Question

Following is the Balance Sheet of Amit and Vidya as at 31st March, 2024:

Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Creditors		26,000	Bank		20,000
Employees Provident Fund		16,000	Stock		30,000
Workmen's Compensation Reserve		30,000	Debtors	44,000
Capital Accounts:			Less: Provision for Bad Debts	2,000	42,000
Amit	1,10,000		Plant and Machinery		1,20,000
Vidya	60,000	1,70,000	Goodwill		20,000
			Profit and Loss Account		10,000
		2,42,000			2,42,000

On the above date, Chintan was admitted as a partner for 1/4th share in the profits of the firm with the following terms:

1. ₹ 2,900 will be written off as Bad Debts.
2. Stock was taken over by Vidya at ₹ 35,000.
3. Goodwill of the firm was valued at ₹ 40,000. Chintan brought his share of goodwill premium in cash.
4. Chintan brought proportionate capital and the capitals of the other partners were adjusted on the basis of Chintan's Capital. For this necessary cash was to be brought in or paid off to the partners as the case may be.

Prepare Revaluation Account and Partners' Capital Accounts.

Answer 1

Revaluation Account
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Bad Debts (₹ 2,900 − ₹ 2,000)		900	By Stock A/c (₹ 35,000 − ₹ 30,000)	5,000
To Profit transferred to Capitals (1 : 1):
Amit's Capital A/c:	2,050
Vidya's Capital A/c:	2,050	4,100
Total		5,000	Total	5,000

 

Partners' Capital Accounts
Particulars	Amit (₹)	Vidya (₹)	Chintan (₹)	Particulars	Amit (₹)	Vidya (₹)	Chintan (₹)
To Goodwill (Existing)	10,000	10,000	-	By Balance b/d	1,10,000	60,000	-
To Profit & Loss A/c	5,000	5,000	-	By Workmen's Comp. Res.	15,000	15,000	-
To Stock A/c (Takeover)	-	35,000	-	By Revaluation Profit	2,050	2,050	-
To Bank A/c (Withdrawal)	42,500	-	-	By Premium for Goodwill	5,000	5,000	-
				By Bank A/c (Cash in)	-	42,500	49,700
To Balance c/d	74,550	74,550	74,550
Total	1,32,050	1,24,550	49,700	Total	1,32,050	1,24,550	49,700

Working Note:

1. Calculation of Adjusted Capitals of Old Partners

Amit's Adjusted Capital

• Opening Capital Balance: ₹ 1,10,000
• Add: Workmen's Compensation Reserve: + ₹ 15,000
• Add: Revaluation Profit: + ₹ 2,050
• Add: Premium for Goodwill: + ₹ 5,000
• Less: Existing Book Goodwill: – ₹ 10,000
• Less: Profit & Loss Account Loss: – ₹ 5,000

Total Adjusted Capital (Amit) = ₹ 1,17,050

Vidya's Adjusted Capital

• Opening Capital Balance: ₹ 60,000
• Add: Workmen's Compensation Reserve: + ₹ 15,000
• Add: Revaluation Profit: + ₹ 2,050
• Add: Premium for Goodwill: + ₹ 5,000
• Less: Existing Book Goodwill: – ₹ 10,000
• Less: Profit & Loss Account Loss: – ₹ 5,000
• Less: Stock Taken Over: – ₹ 35,000

Total Adjusted Capital (Vidya) = ₹ 32,050

2. Capital Adjustment based on Chintan's proportionate Capital

Combined Adjusted Capital of Amit and Vidya for `3/4`th share (`1 - 1/4`):

Total Capital of the New Firm:

`1,49,000 xx 4/3 = 198,000`

Chintan's Capital (`1/4`th share):

`1,98,800 xx 1/4 = 49,700`

Amit's New Capital (`3/8`th share): `1,98,800 xx 3/8 = 74,550`

Vidya's New Capital (`3/8`th share): `1,98,800 xx 3/8 = 74,550`