Question

Vasu and Viraj Share Profits and Losses in the Ratio of 3:2 respectively Their Balance Sheet as on 31st March 2019 was as under

Balance Sheet as on 31st March, 2019

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	45,000	Cash at bank	750
General Reserve	30,000	Sundry debtors	66,750
Capital:		Stock	25,500
Vasu	1,08,000
Viraj	72,000
		Investment	36,000
		Plant	90,000
		Building	36,000
	2,55,000		2,55,000

They admit Hari into Partnership on 1.4. 2019 the terms being that :

1  He shall have to bring in ₹60,000 as his Capital for 1/4 share in future profits

2 Value of Goodwill of the Firm is to be fixed at The average profits for the last three years. The Profit was.

2009-10  ₹ 48,000,

2010-11 ₹ 81,000

2011-12 ₹ 73,500

Hari is unable to bring the value of the Goodwill in cash. It is decided to raise the Goodwill in the books of accounts.

3. Reserve for Doubtful Debts is to be created at ₹ 1,500.

4. Closing Stock is valued at ₹ 22,500

5. Plant and Building is to be depreciated by 5%

Prepare Profit and Loss Adjustment A/c, Capital Accounts of Partners, And Balance Sheet of the New Firm.

Answer 1

Dr	In the books of the firm______ Profit and Loss Adjustment Account						Cr
Particulars			Amount (₹)	Particulars		Amount(₹)
To R.D.D. (New) A/c			1,500	By Loss on Revaluation
To Stock A/c			3,000	Transferred to Partners’ Capital A /cs :
				Vasu	6,480
				Viraj	4,320	10,800
To Depreciation A/cs:
Plant		4,500
Building		1,800	6,300
			10,800			10,800

 

Dr	Partners’ Capital Accounts								Cr
Particulars		Vasu (₹)	Viraj (₹)	Hari(₹)	Particulars	Vasu (₹)	Viraj (₹)	Hari(₹)
To Profit and Loss Adjustment A/c (Loss)		6,480	4,320		By Balance b/d	1,08,000	72,000
To Balance c / d		1,60,020	1,06,680	60,000	By Cash / Bank A/c			60,000
					By Goodwill A/c	40,500	27,000
					By General Reserve A/c	18,000	12,000
		1,66,500	1,11,000	60,000		1,66,500	1,11,000	60,000

 

Balance Sheet as on 1st April 2019
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital A/cs : Vasu	1,60,020		Cash		60,750
Viraj	1,06,680		Sundry Debtors	66,750
Hari	60,000	3,26,700	Less : R.D.D. (New)	1,500	65,250
Sundry Creditors		45,000	Stock	25,500
			Less :Depreciation	3,000	22,500
			Investments		36,000
			Plant	90,000
			Less : Depreciation	4,500	85,500
			Building	36,000
			Less: Depreciation	1,800	34,200
			Goodwill		67,500
		3,71,700			3,71,700

Working Notes :

(1) Average Profit =`" Total Profit"/"No. of years"`

`=(48,000+81,000+73,500)/3`= ₹ 67,500

∴ Goodwill value = ₹  67,500

Vasu’s share in Goodwill = ₹ `40,500( 67,500xx 3/5)`

Viraj’s share in Goodwill = ₹ `27,000 ( 67,500xx2/5)` 

(2) Hari is not able to bring share in goodwill and it is decided to raise the goodwill in the book. Therefore, Goodwill is recorded in the Asset side ₹  67,500.