Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2013 they admitted Karuna as a new partners for 1/5th share in the profits of the firm. The Balance Sheet of Kalpana and Kanika as on 1st April, 2013, was as follows: Balance Sheet of Kalpana and Kanika as on 1st April, 2013 Liabilities Amount Rs Assets Amount Rs Capitals Land and Building 2,10,000 Kalpana 4,80,000 Plant 2,70,000 Kanika 2,10,000 6,90,000 Stock 2,10,000 General Reserve 60,000 Debtors 1,32,000 Workmen’s Compensation Fund 1,00,000 Less: Provision –12,000 1,20,000 Creditors 90,000 Cash 1,30,000 9,40,000 9,40,000 It was agreed that(i) the value of Land and Building will be appreciated by 20%.(ii) the value of plant be increased by Rs 60,000.(iii) Karuna will bring Rs 80,000 for her share of goodwill premium.(iv) the liabilities of Workmen's Compensation Fund were determined at Rs 60,000.(v) Karuna will bring in cash as capital to the extent of `1/5`th share of the total capital of the new firm.Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of the new firm.

Revaluation Account Dr. Cr. Particulars Amount Rs Particulars Amount Rs Revaluation Profit Land and Building A/c 42,000 Kalpana’s Capital A/c 61,200 Plant A/c 60,000 Kanika’s Capital A/c 40,800 1,02,000 1,02,000 1,02,000 Partners’ Capital Accounts Dr. Cr. Particulars Kalpana Kanika Karuna Particulars Kalpana Kanika Karuna Balance b/d 4,80,000 2,10,000 Cash 2,43,000 Balance c/d 6,49,200 3,22,800 2,43,000 General Reserve 36,000 24,000 Workmen Compensation Fund 24,000 16,000 Revaluation A/c 61,200 40,800 Premium for Goodwill 48,000 32,000 6,49,200 3,22,800 2,43,000 6,49,200 3,22,800 2,43,000 Balance Sheet as on April 01, 2012 after Karuna’s admission Liabilities Amount Rs Assets Amount Rs Creditors 90,000 Cash in Hand 4,53,000 Capitals: Debtors 1,32,000 Kalpana 6,49,200 Less: Provision for debtors 12,000 1,20,000 Kanika 3,22,800 Stock 2,10,000 Karuna 2,43,000 12,15,000 Land and Building 2,52,000 Liability for Workmen Compensation 60,000 Plant 3,30,000 13,65,000 13,65,000

Kalpana and Kanika Were Partners in a Firm Sharing Profits in the Ratio of 3 : 2. on 1st April, 2013 They Admitted Karuna as a New Partners for 1/5th Share in the Profits of the Firm.

Question

Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2. On 1^st April, 2013 they admitted Karuna as a new partners for 1/5th share in the profits of the firm. The Balance Sheet of Kalpana and Kanika as on 1st April, 2013, was as follows:

Balance Sheet of Kalpana and Kanika as on 1^st April, 2013
Liabilities		Amount Rs	Assets		Amount Rs
Capitals			Land and Building		2,10,000
Kalpana	4,80,000		Plant		2,70,000
Kanika	2,10,000	6,90,000	Stock		2,10,000
General Reserve		60,000	Debtors	1,32,000
Workmen’s Compensation Fund		1,00,000	Less: Provision	–12,000	1,20,000
Creditors		90,000	Cash		1,30,000

		9,40,000			9,40,000

It was agreed that
(i) the value of Land and Building will be appreciated by 20%.
(ii) the value of plant be increased by Rs 60,000.
(iii) Karuna will bring Rs 80,000 for her share of goodwill premium.
(iv) the liabilities of Workmen's Compensation Fund were determined at Rs 60,000.
(v) Karuna will bring in cash as capital to the extent of `1/5`th share of the total capital of the new firm.

Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of the new firm.

Solution

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Revaluation Profit			Land and Building A/c	42,000
Kalpana’s Capital A/c	61,200		Plant A/c	60,000
Kanika’s Capital A/c	40,800	1,02,000

		1,02,000		1,02,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Kalpana	Kanika	Karuna	Particulars	Kalpana	Kanika	Karuna
				Balance b/d	4,80,000	2,10,000
				Cash			2,43,000
Balance c/d	6,49,200	3,22,800	2,43,000	General Reserve	36,000	24,000
				Workmen Compensation Fund	24,000	16,000
				Revaluation A/c	61,200	40,800
				Premium for Goodwill	48,000	32,000

