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Question
Following is the balance sheet at Sharmila, Urmila and Pramila, who shared profits and losses in the ratio of 5 : 3 : 2 respectively:
Balance Sheet as on 31st March, 2013
| Liabilities | Amount | Assets | Amount |
| Capital accounts: | Land and buildings | 250000 | |
| Sharmila | 2,00,000 | Plant and Machinery | 70000 |
| Urmila | 1,50,000 | Furniture | 20000 |
| Pramila | 1,00,000 | Sundry debtors | 90000 |
| Reserve fund | 50,000 | Stock | 56500 |
| Sundry creditors | 42,800 | Bills receivable | 7400 |
| Bills payable | 6,000 | Cash in hand | 3700 |
| Cash at bank | 51200 | ||
| 5,48,800 | 5,48,800 |
Pramila retired on 31st March, 2013 on the following terms:
(1) Goodwill of the firm was valued at Rs 60,000. It was decided that ‘goodwill’ should be raised to the extent of Pramila’s share only, and to be written off immediately.
(2) Land and building to be appreciated by Rs 20,000. Stock is revalued at Rs 58,500. Furniture is to be depreciated by 10%.
(3) Amount payable to Pramila is to be transferred to her loan account.
Give Journal Entries in the books of the firm.
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Solution
Journal of Partnership Firm
|
Date
|
Particulars
|
L.F.
|
Debit (Rs.)
|
Credit (Rs. )
|
|
31.3.13
|
Reserve Fund A/c ..... Dr.
|
50000
|
||
|
To Sharmila’s Capital A/c
|
25000
|
|||
|
To Urmila’s Capital A/c
|
15000
|
|||
|
To Pramila’s Capital A/c
|
10000
|
|||
|
[Being reserve fund distributed and transfrred to all partners’ capital account in their old ratio)
|
||||
|
31.3.13
|
Goodwill A/c ...... Dr.
|
12000
|
||
|
To Pramila’s Capital A/c
|
12000
|
|||
|
[Being Goodwill raised and credited to Pramila’s Capital A/c ]
|
||||
|
31.3.13
|
Sharmila’s Capital A/c .... Dr.
|
7500
|
||
|
Urmila’s Capital A/c ..... Dr.
|
4500
|
|||
|
To Goodwill A/c
|
12000
|
|||
|
[Being Goodwill written off and debited to remaining partners’ capital A/c in their gain ratio]
|
||||
|
31.3.13
|
Land and Building A/c .... Dr.
|
20000
|
||
|
Stock A/c .... Dr.
|
2000
|
|||
|
To Profit and Loss Adjustment A/c
|
22000
|
|||
|
[Being appreciation in the value of Assets recorded]
|
||||
|
31.3.13
|
Profit and Loss Adjustment A/c .... Dr.
|
2000
|
||
|
To Furniture A/c
|
2000
|
|||
|
[Being the furniture depreciated in value]
|
||||
|
31.3.13
|
Profit and Loss Adjustment A/c .... Dr.
|
20000
|
||
|
To Sharmila’s Capital A/c
|
10000
|
|||
|
To Urmila’s Capital A/c
|
6000
|
|||
|
To Pramila’s Capital A/c
|
4000
|
|||
|
[Being profit on revaluation of assets and liabilities transfered to partners’ capital A/c ]
|
||||
|
31.3.13
|
Pramila’s Capital A/c .......Dr.
|
126000
|
||
|
To Pramila’s Loan A/c
|
126000
|
|||
|
[Being balance due to Pramila transferred to her Loan A/c ]
|
|
Particulars
|
Amount
|
Amount
|
Particulars
|
Amount
|
Amount
|
|
To Furniture A/c
|
2000
|
By Land and Buildings A/c
|
20000
|
||
|
To Partners’ Capital A/c
|
By Stock A/c
|
2000
|
|||
|
Sharmila
|
10000
|
||||
|
Urmila
|
6000
|
||||
|
Pramila
|
4000
|
20000
|
|||
|
22000
|
22000
|
Partners Capital Accounts
|
Particulars
|
SHARMILA
|
URMILA
|
PRAMILA
|
Particulars
|
SHARMILA
|
URMILA
|
PRAMILA
|
|
To Goodwill A/c
|
7500
|
4500
|
By Balance b/d
|
200000
|
150000
|
100000
|
|
|
To Pramila’s Loan A/c
|
126000
|
By Reserve Fund
|
25000
|
15000
|
10000
|
||
|
By Goodwill A/c
|
-
|
-
|
12000
|
||||
|
By Profit & Loass Adjustment A/c
|
10000
|
6000
|
4000
|
||||
|
To Balance c/d
|
227500
|
166500
|
-
|
||||
|
235000
|
171000
|
126000
|
235000
|
171000
|
126000
|
Working Note :-
Pramila s share in goodwill =(value of goodwill raised ) (pramilas share in profit )
=`60000xx12/10=12000`
Calculation of gain ratio :-
old ratio = 5:3:2= `5/10,3/10,2/10`
new ratio = 5:3 `5/8 ,3/8`
Gain ratio = New ratio - old ratio
Sharmila' s gain ratio =`5/5- 5/10=(50-40)/80=10/80`
urmila's gain ratio = `3/8-3/10=(30-24)/80=6/80`
`∴ "gain ratio" =10/80 : 6/80 `
= 10: 6
= 5:3
