000
General Reserve 60,000 Less: RDD 4,000 41,000
Sundry Creditors 20,000 Cash / Bank 8,000
N
2,39,000 2,39,000
Partners were sharing profits & losses in the ratio 2:1:3. Leena expired on 1st October, 2012.
1) Goodwill of the firm to be raised to Rs. 60,000.
TE
2) Share in profits to be computed as average of last 2 years’ profits which were Rs. 23,000 and Rs. 57,000.
3) Goodwill not to appear in the books.
4) Rent of Rs. 2,000 was unpaid.
5) Factory to be appreciated by 20%.
6) Investment to be written down to market value of Rs. 22,000.
7) Interest on Leena’s capital to be provided for at 5%.
N
Prepare
1) Profit & Loss Adjustment A/c.
2) Partners’ Capital A/c.
Q3.
Answer:
 Profit on revaluation: Rs. 10,000
O  Leena’s Legal heir’s loan A/c: Rs. 1,21,125
C
Iyer 60,000 Vehicle 25,000
Murthy 50,000 Investment 36,000
Shetty 40,000 1,50,000 Stock 33,500
E
Reserve Fund 24,000 Debtors 27,500

Sundry Creditors 26,000 Cash/Bank 28,000
2,00,000 2,00,000
PL
Partners were sharing profits & losses in the ratio 3:2:1.

Shetty died on 1st September, 2012.
1) Goodwill to be raised to Shetty’s share of Rs. 7,500.
2) Share in profits to be computed by increasing last year’s profit of Rs. 40,000 by 50%.
3) Sundry Creditors of Rs. 1,500 to be written off.
4) Investments to be revised upwards by Rs. 14,000.
M
5) Shetty made drawings of Rs. 10,000 till date of his death. Interest to be charged for the period at 10%pa.
Prepare
SA
2) Shetty’s Capital A/c.

Answer:
 Shetty’s Legal heir’s loan A/c: Rs. 47,834  Profit & Loss Adjustment A/c: Rs. 15,500 (Profit)
5 - 158
(Death of Partner)
Capital A/c Goodwill 35,000
Axar 25,000 Land & Building 57,000
Virat 35,000 Machinery 10,000
Gautam 25,000 85,000
T
Stock 20,000
General Reserve 40,000 Debtors 25,000
Sundry Creditors 25,000 Less: RDD 2,000 23,000
N
Unpaid Rent 1,000 Cash/Bank 6,000
1,51,000 1,51,000
Gautam died on July 1, 2012.
TE
1) Goodwill to be raised by Rs. 20,000, but only Gautam’s share to be raised.
2) Share in Profits to be calculated by taking into account last 2 years’ profits which were Rs. 30,000 and Rs. 40,000.
3) RDD to be maintained at 10% of debtors.
4) Land & Building and Machinery were to be appreciated by 10% and 15% respectively.
5) Stock of Rs. 2,000 to be written off.
6) Gautam had made drawings of Rs. 5,000 till date of death.
N
Prepare
3) Balance sheet.
Answer:
O  Gautam Legal heir’s loan A/c: Rs. 38,363
C
 Balance Sheet total: Rs. 1,57,888
Neelima 15,000 Furniture 17,000
E
Subhash 21,000 Vehicle 13,000

Saurabh 31,000 67,000 Stock 11,000
General Reserve 12,000 Debtors 22,500
PL

Bills Payable 4,000 Cash/Bank 11,000
99,000 99,000
Saurabh expired on 1st June, 2012.
1) Goodwill of the firm to be raised to Rs. 40,000.
M
2) Share in Profit to be calculated by assuming last year’s profit of Rs. 12,000 plus a raise of 25%.
3) Goodwill to remain in the books of the firm.
4) All debtors were considered good.
5) Land & Building to be revalued upwards to Rs. 50,000.
SA
6) Stock to be written off of Rs. 2,000.

