Question

Akul, Bakul, and Chandan were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31^st March 2018 their Balance Sheet was as follows:

Balance Sheet of Akul, Bakul and Chandan as on 31.3.2018
Liabilities		Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		45,000	Cash at Bank		42,000
Employees Provident Fund		13,000	Debtors	60,000	58,000
General Reserve		20,000	Less: Provision for doubtful debts	2,000
Capitals:		3,72,000	Stock		80,000
Akul	1,60,000		Furniture		90,000
Bakul	1,20,000		Plant and Machinery		1,80,000
Chandan	92,000
		4,50,000			4,50,000

Bakul retired on the above date and it was agreed that:

1. Plant and Machinery were undervalued by 10%.
2. Provision for doubtful debts was to be increased to 15% on debtors.
3. Furniture was to be decreased to ₹ 87,000.
4. Goodwill of the firm was valued at ₹ 3,00,000 and Bakul’s share was to be adjusted through the capital accounts of Akul and Chandan.
5. Capital of the new firm was to be in the new profit sharing ratio of the continuing partners.

Prepare Revaluation account, Partner’s Capital accounts, and the Balance Sheet of the reconstituted firm.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Provision for Doubtful debts A/c		7,000	By Plant & Machinery A/c	20,000
To Furniture A/c		3,000
To Profit t/f to partners Capital A/cs:		10,000
Akul	4,000
Bakul	4,000
Chandan	2,000
		20,000		20,000

 

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Akul	Bakul	Chandan	Particulars	Akul	Bakul	Chandan
To Bakul’s Capital A/c	80,000	-	40,000	By Balance b/d	1,60,000	1,20,000	92,000
To Bakul’s Loan A/c	-	2,52,000	-	By General Reserve A/c	8,000	8,000	4,000
To Cash A/c	-	-	8,000	By Akul’s Capital A/c	-	80,000	-
To Balance c/d	1,00,000	-	50,000	By Chandan’s Capital A/c	-	40,000	-
				By Revaluation A/c - Profit	4,000	4,000	2,000
				By Cash A/c	8,000	-	-
	1,80,000	2,52,000	98,000		1,80,000	2,52,000	98,000

 

Balance Sheet as on 31st March 2018
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		45,000	Plant & Machinery		2,00,000
Employees Provident Fund		13,000	Debtors	60,000	51,000
Bakul’s Loan		2,52,000	Less: Provision	(9,000)
Capital A/cs:		1,50,000	Stock		80,000
Akul	1,00,000		Furniture		87,000
Chandan	50,000		Cash at Bank (42,000 + 8,000 – 8,000)		42,000
		4,60,000			4,60,000

Working Notes:

(1) Computation of amount of goodwill to be credited to Bakul’s Capital 

Revalued Goodwill of the firm = ₹ 3,00,000

Bakul’s Share in Goodwill = `3,00,000 xx (2)/(5)` = 1,20,000 

Bakul’s share to be compensated by Akul = `1,20,000 xx (2)/(3)` = 80,000

Bakul’s share to be compensated by Chandan = `1,20,000 xx (1)/(3)` = 40,000

2) Computation of New Capital of remaining partners after Bakul’s Retirement

Adjusted Capital of Akul = 92,000

Adjusted Capital of Chandan = 58,000

Total Adjusted Capital of Partners = (92,000 + 58,000) = 1,50,000

New Capital Share of Akul = `1,50,000 xx (2)/(3)` = ₹ 1,00,000 

₹ 1,00,000 - 92,000 = ₹ 8,000 Cash brought in

New Capital Share of Chandan = `1,50,000 xx (1)/(3)` = ₹ 50,000

58,000 - 50,000 = ₹ 8,000 Cash withdraw