Question

The balance sheet of Shivshakti Traders, Mumbai is as follows. Partners share profit and losses as 5:2:3.

Balance Sheet as on 31^st March, 2020

Liabilities	Amount (₹)	Assets		Amount (₹)
Creditors	30,000	Bank		18,600
Bills Payable	1,800	Debtors	25,200	24,000
General Reserve	21,000	(-) R.D.D.	1,200
Capital Accounts:		Stock		30,600
Raj	54,000	Building		60,000
Rahul	48,000	Plant and Machinery		48,000
Nitin	26,400
	1,81,200			1,81,200

Rahul retired from the business on 1^st April, 2020 on the Following terms:

1. The assets were revalued as under:
   1. Plant and Machinery is to be depreciated by 10%.
   2. R.D.D. is 10 be increased upto ₹ 1,500.
   3. Building is appreciated by 10%.
   4. Stock at ₹ 42,000. 
2. The goodwill of retiring partner is valued at ₹ 12,000 and the remaining partners decided that goodwill be written back in their new profit sharing ratio which will be 5:3.
3. Amount due to Rahul at the time of retirement is to be transferred to his loan account.

Prepare:

1. Profit and Loss Adjustment Account
2. Partners’ Capital Account
3. Balance Sheet of the New firm.

Answer 1

Dr.	In the Books of the Firm Profit and Loss Adjustment A/c			Cr.
Particulars	Amount ₹	Amount ₹	Particulars	Amount ₹
To Plant and Machinery A/c		4,800	By Building A/c	6,000
To R.D.D A/c		300	By Stock	11,400
To Partners Capital A/c’s (profit)		12,300
Raj	6,150
Rahul	2,460
Nitin	3,690
		17,400		17,400

 

Dr.	Partner's Capital A/c						Cr.
Particulars	Raj	Rahul	Nitin	Particulars	Raj	Rahul	Nitin
To Goodwill A/c	7,500	−	4,500	By Balance b/d	54,000	48,000	26,400
To Rahul Loan A/c	−	66,660	−	By Goodwill A/c	−	12,000	−
To Balance c/d	63,150	−	31890	By General reserve A/c	10,500	4,200	6,300
				By Profit on P & L adj. A/c	6,150	2,460	3,690
	70,650	66,660	36,390		70,650	66,660	36,390

 

Balance Sheet as on 1st April 2020
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital A/c:		95,040	Plant and Machinery	48,000	43,200
Raj	63,150		Less: Depreciation @10%	4,800
Nitin	31,890		Debtors	25,200	23,700
Rahul loan A/c		66,660	Less: R.D.D	1,500
Creditors		30,000	Stock	30,600	42,000
Bills Payable		1,800	Add: Appreciation	11,400
			Building	60,000	66,000
			Add: Appreciation	6,000
			Bank		18,600
		1,93,500			1,93,500

Working Note:

(1)

Dr.	Cash A/c		Cr.
Particulars	Amount	Particulars	Amount
By Balance b/d	18,600	By Balance c/d	18,600
	18,600		18,600

(2)

Dr.	Goodwill A/c		Cr.
Particulars	Amount	Particulars	Amount
By Rahul Capital A/c	12,000	By Raj Capital A/c	7,500
		By Nitin Capital A/c	4,500
	12,000		12,000