Question

Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2020.
                         Books of Jain, Gupta and Malik
                    Balance Sheet as on March 31, 2016    

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Sundry Creditors		19,800	Land and Building	26,000
Telephone Bills Outstanding		300	Bonds	14,370
Accounts Payable		8,950	Cash	5,500
Accumulated Profits		16,750	Bills Receivable	23,450
			Sundry Debtors	26,700
Capitals :			Stock	18,100
Jain	40,000		Office Furniture	18,250
Gupta	60,000		Plants and Machinery	20,230
Malik	20,000	1,20,000	Computers	13,200
		1,65,800		1,65,800

The partners have been sharing profits in the ratio of 5 : 3 : 2. Malik decides to retire from business on April 1, 2020 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.

A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.

The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.

Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

Answer 1

In the books of Jain and Gupta
Revaluation Account
Dr.                                                                                             Cr.

Particulars	Amount Rs		Particulars		Amount Rs
Office Furniture	4,000		Stock		1,900
Land and Building	6,000		Plant and Machinery		3,300
Provision for Doubtful Debts	1,700		Loss transferred to:
			Jain's Capital A/c	3,250
			Gupta's Capital A/c	1,950
			Malik's Capital A/c	1,300	6,500
	11,700				11,700

                                Partners’ Capital Account
Dr.                                                                                             Cr.

Particulars	Jain	Gupta	Malik		Particulars	Jain	Gupta	Malik
Revaluation (Loss)	3,250	1,950	1,300		Balance b/d	40,000	60,000	20,000
Malik’s Capital	1,125	675	-		Accumulated Profits	8,375	5,025	3,350
Cash	-	-	16,500		Jain’s Capital A/c	-	-	1,125
Malik’s Loan	-	-	7,350		Gupta’s Capital A/c	-	-	675
Balance c/d	53,900	69,000	-		Cash	9,900	6,600	-
	58,275	71,625	25,150			58,275	71,625	25,150

                                                Balance Sheet

Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		19,800	Stock (18,100 + 1,900)		20,000
Telephone Bills Outstanding		300	Bonds		14,370
Accounts Payable		8,950	Cash		5,500
Malik’s Loan		7,350	Bills Receivable		23,450
			Sundry Debtors	26,700
Partners’ Capital:			Less: Provision for Bad Debts	1,700	25,000
Jain	53,900		Land and Building (26,000 – 6,000)		20,000
Gupta	69,000	1,22,900	Office Furniture (18,250 – 4,000)		14,250
			Plant and Machinery (20,230 + 3,300)		23,530
			Computers		13,200
		1,59,300			1,59,300

Working Note:
1) Malik’s share of goodwill = Total Goodwill × Retiring Partner Share = 9,000 x `2/10` = Rs. 1,800

2) Gaining Ratio = New Ratio – Old Ratio
Jain's Gaining Share = `5/8 - 5/10 = [ 50 - 40 ]/80 = 10/80`

Gupta Gaining Share = `3/8 - 3/10 = [ 30 -24 ]/80 = 6/80`

Gaining Ratio between Jain and Gupta = 10:6 or 5:3