CPT Chapter Partnership : Admission, Death and Retirement

CA CPT syllabus “Partnership : Admission, Death and Retirement” deals with accounting entries at the time of admission, retirement or death of a partner.  It deals with the revaluation of assets and liabilities, change in profit sharing ratio,  treatment of goodwill, distribution of accumulated profits and losses, settlement of dues to partners etc.

CA CPT Exam  

With Sheela Warrier.Duration:5hrs09min

Partnership :Admission,Retirement & DeathDuration (min:sec)
Admission of Partner 
Introduction01:22
Effect on Admission07:09
Change in PSR15:27
Why Existing Partners are compensated10:47
Goodwill at Admission08:49
Goodwill Premium11:40
Goodwill Premium Retained in Business08:15
Goodwill Premium Withdrawn by Partners02:05
Goodwill Premium not brought by new Partners02:20
Example 1 Goodwill07:22
Example Goodwill09:17
Hidden Goodwill04:20
Quiz11:21
Revaluation of Assets & Liabilities08:40
Accounting Entry /td>02:07
Revaluation Account Example07:08
Memorandum Revaluation A/c08:46
No Revaluation A/c01:52
Accumulated Profit02:35
Example10:10
Quiz05:40
Retirement of a Partner 
Introduction08:06
Gaining Ratio03:50
Goodwill04:39
Revaluation Account Example07:03
Memorandum Revaluation A/c08:34
No Revaluation A/c01:30
Accumulated Profit05:30
Life Policies07:09
Joint Life Policies Method 106:26
Joint Life Policies Method 206:49
Joint Life Policies Method 311:47
Summary of JLP05:56
Single Life Policy02:20
Final Settlement05:42
Examples10:43
Quiz12:21
Death of a Partner 
Introduction04:34
Example01:14
Joint Life Policy04:40
Example05:33
Quiz06:28
Final Quiz07:04
Additional Questions12:55
Conclusion10:41
Total5:08:46

Notes

Few things covered by us:

Adjustments to be made

New & Sacrificing Ratio
Share of Goodwill
Revaluation of Assets and Liabilities
Accumulated Profits and Losses

Goodwill

Purchased Goodwill
Inherently generated Goodwill
Goodwill premium paid by new partner
Treatment of GW premium

Goodwill Premium

What is Goodwill Premium ?
If full value exists in Balance Sheet
If Goodwill is undervalued in Balance Sheet
If Goodwill is overvalued in Balance Sheet

Goodwill Premium

Maybe paid privately to the old partners
Maybe retained in the business
Maybe withdrawn by the old partners
Premium may not be brought in by the new partner

Revaluation of Assets and Liabilities

Revaluation Account
or
Profit and Loss Adjustment
Transfer profit / loss to old partners accounts
Memorandum Revaluation Account
Without Revaluation account

Retirement of Partner

Adjustments to be made
Gaining Ratio
Share of Goodwill
Revaluation of Assets and Liabilities
Accumulated Profits and Losses
Joint Life Policy
Final Payment

Revaluation of Assets and Liabilities

Revaluation Account
or
Profit and Loss Adjustment
Transfer profit / loss to all partners accounts
Memorandum Revaluation Account
Without Revaluation account

Life Policy

Joint Life Policy
Single Life Policy
Objective
Premium, Surrender value, Maturity
Accounting Treatment - 3 methods

Single Life Policies

Transfer premiums to Profit and Loss a/c
Retiring Partner’s policy is surrendered
Retiring Partner is entitled to share SV of all policies.

Final Settlement

Balance in Capital a/c
Share of Reserves
Share of Goodwill
Revaluation Profit/Loss
Share in Life Policy

Death of Partner

Adjustments to be made

Gaining Ratio
Share of Goodwill
Revaluation of Assets and Liabilities
Accumulated Profits and Losses
Profit in CY up to date of death
Joint Life Policy
Final Payment


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CPT Chapter Introduction to Partnership

CA CPT syllabus “Introduction to Partnership” explains the features of a partnership, its advantages over a sole proprietorship and the importance a Deed of Partnership. This chapter deals with the distribution of profits and the valuation of Goodwill of a partnership business. It also explains how with a change in the profit sharing ratio among partners accounting entries need to be passed to adjust Goodwill.