	6,49,200	3,22,800	2,43,000		6,49,200	3,22,800	2,43,000

Balance Sheet as on April 01, 2012 after Karuna’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		90,000	Cash in Hand		4,53,000
Capitals:			Debtors	1,32,000
Kalpana	6,49,200		Less: Provision for debtors	12,000	1,20,000
Kanika	3,22,800		Stock		2,10,000
Karuna	2,43,000	12,15,000	Land and Building		2,52,000
Liability for Workmen Compensation		60,000	Plant		3,30,000
		13,65,000			13,65,000

shaalaa.com

Notes

Karuna is admitted for 1/5th share
Let the total share of the firm be 1
Remaining share= `1-1/5=4/5`

This remaining share will be shared among old partners in their old ratio i.e. 3 : 2
Kalpana's Share=`4/5xx3/5=12/25`

Kanika's Share =`4/5xx2/5=8/25` $= \frac{4}{5} \times \frac{2}{5} = \frac{8}{25}$

New Ratio=`12:8:5`

Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio

Kalpana= `3/5-12/25=3/25`

Kanika = `2/5-8/25=2/25`

Sacrificing Ratio = 3 : 2

Adjusted Capital of Kalpana = 6.49,200
Adjusted Capital of Kanika = 3,22,800
Total Adjusted Capital = 9,72,000 (6,49,200+3,22,800)

Karuna's Capital= Adjusted Capital of kalpana and kanika`xx`karuna's share`xx` Reciprocal of thee firm's share

Karuna's Capital= `9,72,000xx1/5xx5/4=Rs 2,43,000`

Admission of Partner> Revaluation of Assets and Liabilities

Is there an error in this question or solution?

Q 17.1 Q 16 Q 17.2

2013-2014 (March) Foreign Set 1

APPEARS IN

2013-2014 (March) Foreign Set 1 (with solutions)

Q 17.1 | 8 marks

RELATED QUESTIONS

Anil and Sunil were partners sharing profits and losses in the ratio of 2:1 respectively. Their Balance Sheet was as follows:

Balance Sheet as on 31st March 2010
Liabilities	Amount (Rs)	Assets	Amount (Rs)
Capital A/c		Cash at Bank	4,000
Anil	24,000	Debtors	15,000
Sunil	16,000	Stock	23,500
Trade Creditors	26,000	Furniture	5,000
Anil’s Loan A/c	6,500	Building	25,000
	72,500		72,500

On 1st April 2010, Ram is admitted in the partnership on the following terms:
(1) Ram should bring in cash of Rs. 12,000 as capital for 1/5th share in future profit.
(2) Goodwill A/c is raised in the books of the firm for Rs. 4,500.
(3) A building is revalued at Rs. 28,000 and the value of stock be reduced by Rs. 1,500.
(4) Reserve for doubtful debts is provided at 5% on debtors.

Prepare:
(a) Profit and Loss Adjustment account.
(b) Capital Accounts of partners.
(c) Balance Sheet of the new firm.

Ramesh and Umesh were partners in a firm sharing profits in the ratio of their capitals. On 31st March, 2013 their Balance Sheet was as follows:On the above data the firm was dissolved.

Balance Sheet of Ramesh and Umesh as on 31^st March, 2013
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		1,70,000	Bank	1,10,000
Workmen’s Compensation Fund		2,10,000	Debtors	2,40,000
General Reserve		2,00,000	Stock	1,30,000
Ramesh’s Current Account		80,000	Furniture	2,00,000
Capitals:			Machinery	9,30,000
Ramesh	7,00,000		Umesh’s Current Account	50,000
Umesh	3,00,000	10,00,000
		16,60,000		16,60,000

(i) Ramesh took over 50% of stock at Rs 10,000 less than book value. The remaining stock was sold at a loss of Rs 15,000. Debtors were realised at a discount of 5%.
(ii) Furniture was taken over by Umesh for Rs 50,000 and machinery was sold for Rs 4,50,000.
(iii) Creditors were paid in full.
(iv) There was an unrecorded bill for repairs for Rs 1,60,000 which was settled at Rs 1,40,000.

Prepare Realisation Account.

The gradual and permanent decrease in the value of fixed assets due to any cause.

Answer in one sentence only.

What is revaluation account?

Write the word/term or phrase which can substitute the following statement.
The account which shows change in the values of assets.

Write the word/term or phrase which can substitute the following statement.
Account which is opened to record the gains and losses on revaluation.

Select the most appropriate answer from the alternative given below and rewrite the sentence.

Account is debited when unrecorded liability is brought into business.

______ is credited when an unrecorded asset is brought into the business.

Write a word/phrase/term which can substitute the following statement.

An account opened to adjust the value of assets and liabilities at the time of admission of a partner.

Write a word/phrase/term which can substitute the following statement.

Profit and Loss Account balance appearing on the liability side of the Balance Sheet.

