Question

Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2020 was as follows:

Liabilities	Amt (Rs.)	Assets	Amt (Rs.)
Creditors	49,000	Cash	8,000
Reserves	18,500	Debtors	19,000
Digvijay’s Capital	82,000	Stock	42,000
Brijesh’s Capital	60,000	Buildings	207,000
Parakaram’s Capital	75,500	Patents	9,000
	2,85,000		2,85,000

Brijesh retired on March 31, 2020 on the following terms:

1. Goodwill of the firm was valued at Rs 70,000 and was not to appear in the books.
2. Bad debts amounting to Rs 2,000 were to be written off.
3. Patents were considered as valueless.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Digvijay and Parakaram after Brijesh’s retirement.

Answer 1

 Books of Digvijay and Parakaram
Revaluation Account

Dr.                                                        Cr.

Particular	Amt (Rs.)	Particular	Amt (Rs.)
Bad Debts	2,000	Loss transferred to Capital Account:
Patents	9,000	Digvijay	4,400
		Brijesh	4,400
		Parakaram	2,200
	11,000		11,000

                                      Partners’ Capital Account
Dr.                                                                                             Cr.

Particulars	Digvijay	Brijesh	Parakaram	Particulars	Digvijay	Brijesh	Parakaram
Brijesh’s Capital A/c	18,667	-	9,333	Balance b/d	82,000	60,000	75,500
Revaluation (Loss)	4,400	4,400	2,200	Digvijay’s Capital A/c	-	18,667	-
Brijesh’s Loan	-	91,000	-	Parakaram’s Capital A/c	-	9,333	-
Balance c/d	66,333	-	67,667	Reserves	7,400	7,400	3,700
	89,400	95,400	79,200		89,400	95,400	79,200

                        Balance Sheet as on March 31, 2017 

Liabilities	Amt (Rs.)	Assets	Amt (Rs.)	Amt (Rs.)
Creditors	49,000	Cash		8,000
Brijesh’s Loan	91,000	Debtors	19,000	17,000
Digvijay’s Capital A/c	66,333	Less: Bad Debts	2,000
Parakaram’s Capital A/c	67,667	Stock		42,000
		Buildings		207,000
	274,000			274,000

Note: As sufficient balance is not available to pay the amount due to Brijesh, the balance of his Capital Account transferred to his Loan Account.

Working Note:

1. Brijesh’s Share of Goodwill
Total goodwill of the firm x Retiring Partner’s Share = 70,000 x `2/5` = Rs. 28,000.

2. Gaining Ratio = New Ratio – Old Ratio
Digvijay’s Share = `2/3 - 2/5 = [10 - 6]/15 = 4/15`

Parakaram’s Share = `1/3 - 1/5 = [5 - 3]/15 = 2/15`

Gaining ratio between Digvijay and Parakaram = 4 : 2 or 2 : 1