Question

A, B and C were equal partners. Their Balance Sheet as at 31-3-2024 was as under:

BALANCE SHEET as at 31-3-2024
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
B/P		20,000	Bank		20,000
Creditors		40,000	Stock		20,000
General Reserve		30,000	Furniture		28,000
P/L		6,000	Debtors	45,000	40,000
Capitals:		1,32,000	Less: RBDD	5,000
A	60,000		Land & Building		1,20,000
B	40,000
C	32,000
		2,28,000			2,28,000

B retired on 1st April, 2024. A and C decided to continue the business as equal partners on the following terms:

1. Goodwill of the firm was valued at ₹ 57,600.
2. Reserve for bad and doubtful debts to be maintained at 10% on debtors.
3. Land and building to be increased to ₹ 1,32,000.
4. Furniture to be reduced by ₹ 8,000.
5. Rent outstanding (not provided for as yet) was ₹ 1,500.

Remaining partners decided to bring sufficient cash in the business to pay off B and to maintain a bank balance of ₹ 24,800. They also decided to readjust their capitals as per their new profit sharing ratio.

Prepare necessary Ledger Accounts and Balance Sheet.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Furniture A/c		8,000	By Provision for Doubtful debts A/c	500
To Outstanding Rent A/c		1,500	By Land & Building A/c	12,000
To Profit t/f to Partners Capital A/cs:		3,000
A	1,000
B	1,000
C	1,000
		12,500		12,500

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To B’s Capital A/c	9,600	-	9,600	By Balance b/d	60,000	40,000	32,000
To Cash A/c	-	72,200	-	By General Reserve A/c	10,000	10,000	10,000
To Balance c/d	63,400	-	35,400	By Revaluation A/c - Profit	1,000	1,000	1,000
				By A’s Capital A/c	-	9,600	-
				By C’s Capital A/c	-	9,600	-
				By Profit & Loss A/c	2,000	2,000	2,000
	73,000	72,200	45,000		73,000	72,200	45,000
To Balance c/d	87,900	-	87,900	By Balance b/d	63,400	-	35,400
				By Bank A/c	24,500	-	52,500
	87,900	-	87,900		87,900	-	87,900

 

Balance Sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
B/P		20,000	Bank		24,800
Creditors		40,000	Debtors	45,000	40,500
Outstanding Rent		1,500	Less: Provision for bad debts	4,500
Capital A/cs:		1,75,800	Furniture		20,000
A	87,900		Stock		20,000
C	87,900		Land & Building		1,32,000
Outstanding Rent		1,500
		2,37,300			2,37,300

Working notes:

(i) Gaining ratio = New Ratio – Old Ratio 

A = `1/2-1/3=(3-2)/6=1/6`

C = `1/2-1/3=(3-2)/6=1/6`

Gaining ratio = 1 : 1

(ii) Goodwill of the firm = ₹ 57,600

B = `57,600xx1/3` = ₹ 19,200

A = `19,200xx1/2` = ₹ 9,600

C = `19,200xx1/2` = ₹ 9,600