Question

Bittu and Chintu were partners in a firm sharing profit and losses in the ratio of 4 : 3. Their Balance Sheet as at 31st March, 2024 was as follows:

Balance Sheet of Bittu and Chintu as at 31st March, 2024
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:		14,00,000	Fixed Assets	15,40,000
Bittu	8,00,000		Stock	3,50,000
Chintu	6,00,000		Debtors	1,40,000
General Reserve		2,10,000	Bank	70,000
Creditors		4,90,000
		21,00,000		21,00,000

On 1^st April, 2024, Diya was admitted in the firm for `1/7`th share in the profits on the following terms:

1. New profit sharing ratio between Bittu, Chintu and Diya will be 3 : 3 : 1.
2. Fixed Assets were found to be overvalued by ₹ 1,40,000.
3. Creditors were paid ₹ 4,20,000 in full settlement.
4. Diya brought proportionate capital and ₹ 5,60,000 as her share of goodwill premium by cheque.

Prepare Revaluation Account and Partner’s Capital Accounts.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To fixed Assets A/с	1,40,000	By creditors A/c		70,000
		By loss on Revaluation		70,000
		Bittu’s Capital	40,000
		Chintu’s Capital	30,000
	1,40,000			1,40,000

 

Dr.	Partner’s Capital Accounts						Cr.
Particulars	Bittu	Chintu	Diya	Particulars	Bittu	Chintu	Diya
To Revaluation A/c	40,000	30,000	-	By Balance b/d	8,00,000	6,00,000	-
To Balance c/d	14,40,000	6,60,000	3,50,000	By Premium for goodwill A/c	5,60,000	-	-
				By General Reserve А/c	1,20,000	90,000	-
				By Bank A/с	-	-	3,50,000
	14,80,000	6,90,000	3,50,000		14,80,000	6,90,000	3,50,000

Working Notes:

1. Calculation of Gain and Sacrifice

Old Ratio of Bittu and Chintu = 4 : 3

Now Ratio of Bittu, Chintu and Diya = 3 : 3 : 1

Sacrificing Ratio = Old Ratio – New Ratio

Bittu = `4/7-3/7=1/7` (Sacrifice)

Chintu = `3/7-3/7` = NIL

2. Calculation of Diya’s Capital:

Adjusted Capital of Bittu and Chintu = ₹ 14,40,000 + ₹ 6,60,000 = ₹ 21,00,000

New Capital of firm = ₹ 21,00,000 × `7/6` = ₹ 24,50,000 

Diya’s Capital = ₹ 24,50,000 × `7/6` = ₹ 3,50,000