Question

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
 

Liabilities		Amount (₹)	Assets		Amount (₹)
Sundry Creditors		12,600	Bank		4,100
Provident Fund		3,000	Debtors	30,000
General Reserve		9,000	Less: Provision	1,000	29,000
Capital A/cs:
Amit	40,000		Stock		25,000
Balan	36,500		Investments		10,000
Chander	20,000	96,500	Patents		5,000
			Machinery		48,000
		1,21,100			1,21,100

 
It was agreed that:
(i)  Goodwill will  be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%. 
(iv) Liability on account of Provident Fund was estimated at ₹ 2,400.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement. 

Answer 1

Revaluation Account

Dr.						Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Machinery			4,800	Investments A/c	5,800
Patents			1,000	Provident Fund A/c	600
Profit transferred to:
Amit’s Capital A/c		300
Balan’s Capital A/c		200
Chander’s Capital A/c		100	600
			6,400		6,400

 

Partners’ Capital Account

Dr.				Cr.
Particulars	Amit	Balan	Chander	Particulars	Amit	Balan	Chander
Investments A/c			15,800	Balance b/d	40,000	36,500	20,000
Chander’s Capital A/c	2,700	1,800		Revaluation A/c (Profit)	300	200	100
Loan A/c			10,300	General Reserve	4,500	3,000	1,500
Current A/c		5,900		Amit’s Capital A/c			2,700
Balance c/d	48,000	32,000		Balan’s Capital A/c			1,800
				Current A/c	5,900
	50,700	39,700	26,100		50,700	39,700	26,100

Working Notes:

WN1: Adjustment of Goodwill

Chander's share of goodwill = `27,000 xx 1/6 = "Rs" 4,500`

Amit will pay = `4,500 xx 3/5 = "Rs" 2,700`

Balan will pay = `4,500 xx 2/5 = "Rs" 1,800`

WN2 Adjustment of Capital

Adjusted Old Capital of Amit = `44,800 (40,000 + 4,500 + 300) - 2,700 = "Rs" 42,100`

Adjusted Old Capital of Balan = `39,700 (36,500 + 3,000 + 200) - 1,800 = "Rs" 37,900`

Total adjusted capital = `42,100 + 37,900 = "Rs" 80,000`

New Profit sharing ratio = `3 : 2`

Amit's New Capital =`80,000 xx 3/5 = "Rs" 48,000`

Balan's New Capital = `80,000 xx 2/5 = "Rs" 32,000`

Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.