Question

Alfa and Beta are partners in a firm. Their Balance Sheet as at 31st March, 2024, is given below:

Balance Sheet of Alfa and Beta As of 31st March, 2024
Liabilities	(₹)	(₹)	Assets	(₹)	(₹)
Sundry Creditors		1,16,000	Cash at Bank		93,600
Workmen’s Compensation Reserve		24,000	Sundry Debtors		76,400
Capital Accounts:		1,80,000	Stock		1,10,000
Alfa	1,00,000		Investment		20,000
Beta	80,000		Goodwill		20,000
		3,20,000			3,20,000

On 1st April, 2024, they admit Beta’s son Gama, as a partner on the following terms:

1. Gama to have `1/4` share of profits, half of which is to be gifted to him by his father and the remaining half to be purchased from Alfa.
2. Gama to bring in ₹ 60,000 as his capital but would be unable to bring in cash his share of goodwill.
3. Goodwill of the firm to be valued at ₹ 40,000.
4. 50% of the investment to be taken over by Alfa and Beta in their profit-sharing ratio.
5. The liability on account of Workmen’s Compensation Claim to be ₹ 30,000.

You are required to:

1. Calculate the new profit-sharing ratio of all the partners.
2. Prepare the Partners’ Capital Accounts.

Answer 1

(i)
Gifted by Beta = `1/2  "of"  1/4 = 1/8`

Purchased from Alfa = `1/8`

New Ratio of Alfa = `1/2 - 1/8`

= `1/2 xx 4/4 = 4/8`

= `4/8 - 1/8`

= `(4 - 1)/8`

= `3/8`

New Ratio of Beta = `1/2 - 1/8`

= `1/2 xx 4/4 = 4/8`

= `4/8 - 1/8`

= `(4 - 1)/8`

= `3/8`

New Ratio of Gama = `1/4 xx 2/2`

= `2/8`

∴ New Profit Sharing Ratio = `3/8 : 3/8 : 2/8` or 3 : 3 : 2

(ii)

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Alpha	Beta	Gama	Particulars	Alpha	Beta	Gama
To Goodwill	10,000	10,000		By Bal b/d	1,00,000	80,000
To Investment	5,000	5,000		By Cash/Bank			60,000
To Revaluation	3,000	3,000		By Gama’s Current A/c	5,000
To Bal c/d	87,000	62,000	60,000
	1,05,000	80,000	60,000		1,05,000	80,000	60,000

Working Notes:

Beta has ‘gifted’ `1/8` share and balance `1/8` share ‘Purchased’ from Alfa, `1/8`th Share in goodwill = `1/8 xx 40,000` = ₹ 5,000 will be credited to Alfa’s Capital A/c only.