Question

Following is the Balance Sheet of Dhirshree, Sonam, and Simaran who were sharing profit and losses in the proportion of their capitals:

Balance Sheet as on 31st March, 2016

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital accounts:		Plant and Machinery	60,000
Dhirshree	1,50,000	Land and building	1,65,000
Sonam	60,000	Stock	36,000
Simaran	90,000	Debtors               36,000
Sundry Creditors	45,000	Less: R.D.D.         3,000	33,000
		Bank balance	51,000
	3,45,000		3,45,000

Simran retired from the business on 31^st March 2016 and the following adjustments were agreed to:
1) The stock is to be valued at 92% of its book value.
2) R.D.D. is to be maintained at 10% on sundry Debtors.
3) The value of land and building be appreciated by 20%.
4) The goodwill of the firm be fixed at Rs. 36,000 and simran's share in the same adjusted in the accounts of containuing partners in the gain ratio.
5) The entire capital of the new firm be fixed at Rs. 4,80,000 between Dhirshree and Sonam in the proportion to their new profit sharing ratio which is fixed as 3: 1 by making adjustment for difference in cash.
Prepare : 
1) Profit and Loss Adjustment Account.
2) Partner's Capital Accounts.
3) Balance Sheet after retirement of Simran.

Answer 1

Dr.	Profit & Loss Adjustment A/c				Cr.
Particulars		Amount (Rs.)	Particulars	Amount (Rs.)
To Stock		2,880	By Land and Building	33,000
To Reserve for Doubtful Debts		600
To Profit Transferred to:
Dirshree's Capital A/c 14,760
Sonam's Capital A/c    5,904
Simran's Capital A/c     8856		29,520
		33,000		33,000

                                        

Dr.	Partner's Capital A/c						Cr.
Particulars	Dhirshree	Sonam	Simaran	Particulars	Dhirshree	Sonam	Simaran
To Simaran's Capital	30,000	6,000	-	By Balance b/d	1,50,000	60,000	90,000
To Bank A/c	-	-	1,34,856	By Profit & Loss Adjustment A/c	14,700	5,904	8,856
To Balance c/d	3,60,000	1,20,000	-	By Dhirshree's Capital A/c	-	-	30,000
				By Sonam's Capital A/c	-	-	6,000
				By Bank A/c	2,25,240	60,096	-
	3,90,000	1,26,000	1,34,856		3,90,000	1,26,000	1,34,856

                                                  

Balance Sheet As on March 31, 2016
Liabilities	Amount	Assets	Amount
Capital		Land and Building    165,000
- Dhirshree	3,60,000	( - ) Depreciation       33,000	1,98,000
- Sonam	1,20,000	Stock                          36,000
Sundry Creditors	45,000	Less: Depreciation     2,880	33,120
		Sundry debtors          36,000
		Less: RDD                   3,600	32,400
		Plant and Machinery	60,000
		Bank Balance ( 51,000 + 2,25,240 + 60,096 - 1,34,856 )	2,01,480
	525,000		525,000

Working Notes :
Old Profit Sharing Ratio = 5: 2: 3
New Profit Sharing Ratio of Remaining Partners = 3: 1
Gaining Ratio = New Profit Ratio - Old Profit Ratio
Dhirshree = `3/4 - 5/10 = 10/40`

Sonam = `1/4 - 2/10 = 2/40`

Gaining Ratio = `10/40 : 2/40` = 5: 1.