Question

Ram, Mohan and Sohan were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2025, their Balance Sheet was:

Liabilities	₹	₹	Assets	₹
Capital A/cs:		3,50,000	Land	1,25,000
Ram	1,50,000		Patents	30,000
Mohan	1,25,000		Machinery	1,50,000
Sohan	75,000		Stock	1,90,000
Sundry Creditors		1,55,000	Cash at Bank	40,000
Workmen’s Compensation Reserve		30,000
		5,35,000		5,35,000

Sohan died on 1st August, 2025. It was agreed that:

1. Goodwill of the firm is to be valued at 1,75,000.
2. Machinery be valued at ₹ 1,40,000; Patents at ₹ 40,000; Land at ₹ 1,50,000 on this date.
3. For the purpose of calculating Sohan’s share in the profits of the year of death, profits should be taken to have accrued on the same scale as in the previous year, which were 75,000.

Prepare Revaluation Account and Sohan’s Capital Account.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Machinery A/c		10,000	By Patents A/c	10,000
To Profit on Revaluation transferred to		25,000	By Land A/c	25,000
Ram’s Capital A/c	12,500
Mohan’s Capital A/c	7,500
Sohan’s Capital A/c	5,000
		35,000		35,000

 

Dr.	Sohan’s Capital Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Sohan’s Executors’ A/c	1,26,000	By Balance b/d	75,000
		By Revaluation A/c	5,000
		By Workmen’s Compensation Reserve A/c	6,000
		By Ram’s Capital A/c	21,875
		By Mohan’s Capital A/c	13,125
		By Profit & Loss Suspense A/c	5,000
	1,26,000		1,26,000

Working Note:

1. Sohan’s Share of Goodwill:

Total Goodwill of the Firm = ₹ 1,75,000

Sohan’s Share of Goodwill = `1,75,000 xx 2/10`

= ₹ 35,000

2. Contributed by Ram and Mohan in their gaining ratio (5 : 3):

Ram = `35,000 xx 5/8`

= ₹ 21,875

Mohan = `35,000 xx 3/8`

= ₹ 13,125

3. Sohan’s Share of Profit (Till date of death):

Estimated profit based on previous year’s profit (₹ 75,000) for 4 months:

Sohan’s Share = `75,000 xx 4/12 xx 2/10`

= ₹ 5,000

4. Share of Workmen’s Compensation Reserve:

Sohan’s Share = `30,000 xx 2/10`

= ₹ 6,000