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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

ConceptRetirement and Death of a Partner - Calculation of New Profit Sharing Ratio

#### 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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