Question

Balance Sheet as at 31st March, 2024 of Ramesh, Kumar and Pappu, who were sharing profits and losses in the ratio of 2 : 3 : 5.

Liabilities	₹	Assets	₹
Capitals:		Cash	18,000
Ramesh	36,000	Bills Receivable	24,000
Kumar	44,000	Furniture	28,000
Pappu	52,000	Stock	44,000
Creditors	64,000	Debtors	42,000
Bills Payable	32,000	Investments	32,000
Profit & Loss A/c	14,000	Machinery	34,000
		Goodwill	20,000
	2,42,000		2,42,000

On 1st April, 2024 they admit Shilpa into partnership on the following terms:

1. Furniture, Investments and Machinery to be reduced by 15%.
2. The value of stock to be taken is at ₹ 48,000.
3. Shilpa will bring in ₹ 26,000 as her share of goodwill.
4. Shilpa to bring ₹ 32,000 towards capital for a `1/6`th share and old partners to adjust their capitals accordingly.
5. Outstanding rent amounted to ₹ 1,800.
6. Prepaid salaries ₹ 800.
7. Adjustments of capital to be made by cash.

Prepare Revaluation Account, Capital Accounts, Cash Account and the Balance Sheet of the new firm.

Answer 1

Dr.	Revaluation Account				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Furniture		4,200	By Prepaid Salaries		800
To Investments		4,800	By Stock (₹48,000 - ₹44,000)		4,000
To Machinery		5,100	By Loss on Revaluation transferred to:		11,100
To Outstanding Rent		1,800	Ramesh’s Capital A/c	2,220
			Kumar’s Capital A/c	3,330
			Pappu’s Capital A/c	5,550
		15,900			15,900

 

Dr.	Partners’ Capital Accounts								Cr.
Particulars	Ramesh (₹)	Kumar (₹)	Pappu (₹)	Shilpa (₹)	Particulars	Ramesh (₹)	Kumar (₹)	Pappu (₹)	Shilpa (₹)
To Revaluation	2,220	3,330	5,550		By Balance b/d	36,000	44,000	52,000
To Goodwill (written off)	4,000	6,000	10,000		By Profit and Loss A/c	2,800	4,200	7,000
To Bank A/c (Withdrawal)	5,780				By Bank A/c (Capital)				32,000
To Balance c/d	32,000	48,000	80,000	32,000	By Bank A/c (Goodwill)	5,200	7,800	13,000
					By Bank A/c (Bring in)		1,330	23,550
	44,000	57,330	95,550	32,000		44,000	57,330	95,550	32,000

 

Dr.	Cash Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	18,000	By Ramesh’s Capital A/c	5,780
To Shilpa’s Capital A/c	32,000	By Balance c/d	95,100
To Goodwill A/c	26,000
To Kumar’s Capital A/c	1,330
To Pappu’s Capital A/c	23,550
	1,00,880		1,00,880

 

New Balance Sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		64,000	Cash		95,100
Bills Payable		32,000	Bills Receivable		24,000
Outstanding Rent		1,800	Furniture		23,800
Capital A/c:		1,92,000	Stock		48,000
Ramesh	32,000		Debtors		42,000
Kumar	48,000		Investments		27,200
Pappu	80,000		Machinery		28,900
Shilpa	32,000		Prepaid Salaries		800
		2,89,800			2,89,800

Working Note:

Shilpa brings ₹ 26,000 as her share of goodwill. This is distributed to the sacrificing partners in the sacrificing ratio, which is the same as the old ratio, 2 : 3 : 5.

Ramesh’s share = `26,000 xx 2/10`

= 5,200

Kumar’s share = `26,000 xx 3/10`

= 7,800

Pappu’s share = `26,000 xx 5/10`

= 13,000

The old goodwill of ₹ 20,000 is written off by debiting the old partners’ capital accounts in their old ratio of 2 : 3 : 5.

Ramesh’s share = `20,000 xx 2/10`

= 4,000

Kumar’s share = `20,000 xx 3/10`

= 6,000

Pappu’s share = `20,000 xx 5/10`

= 10,000

Shilpa's capital is ₹ 32,000 for a `1/6`th share. The new total capital of the firm is ₹ 1,92,000 (₹ 32,000 × 6).

Cash adjustments are made to bring the old partners’ capital to their new balances.

Old Adjusted Capital:

Ramesh = 36,000 + 2,800 + 5,200 − 2,220 − 4,000

= 37,780

Withdrawals = 37,780 − 32,000

= 5,780

Kumar = 44,000 + 4,200 + 7,800 − 3,330 − 6,000

= 46,670

Brings in = 48,000 − 46,670

= 1,330

Kumar = 52,000 + 7,000 + 13,000 − 5,550 − 10,000

= 56,450

Brings in = 80,000 − 56,450

= 23,550