Page 20 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 1: Acquisition of Business

Profit-sharing ratio (b) 5 3 2 notes
Capital Profit Ratio (a ÷ b) 32,000 62,133 78,300
Capital in profit sharing ratio taking Ram’s
Capital as basis because it is least. 1,60,000 96,000 64,000

Total of equity share capital to be issued to
partners including the initial allotment of ` 3,000. 1,60,000 96,000 64,000
Less: Initial allotment 1,000 1,000 1,000
Further allotment 1,59,000 95,000 63,000
For balance issue of debentures — 90,400 92,600
Because the price of each debenture is ` 100 No.
of debentures issued — 904 926

Total no. of equity shares issued 16,000 9,600 6,400
(b) Journal of r. pvt. limited
Date particulars l.f. ` `
Business Purchase Account Dr. 5,00,000
To R & Company 5,00,000
(Being purchase price recorded)
Bank Account Dr. 3,000
To Equity Share Capital Account 3,000
(Being allotment of 300 shares to Ram Rahim and Rogers
as subscribed to Memorandum of Association)
Goodwill Account Dr. 1,18,000
Fixed Assets Account Dr. 3,00,000
Stock Account Dr. 42,000
Debtors Account Dr. 60,000
Bank Account Dr. 14,000
Cash Account Dr. 6,000
Preliminary Expenses Account Dr. 12,000
To Creditors’ Account 50,000
To Provision for D/D Account 2,000
To R & Company 5,00,000
(Being above assets and liabilities of R & Co. taken over)
R & Company Dr. 5,00,000
To Equity Share Capital Account 3,17,000
To Debentures Account 1,83,000
(Being payment of purchase consideration in shares and debentures)
Note: If we assume that ` 3,000 equity shares are already allotted to vendors, the purchase
consideration will be reduced by the amount ` 3000 and purchase consideration will be
` 5,00,000 – ` 3000 = ` 497,000, and capital reserve/profit on sale of business will be ` 1,15,000.
Illustration 6 (Distribution of Equity and Preference Shares amongst Partners)
A, B & C were partners sharing profits and losses in the ratio of 5:3:2 respectively. The trial
balance of the firm on 31st March 2012 was as follows:

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