Question

On 31-3-2010 the Balance Sheet of W and R who shared profits in 3 : 2 ratio was as follows: 

Liabilities		Amount Rs	Assets		Amount Rs
Creditors		20,000	Cash		5,000
Profit and Loss Account		15,000	Sundry Debtors	20,000
Capital Accounts:			Less: Provision	(700)	19,300
W	40,000		Stock		25,000
R	30,000	70,000	Plant and Machinery		35,000
			Plants		20,700
		1,05,000			1,05,000

On this date B was admitted as a partner on the following conditions: 

(a) ‘B’ will get 4/15^th share profits.

(b) ‘B’ had to bring Rs 30,000 as his capital to which amount other Partners capital shall have to be adjusted.

(c) He would pay cash for his share of goodwill which would be based on 2½ years purchase of average profits of past 4 years.

(d) The assets would be revalued as under:

Sundry debtors at the book value less 5% provision for bad debts. Stock at Rs 20,000, Plant and Machinery at Rs 40,000.

(e) The profits of the firm for the years 2007, 2008 and 2009 were Rs 20,000; Rs 14,000 and Rs 17,000 respectively.

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

Answer 1

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Provision for Bad Debts A/c (1,000 - 700)	300	Plant & Machinery		5,000
Stock	5,000	Loss transferred to:
		W’s Capital A/c	180
		R’s Capital A/c	120	300
	5,300			5,300

 

Partners’ Capital Accounts
Dr.							Cr.
Particulars	W	R	B	Particulars	W	R	B
Revaluation A/c (Loss)	180	120	–	Balance b/d	40,000	30,000	–
Cash A/c (Bal. Fig)	5,920	7,280	–	Profit and Loss A/c	9,000	6,000	–
Balance c/d	49,500	33,000	30,000	Cash A/c	–	–	30,000
				Premium for Goodwill	6,600	4,400	–
	55,600	40,400	30,00		55,600	40,400	30,000

Balance Sheet                                as on March 31, 2010
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		20,000	Cash		32,800
Capital Accounts:			Sundry Debtors	20,000
W	49,500		Less: Provision for Bad Debts	(1,000)	19,000
R	33,000		Stock		20,000
B	30,000	1,12,500	Plant and Machinery		40,000
			Plants		20,700
		1,32,500			1,32,500