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A, B and C Were Partners in a Firm Sharing Profit in the Ratio of 3:2:1. on 31-3-2015 Their Balance Sheet Was as Follows - Accountancy

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A, B and C were partners in a firm sharing profit in the ratio of 3:2:1. On 31-3-2015 their Balance sheet was as follows :

                           Balance Sheet of A,B and C as on 31-3-2015

Liabilities Amount(Rs.) Assets Amount(Rs.)

Creditors

General Reserve

 

Capitals

    A                       60,000

    B                       40,000

    C                       20,000

84,000

21,000

 

 

 

 

1,20,000

Bank

Debtors

Stock

Investments

Furniture & Fittings

Machinery

 

17,000

23,000

1,10,000

30,000

10,000

35,000

 

  2,25,000   2,25,000

On the above date D was admitted as new partner and it was decided that

(i) The new profit sharing ratio between A, B, C and D will be 2:1:1:1.

(ii) Goodwill of the firm was valued at Rs.90,000 and D brought his share of goodwill premium in cash.

(iii) The Market value of investments was Rs.24,000

(iv) Machinery will be reduced to Rs.29,000

(v) A Creditor of Rs.3,000was not likely to claim the amount and hence to be written off.

(vi) D will bring proportionate capital so as to give him 1/6th share in the profits of the firm.

Prepare Revaluations Account, Partner’s Capital Accounts and Balance Sheet of the reconstitute firm

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Solution

                                                       Revaluation Account

Dr.                                                                                                                                             Cr.

Particulars Amount(Rs.) Particulars Amount(Rs.)

To Investments A/c

To Machinery A/c

 

 

 

 

 

6,000

6,000

 

 

 

 

 

By Creditors A/c

 

By Loss on Revaluation A/c

    A’s Capital A/c              4,500

    B’s Capital A/c              3,000

    C’s Capital A/c              1,500

 

3,000

 

 

 

 

9,000

 

  12,000   12,000

 

                                                                                       Partner’s Capital Account

Dr.                                                                                                                                                                                        Cr.

Particulars A (Rs.) B (Rs.) C (Rs.) D (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.) D (Rs.)

Reval A/c

Balance c/d

 

 

4,500

81,000

 

 

3,000

44,000

 

 

1,500

22,000

 

 

 

29,400

 

 

Balance c/d

Gen. Reserve

Prem. for G/w

Cash A/c

60,000

10,500

15,000

 

40,000

7,000

 

 

20,000

3,500

 

 

 

 

 

29,400

  85,500 47,000 23,500 29,400   85,500 47,000 23,500 29,400

 

                                                                  Balance Sheet

Liabilities Amount(Rs.) Assets Amount(Rs.)

Creditors

 

Capitals :

   A                                     81,000

   B                                     44,000

   C                                     22,000

   D                                     29,400

 

 

81,000

 

 

 

 

 

1,76,400

 

 

Bank (17,000 + 29,400 + 15,000)

Debtors

Stock

Investments

Furniture & Fittings

Machinery

 

 

61,400

23,000

1,10,000

24,000

10,000

29,000

 

 

  2,57,400   2,57,400

 

Working Notes :

WN 1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

A's = (3/6) - (2/6) = 1/6

B's = (2/6) - (2/6) = Nil

C's = (1/6) - (1/6) = Nil

 

WN 2: Adjustment of Goodwill

D's Share of Goodwill = 90,000 x (1/6) = 15,000

15,000 will be credited to A's Capital A/c, as he is the only sacrificing partner

 

WN 3: Calculation of D’s Proportionate Capital

Adjusted Old Capital of A = 60,000 + 10,500 + 15,000 - 4,500 = 81,000

Adjusted Old Capital of B = 40,000 + 7,000 - 3,000 = 44,000

Adjusted Old Capital of C = 20,000 + 3,500 - 1,500 = 22,000

Total Adjusted Capital = 81,000 + 44,000 + 22,000 = 1, 47,000

D’s Proportionate Capital = Total Adjusted Capital x D’s Profit Share x Reciprocal of Combined New Share of Old Partners

                                     = 1,47,000 x (1/6) x (6/5)

                                      = 29,400

Concept: Preparation of Revaluation Account and Balance Sheet
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