Question

Following is the Balance Sheet of Dhiraj and Niraj who shared profits and losses equally.

                  Balance Sheet as on 31^st March, 2013

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Capital A/c’s		Plant and Machinery	45000
Dhiraj	125000	Land and Building	84000
Niraj	35000	Patents	3400
Creditors	86200	Stock	47800
Bills Payable	28,000	Furniture	10600
General Reserve	6800	Debtors	80000
		Cash	10200
	281000		281000

On 1^st April, 2013 they agreed to admit Suraj on the following terms and conditions:

1) Suraj to bring for 1/3^rd share in future profit in cash Rs 90,000 towards his capital.

2) The firms goodwill should be raised to Rs 90,000 and it is to be written off after Suraj admission in new profit ratio.

3) Plant and Machinery was found undervalued by 10% and Land and Building was found overvalued by 20%.

4) Stock to be increased by Rs 2,200 and furniture to be reduced to Rs 10,000/-

5) Out of creditors Rs 1,200 is no more payable.

6) The Capital A/c to be adjusted in new profit sharing ratio by opening the current accounts.

Prepare Revaluation A/c, Capital A/c and New Balance Sheet.

Answer 1

                      Profit and Loss Adjustment Account
Dr.                                                                                           Cr.

Particulars	Amount (Rs)	Particulars		Amount (Rs)
Land and Building	14000	Plant and Machinery		5000
Furniture	600	Stock		2200
		Creditors		1200
		Loss transferred to:
		Dhiraj’s Capital	3100	6200
		Niraj’s Capital	3100
	14600			14600

                        Partners' Capital Accounts

Dr.                                                                                        Cr. 

Particulars	Dhiraj	Niraj	Suraj	Particulars	Dhiraj	Niraj	Suraj
Goodwill (Written off)	30000	30000	30000	Balance b/d	125000	35000
Profit and Loss Adjustment (Loss)	3100	3100		General Reserve	3400	3400
Current A/c	50300			Premium for Goodwill	45000	45000
Balance c/d	90000	50300	60000	Cash			90000
	173400	83400	90000		173400	83400	90000
Balance b/d	90000	90000	90000	Balance b/d	90000	50300	60000
				Current A/c		39700	30000
	90000	90000	90000		90000	90000	90000

 

Balance Sheet

as on April 01, 2013 after Suraj’s admission 

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital A/c:			Plant and Machinery		50000
Dhiraj	90000		Land and Building		70000
Niraj	90000		Patents		3400
Suraj	90000		Stock		50000
A's Current A/c		50300	Furniture	10600	10000
Bills Payable		28000	Less : Depreciation	600
Creditors	86200		Debtors		80000
Less : Not Payable	1200		Cash (Rs 10200 + Rs 90000)		100200
			Current A/c:
			Niraj	39700	69700
			Dhiraj	39700
		433300			433300

Working Notes:
Calculation of New Profit Sharing Ratio 

Old Ratio = Dhiraj : Niraj = 1 : 1

Manoj's Share = `1/3`

Let the total share of firm = 1

Remaining share of the firm = `1-1/3 = 2/3`

Old -Profit Sharing Ratio = 1 : 1

Calculation of New Profit Sharing Ratio :

Dhiraj's New Share =`2/3 - 1/2 = 2/6`

Niraj's New Share = `2/3 - 1/2 = 2/6`

New profit sharing ratio of Dhiraj , Niraj and Suraj =`2/6 : 2/6 : 1/3` = 1 : 1 : 1

Sacrificing Ratio = Old Ratio - New Ratio

Dhiraj's Sacrifice =`1/2 - 1/3 = 1/6`

Niraj's Sacrifice = `1/2 - 1/3 = 1/6`

Sacrificing Ratio Dhiraj's and Niraj's = 1:1

WN 1: Calculation of Plant and Machinery Undercasted 

Plant and Machinery Undercast =`45000/90 xx 10 = 5000`

WN 2: Calculation of Land and Building Overcasted 

Land and building Overvalued = `84000/120 xx 20 ="Rs" 14000`

WN 3: Distribution of General Reserve 

Dhiraj will get =`6800 xx 1/2 = "Rs" 3400`

Niraj will get = `6800 xx 1/2 = "Rs" 3400`

WN 4: Distribution of Suraj’s Share of Goodwill 

Dhiraj will get =`90000 xx 1/2 = "Rs" 45000`

cwill get = `90000 xx 1/2 = "Rs" 45000`

WN 5 : Writing off Goodwill

Dhiraj's Capital Account will be debited = `90000 xx 1/3 = "Rs" 30000`

Niraj's Capital Account will be debited = `90000 xx 1/3 = "Rs" 30000`

Suraj's Capital Account will be debited = `90000 xx 1/3 = "Rs" 30000`

WN 6: Calculation of New Capital

Total Capital of the Firm
= Share of Capital brought in by Suraj × Reciprocal of Suraj's share suraj's capital = Rs 90000

Total Capital of the firm = `90000 xx 3/1 = "Rs."  270000`

Dhiraj's New Capital = Rs `270000 xx 1/3 = "Rs"  90000`

Niraj's New Capital = Rs. `270000 xx 1/3 = "Rs"   90000`j's New Capital = Rs. `270000 xx 1/3 = "Rs" 90000`