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A, B And C Were Partners in a Firm Sharing Profits in the Ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 Was as Follows: - CBSE (Arts) Class 12 - Accountancy

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Question

AB and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:

Liabilities

Amount

(₹)

Assets

Amount

​(₹)

Creditors 50,000 Land 50,000
Bills Payable 20,000 Building 50,000
General Reserve 30,000 Plant 1,00,000
Capital A/cs:   Stock 40,000
 A 1,00,000   Debtors 30,000
 B 50,000   Bank 5,000
 C  25,000 1,75,000    
  2,75,000   2,75,000


​ From 1st April, 2015, AB and decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Building A/c

3,000

Land A/c

30,000

Revaluation Profit

 

Creditors A/c

6,000

A

16,500

 

 

 

B

11,000

 

 

 

C

5,500

33,000

 

 

 

36,000

 

36,000

 

Partners’ Capital Account

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

A’s Capital A/c

 

 

25,000

Balance b/d

1,00,000

50,000

25,000

Balance c/d

1,56,500

71,000

10,500

R/v Profit

16,500

11,000

5,500

 

 

 

 

General Reserve

15,000

10,000

5,000

 

 

 

 

C’s Capital A/c

25,000

 

 

 

1,56,500

71,000

35,500

 

1,56,500

71,000

35,500

 

Balance Sheet

as on March 31, 2015 

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital A/c

 

Land

50,000

 

A

1,56,500

 

Add: Increase

30,000

80,000

B

71,000

 

Building

50,000

 

C

10,500

2,38,000

Less: Dep.

3,000

47,000

 

 

Plant

1,00,000

Creditors

50,000

 

Bank

5,000

Less: Written-off

6,000

44,000

Stock

40,000

Bills Payable

20,000

Debtors

30,000

 

3,02,000

 

3,02,000

Working Notes : 

Old ratio                                                       New ratio

`3: 2: 1`                                                           `1: 1: 1`

S/R of A = Old ratio - New ratio = `3/6 -1/3 = 1/6` (sacrificing)

S/R of B = Old ratio - New ratio = `2/6 -1/3 = 0/6` 

S/R of C = Old ratio - New ratio = `1/6 -1/3 = 1/6` (Gaining)

C will compensate A, since he is gaining 

C's capital A/c Dr.         25,000

         To A's capital A/c           25,000

  Is there an error in this question or solution?

APPEARS IN

Solution A, B And C Were Partners in a Firm Sharing Profits in the Ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 Was as Follows: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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