CA CPT Exam  

With Sheela Warrier.Duration:3hrs49min

Partnership :Introduction, PL Appropriation, PSR & GoodwillDuration (min:sec)
Introduction to Partnership 
Introduction02:51
Why & What is Partnership?07:20
Limited Liability Partnership (LLP)02:42
Partnership Deed05:07
In absence of agreement03:00
Example02:47
Profit Loss Appropriation A/c 
P&L Appropriation Account .07:23
Examples08:14
Fixed & Fluctuating Capital05:30
Interest on Capital07:41
Interest on Drawings08:45
Fixed amount withdrawn every month07:45
Example02:03
Guaranteed Min Profit04:06
Example03:54
Quiz26:28
Profit Sharing Ratio 
PSR04:04
PSR-change in ratio06:11
PSR-Admission11:29
PSR-Retirement10:37
Quiz23:13
Goodwill 
What is Goodwill?07:23
Valuation of Goodwill02:12
Av Profit Method05:18
Wt. Av Profit Method04:03
Super Profit Method04:41
Capitalisation Method02:28
Annuity Method10:13
Summary02:57
Accounting Entry14:28
Quiz07:31
Conclusion06:51
Total3:49:15

Notes

Few things covered by us:

Partnership

What is partnership ? What is LLP ?
Partnership agreement
Profit & Loss Appropriation
Computation of interest on capital and drawings
Change in profit sharing ratio
Goodwill

Why Partnership?
Business Expansion
Pooling of resources

What is Partnership ?

It’s a relationship
Two or more persons
Share profits of a business
iv. Carried on by all or any of them acting for all.
Unlimited liability

Limited Liability Partnership

Both a partnership and a body corporate
Limited liability of partners
No liability for unauthorized acts of other partners
Taxed as a partnership

Partnership Deed

Registered Agreement
How much amount they will contribute?
Can they withdraw money?
Rate on Interest for Capital & Drawings
Salary?
Sharing of Profit?
Goodwill at change of constitution of firm
Dispute settlement
Audited Accounts

In the absence of an Agreement

No salary
No interest on capital
No interest on drawings
Interest @ 6% p.a. on loan
Profit sharing ratio - equal
Salary and interest on capital payable only if there is profit

Final Accounts for Partnership

Trading A/c
Profit & Loss A/c
Profit & Loss Appropriation A/c
Balance Sheet

Valuation of Goodwill

Four Methods:
Average Profits Method
Super Profits Method
Capitalisation Method
Annuity Method

Goodwill - Accounting Entries

At the time of Admission
At the time of Retirement
In case of change in Profit Sharing Ratio


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CPT Chapter Bills of Exchange & Promissory Note

CA CPT syllabus “Bills of Exchange & Promissory Note” deals with the features, benefits and differences of a Bill of Exchange , a Promissory Note and a Foreign Bill.  It explains the accounting treatment when bills are honoured or dishonoured in case of a Bill Receivable, a Bill Payable or an Accommodation Bill. Terms like discounting of a bill, retirement of a bill, rebate on a bill etc are also discussed.

CA CPT Exam  

With Sheela Warrier.Duration:4hrs 42min

Bills of Exchange & Promissory NoteDuration (min:sec)
What is Bills of Exchange & Promissory Note? 
Introduction03:13
What is BOE12:00
When do we need BOE04:25
Parties to BOE09:31
Promissory Note07:57
Diff Between BOE & Promissory Note03:42
End of Currency Note & Foreign Bill01:55
Summary04:16
Quiz06:14
Accounting Treatment 
Bills Receivable Payable05:05
Accounting Entry18:58
Dishonour of Bill24:24
New Bill at Maturity04:27
Entry in the Books of Debtor08:08
Dishonour & Insolvency13:28
Accounting Entry Summary13:25
Quiz17:38
Period of Bill 
Maturity date of bill06:31
How many days in a month03:19
Example- Date of Maturity04:51
Public holidays02:08
Renewal of a Bill07:18
Retirement of Bill07:08
Quiz14:21
Accommodation of Bill07:09
Accommodation Problem11:58
Bills for Collection01:22
Bills Receivable & Payable Book06:03
Quiz10:29
Final Quiz17:18
Additional Questions5:07
Conclusion18:25
Total4:37:06

