Following is the Balance sheet of Harsha and Versha’s firm on 31st March, 2016. They share profit and losses in the ratio of 3 : 2. Balance sheet as on 31st March, 2016 Liabilities Amount (₹) Assets Amount (₹) Capital A/c: Land & building 2,00,000 Harsha 2,80,000 Furniture 76,000 Varsha 2,80,000 Sundry debtors 3,00,000 Sundry creditors 4,00,000 Stock 1,60,000 Cash at bank 2,24,000 9,60,000 9,60,000 They decided to admit Asha on 1st April, 2016, into partnership on the following terms: Asha should bring Rs. 80,000 as her share of goodwill, which is to be retained in the business. She should bring Rs. 1,00,000 as her capital for 1/4th share in future profits. land and building to be valued at Rs. 2,40,000 and furniture be reduced by 10%. A provision of 5% on debtors to be made for doubtful debts. The stock is to be taken at a value of Rs. 2,00,000. The excess of capital of Harsha and Varsha over their due proportion of sharing profits in the firm is to be transferred to their respective loan accounts. Prepare: Profit and Loss Adjustment Account, Partner’s Capital Account and new Balance Sheet of the firm.

In the books of Harsha and Varsha Dr. Profit and Loss Adjustment A/c Cr. Particulars Amount (₹) Amount (₹) Particulars Amount (₹) To Furniture A/c 7,600 By Land and Building A/c 40,000 To R.D.D A/c 15,000 By Stock A/c 40,000 To Profit on Revaluation transferred to partners capital A/c Harsha 34,440 Varsha 22,960 57,400 80,000 80,000 Dr. Partner's Capital A/c Cr. Particulars Harsha Varsha Asha Particulars Harsha Varsha Asha Varsha's Loan A/c[Balancing Fig] 214,960 By Balance b/d 280,000 280,000 Harsha's Loan A/c[Balancing Fig.] 182,440 By Goodwill A/c 48,000 32,000 To Balance c/d[Working Note] 180,000 120,000 100,000 By Bank A/c 100,000 By Profit or Loss Adjustment A/c [Profit] 34,440 22,960 362,440 334,960 100,000 362,440 334,960 100,000 Balance Sheet of New Firm Liabilities Amount (₹) Amount (₹) Assets Amount (₹) Amount (₹) Sundry Creditors 4,00,000 Land & Building 2,00,000 Harsha’s Loan A/c 1,82,240 (+) Appreciation 40,000 2,40,000 Varsha’s Loan A/c 2,14,960 Furniture 76,000 Capital A/c[Working Note] (-) Depreciation @ 10% (7,600) 68,400 Harsha 1,80,000 Sundry Debtors 3,00,000 Varsha 1,20,000 (-) R.D.D. @ 5% (15,000) 2,85,000 Asha 1,00,000 4,00,000 Stock 1,60,000 (+) Appreciation 40,000 2,00,000 Bank Balance 4,04,000 11,97,400 11,97,400 Dr. Bank A/c Cr. Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 2,24,000 By Balance c/d 4,04,000 To Goodwill A/c 80,000 To Asha’s Capital A/c 1,00,000 4,04,000 4,04,000 Dr. Goodwill A/c Cr. Particulars Amount (₹) Amount (₹) Particulars Amount (₹) To Harsha’s Capital A/c 48,000 By Bank A/c 80,000 To Varsha’s Capital A/c 32,000 80,000 80,000 80,000 Working Note: Calculation of New Ratio and Proportionate Capital Balance Ratio = 1 – Share Given to New Partner Therefore, Balance Ratio = 1 – 1/4 = 3/4 Harsha’s New Ratio = B.R. – O.R. = `3/4 xx 3/5 = 9/20` Varsha’s New Ratio = B.R. × O.R. = `3/4 xx 2/5 = 6/20` Asha’s New Ratio = `1/4 xx 5/5 = 5/20` Therefore, their New Ratio = 9 : 6 : 5 New Partner brought Rs. 1,00,000 as her new capital Therefore, their proportionate capital are Harsha’s Capital = Rs. 1,80,000 Varsha’s Capital = Rs. 1,20,000 Asha’s Capital = Rs. 1,00,000

Following is the Balance Sheet of Harsha and Versha'S Firm on 31st March, 2016. They Share Profit and Losses in the Ratio of 3 : 2. They Decided to Admit Asha on 1st April, 2016, - Book Keeping and Accountancy

Question

Following is the Balance sheet of Harsha and Versha’s firm on 31st March, 2016. They share profit and losses in the ratio of 3 : 2.

