Page 21 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes Debit ` credit `
Machinery 1,00,000 Sundry Creditors 64,700
Stock 68,700 Bills Payable 20,000
Sundry Debtors 62,000 Capital Accounts:
Drawing Accounts: A 68,000
A 25,000 B 45,000

B 23,000 C 23,000
C 17,000 Depreciation on Machinery 40,000
Cash at bank 89,300 Profit for the year ending 31.3.2012
1,24,300
3,85,000 3,85,000
Interest on capital accounts at 10% p.a. on the amount standing to the credit of partners Capital
accounts at the beginning of the year was not provided before preparing the above trial balance.
On 1st April, 2012, they formed a private limited company with an authorised share capital of
` 2,00,000 in shares of ` 10 each to be divided in different classes to take over the business of
partnership.
You are informed as under:
1. Machinery is to be transferred at ` 70,000.
2. Shares in the company are to be issued to partners, at par, in such number and in such
classes as will give the partners, by reason of their share-holding alone the same right as
regards interest on capital and sharing of profit and losses as they had in partnership.

3. Before transferring the business the partners wish to draw from partnership profits to such
an extent that the balance is reduced to ` 50,000. For this purpose, sufficient profits of the
year are to be retained in profit-sharing ratio.

4. All assets and liabilities except machinery and the bank are to be transferred at their book
value as on 31 March, 2012.
Required:
(i) Capital accounts showing all adjustments required to dissolve the partnership.

(ii) Statement showing the workings of the number of shares of each class to be issued by
the company to each of the partners and statement of additional drawings in cash.
(iii) The balance sheet of the company immediately after acquiring the business of
partnership and issuing of shares.
Solution

(i) capital accounts
March 31, 2012 A B C March 31, 2012 A B C
` ` ` ` ` `
To Drawing 25,000 23,000 17,000 By Balance b/d 68,000 45,000 23,000

To Bank
(additional drawing) 27,150 8,710 3,440 By Interest on capital 6,800 4,500 2,300
To 10% Preference By P/L Account
Share A/c. 68,000 45,000 23,000 (balance of profit) 55,350 33,210 22,140

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