Notes

Few things covered by us:

Bills of Exchange

What is a Bill of Exchange?
What is a Promissory Note?
Discounting, endorsement and dishonour of bills
Accounting entries
When does a Bill Mature
Renewal of a Bill
Retirement of a Bill
Accommodation Bills
Bills for Collection
Day Books
Conclusion

What is a Bill of Exchange


In writing & not oral.
must be dated.
unconditional order
must sign it.
stamped as per law
amount certain.
payable to certain person.
payable either on demand or on the expiry of a fixed period of time.
must be accepted

When do we need Bill of Exchange

Credit transactions
Evidence of debt
Discount and raise cash
Negotiable instrument
Negotiable Instrument Act 1881

Parties to a Bill of Exchange

Drawer / Maker / Creditor / Seller
Drawee / Acceptor / Debtor / Payer / Buyer
Payee
Endorsee

Parties to a Promissory Note

Drawer / Payer/ Promisor / Maker
Drawee / Payee / Promisee
Endorsee

What is a Promissory Note

in writing and not oral
unconditional promise to pay
signed by the maker
maker certain person
sum payable certain
the person to whom payment -must be certain. Not payable to a bearer
sum payable certain
properly stamped
(does not require acceptance because the maker himself promises to make the payment)

Foreign Bill

Bill drawn in one country but payable in another.

Examples:
A bill drawn in India but payable to a resident outside India & made payable outside India
A bill drawn outside India on a person resident outside India
A bill drawn outside India made payable in India
A bill drawn outside India made payable outside India

Accounting Treatment

Bills Receivable (Asset)
who receives an accepted Bill of Exchange
who receives a Promissory Note

Bills Payable (Liability)
who accepts a Bill of Exchange
who makes a Promissory Note

Personal account - representing debtor and creditor

Insolvency and Dishonour

What is insolvency ?

Entries for dishonour
Recovery from estate
Bad debt - creditor
Deficiency - debtor

Date of Maturity

Bill After Date
Bill After Sight
Days of Grace
Bill at Sight / Demand

Renewal of Bill

Cancel old bill
Create new bill
Interest for period of new bill
Journal entries

Retirement of a Bill

Early Payment
Rebate on Bills Retired
Journal Entries


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CPT Chapter Sale of Goods on Approval or Return basis

CA CPT syllabus “Sale on Approval or Return basis” explains why a business adopts a policy of sale on approval or return basis and the different methods of passing accounting entries depending on whether such transactions are occasional, frequent and numerous.

CA CPT Exam  

With Sheela Warrier.Duration:1hrs 37min

Sale of Goods on Return BasisDuration (min:sec)
What is Sales Return? 
Introduction00:48
Index01:46
Meaning of Sales Return & Why do we have Sales Return Policy09:04
Accounting Treatment 
Accounting Records for Occasional Transaction
Exercise05:50
Mini Quiz04:33
Accounting for Frequent transaction17:33
Exercise07:30
Accounting for Numerous transaction10:10
Exercise09:57
Mini Quiz10:48
Additional Questions2:02
Summary05:43
Total1:36:36

Notes

Few things covered by us:

Sale of Goods on Approval or Return Basis

Meaning
Why are goods sold on approval or return basis
Accounting records
a) In case of occasional sale or return
b) In case of frequent sale or return
c) In case of numerous sale or return transactions

Meaning

Goods sold on approval or return basis refers to goods delivered to customers who have an option to retain or return them within a specified period.