Balance sheet as on 31st March, 2016
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital A/c:		Land & building	2,00,000
Harsha	2,80,000	Furniture	76,000
Varsha	2,80,000	Sundry debtors	3,00,000
Sundry creditors	4,00,000	Stock	1,60,000
		Cash at bank	2,24,000
	9,60,000		9,60,000

They decided to admit Asha on 1st April, 2016, into partnership on the following terms:

Asha should bring Rs. 80,000 as her share of goodwill, which is to be retained in the business.
She should bring Rs. 1,00,000 as her capital for 1/4th share in future profits.
land and building to be valued at Rs. 2,40,000 and furniture be reduced by 10%.
A provision of 5% on debtors to be made for doubtful debts.
The stock is to be taken at a value of Rs. 2,00,000.
The excess of capital of Harsha and Varsha over their due proportion of sharing profits in the firm is to be transferred to their respective loan accounts.

Prepare:

Profit and Loss Adjustment Account, Partner’s Capital Account and new Balance Sheet of the firm.

Ledger

Solution

In the books of Harsha and Varsha
Dr.	Profit and Loss Adjustment A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Furniture A/c		7,600	By Land and Building A/c	40,000
To R.D.D A/c		15,000	By Stock A/c	40,000
To Profit on Revaluation transferred to partners capital A/c
Harsha	34,440
Varsha	22,960	57,400
		80,000		80,000

Dr.	Partner's Capital A/c						Cr.
Particulars	Harsha	Varsha	Asha	Particulars	Harsha	Varsha	Asha
Varsha's Loan A/c [Balancing Fig]		214,960		By Balance b/d	280,000	280,000
Harsha's Loan A/c [Balancing Fig.]	182,440			By Goodwill A/c	48,000	32,000
To Balance c/d [Working Note]	180,000	120,000	100,000	By Bank A/c			100,000
				By Profit or Loss Adjustment A/c [Profit]	34,440	22,960
	362,440	334,960	100,000		362,440	334,960	100,000

Balance Sheet of New Firm
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		4,00,000	Land & Building	2,00,000
Harsha’s Loan A/c		1,82,240	(+) Appreciation	40,000	2,40,000
Varsha’s Loan A/c		2,14,960	Furniture	76,000
Capital A/c [Working Note]			(-) Depreciation @ 10%	(7,600)	68,400
Harsha	1,80,000		Sundry Debtors	3,00,000
Varsha	1,20,000		(-) R.D.D. @ 5%	(15,000)	2,85,000
Asha	1,00,000	4,00,000	Stock	1,60,000
			(+) Appreciation	40,000	2,00,000
			Bank Balance		4,04,000
		11,97,400			11,97,400

Dr.	Bank A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	2,24,000	By Balance c/d	4,04,000
To Goodwill A/c	80,000
To Asha’s Capital A/c	1,00,000
	4,04,000		4,04,000

Dr.	Goodwill A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Harsha’s Capital A/c	48,000		By Bank A/c	80,000
To Varsha’s Capital A/c	32,000	80,000
		80,000		80,000

Working Note:

Calculation of New Ratio and Proportionate Capital

Balance Ratio = 1 – Share Given to New Partner

Therefore, Balance Ratio = 1 – 1/4 = 3/4

Harsha’s New Ratio = B.R. – O.R. = `3/4 xx 3/5 = 9/20`

Varsha’s New Ratio = B.R. × O.R. = `3/4 xx 2/5 = 6/20`

Asha’s New Ratio = `1/4 xx 5/5 = 5/20`

Therefore, their New Ratio = 9 : 6 : 5

New Partner brought Rs. 1,00,000 as her new capital

Therefore, their proportionate capital are

Harsha’s Capital = Rs. 1,80,000

Varsha’s Capital = Rs. 1,20,000

Asha’s Capital = Rs. 1,00,000

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Partnership Final Accounts

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