Amit, Balan and Chander were partners in a firm sharing profits in the proportion of `1/2, 1/3 and 1/6`respectively. Chander retired on 1-4-2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
| Balance Sheet of Amit, Balan and Chander as on 1-4-2014 | |||
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Sundry Creditors Provident Fund General Reserve Capitals Amit 40,000 Balan 36,500 Chander 2,000 |
12,600 3,000 9,000
96,500 |
Bank Debtors 30,000 Less: Provision 1,000 Stock Investments Patents Machinery |
4,100
29,000 25,000 10,000 5,000 48,000 |
| 1,21,100 | 1,21,100 | ||
It was agreed that:
(a) Goodwill will be valued at Rs 27,000.
(b) Depreciation of 10% was to be provided on machinery.
(c) Patents were to be reduced by 20%.
(d) Liability on account of Provident Fund was estimated at Rs 2,400.
(e) Chander took over investments for Rs 15,800.
(f) Amit and Balan decided to adjust their capitals in a proportion of their profit sharing ratio by
opening current accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.
Solution
| Revaluation Account | |||
| Dr. | Cr | ||
| Particulars | Rs | Particulars | Rs |
|
To Machinery A/c To Patents A/c To Profit transferred to: Amit’s Capital A/c 300 Balan’s Capital A/c 200 Chander’s Capital A/c 100 |
4,800 1,000
600 |
By Investments A/c By Provident Fund A/c
|
5,800 600
|
| 6,400 | 6,400 | ||
| Partner’s Capital Account | |||||||
| Dr. | Cr. | ||||||
| Particulars | Amit | Balan | Chander | Particulars | Amit | Balan | Chander |
|
To Investments A/c To Chander Capital A/c To Loan A/c To Current A/c To Balance c/d
|
2,700
48,000
|
1,800
5,900 32,000
|
15,800
10,300
|
By Balance b/d By Revaluation A/c (Profit) By General Reserve A/c By Amit’s Capital A/c By Balan’s Capital A/c By Current A/c |
40,000 300 4,500
5,900 |
36,500 200 3,000
|
20,000 100 1,500 2,700 1,800
|
|
|
50,700 |
39,700 |
26,100 |
|
50,700 |
39,700 |
26,100 |
Working Notes:
WN1: : Adjustment of Goodwill
Chander's Share of Goodwill = `27000 xx 1/6 = 4500`
Amit will pay = `4500 xx 3/5 = 2700`
Balan will pay = `4500 xx2/5 = 1800`
WN2 Adjustment of Capital:
Adjusted Old Capital of Amit = 44,800 (40,000 + 4,500 + 300) – 2,700 = 42,100
Adjusted Old Capital of Balan = 39,700 (36,500 + 3,000 + 200) – 1,800 =37,900
Total Adjusted Capital = 42,100 + 37,900 = 80,000
New Profit Sharing Ratio = 3:2
Amit's New Capital = `80000 xx 3/5 = 48000`
Balan's New Capital = `80000 xx 2/5 = 32000`
Note : Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio
