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On the dissolution of a partnership the balance at bank is not transferred to the Realisation A/c be cause, there is no need to realise the same.

Since the liability of partners is unlimited their private assets can be used to pay o the firm’s debts. But they will have the right to use their assets for paying their private debts first. They need to contribute only the remaining assets.

Provision for baddebt a/c Dr. To Realisation

(a) Realisation A/c.

(c) Realisation a/c

(c) Establishing relationship between the account data

Reconstitution refers to a change in the nature of relationship among partners due to 

1. Change in profit sharing ratio 

2. Admission 

3. Retirement 

4. Death or Amalgamation of two partnership firms. 

In the firm of Ammu, Beena and Ceema reconstitution of firm takes place because they decided to change their profit sharing ratio: 

Old ratio = 2:3:1 = 2/6 : 3/6: 1/6 

New ratio = 1:2:3 = 1/6 : 2/6: 3/6 

Ammu’s sacrice = old ratio – new ratio = 2/6 – 1/6 = 1/6

Beena’s sacrice = old ratio-new ratio = 3/6 – 2/6 = 1/6 

Ceema’s gain = new ratio-old ratio = 3/6 – 1/6 = 2/6 

Ammu’s revaluation profit = 22,500 × \(\frac{1}{6}\) = 3750 

Beena’s revaluation profit = 22,500 × \(\frac{1}{6}\) = 3750 

Ceema’s revaluation profit = 22,500 × \(\frac{1}{6}\) = 7500.

The retiring or deceased partner is entitled to his share of goodwill at the time of retirement” death because the goodwill has been earned by the firm with the efforts of all the existing partners. Hence, at the time of retirement/death of a partner, goodwill is valued as per agreement among the partners the retiring/deceased partner compensated for his share of goodwill by the continuing partners (who have gained due to acquisition of share of profit from the retiring/deceased partner) in their gaining ratio.

At the time of retirement or death of a partner there may be some assets which may not have been shown at their current values. Similarly, there may be certain liabilities which have been shown at a value different from the obligation to be met by the firm. Not only that, there may be some unrecorded assets and liabilities which need to be brought into books.

As learnt in case of admission of a partner, a Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets and/or liabilities and bringing unrecorded items into firm’s books and the same is transferred to the capital account of all partners including retiring/deceased partners in their old profit sharing ratio.

The sum due to the retiring partner (in case of retirement) and to the legal representatives/ executors (in case of death) includes: 

• credit balance of his capital account; 

• credit balance of his current account(if any); 

• his share of goodwill ; 

• his share of accumulated profits (reserves); 

• his share in the gain of revaluation of assets and liabilities; 

• his share of profits up to the date of retirement/death; 

• interest on his capital, if involved, up to the date of retirement/death; and 

• salary/commission, if any, due to him up to the date of retirement/death.

The following deductions, if any, may have to be made from his share:

• debit balance of his current account(if any); 

• his share of goodwill to be written off; if necessary; 

• his share of accumulated losses; 

• his share of loss on revaluation of assets and liabilities; 

• his share of loss up to the date of retirement/death; 

• his drawings up to the date of retirement/death; 

• interest on drawings, if involved, up to the date of retirement/death.

When new partner is admitted he acquires his share in the profits from the old partners. In other words, on the admission of a new partner, the old partners sacrifice a share of their profit in favour of the new partner. But, what will be the share of new partner and how he will acquire it from the existing partners is decided mutually among the old partners and the new partner.

On admission of a new partner, the profit sharing ratio among the old partners will change. keeping in view their, respective contribution to the profit sharing ratio of the incoming partner. Hence, there is a need to ascertain the new profit sharing ratio among all the partners.

A well-established business develops an advantage of good name, reputation and wide business connections. This helps the business to earn more profits as compared to a newly set up business. In accounting, the monetary value of such advantage is known as “goodwill”.

The main factors affecting the value of goodwill are as follows: 

• Nature of business: A firm that produces high value added products or having a stable demand is able to earn more profits and therefore has more goodwill. 

• Location: If the business is centrally located or is at a place having heavy customer traffic, the goodwill tends to be high. 

