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,

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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Q 3.A Q 2.B Q 3.B

2018-2019 (March) Set 1

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RELATED QUESTIONS

From the following Trial Balance of M/s Mahesh and Umesh, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet as on that date. Profit sharing ratio of Mahesh and Umesh was 3/5th and 2/5th respectively.

Trial Balance as on 31^st March, 2013
Debit Balance	Amount (₹)	Credit Balance	Amount (₹)
Investments	56,000	Capital A/c:
Carriage	7,000	Mahesh	1,62,000
Loose Tools	17,000	Umesh	1,08,000
Building	1,50,000	Current A/c:
Salary	13,000	Mahesh	16,200
Audit fees	8,500	Umesh	10,800
Opening stock	83,000	Sundry Creditors	99,000
Wages	7,500	Sales	4,20,000
Purchases	1,97,000	Bank Overdraft	56,400
Motive Power	15,000
Bad Debts	6,400
Printing and Stationery	4000
Debtors	96,000
Cash at Bank	52,000
Machinery	72,000
Motor Van	88,000
	8,72,400		8,72,400

Adjustments:

1) Stock on hand on 31st March, 2013 was valued at Rs 76,000.

2) Interest on partner’s capital at 5% p.a. was allowed.

3) Goods worth Rs 2,000 and Rs 1,500 withdrawn by Mahesh and Umesh respectively for their personal use.

4) Mahesh is entitled to get salary of Rs 6,500 and Umesh is to be given 20% commission on sales.

5) Rs. 2,500 due from customer is not recoverable.

6) Depreciate Motor Van at 8% p.a. and Building at 7% p.a.

From the following Trial Balance of M/s Sanjay and Vijay, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet as on that date after taking into consideration the adjustments given below.

Trial Balance as on 31^st March, 2013

Debit Balance	Amount Rs	Credit Balance	Amount Rs
Salaries and wages	12000	Sales	110000
Postage and Telegram	1,750	Sundry Creditors	72700
Opening Stock	23,500	Bills Payable	40000
Plant and Machinery	70,000	10% Bank loan (Taken on 1st Oct 2012)	60000
Advertisement	5,000	Outstanding Audit fees	5900
Import duty	2,100	Capital A/c-
Bad debts	1000	Sanjay	45000
Purchases	98500	Vijay	45000
Sundry Debtors	45800
Bills Receivable	16700
Carriage outward	1800
Wages and stationery (Note 2)	14000
Printing and stationery	4600
Cash in hand	1850
Leasehold Premises	80000
	378600		378600

Adjustments:
1) Closing stock was valued at Rs 30,000.

2) Postage stamps of Rs 250 and stationery of Rs 400 are unused.

3) Goods of Rs 2,500 distributed as free samples.

4) Leasehold property is to be run for 10 years w.e.f. 1st October, 2012.

5) Depreciate Plant and Machinery at 10% p.a.

6) Mr. Rajan, our customer become insolvent and could not pay his debts of Rs 1,500.

Keshav and Madhav were partners sharing the profits and losses in the ratio of 2:3. Their Balance Sheet is as follows:

Balance Sheet as on 31^st March, 2011

Liabilities	Amount (Rs)	Assets		Amount (Rs)
Capital Accounts :		Live stock		20000
Keshav	250000	Building		138000
Madhav	260000	Investment		45000
Creditors	8500	Loose Tools		38000
		Debtors	90000	72000
		(-)R.D.D	18000	72000
		Profit and Loss A/c		15000
		Closing Stock		104500
		Cash in Hand		86000
	518500			518500

On 1^st April, 2011 they admitted Uddhav on the following terms:

1) The new profit sharing ratio is equal.

2) Uddhav brings Rs 2,00,000 as his capital and Rs 80,000 as share of goodwill in cash.

3) Prepaid insurance of Rs 7,500 was not recorded in the books.

4) Loose tools were found undervalued by 5% and Building was found overvalued by 15% in the books.

5) All debtors are considered as good and out of creditors Rs 500 is no longer payable.

6) The market Value of Investment is 50% more than its book value.