Prepare
1) Profit & Loss Adjustment A/c
2) Partners’ Capital A/c
3) Balance sheet
Answer:
 Profit & Loss Adjustment A/c: Rs. 23,500 (Profit)  Saurabh’s Legal heir’s loan A/c: Rs. 38,800
5 - 159

Capital A/c Building 1,44,000
Shah 1,00,000 Furniture 26,000
Vora 1,50,000 Investment 98,000
Thakker 80,000 3,30,000 Stock 54,000
T
Debtors 66,000
Bills Payable 23,000 Cash / Bank 4,000
N
Profit & Loss A/c 27,000
4,13,000 4,13,000
Thakker died on 1st July, 2012.
TE
1) Goodwill to be calculated as 2 years’ purchase of past 3 years’ average profits which were as follows:
Rs. 80,000, Rs. 90,000 and Rs. 1,20,000.
2) Share in profits to be computed as average of 3 years’ profits plus 40%.
3) R.D.D. to be written back to 5% of debtors.
4) Drawings by Thakker till date of his death were Rs. 20,000. Interest on drawings to be charged at 10%pa.
5) Furniture to be depreciated by 10%.
N
6) Stock to be revised upwards by Rs. 26,000.
Prepare
1) Thakker’s Capital A/c
Answer:
O
2) Working of Goodwill and Share in Profits.
 Profit & Loss Adjustment A/c: Rs. 26,100 (Profit)  Thakker’s Legal heir’s loan A/c: Rs. 1,34,923
C
Amar 11,000 Furniture 24,000
Akbar 22,000 Vehicle 16,000
E
Anthony 44,000 77,000 Stock 10,000

1,17,000 1,17,000
PL
Partners were sharing profits & losses in the ratio of their capitals.
Anthony passed away on 1st September, 2012.
Rs. 5,000, Rs. 6,000, Rs. 7,500.
2) Share in profits to be based on last year’s profit plus 33 1/3%.
3) Goodwill to not appear in the books of the firm.
M
4) R.D.D. to be provided for at 15% of debtors.

5) Sundry Creditors were undervalued by Rs. 8,000.
6) Depreciate Furniture by Rs. 4,000 and Vehicle by Rs. 2,000.
SA
7) Anthony had made drawings of Rs. 4,000 till date of death.

Prepare
3) Balance sheet.
Answer:
 Loss on revaluation: Rs. 14,900  Anthony’s Legal heir’s loan A/c: Rs. 59,081
5 - 160
(Death of Partner)
Capital A/c Factory 80,000
Pam 40,000 Machinery 40,000
Sam 20,000 Investment 20,000
Cam 40,000 1,00,000 Stock 10,000
T
Bills Payable 15,000
1,80,000 1,80,000
N
Cam died on 1st December, 2012.
1) Goodwill raised to Cam’s share of Rs. 25,000. Goodwill to be written off.
TE
2) Share in profits to be based on last year’s profit of Rs. 1,00,000.
3) Bills Payable of Rs. 5,000 to be written off.
4) Machinery was undervalued by 20%.
5) Stock of Rs. 2,000 to be written off.
6) Interest on Cam’s capital to be provided for at 10% where as on drawings at 5%.
7) Cam had made drawings till date of death of Rs. 3,000.
N
Prepare
2) Cam’s Capital A/c
Q9.
Answer:
Liabilities
O  Cam’s Legal heir’s loan A/c: Rs. 94,484/-
Amt. (Rs.) Amt. (Rs.) Assets Amt. (Rs.) Amt. (Rs.)
C
Kishor 65,000 Factory 50,000
Prakash 75,000 Investment 45,000
Deepak 25,000 1,65,000 Stock 35,000
E
Profit & Loss A/c 36,000 Debtors 25,000

2,25,000 2,25,000
PL

Deepak died on 1st July, 2012.
Rs. 35,000, Rs. 15,000 and Rs. 55,000.
2) Share in profit to be average of last 3 years’ profits.
3) Goodwill to be written back.
M
4) Factory to be depreciated by 10%.

5) Deepak had made drawings of Rs. 5,000 till date of his death.
6) RDD to be maintained at 10%.
SA
Prepare
2) Partners’ Capital A/c
3) Balance sheet
Answer:
 Profit & Loss Adjustment A/c: Rs. 7,500  Deepak’s Legal heir’s loan A/c: Rs. 63,021
5 - 161

