Question

Suresh and Ramesh are partners in a business sharing Balance sheet as on 31st March 2013 are as follows:

Balance Sheet as on 31st March 2013
Liabilities	Amount (Rs)	Amount (Rs)	Assets	Amount (Rs)	Amount (Rs)
Capital A/c’s			Building		30000
Suresh	50000	74000	Machinery		10000
Ramesh	24000		Furniture		9500
Creditors		57000	Debtors	40000	39000
Bills Payable		20000	(-) R.D.D	1000
Reserve fund		9000	Stock		30000
			Bills Receivable		7600
			Cash at Bank		33900
		160000			160000

They admitted Kailash on 1^st April 2013 as a partner on the following terms:

1) Kailash will bring Rs 30,000 as his capital for 1/4^th share in future profit and Rs. 12,000 as goodwill which will be withdrawn by old partners.

2) Stock and Machinery to be depreciated by 10%.

3) R.D.D. is to be maintained at 5% on debtors.

4) Building to be appreciated by 20% and furniture is revalued at Rs 10,000.

Prepare Profit and Loss Adjustment Account, Partner’s Capital Accounts, and Balance Sheet of the New firm.

Answer 1

Dr.	Profit and Loss Adjustment Account					Cr.
Particulars			Amt (Rs)	Particulars	Amt (Rs)
Stock			3000	Building	6000
Machinery			1000	Furniture	500
Reserve for Doubtful Debts (R.D.D)			1000
Profit transferred to:
Suresh’s Capital		750	1500
Ramesh’s Capital		750
			6500		6500

                   

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Suresh	Ramesh	Kailash	Particulars	Suresh	Ramesh	Kailash
Cash (Goodwill withdrawn)	6000	6000		Balance b/d	50000	24000
Balance c/d	55250	29250	30000	Reserve Fund	4500	4500
				Profit and Loss Adjustment (Profit)	750	750
				Cash			30000
				Premium for Goodwill	6000	6000
	61250	35250	30000		61250	35250	30000

 

 

Balance Sheet as on April 01, 2013, after Kailash’s admission
Liabilities		Amt (Rs.)	Assets		Amt (Rs.)
Creditors		57000	Building		36000
Capital			Furniture		10000
Suresh	55250	114500	Bills Receivable		7600
Ramesh	29250		Sundry Debtors	40000	38000
Kailash	30000		Less: Reserve for Doubtful Debts	(2000)
Bills Payable		20000	Machinery	10000	9000
			Less: Depreciation	(1000)
			Stock	30000	27000
			Less: Depreciation	(3000)
			Cash at Bank		63900
		191500			191500

Working Notes:

Calculation of New Profit Sharing Ratio

Old Ratio = Suresh : Ramesh = 1 : 1

Kailash's Share = `1/4`

Let the total share of firm = 1

Remaining share of firm = `1-1/4 = 3/4`

Suresh's New share = `3/4 xx 1/2 = 3/8`

Ramesh's New share = `3/4 xx 1/2 = 3/8`

New Profit Sharing Ratio = `3/8 : 3/8 : 1/4 = (3:3:2)/8`

Sacrificing Ratio = Old Ratio - New Ratio

Suresh's Sacrifice = `1/2 - 3/8 = 1/8`

Ramesh's Sacrifice = `1/2 - 3/8 = 1/8`

Sacrificing Ratio = 1: 1

WN 1: Distribution of Reserve Fund

Suresh will get = `9000 xx 1/2 = "Rs" 4500`

Ramesh will get = `9000 xx 1/2 = "Rs." 4500`

WN 2: Distribution of Dhiraj Kumar’s share of Goodwill

Suresh will get = `12000 xx 1/2 = "Rs." 6000`

Ramesh will get = `12000 xx 1/2 = "Rs."  6000`

WN 3: Cash Account

Dr.	Cash Account				Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Balance b/d		33900	Capital A/cs:
Kailash's Capital A/c		30000	Suresh	6000	12000
Premium for goodwill A/c		12000	Ramesh	6000
			Balance c/d		63900
		75900			75900