Prepare, Profit and Loss Adjustment in A/c, Capital Accounts of partners and Balance Sheet of the new firm.

Ashok and Sangmesh are in partnership sharing profit and losses in the ratio of 2 : 1. From the following trial balance and adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended on 31st March 2016 and Balance sheet as on that date:

Trial Balance as on 31st March 2016
Particulars	Debit Amount (₹)	Credit Amount (₹)
Prepaid insurance	3,200
Insurance	8,000
R.D.D.		4,000
Discount	3,200
Postage and telephone	12,800
Debtors and creditors	2,64,000	2,72,000
Salaries	2,24,000
Wages	96,000
Opening stock	1,92,000
Carriage	4,000
Purchased and sales	7,72,800	12,06,400
Return inward/Outward	22,400	36,800
Bank Overdraft		4,83,200
Plant and Machinery	96,000
Land and Building	7,04,000
Partner's Capital accounts:
Ashok		2,08,000
Sangmesh		1,92,000
	24,02,400	24,02,400

Adjustment:

Write off Rs. 8,000 for bad debts and provide R.D.D. @ 5% on debtors.
Goods worth Rs. 16,000 were distributed as free samples.
Closing stock on 31st March 2016 was valued at the cost of Rs. 2,24,000 while its market price was Rs. 2,40,000.
The salaries were outstanding at Rs. 8,000.
Depreciation: Land and Building @ 5% p.a. and Plant and Machinery @ 10 % p.a.

Darshan and Amar were partners sharing profit and losses in the proportion of 2: 1. Their balance sheet is as follows:

Balance sheet as on 31st March 2016

Liabilities	Amt(Rs)	Amt(Rs)	Assets	Amt(Rs)	Amt(Rs)
Capital A/cs:			Building		1,00,000
Darshan	96,000		Furniture		20,000
Amar	64,000	1,60,000	Equipments		10,000
General reserve		18,000	Debtors	63,000
Profit and Loss A/c		6,000	Less: R.D.D	3,000	60,000
Creditors		80,000	Stock		84,000
Pawans loan A/c		26,000	Cash		16,000
		2,90,000			2,90,000

On 1st April, 2016 Ranjit is admitted in the partnership on the following terms.

(1) Ranjit should bring in cash Rs 48,000 as capital for 1/5th share in future profits.
(2) Goodwill was raised in the books of the firm for Rs 18,000
(3) Building is revalued st RS 1,12,000 and tghe value of stock to be reduced by Rs 6,000
(4) Reserve for doubtful debts be maintained at Rs 1,800.
(5) Pawans loand is to be repaid.

Prepare:
(1) Revaluation A/c
(2) Capital A/cs of partners and
(3) Balance sheet of the new firm

Dhiraj and Suraj are partners sharing profits and losses in the ratio of 2 : 1. From the following Trial Balance and adjustments, prepare Trading and Profit and Loss account for the year ended 31st March, 2013 and balance sheet as on that date :
Trial Balance as on 31.03.2013

Particulars	Amount Rs.	Particulars	Amount Rs.
Opening Stock	32,000	Sales	1,93,500
Purchases	64,000	Sundry Creditors	16,500
Plant and Machinery	30,000	Return Outward	2,500
Furniture	18,500	Capital Accounts
Carriage	1,500	Dhiraj	90,000
Wages	30,000	Suraj	50,000
Bills Receivable	5,000
Sundry Debtors	32,000
Conveyance	4,000
Salaries	10,500
Cash in hand	14,750
Land and Building	83,500
Bad debts	1,750
Patents	25,000
	352,500		352,500

Adjustments :

(1) Closing stock : Cost price RS. 25,000 and market price Rs. 30,000.

(2) An amount of Rs. 3,500 spent for repairs to building is debited to building account.

(3) Depreciate plant and machinery and building at 5% p.a.

(4) Included in wages in advance given to workers Rs. 3,000.

(5) Provide Rs. 1,500 for bad and doubtful debts on debtors.

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The account to which all adjustments are made when capital is fixed.

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An asset which can be converted into cash easily.

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The account in which selling expenses of the business are recorded.