Question

Given below is a Balance Sheet of Aditya, Ajinkya and Arun, who were partners in a firm sharing profits and losses in the ratio 5 : 3 : 2.

Their Balance Sheet as on 31st March 2020 was as follows:

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	10,450	Cash	3,800
Reserve Fund	7,500	Debtors	9,000
Capital Account:		Stock	8,750
Aditya	21,000	Machinery	50,000
Ajinkya	18,500	Furniture	2,500
Arun	16,600
	74,050		74,050

On 1st April 2020 Arun retired on the following terms:

1. Goodwill of the firm will be raised in the books at ₹ 10,000.
2. Stocks to be reduced by 10%, furniture by 5% and Machinery by 10%.
3. R.B.D.D. be maintained at 5% on debtors.
4. ₹ 100 to be written off from creditors.
5. All the amount due to Arun transferred to his loan account.

Prepare:

1. Profit and Loss adjustment account.
2. Partners Capital Account.
3. Balance Sheet of the new firm.

Answer 1

Dr.	In the Books of the firm Profit and Loss Adjustment A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Stock A/c	875	By Creditors A/c		100
To Furniture A/c	125	By loss on revaluation transferred to Partners' Capital A/c:		6,350
To Machinery A/c	5,000	Aditya	3,175
To R.B.D.D. on Debtors	450	Ajinkya	1,905
		Arun	1,270
	6,450			6,450

 

Dr.	Partners’ Capital Account						Cr.
Particulars	Aditya (₹)	Ajinkya (₹)	Arun (₹)	Particulars	Aditya (₹)	Ajinkya (₹)	Arun (₹)
To Profit & Loss Adj. A/c (Loss)	3,175	1,905	1,270	By Balance b/d	21,000	18,500	16,600
To Arun’s Loan A/c	-	-	18,830	By Reserve Fund (5 : 3 : 2)	3,750	2,250	1,500
To Balance c/d	26,575	21,845	-	By Goodwill A/c (5 : 3 : 2)	5,000	3,000	2,000
	29,750	23,750	20,100		29,750	23,750	20,100

 

Balance sheet as on 1st April 2020
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Accounts:		48,420	Debtors	9,000	8,550
Aditya	26,575		Less: R.B.D.D.	450
Ajinkya	21,845		Stock	8,750	7,875
Arun’s Loan Account		18,830	Less: Depreciation	875
Creditors	10,450	10,350	Machinery	50,000	45,000
Less: Written off	100		Less: Depreciation	5,000
			Furniture	2,500	2,375
			Less: Depreciation	125
			Goodwill		10,000
			Cash		3,800
		77,600			77,600