Give any one purpose for which the amount received as 'Securities Premium' may be utilised.
The amount received as securities premium can be utilised to write-off preliminary expenses of the company and to write-off the commission paid, or discount allowed on any of the shares or debentures of the company.
What is meant by 'Reconstitution of a Partnership Firm'?
In a partnership firm, any change in the existing agreement between the partners amounts to its reconstitution. It leads to the end of the existing agreement and a new agreement comes into being with a changed relationship among the members of the partnership firm.
Virad, Vishad and Roma were partners in a firm sharing profits in the ratio of 5:3:2 respectively. On March 31, 2013, their Balance Sheet was as under:
Virad died on October 1, 2013. It was agreed between his executors and the remaining partner's that:
(a) Goodwill of the firm be valued at 2 1/2 years purchase of average profits for the last three years. The average profits were Rs 1,50,000.
(b) Interest on capital be provided at 10% p.a.
(c) Profit for the year 2013-14 be taken as having accrued at the same rate as that of the previous year which was Rs 1,50,000. Prepare Virad's Capital Account to be presented to his Executors as on October 1, 2013.
Calculation of Gaining Ratio of Vishad and Roma:
Old Ratio = 5: 3: 2
New ratio = 3:2
Calculation of gain ratio:
Vishad: 3/5- 3/10 = 3/10
Roma: 2/5 – 2/10 = 2/10
Gaining ratio = 3:2
Calculation of Virat’s share of goodwill:
Average Profit = Rs 1,50,000
Goodwill at 2 ½ years purchase = 1,50,000 x 2 ½ = Rs 3,75,000
Virad’s share of goodwill = 3,75,000 x 5/10 = R 1,87,500
Good will to be transferred to Vishad’s capital a/c = 1,87,500 * 3/5 = Rs 1,12,500
Good will to be transferred to Roma’s capital a/c = 1,87,500 * 2/5 = 75,000
Share of Profit payable to Virad up to the 1/10/2013:
= 1,50,000 x 5/10 x 6/12 = Rs 37,500
Interest on Virad’s Capital:
= 3,00,000 * 10% * 6/12
Virad’s share of Reserve fund:
= 60,000 * 5/10 = 30,000
Satnam and Qureshi after doing their MBA decided to start a partnership firm to manufacture ISI marked electronic goods for economically weaker section of the society. Satnam also expressed his willingness to admit Juliee as partner without capital who is especially abled but a very creative and intelligent friend of him. Qureshi agreed to this. They formed a partnership on 1st April 2012 on the following terms:
(i) Satnam will contribute Rs 4,00,000 and Qureshi will contribute Rs 2,00,000 as capitals.
(ii) Satnam, Qureshi and Juliee will share profits in the ratio of 2:2:1.
(iii) Interest on capital will be allowed @ 6% p.a. Due to shortage of capital Satnam contributed Rs 50,000 on 30th September, 2012 and Qureshi contributed Rs 20,000 on 1st January, 2013 as additional capitals. The profit of the firm for the year ended 31st March, 2013 was Rs 3,37,800.
(a) Identify any two values which the firm wants to communicate to the society.
(b) Prepare Profit & Loss Appropriation Account for the year ending 31st March, 2013.
1) Devotion to law, to manufacture ISI marked goods.
2) Sensitivity towards especially abled people.
Calculation of Interest on Capital:
a) Interest on Satnam’s capital:
On Initial capital of Rs 4,00,000
4,00,000* 6% = 24,000
On additional capital of Rs 50,000
50,000* 6% * 6/12 = 1500
Total interest on Satnam’s capital = 24000 + 1500 = Rs 25,500.
b) Interest on Qureshi’s Capital:
On initial capital of Rs 2,00,000
2,00,000* 6% = Rs 12,000
On additional capital of Rs 20,000
20,000 * 6% * 3/12 = Rs 300
Total interest on Qureshi’s Capital = 12,300
Give the meaning of 'Debenture'.
Debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract for the repayment of the principal sum after a fixed period of time and payment of interest at regular intervals.
Why heirs of a retiring/deceased partner are entitled to a share of goodwill of the firm?
Distinguish between 'Dissolution of Partnership' and Dissolution of Partnership Firm' on the basis of closure of books.
Following is the difference between dissolution of partnership and dissolution of a partnership firm.
Basis of Difference
Dissolution of Partnership
Dissolution of Partnership Firm
Settlement of Assets and liabilities
Assets and liabilities are revalued and new balance sheet is prepared.
Assets are sold and liabilities are paid off.
X, Y and Z are partners sharing profits in the ratio of 1/2, 2/5, 1/10. Find the new ratio of remaining partners if Z retires.
Old profit sharing ratio =1/2, 2/5, 1/10 =5:4:1 (by taking 10 as LCM)
As Z retires, the new profit sharing ratio will be 5: 4.
What is the maximum amount of discount at which forfeited shares can be re-issued?
Forfeited shares can be reissued as fully paid at a par, premium or discount. In this, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue.
Saloni and Shrishti were partners in a firm sharing profits in the ratio of 7:3. Their capitals were Rs 2,00,000 and Rs 1,50,000 respectively. They admitted Aditi on 1st April, 2013 as a new partner for 1/6 share in future profits. Aditi brought Rs 1,00,000 as her capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transaction on Aditi's admission.
Aditi is admitted for 1/6th share of profit, for capital amounting to Rs 100000.
Capitalized value of firm on the basis of Aditi’s capital = 100000*6/1=600000.
Actual capital = 200000+150000+100000=450000.
Value of goodwill = 600000-450000= 150000.
Aditi’s share in goodwill = 1/6th of 1,50,000 = Rs 25,000
The journal entries are as follows: