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Piecemeal distribution (calculate surplus capital)
« on: March 05, 2011, 02:57:18 PM »

The following is the balance sheet ofx,y,z ho share profits in the ratio of 4:3:1 on 1/1/2006 on which date they dissolve patnership. their

capita are to be repaid as and when the assets are realised

Balance sheet as at 1/1/1999

Liabilities Assets
Sundry creditors  52,500             Building   60,000
Bank overdraft    17,500             Machinery  80,000
Capital  accounts                    Stock     1,00,000
x                 1,40,000          Debtors    1,30,000         
y                  60,000
z                  1,00,000

                  3,70,000                     3,70,000

The ssets were realised as under

I installmnt         40,000
II                  30,000
III                 50,000
IV                  80,000
V                  1,30,000

no further sums could be realised
Prepare a statement showing the distribution on the basis of proportionate capital method

Statement showing the distribution on the basis of gradual realisation
     
______________________________________________________|partner's_capital|_________________________________
                   |Rs.    | Creditors| Bank overdraft| X          |  Y        |   Z      | 
balance b/d               52,500     17,500           1,40,000  60,000  1,00,000
I Realisatopn 40,000 30,000     10,000                  -             -           -
                                  22,500      7,500                  -              -           -
II realisation  30,000 22,500      7,500                   -             -           -
                                         -            -                       -             -            -
III realisation 50,000                     


here i know how to work out till paying out the liabilities part (creditors and bills payable), i need guidance on how distribution process

works among the parners using the above method, please tell how Huh

Thanks
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Re: Piecemeal distribution (calculate surplus capital)
« Reply #1 on: March 07, 2011, 04:48:18 PM »

                                       Creditors     Bank Overdraft  _______Partner's Capitals______
                                                                                          X            Y              Z   

Balance b/d                        52,500          17,500            1,40,000    60,000     1,00,000

Ist Realisation     + 40,000  -22,500          -17,500                  -             -                -
                                        ---------      ----------           ----------    ----------     ----------    
                                         30,000            -                 1,40,000     60,000      1,00,000
IInd realisation    + 30,000  -30,000 
                        ----------    ---------      ----------           ----------    ----------     ----------     
                                                                                  1,40,000     60,000      1,00,000
IIIrd realisation  +50,000                                                                                  -50,000
                                                                                   ----------    ----------     ----------     
                                                                                   1,40,000     60,000       50,000
IVth realisation  +80,000                                                                                  -15,000
                                                                                   ----------    ----------     ----------     
                                                                                   1,40,000     60,000       35,000
                                                                                     -52,000                     -13,000
                                                                                   ----------    ----------     ----------     
                                                                                     88,000      60,000        22,000
IVth realisation  +1,30,000                                                -8,000                        -2,000
                                                                                   ----------    ----------     ----------     
                                                                                     80,000      60,000        20,000
                                                                                    -60,000     -45,000       -15,000
                                                                                   ----------    ----------     ----------     
Realisation Loss                                                              20,000      15,000          5,000
                                                                                   ----------    ----------     ----------     








Working Notes

Bank Overdraft is the most liquid liability. We assume that it gets paid first.

The next amounts are utilised towards payments to creditors.


                         Amounts to be paid to partners to make their capitals proportionate

a) Capital                                                                      1,40,000     60,000      1,00,000

b) Profit Sharing Ratio                                                          4              3               1

c) Capital Per unit share   a                                              1,40,000    60,000      1,00,000
                                     --                                              ----------   ----------    ----------
                                      b                                                  4              3               1

                                                                                       35,000     20,000      1,00,000

d) Capital based on least per unit share
       20,000 x b                                                                 80,000     60,000        20,000 


e) Excess Capital [a - d]                                                     60,000         0            80,000 

           This excess capital 1,40,000 (60,000 + 80,000) is to be paid out to X and Z
            to make the capitals of X, Y and Z proportionate to their profit sharing ratios.

            For this purpose the first 1,40,000 is to be paid to X and Z only.

Between X and Z
f) Captial based on least  per unit share
     35,000 x b                                                                 1,40,000                     35,000

g) Excess Capital [a - f]                                                          0                          65,000
 
       This excess capital 65,000 is to be paid out to Z to make his and X's capitals
       proportionate to their profit sharing ratio. For this purpose the first 65,000 is to be paid to Z only.

      The amount over 65,000 and upto 1,40,000 is to be paid to X and Z in their profit sharing  proportions.

    The amount over 1,40,000 is to be paid out to the partners in their profit sharing proportion.


IIIrd Realisation 50,000

          50,000 to Z

IVth Realisation  80,000

      - First 15,000 to Z

      - Remaining 65,000 (80,000 - 15,000) to X and Z in the ratio of profit sharing inter se between them i.e. 4 : 1
          X's Share = 52,000 (65,000 x 4/5)
          Z's Share = 13,000 (65,000 x 1/5)

Vth  Realisation 1,30,000

      Since X and Z have been together paid out 1,30,000 (50,000 + 80,000) another 10,000 is to be paid to  X and Z only

      - First 10,000 to X and Z in 4:1 ratio

          X's Share = 8,000 (10,000 x 4/5)
          Z's Share = 2,000 (10,000 x 1/5)

      - Remaining 1,20,000 between X, Y and Z in the ratio 4 : 3 : 1

          X's Share = 60,000 (1,20,000 x 4/8)
          Y's Share = 45,000 (1,20,000 x 3/8)
          Z's Share = 15,000 (1,20,000 x 1/8)



The great end of education is to discipline rather than to furnish the mind; To train it to the use of its own powers rather than to fill it with the accumulation of others - Tryon Edwards

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at krishbhavara
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Re: Piecemeal distribution (calculate surplus capital)
« Reply #2 on: March 14, 2011, 04:08:12 AM »

took me time to analyze
finally or for now i have a doubt

here
Between X and Z
f) Captial based on least  per unit share
     35,000 x b                                                                 1,40,000                     35,000

g) Excess Capital [a - f]                                                          0                          65,000

how Rs. 35,000 calculated   Huh
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Re: Piecemeal distribution (calculate surplus capital)
« Reply #3 on: March 14, 2011, 05:43:11 AM »

Step (c)
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Re: Piecemeal distribution (calculate surplus capital)
« Reply #4 on: March 14, 2011, 06:04:37 AM »

ok

so the amount (Rs. 35,000) was calculated between X & Z capital and taking a's because his was small than Z...  right Huh
 
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Re: Piecemeal distribution (calculate surplus capital)
« Reply #5 on: March 14, 2011, 08:18:56 AM »

We calculate the capital per unit share at the beginning itself.

         First we consider all partners ... X, Y, Z

         Next we consider only those partners who have excess capital. X, Z

                  To decide who should be paid between them

                  We consider only their capitals per unit share.
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