• Efficiency of management: A well-managed concern usually enjoys the advantage of  high productivity and cost efficiency. This leads to higher profits and so the value of goodwill will also be high. 

• Market situation: The monopoly condition or limited competition enables the concern to earn high profits which leads to higher value of goodwill. 

• Special advantages: The firm that enjoys special advantages like import licences, low rate and assured supply of electricity, long-term contracts for supply of materials, well- known collaborators, patents, trademarks, etc. enjoy higher value of goodwill.

1. Provision for taxation: It is a provision because it is created from the profit and loss account.

2. Sinking fund: It is a provision because it is created from the profit and loss account.

3. Investment fluctuation fund: It is a provision because it is created from the profit and loss account.

4. Dividend equalization fund: It is a reserve because it is created from the profit and loss appropriation account.

5. Employees’ Bonus fund: It is a provision because it is created from the profit and loss account.

6. Reserve for repairs and renovation: It is a provision because it is created from profit and loss account.

7. Capital or Debenture redemption fund: Both are reserved because they are created from the profit and loss appropriation account.

Correct option is (c) Reserve fund

Chemical fertilizer: Fertilizers that are prepared by using petro-chemicals are called chemical fertilizers. They are proved to be harmful to agriculture.

Correct option is (A) Creditor

Correct option is (c) Accrual

(c) Business entity concept

Correct option is (c) Conservatism

(b) Going concern

Cash discount is allowed by the suppliers to customers for prompt payment of amount due either on or before the due date. A provision created on sundry debtors for allowing such discount is called provision for discount on debtors.

1. Bad Debts: When it is definitely known that amount due from a customer (debtor) to whom goods were sold on credit, cannot be realised at all, it is treated as bad debts. 

2. Provision for bad and doubtful debts refers to amount set aside as a charge against profit to meet any loss arising due to bad debt in future. 

3. Cash discount is allowed by the suppliers to customers for prompt payment of amount due either on or before the due date.

1. To record omissions in trial balance such as closing stock, interest on captial, interest on drawings, etc. 

2. To bring into account outstanding and prepaid expenses. 

3. To bring into account income accrued and received in advance.

4. To create reserves and provisions.

The unsold goods in the business at the end of the accounting period are termed as closing stock. As per As-2 (Revised), the stock is valued at cost price or net realisable value, whichever is lower.

Presentation in final accounts: 

1. In the trading account: Shown on the credit side. 

2. In the balance sheet: Shown on the assets side under current assets.

Provision for bad and doubtful debts refers to amount set aside as a charge against profit to meet any loss arising due to bad debt in future. The amount of doubtful debts is calculated on the basis of some percentage on debtors at the end of the accounting period after deducting further bad debts (if any). A provision for doubtful debts is created and is charged to profit and loss account. 

(c) Both (a) and (b)

(d) Debited to profit and loss account

Adjustment entries are the journal entries made at the end of the accounting period to account for items which are omitted in trial balance and to make adjustments for outstanding and prepaid expenses and revenues accrued and received in advance.

(a) Profit and Loss

No, it is an undesirable change, and it is a human made change. Deforestation leads to decreasing rainfall, and leads to global warming.

(b) change the seasons

1. Changes in which we cannot get the original substance by reversing the experimental conditions are called irreversible changes. 

2. Examples are burning of wood, burning of diwali crackers ripening of fruits, rusting of iron etc.

(d) Burning of cooking gas

Change in which heat is liberated are called Exothermic changes.

Correct option is C) Basic

(c) Burning of crackers

It is a man made change.

(a) Growing of plants 

(b) Ripening of fruits

Changes which occur in short duration of time are called feist changes.

The process of separating a soluble solid from the solution by heating or evaporating is called crystallization.

A chemical change is also called a chemical reaction.

This is a man made change.

i. – e 

ii. – d 

iii – a 

iv. – b 

v. – c

Changes which can be reversed, to get back the original state, are known as reversible changes. Eg.: Melting of ice, stretching of rubber band.

When a material undergoes a change in shape, size, colour or state without a new substance getting formed, then it is called a physical change.

When a material undergoes a change in its composition, it is called a chemical change.

They require longer periods. It is a slow process.

Changes mainly are of two types. Physical and Chemical.