Meaning

Sale will be recognized only when:

buyer approves the goods
buyer indicates in some way that he has accepted the sale
buyer does not return the goods within specified period

Why are Goods Sold on Approval or Return Basis

to boost sales
to introduce a new product
to capture a larger share of the market

Accounting records (occasional transactions)

When goods are sent on approval basis
When goods are returned
When goods are approved
If there are negotiations on pricing
When goods are neither approved nor
returned at the year end

Accounting (frequent transactions)

Sale or Return (Goods on Approval) Day Book
Sale or Return Ledger
Total Sale or Return account
Individual Customer’s accounts
Entries in General Ledger / Debtors Ledger only on Sale

Memorandum Books

Not a part of Financial Books
Not a part of Accounts

Few examples are below-
Under sales on approval or return basis, the ownership of goods is passed only:
(a) when the customer gives his approval
(b) if the goods are not returned within specified period.
(c) Both (a) and (b)
(d) None of the above

Under sales on return or approval basis, when transactions are few, the seller, while sending the goods, treats them as
(a) an ordinary sale but no entry is passed in the books
(b) an ordinary sale and entry for normal sale is passed in the books
(c) Approval sale and no entry is passed
(d) None of the above

Under sales on return or approval basis, when transactions are few and the seller at the end of the accounting year reverses the sale entry, then what will be the accounting treatment for the goods returned by the customers on a subsequent date?

(a) No entry will be passed for such return of goods
(b) Entry for return of goods is passed by the seller
(c) Only the stock account will be adjusted
(d) None of the above

What is the objective behind selling goods on approval basis :
(a) For introducing a new product is the market
(b) For pushing up sales
(c) To capture a larger share in the market
(d) All of these


Sale or Return Day Book and Sale or Return Ledger are known as:
(a) Subsidiary books
(b) Principal books
(c) Memorandum books
(d) Both (a) and (c)


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CPT Chapter Joint Venture

CA CPT chapter “Joint Venture” explains the concept of a  joint venture and how it differs from a partnership. It deals with the accounting entries depending on whether a separate set of books is maintained for the Joint Venture business or accounting is done in the same set of books.

CA CPT Exam  

With Sheela Warrier.Duration:2hrs 59min

Joint VentureDuration (min:sec)
What is Joint Venture? 
Introduction02:54
What is Joint Venture?04:19
Joint Venture vs. Partnership08:11
Joint Venture Accounting-Separate Book 
Methods of JV accounting10:42
Separate Set of Book05:17
Accounting Entry Separate Set of Books11:30
Example 113:38
Example 207:07
Summary04:31
Quiz10:37
Joint Venture Accounting-Same Books 
Accounting record all transaction07:40
Example 110:55
Example 207:32
Accounting record own transaction (Memorandum Book)06:02
Example105:43
Example212:04
Treatment of special Items07:12
Examples special Items08:40
Summary record all transaction vs. Own Transaction09:37
Final Quiz18:18
Additional Questions1:12
Conclusion05:35
Total2:59:16

Notes

Few things covered by us:

What is a Joint Venture
Distinction between Joint Venture and Partnership
Accounting for Joint Venture - Separate set of books
Accounting for Joint Venture - Individually
With Memorandum Joint Venture
Without Memorandum Joint Venture

What is Joint Venture

Business of short duration
Short term partnership
Special purpose partnership
Co venturers
Share profit or loss

Separate set of books for Joint Venture

1) Joint Bank a/c - jointly operated account, cash inflows and outflows, closed by transfer to co venturers’ accounts
2) Joint Venture a/c - profit or loss
3) Co Venturers’ Personal accounts - Capital accounts

No separate set of books

1) Keeps record of all transactions in his own books
2) Keeps record of only own transactions in own books
(Memorandum Joint Venture)

Accounting without Memorandum Joint Venture a/c

Joint Venture a/c - nominal a/c
Co Venturers’ a/c - personal a/c

Accounting with Memorandum Joint Venture a/c

Only own transactions
Joint Venture with Co-venturer a/c - personal a/c
Memorandum Joint Venture a/c - a statement
(no double entry)


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