Question

Vijayan, Sudhan, and Suman are partners who share profits and losses; in the capital ratio. Their balance sheet as of 31st December 2018 is as follows:

Balance Sheet as on 31.12.2018

Liabilities		₹	Assets	₹
Capital accounts:			Buildings	80,000
Vijayan	70,000	1,50,000	Stock	45,000
Sudhan	50,000		Debtors	30,000
Suman	30,000		Cash at bank	20,000
General reserve		18,000	Cash in hand	15,000
Creditors		17,000
		1,85,000		1,85,000

Suman died on 31.3.2019. On the death of Suman, the following adjustments are made:

1. Building is to be valued at ₹ 1,00,000
2. Stock to be depreciated by ₹ 5,000
3. Goodwill of the firm is valued at ₹ 36,000
4. Share of profit from the closing of the last financial year to the date of death on the basis of the average of the three completed year’s profit before death.

Profit for 2016, 2017 and 2018 were ₹ 40,000,₹ 50,000 and ₹ 30,000 respectively.

Prepare the necessary ledger accounts and the balance sheet immediately after the death of Suman.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars		Rs	Particulars	Rs
To Stock		5,000	By Buildings	20,000
To Profit on revaluation transferred to
Vijayan's Capital A/c	7,000	15,000
Sudhan's Capital A/c	5,000
Suman's Capital A/c	3,000
		20,000		20,000

Suman share of G/w

Vijayan : Sudhan : suman

Old ratio = 7:5:3

New ratio = 7:5

Gaining ratio New ratio – old ratio

Vijayan = `7/12 - 7/15 = (35 - 28)/60 = 7/60`

Sudhan = `1/12 - 5/15 = (25 - 20)/60 = 5/60`

Gain Ratio = 7 : 5

Vijayan share of G/w = `7,200 xx 7/12` = Rs. 4,200

Sudhan share of G/w = `7,200 xx 5/12`= Rs 3,00

Dr.	Capital A/c						Cr.
Particulars	Vijay	Sudhan	Suman	Particulars	Vijay	Sudhan	Suman
To Suman's Capital A/c	4,200	3,000	-	by bal b/d	70,000	50,000	30,000
To Suman's Executor's A/c				By General Reserve A/c	8,400	6,000	3,600
(bal.fig)	-	-	45,800	By Revaluation	7,000	5,000	3,000
				By Vijay's Capital A/c	-	-	4,200
				By Sudhan's Capital A/c	-	-	3,000
				By P & L suspense A/c	-	-	2,000
To bal c/d	81,200	58,000	-
	85,400	61,000	45,800		85,400	61,000	45,800
				by bal b/d	81,200		-

 

Average Profit `= (40,000 + 50,000 + 30,000)/3` = Rs 40,000

Suman share of profit till the date of his retirement `= 40,000 xx 3/12 xx 3/15` = Rs. 2,000

Liabilities	Rs	Assets	Rs	Rs
Creditors	17,000	Building	80,000
		Add: Appreciation	20,000	1,00,000
Suman's Executor's A/c	45,800
Capital A/c		Stock	45,000
Vijayan	81,200	Less: Depreciation	5,000	40,000
Sudhan	58,000	Debtors		25,000
		Cash at Bank		20,000
		Cash in hand		15,000
		P&L Suspense A/c		2,000
	2,02,000			2,02,000