Question
Explain the meaning of partnership.
✓
Answer
As per Indian Partnership Act $1932,$ Section$-4,$ 'Partnership is the relation between the persons who have agreed to share the profit of a business carried on by all or any one of them acting for all.’
As per Luise Henny, 'two or more persons who are competent to undertake a contract to earn profit from a legal business is termed as partnership.
Thus,
$(1)$ partnership is created by contract.
$(2)$ Person who are competent to undertake a contract to earn profit from a legal business is known as partnership.
$(3)$ The person who enter into such relationship are individually called 'Partners'.
$(4)$ The business run collectively in partnership by two or more persons is known as partnership firm.
As per Luise Henny, 'two or more persons who are competent to undertake a contract to earn profit from a legal business is termed as partnership.
Thus,
$(1)$ partnership is created by contract.
$(2)$ Person who are competent to undertake a contract to earn profit from a legal business is known as partnership.
$(3)$ The person who enter into such relationship are individually called 'Partners'.
$(4)$ The business run collectively in partnership by two or more persons is known as partnership firm.
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What is debenture?
Prakhar Ltd. issued $8,000, 7.5\%$ convertible debentures of $₹ 200$ each at par as on April $1, 2014.$ As per the terms. of issue of debentures, all the debentures will be converted into shares after $4$ years and for this one equity share of $₹ 10$ each will be issued at a premium of $25\%$ against each debenture. As per terms agreed, all the debentures are converted into shares as on April $1, 2018.$ Write journal entires in the books of the company $($without narration$)$
→Explain common size statement.
Manju, Prabha and Meena are the partners of a partnership firm. Their profit-loss sharing ratio is $5: 3: 2 .$ They want to change their profit-loss sharing ratio to $3: 2: 1 .$ Therefore, they decided to revalue the assets-liabilities of the firm. From the following information prepare revaluation account and balance sheet after revaluation.
Additional information:
$(1)$ The value of land-building is to be increased by $25 \%.$
$(2)$ The value of furniture is to be reduced by $10 \%.$
$(3)$ The value of machinery is to be kept $80 \%.$
$(4)$ The book value of closing stock is $5000$ more than its market value.
$(5)$ Total amount of $2500$ is to be kept for bad debts reserve on debtors.
$(6)$ An amount of $2 3000$ among the creditors is now not to be paid.
$(7)$ Interest on bank loan for last three month is outstanding.
→Additional information:$(1)$ The value of land-building is to be increased by $25 \%.$
$(2)$ The value of furniture is to be reduced by $10 \%.$
$(3)$ The value of machinery is to be kept $80 \%.$
$(4)$ The book value of closing stock is $5000$ more than its market value.
$(5)$ Total amount of $2500$ is to be kept for bad debts reserve on debtors.
$(6)$ An amount of $2 3000$ among the creditors is now not to be paid.
$(7)$ Interest on bank loan for last three month is outstanding.
Prepare common size statement of profit and loss from the following profit and loss statements of two years.
→| Particulars | Note | $31-3-2017$ | $31-3-2016$ |
| No. | $(Rs.)$ | $(Rs.)$ | |
| $(I)$ Sales revenue | $48,00,000$ | $40,00,000$ | |
| $(II)$ Other income | $4,80,000$ | $2,40,000$ | |
| $(III)$ Total income | $52,80,000$ | $42,40,000$ | |
| $(IV)$ Expenses : | |||
| $(i)$ Cost of goods consumed | $26,40,000$ | $20,80,000$ | |
| $(ii)$ Net purchase | $2,40,000$ | $1,60,000$ | |
| $(iii)$ Changes in stock | $(2,40,000)$ | $1,20,000$ | |
| $(iv)$ Employees benefit expenses | $7,20,000$ | $6,00,000$ | |
| $(v)$ Financial cost | $4,80,000$ | $4,80,000$ | |
| $(vi)$ Depreciation | $5,76,000$ | $4,00,000$ | |
| Total Expenses Profit before tax | $44,16,0000$ | $38,40,000$ | |
| $(III)$ Profit before tax | $8,64,000$ | $4,00,000$ | |
| $(IV)$ Less : Income tax $(30\%)$ | $2,59,200$ | $1,20,000$ | |
| $(V)$ Profit after tax | $6,04,800$ | $2,80,000$ |
Describe three limitations of ratio analysis.
From the following information, pass necessary journal entries and prepare a revaluation account and a balance sheet after revaluation in the books of Sajan and Nirmi.Sajan and Nirmi are the partners sharing profit-loss in the ratio of $5: 3 .$ Their firm's balance sheet as on $31-3-2017$ is as under :
Partners decided to revalue the assets and liabilities of the firm and to distribute profit in ratio of $1.3$ for future.
$(1)$ The value of land-building is to be increased by $10\%$
$(2)$ The value of machinery and furniture is to be reduced by $40\%$
$(3)\ 1000$ bad debts reserve on debtors is not required.
$(4)\ 1500$ repairing expense is required for stock.
$(5)\ 1500$ out of creditors is now not to be paid which is to be recorded in the books.
$(6)$ Outstanding expenses is $10,000$ and income receivable is $2000$
$(7)$ Investment is to be shown at its market value.
→Partners decided to revalue the assets and liabilities of the firm and to distribute profit in ratio of $1.3$ for future.
$(1)$ The value of land-building is to be increased by $10\%$
$(2)$ The value of machinery and furniture is to be reduced by $40\%$
$(3)\ 1000$ bad debts reserve on debtors is not required.
$(4)\ 1500$ repairing expense is required for stock.
$(5)\ 1500$ out of creditors is now not to be paid which is to be recorded in the books.
$(6)$ Outstanding expenses is $10,000$ and income receivable is $2000$
$(7)$ Investment is to be shown at its market value.
Charmi Limited purchased machinery worth $₹ 6,00,000$ from Prem Manufacturing Ltd.
$1-12-2017.$ Paid $₹ 2,00,000$ by cheque on $1-1-2018$ and for balance amount issued $11 \%$ debentures of $₹ 4,20,000$. Write necessary journal entries in the books of Charmi Ltd. $[$Without narration$].$
→$1-12-2017.$ Paid $₹ 2,00,000$ by cheque on $1-1-2018$ and for balance amount issued $11 \%$ debentures of $₹ 4,20,000$. Write necessary journal entries in the books of Charmi Ltd. $[$Without narration$].$
How would you deal with the following balances disclosed in the balance sheet at the time of dissolution of a partnership firm $?$
$(i)$ Investment fluctuation fund
$(ii)$ Provident fund
$(iii)$ Debit balance of profit-loss A/c
→$(i)$ Investment fluctuation fund
$(ii)$ Provident fund
$(iii)$ Debit balance of profit-loss A/c
Profit and loss statement for the year ending on $31-3-2016$ and $31-3-2017$ of Shankar Limited are given as follows. Prepare comparative statement of profit and loss.
→| Particular | Note | $31-3-2017$ | $31-3-2016$ |
| No. | $(Rs.)$ | $(Rs.)$ | |
| Sales revenue | $60,75,000$ | $45,00,000$ | |
| Other income | $7,00,000$ | $10,00,000$ | |
| Expenses: | |||
| Cost of goods consumed | $36,00,000$ | $30,00,000$ | |
| Net purchase for resale | $2,70,000$ | $2,00,000$ | |
| Changes in stock | $90,000$ | $70,000$ | |
| Employee benefit expenses | $5,60,000$ | $4,00,000$ | |
| Financial cost | $1,35,000$ | $90,000$ | |
| Depreciation and amortized amount | $1,05,000$ | $70,000$ | |
| Income tax rate $30\%$ |