Question

Following is the balance sheet of Harish and Girish

               Balance Sheet as on 31^st March, 2010

Liabilities	Amount (Rs)	Amount (Rs)	Assets	Amount (Rs)	Amount (Rs)
Creditors		38000	Cash in Hand		37000
Bills Payable		46,000	Stock		21000
Profit and Loss A/c		16,000	Debtors	46000	40000
Capital A/c’s			(-)R.D.D	6000
Harish	100000	240000	Equipments		12000
Girish	140000		Furniture		25000
			Plant		85000
			Building		120000
		340000			340000

They admitted Shirish on 1^st April 2010 on the following conditions:

1) For his 1/3^rd share in the future profits Shirish brings Rs 2,00,000 as his Capital.

2) It is decided to raise goodwill by Rs 90,000 and write it off fully after Shirish’s admission.

3) Equipments and plant to be depreciated by 20% and10% respectively and Building to be appreciated by 15%.

4) Bills Payable were retired for Rs 35,000

5) All debtors are considered good.

6) Furniture of the book value Rs 12,000 was taken over by Harish at 40% of the book value.

Prepare, revaluation A/c, Partner’s Capital Account and Balance Sheet of the new firm.

Answer 1

                     Profit and Loss Adjustment Account
Dr.                                                                                         Cr.

Particulars		Amount (Rs)	Particulars	Amount (Rs)
Plant		8500	Bills Payable	11000
Equipment		2400	Reserve for Doubtful Debts	6000
Furniture		7200	Building	18000
Profit transferred to :
Harish's Capital	8450	16900
Girish;s Capital	8450
		35000		35000

 

                               Partners’ Capital Accounts
Dr.                                                                                       Cr.

Particulars	Harish	Girish	Shirish	Particulars	Harish	Girish	Shirish
Plant	4800			Balance b/d	100000	140000
Goodwill (Written off)	30000	30000	30000	Profit and loss A/c	8000	8000
Balance c/d	126650	171450	170000	Profit and Loss Adjustment (Profit)	8450	8450
				Cash			200000
				Premium for Goodwill	45000	45000
	161450	201450	200000		161450	201450	200000

Balance Sheet
as on April 01,2012 after shirish's admission

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		38000	Stock		21000
Capital			Debtors		46000
Harish	126650	468100	Equipment	12000	9600
Girish	171450		Less : 20% Depreciation	2400
Shirish	170000		Plant	85000	76500
			Less : 10% Depreciation	8500
			Furniture	25000	13000
			Less : Taken by Harish	12000
			Building		138000
			Cash		202000
		506100			506100

Working Notes:

Calculation of Profit Sharing Ratio

Old Ratio = Harish : Girish = 1 : 1

Shirish's Share = `1/3`

Let the total share of firm = 1

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

Harish's New Share = `2/3 xx 1/2 = 2/6`

Girish's New Share = `2/3 xx 1/2 = 2/6`

New Profit Sharing Ratio of Harish , Girish and Shirish
= `2/6 : 2/6 : 1/3 = (2:2:2)/6`

Sacrificing Ratio = Old Ratio - New Ratio

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

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

Sacrificing Ratio = 1 : 1

WN 1: Distribution of Profit and Loss A/c

Harish will give = `16000 xx 1/2 = "Rs" 8000`

Girish  will give = `16000 xx 1/2 = "Rs" 8000`

WN 2: Distribution of Shirish’s Share of Goodwill 

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

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

WN 3: Writing off Goodwill

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

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

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

WN 4 :

Loss of Furniture taken by Harish
= `"Rs" 12000 - "Rs" 4800 ("Rs" 12000 xx 40/100)`
= Rs 7200

WN 5 : Cash Account 
Dr.                             Cash Account                                   Cr.

Particulars	Amount (Rs)	Particulars	Amount (Rs)
Balance b/d	37000	Goodwill Written off	90000
Premium for Goodwill	90000	Bills Payable	35000
Shirish’s Capital A/c	200000	Balance c/d	202000
	327000		327000