Question

Akash and Suraj are partners in a firm sharing profits and losses in the ratio 3 : 2. Their balance sheet as on 31st March, 2013 was as follows:

                       Balance Sheet as on 31st March, 2013

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital A/c           Akash           Suraj	50000 50000	Furniture	2100
General Reserve	10000	Stock	28700
Sundry creditors	60000	Land and building	35000
Bills payable	17000	Plant and machinery	49000
		Sundry debtors	63000
		Cash	9200
	187000		187000

They agreed to admit Sanjay in their partnership on 1st April, 2013, on the following terms :

1. Sanjay should bring Rs. 1,500, as his share of goodwill in the firm, and Rs. 2,000 as his capital.
2. Reserve for doubtful debts is to be provided @ 5% on debtors.
3. Land and building be depreciated at 10% p. a.
4. Plant and machinery to be depreciated @ 5% and stock to be depreciated @ 10% p. a.
5. The new profit sharing ratio will be 2: 1: 1.

Prepare :

1. Revaluation Account.
2. Partners’ Capital Accounts.
3. New Balance Sheet of the firm.

Answer 1

                                  Revaluation Account

Particulars	Amount	Particulars	Amount
To Stock	2870
To Land and Building	3500
To Plant and Machinery	2450	To Loss of Revaluation A/c
To R.D.D.	3150	Akash’s Capital A/c	7182
		Suraj’s Capital A/c	4788
	11970		11970

 

                                               Partners’ Capital Account

Particulars	Akash	Suraj	Sanjay	Particulars	Akash	Suraj	Sanjay
By Loss on Revaluation A/c	7182	4788	-	By Balance b/d	50,000	50,000	-
				By General Reserve (3:2)	6,000	4,000	-
				By Cash A/c	-	-	2,000
				By Goodwill A/c	600	900
To Balance c/d	49,418	50,112	2,000
	56,600	54,900	2,000		56,600	54,900	2,000

                              New Balance Sheet as on 1 April 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital A/c			Furniture		2100
Akash	49,418		Stock	28,700
Suraj	50,112		(-) Depreciation @ 10%	-2870	25,830
Sanjay	2000	101,530	Land and Building	35,000
Sundry Creditors		60,000	(-) Depreciation @ 10%	-3,500	31,500
Bills Payable		17,000	Plant and Machinery	49,000
			(-) Depreciation @ 5%	-2450	46,550
			Sundry debtors	63,000
			(-) R.D.D. @ 5%	-3150	59,850
			Cash( 9,200 + 1,500 + 2,000)		12700
		178,530			178,530

Working Notes:

WN 1: Calculation of sacrificing Ratio

Akash's Sacrifice = `3/5 - 2/4 = ( 12 - 10 )/20 = 2/20`

 

Suraj's Sacrifice = `2/5 - 1/4 = ( 8 - 5)/20 = 3/20`

 

WN 2: Calculation of share of Goodwill
Akash's share = 1,500 x `2/5` = Rs. 600

Suraj's share = 1,500 x `3/5` = Rs. 900

 

WN 3: Calculation of Depreciation
Land and Building = 35,000 x `10/100` = Rs. 3,500

Plant and Machinery = 49,000 x `5/100` = Rs. 2,450

Stock = 28,700 x `10/100` = Rs. 2,870

 

WN 4: Calculation of Reserve for Doubtful Debts

Debtors = 63,000 x `5/100` = Rs. 3,150

 

WN5: Calculation of share in Revaluation Loss
Akash's share = 11,970 x `3/5` = Rs. 7,182

Suraj's share = 11,970 x `2/5` = Rs. 4,788

 

WN6: Calculation of share in general Reserve
Akash's share = 10,000 x `3/5` = Rs. 6,000

Suraj's share = 10,000 x `2/5` = Rs. 4,000