Capital A/c Factory 3,36,000
Kulkarni 1,50,000 Machinery 2,39,000
Nene 2,00,000 Vehicle 35,000
Gokhale 3,00,000 6,50,000
T
Stock 1,58,000
General Reserve 1,30,000 Debtors 2,25,400
Sundry Creditors 2,00,500 Less: RDD 5,400 2,20,000
N
Bills Payable 10,500 Cash/Bank 3,000
9,91,000 9,91,000
Partners were sharing profits & losses in the ratio of their capitals.
TE
Gokhale passed away on 1st August, 2012.
1) Goodwill to be calculated as 3 years’ purchase of past 3 years’ average profits which were as follows Rs. 1,00,000,
Rs. 1,50,000, Rs. 2,50,000.
2) Share in profits is assumed as average of last 2 years’ profits.
3) Goodwill to be raised to Gokhale’s share.
4) R.D.D. to be raised to 10% of debtors.
N
5) Machinery to be depreciated by 10%. Factory to be revised upwards to Rs. 4,00,000.
6) Interest on Gokhale’s capital to be provided at 10%pa.
Prepare
2) Gokhale’s Capital A/c
Answer:
O
 Profit & Loss Adjustment A/c: Rs. 22,960 (Profit)  Gokhale’s Legal heir’s loan A/c: Rs. 6,42,135
C
Section IV : Objective Type Questions
Q.1. Objective Type Questions:
(A) Answer one sentence only.
E
1. What is gain ratio or benefit ratio?

Ans. Profit of the deceased partner is distributed among the remaining partners in their old profit sharing ratio or as per the
new profit sharing ratio; such extra profit added to the continuing partners is known as Gain ratio.
PL
2. How is gain ratio calculated?

Ans. Gain ratio is calculated in the following manner: Gain ratio= New ratio- old ratio
3. When is gain ratio required to be calculated?
Ans. Gain ratio is calculated when any partner dies in the old or existing partnership firm.
4. How would you treat general reserve on death of a partner?
Ans. The amount is distributed among all partners in their profit sharing ratio.
M
5. How much amount due to deceased partner is calculated?

Ans. The amount due to deceased partner is calculated till the date the deceased partner renders services to the business
i.e. till the date of death.
6. How is amount due to deceased partner settled?
SA
Ans. The amount due to the deceased partner is transferred to his legal heir or representative’s loan a/c or executor after
completing all legal formalities.
7. How is the share of deceased partner in accrued profit calculated?
Ans. The share of deceased partner is calculated on the assumed basis of average profit of previous years and credited to
deceased partners capital a/c.
8. How is a debit balance of profit & loss account dealt with on death of a partner?
Ans. On the death of a partner, debit balance of Profit & loss a/c is transferred to partners capital or current a/c in their profit
sharing ratio.
5 - 162
(Death of Partner)
(B) Write a word or a term or a phrase which can substitute each of the following statements.
1. The account which shows revaluation of assets and liabilities. Revaluation A/c or profit and
loss adjustment A/c
2. Excess of credit side over debit side of revaluation account. Profit on Revaluation
3. The method under which payment is made to retiring partner in installment. Installment method
T
4. Excess of proportionate at capital over actual capital. Deficit
5. The account to which deceased partners capital balance is transferred. Deceased Partner’s Executors
Loan Account
N
6. The partner who died. Deceased Partner
7. A person who represent the deceased partner. Legal heir or executor
(C) Fill in the blanks with appropriate alternative given in the brackets.
TE
1. Gain ratio is calculated on _______________. retirement or death
(a) admission of a partner (b) retirement of a partner of a partner
(c) death of a partner (d) retirement or death of a partner
2. Gain ratio is the ratio in which _______________. the continuing
(a) the old partner gains on admission of a new partner partner’s benefits
(b) the goodwill of a new partner on admission is credited to old partners on retirement or
N
(c) the continuing partner’s benefits on retirement or death of a partner death of a partner
(d) none of the above
3. Share of profit of a deceased partner till the date of death is ___________. debited to P/L
(a) debited to P/L Adjustment A/c
(b) credited to P/L Adjustment A/c
(c) debited to P/L Suspense A/c
O Suspense A/c
C
(d) credited to P/L Suspense A/c
4. An amount received from the Insurance Company against the joint life policy is _________. credited to all
(a) debited to deceased partner partners capital
(b) credited to deceased partner a/c in their profit
(c) credited to continuing partners capital a/c sharing ratio
E
(d) credited to all partners capital a/c in their profit sharing ratio
5. M.N.S. are partners in a firm having joint life policy of Rs. 10,00,000 on which premium has been N & S are correct
paid by a firm. M dies and his legal representatives want the whole amount of the policy where as
PL
N & S want to distribute the amount among all the partners.

