Question

Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2:2:3:3. On 1.4.2016 their Balance Sheet was as follows

Balance Sheet of Suresh, Ramesh, Mahesh and Ganesh as on 1.4.2016
Liabilities	Rs	Assets	Rs
Capitals : Suresh               1,00,000 Ramesh              1,50,000 Mahesh               2,00,000 Ganesh               2,50,000 Sundry Creditors Workmen Compensation Reserve	7,00,000 1,70,000 75,000	Fixed Assets Current Assets	6,00,000 3,45,000
	9,45,000		9,45,000

From the above date, the partners decided to share the future profits equally. For this purpose, the goodwill of the firm was valued at Rs 90,000.

It was also agreed that:

1) Claim against Workmen Compensation Reserve will be estimated at Rs 1,00,000 and fixed assets will be depreciated by 10%.

2) The capitals of the partners will be adjusted according to the new profit sharing ratio. For this, necessary cash will be bought or paid by the partners as the case may be.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer 1

Revaluation Account
Dr.			Cr.
Particulars	Rs	Particulars	Rs
To Provision for WCF A/c To Depreciation on Fixed Assets	25,000 60,000	By Revaluation Loss: Suresh Capital A/c   17,000 Ramesh Capital A/c  17,000 Mahesh Capital A/c   25,500 Ganesh Capital A/c   25,500	85,000
	85,000		85,000

 

Partner’s Capital Account
Dr.									Cr.
Particulars	Suresh	Ramesh	Mahesh	Ganesh	Particulars	Suresh	Ramesh	Mahesh	Ganesh
To Revaluation A/c (Loss) To Mahesh’s Capital A/c To Ganesh’s Capital A/c     To Cash A/c To Balance c/d	17,000 2,250 2,250       1,53,750	17,000 2,250 2,250       1,53,750	25,500         25,250 1,53,750	25,500         75,250 1,53,750	By Balance b/d By Suresh’s Capital A/c By Ramesh’s Capital A/c   By Cash A/c	1,00,000       75,250	1,50,000       5,250	2,00,000 2,250 2,250	2,50,000 2,250 2,250
	1,75,250	1,75,250	2,04,500	2,54,500		1,75,250	1,75,250	2,04,500	2,54,500

 

Balance Sheet
Liabilities	Rs	Assets	Rs
Capital Suresh              1,53,750 Ramesh            1,53,750 Mahesh             1,53,750 Ganesh             1,53,750___ Sundry Creditors Claim against WCF	6,15,000 1,70,000 1,00,000	Fixed Assets                6,00,000 Less: Depreciation        (60,000)   Current Assets	5,40,000   3,45,000
	8,85,000		8,85,000

Working Notes:

WN 1: Calculation of Gaining Ratio/ Sacrificing Ratio:

Old Rato     2:2:3:3

New Ratio   1:1:1:1

Suresh = `2/10 - 1/4 = -1/20` Gaining

Ramesh = `2/10 - 1/4 = -1/20` Gaining

Mahesh = `3/10 - 1/4 = 1/20` Sacrificing

Ganesh = `3/10 - 1/4 = 1/20` Sacrificing

Suresh, Ramesh will compensate Mahesh, Ganesh

Journal Entry for Goodwill

Journal
Date	Particulars	L.F	Dr. Rs	Cr. Rs
	Suresh’s Capital A/      Dr Ramesh’s Capital A/c   Dr      To Mahesh’s Capital A/c      To Ganesh’s Capital A/c (Being gaining partners compensate sacrificing partners		4,500 4,500	4,500 4,500

WN 2: Calculation of Adjusted Capital

Suresh = 1,00,000 – 21,500= Rs 78,500

Ramesh = 1,50,000 − 21,500= Rs 1,28,500

Mahesh = 2,04,500 – 25,500= Rs 1,79,000

Ganesh = 2,54,500 −25,500= Rs 2,29,000

Total Combined Capital= 6,15,000

WN 3: Calculation of New Capital

Suresh =`615000xx1/4 = 153750`

Ramesh = `615000 xx 1/4 = 153750`

Mahesh = `615000 xx 1/4 = 153750`

Ganesh = `615000 xx 1/4 = 153750`