Question

Rajesh, Sathish and Mathan are partners sharing profits and losses in the ratio of 3:2:1 respectively. Their balance sheet as on 31.3.2017 is given below.

Liabilities		₹	Assets	₹
Capital accounts:			Premises	4,00,000
Rajesh	4,00,000	9,50,000	Machinery	4,20,000
Sathish	3,00,000		Debtors	1,60,000
Mathan	2,50,000		Stock	3,00,000
General reserve		1,20,000	Cash at bank	20,000
Creditors		50,000
Bills payable		1,80,000
		13,00,000		13,00,000

Mathan retires on 31st March, 2017 subject to the following conditions :

1. Rajesh and Sathis will share profits and losses in the ratio of 3:2
2. Assets are to be revalued as follows;
   Machinery ₹ 4,50,000, Stock ₹ 2,90,000 , Debtors ₹ 1,52,000
3. Goodwill of the firm is valued at ₹ 1,20,000.

Prepare the necessary ledger accounts and the balance sheet immediately after the retirement of Mathan.

Answer 1

(i) Computation of gaining ratio:

Share Gained = New share - Old Share

Rajesh = `3/5 - 3/6 = (18 - 15)/30 = 3/30`

Sathish = `2/5 - 2/6 = (12 - 10)/30 = 2/30`

Gaining ratio of Rajesh and Sathish is = 3 : 2

(ii) Adjustment for goodwill:

Goodwill = 1,20,000

Share of Goodwill of Manoj = `1,20,000 xx 1/6` = 20,000

It is to be adjusted in the capital accounts of Rajesh and sathish in the gaining ratio of 3 : 2

Rajesh = `3/5 xx 20,000` = 12,000

Sathish = `2/5 xx 20,000` = 8000

Dr.	Revaluation A/c			Cr.
Particulars	Rs	Particulars	Rs	Rs
To Machinery	30,000	By Loss on Revaluation
To Stock A/c	10,000	Rajesh Capital	24,000	48,000
To Debtors	8,000	Sathish Capital	16,000
		Mathan Capital	8,000
	48,000			48,000

 

Dr.	Capital Account						Cr.
Particulars	Rajesh ₹	Sathish ₹	Mathan ₹	Particulars	Rajesh ₹	Sathish ₹	Mathan ₹
To Revaluation  loss A/c	24,000	16,000	8,000	By Balance b/d	4,00,000	3,00,000	2,50,000
To Manthan's Capital A/c	12,000	8,000	-	By Workmen compensation fund	15,000	9,000	6,000
To Mathan's loan A/c	-	-	2,82,000	By Rajesh Capital A/c	-	-	12,000
To bal c/d	4,24,000	3,16,000	-	By Sathish Capital A/c	-	-	8,000
	4,60,000	3,40,000	2,90,000		4,60,000	3,40,000	2,90,000
				By Balance b/d	4,24,000	3,16,000	-

 

Balance Sheet as on 31.12.2017
Liabilities	Rs	Assets	Rs	Rs
Manthan's Loan	2,82,000	Machinery	4,20,000	3,90,000
Creditors	50,000	Less: Depreciation	30,000
Capital A/c		Premises		4,00,000
Rajesh	4,24,000	Debtors	1,60,000	1,52,000
Sathish	3,16,000	Less: Bad debts	8,000
Bills payable	1,80,000	Stock	3,00,000	2,90,000
		Less: Revalued	10,000
		Goodwill		20,000
	12,52,000			12,52,000