(a) M’s representatives and correct (b) N & S are correct
(c) All are wrong (d) Insurance company will decide
6. Interest on drawing due from deceased partner till the date of death is __________ to his capital a/c Debited
(a) debited (b) credited
M
(c) none of the above

(D) State whether the following statements are TRUE/FALSE
1. Deceased partner is entitled to his share of goodwill. True
2. Deceased partner is not entitled to his share of general reserve. False
SA
3. The capital account of a deceased partner always shows a debit balance. False
4. An amount due to a deceased partner is transferred to his executor’s loan A/c. True
5. If goodwill is written off deceased partner’s capital account is debited. False
6. Death of partner is like a compulsory retirement. True
7. Total amount due to deceased partner is paid in cash to executor immediately after his death. False
8. On the death of a partner, his share in the goodwill is divided equally among continuing partners. False
9. Deceased Partner’s share in profit upto the date of his death will be debited to his capital A/c. False
5 - 163
SA
M
PL
E
C
O
N
TE
N
T

STD 12th Book Keeping and Accountancy Smart Notes Commerce Question and Answer Book MH Board 1

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STD 12th Book Keeping and Accountancy Smart Notes Commerce Question and Answer Book MH Board 1

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SA

Total Marks = 100

Q.No. Particulars Total marks

(E) Prepare a specimen of a Bill of Exchange from the following information 5

Theory question on Analysis of Financial Statements

3 Problem on Admission / Retirement / Death of a Partner 10

Problem on Admission / Retirement / Death of a Partner

5 Problem on Dissolution of Partnership Firm 10

Problem on Accounting for Shares / Debentures

Chapter no. Particulars Page Nos.

3 Reconstitution of Partnership (Admission of a Partner) 3 - 76 to 3 - 119

5 Reconstitution of Partnership (Death of a Partner) 5 - 145 to 5 - 163

8 Single Entry System

10 Company Accounts Part - I (Accounting for Shares) 10 - 361 to 10 - 394

11 Company Accounts Part - II (Accounting for Debentures) 11 - 395 to 11 - 409

12 Analysis of Financial Statements 12 - 410 to 12 - 421

Board Papers 422 - 434

31st March, 2012 was as follows: (S)

Bills Payable 22,000 Less: R.D.D 800 18,000

1) Stock was revalued at Rs. 26,000.

2) R.D.D was maintained at Rs. 4,000.

3) Balance Sheet of Shrikant & Anita.

Their Balance Sheet as on 31st March, 2012 was as under. (S)

Sudhakar 40,000 Machinery 40,000

1) Sundry assets revalued to Rs. 90,000/-.

Mangal’s Capital A/c 225

Dr. Partner’s Capital Account Cr.

Capital A/c Land & Building 7,000

Anjali 15,000 Building 16,000

4) Rajendra was entitled to get a salary of Rs. 800/- per month.

2) Share in current profits

Balance sheet as on 31st December, 2011

Subash 15,000 Debtors 12,000

Minaxi 30,000 Investment 20,000

Reserve 18,000 Cash 14,000

To Balance c/d 38,700

Minaxi 38,700 Investment 18,000

Creditors 28,000 Profit & Loss Suspense A/c 500

Average Profits = (6000 + 12000 + 7000 + 11000) / 4

Share in Goodwill = 1/6 x Rs. 18000

1) Krishna’s capital A/c and P/L Adjustment A/c.

To Drawings A/c 20,000 By Balance B/d 25,000

Section II : Board Problems

Sheet as on 31st March, 2012 was as follows: (October 2014)

Supriya 40,000 Stock 30,000

5) Interest on drawings is Rs. 100 for the period on Neha’s drawings.

2) Working of Goodwill and Share in Profits.

Q2. Balance sheet as on 31st March, 2012

Reserve Fund 24,000 Debtors 27,500

Partners were sharing profits & losses in the ratio 3:2:1.

2) Shetty’s Capital A/c.

Subhash 21,000 Vehicle 13,000

Sundry Creditors 16,000 Less: RDD 1,500 21,000

6) Stock to be written off of Rs. 2,000.

Q6. Balance sheet as on 31st March, 2012

Anthony 44,000 77,000 Stock 10,000

4) R.D.D. to be provided for at 15% of debtors.

7) Anthony had made drawings of Rs. 4,000 till date of death.

Profit & Loss A/c 36,000 Debtors 25,000

Partners were sharing profits & losses in the ratio 3:4:5.

4) Factory to be depreciated by 10%.

Q10. Balance sheet as on 31st March, 2012

1. What is gain ratio or benefit ratio?