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
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
