Question

Following is the Balance Sheet of the firm of Nana, Nani and Sona who share Profits and Losses in the ratio of their Capital.

Balance Sheet as on 31st March, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital A/c:		Machinery		20,000
Nana	50,000	Building		55,000
Nani	20,000	Stock		12,000
Sona	30,000	Debtors	12,000	11,000
Creditors	10,000	Less: RDD	1,000
Bills Payable	5,000	Cash		17,000
	1,15,000			1,15,000

Sona retires from the business on 1st April 2019 and the following Adjustment were agreed.

1. Stock is to be valued at 92% of its Book Value.
2. RDD is to be maintained at 10% on debtors.
3. The value of Building is to be appreciated by 20%.
4. The Goodwill of the firm be fixed at ₹ 12000. Sona’s share in the same be adjusted in the accounts of continuing partners in gaining Ratio.
5. The entire Capital of the new firm be fixed at ₹ 1,60,000 between Nana and Nani in their New Profit sharing ratio which is fixed at 3:1 making adjustment in Cash.
6. Amount payable to Sona paid in cash.

Prepare: Revaluation Account, Partnership Capital Account and Balance Sheet of the reconstituted firm.

Answer 1

In the Books of the Firm
Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Stock A/c		960	By Building A/c	11,000
To RDD A/c		200
To  Profit transferred to Partners Capital A/c:
Nana	4,920	9,840
Nani	1,968
Sona	2,952
		11,000		11,000

 

Dr.	Partner’s Capital Accounts						Cr.
Particulars	Nana (₹)	Nani (₹)	Sona (₹)	Particulars	Nana (₹)	Nani (₹)	Sona (₹)
To Goodwill A/c	3,000	600	-	By Balance b/d	50,000	20,000	30,000
To Cash A/c	-	-	36,552	By Revaluation A/c (Profit)	4,920	1,968	2,952
To Balance c/d	1,20,000	40,000	-	By Goodwill A/c	-	-	3,600
				By Cash A/c	68,080	18,632	-
	1,23,000	40,600	36,552		1,23,000	40,600	36,552

 

Balance Sheet as on 1st April, 2019
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		10,000	Cash		67,160
Bills Payable		5,000	Machinery		20,000
Capital A/c:			Stock	12,000	11,040
Nana	1,20,000	1,60,000	Less: Reduction	960
Nani	40,000		Debtors	12,000	10,800
			Less: RDD	1,200
			Building	55,000	66,000
			Add: Appreciation	11,000
		1,75,000			1,75,000

Working Note:

Calculation of Gaining Ratio:

Old Ratio = 5 : 2 : 3

New Ratio = 3 : 1

Gain Ratio = New Ratio – Old Ratio

Nana’s Gain Ratio = `3/4 - 5/10 = (30-20)/ 40 = 10/40`

Nani’s Gain Ratio = `1/4 - 2/10 = (10-8)/40 = 2/40` 

Gain Ratio = 10 : 2 i.e. 5 : 1