Vikram and Pradnya share profits and losses in the ratio 2:3 respectively. Their balance sheet as on 31st March 2018 was as under.

Balance Sheet as on 31st March 2018

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	1,05,000	Cash	7,500
Capitals:		Land & Building	37,500
Vikram	75,000	Plant	45,000
Pradnya	75,000	Furniture	3,000
		Stock	75,000
		Debtors	87,000
	2,55,000		2,55,000

They agreed to admit Avani as a partner on 1st April 2018 on the following terms:

Avani shall have 1/4th share in future profits.
He shall bring ₹ 37,500 as his capital and ₹ 30,000 as his share of goodwill.
Land and building to be valued at ₹ 45,000 and furniture to be depreciated by 10%.
Provision for bad and doubtful debts is to be maintained at 5% on the Sundry Debtors.
Stocks to be valued ₹ 82,500.

The capital A/c of all partners to be adjusted in their new profit and loss ratio and excess amount be transferred to their loan accounts.

Prepare Profit and Loss Adjustment Account, Capital Accounts, and New Balance Sheet.

The balance sheet of Medha and Radha who share profit and loss in the ratio 3: 1 is as follows:

Balance Sheet as on 31 March 2018
Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	80,000	Cash	78,000
Bills Payable	20,000	Sundry debtors	64,000
Bank overdraft	20,000	Stock	40,000
Capital A/c:		Plant and Machinery	60,000
Medha	1,20,000	Furniture	22,000
Radha	40,000	Land and Building	32,000
General reserve	16,000
	2,96,000		2,96,000

They decided to admit Krutika on 1^st April 2018 on the following terms:

Krutika is taken as partner on 1^st April 2017. She will pay 40,000 as her capital for 1/5th share in future profits and Rs. 2,500 as goodwill.
A 5% provision for bad and doubtful debt be created on debtors.
Furniture be depreciated by 20%.
Stocks be appreciated by 5% and plant and machinery by 20%.
The Capital accounts of all partners be adjusted in their new profit sharing ratio by adjusting the amount through current account.
The new profit sharing ratio will be 3/5:1/5:1/5 respectively.

You are required to prepare profit and loss adjustment A/c, Partner’s Capital A/c, Balance Sheet of the new firm.

The Balance Sheet of Sahil and Nikhil who share profits in the ratio of 3: 2 as on 31st March 2017

Balance Sheet as on 31st March 2017
Liabilities	Amt. (₹)	Amt. (₹)	Assets	Amt. (₹)	Amt. (₹)
Creditors		60,000	Furniture		60,000
capitals:			Building		72,000
Sahil	80,000		Debtors		40,000
Nikhil	1,00,000	1,80,000	Closing Stock		48,000
			Cash in Hand		20,000
		2,40,000			2,40,000

Varad admitted on 1St April 2017 on the following terms :

1. Varad was to pay 1,00,000 for his share of capital.

2. He was also to pay 40,000 as his share of goodwill.

3. The new profit sharing ratio was 3:2:3

4. Old partners decided to revalue the assets as follows:

Building 1,00,000, Furniture- 48,000, Debtors - 38,000 (in view of likely bad debts)

5. It was found that there was a liability for 3,000 for goods in March 2017 but recorded on 2nd April 2017.

You are required to prepare:

a) Profit and Loss adjustment accounts

b) Capital accounts of the partners

c) Balance sheet after the admission of Varad

The following is the Balance Sheet of Om and Jay on 31st March 2018, they share profits and losses in the ratio 3:2

Balance Sheet As On 31st March 2018
Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	30,000	Cash	3,000
Capital A/c		Building	15,000
Om	21,000	Machinery	21,000
Jay	21,000	Furniture	900
Current A/c		Stock	12,300
Om	3,750	Debtors	27,000
Jay	3,450
	79,200		79,200

They take Jagdish into partnership on 1st April 2018 the terms being:

Jagdish should pay 3,000 as his share of Goodwill. 50% of goodwill withdrawn by partners in cash.
He should bring 9,000 as capital for 1/4th share in future profits.
Building to be valued at 18,000, Machinery and Furniture to be reduced by 10%.
A Provision of 5% on debtors to be made for doubtful debts.
Stock is to be taken at a value of 15,000.

Prepare profit and loss A/c, Partner’s Current A/c, Balance Sheet of the new firm.

On revaluation, the increase in the value of assets leads to _________.

How are accumulated profits and losses distributed among the partners at the time of admission of a new partner?

State whether the following will be debited or credited in the revaluation account.

Depreciation on assets
Unrecorded liability
Provision for outstanding expenses
Appreciation of assets

What are the journal entries to be passed on revaluation of assets and liabilities?

Amal and Vimal are partners in a firm sharing profits and losses in the ratio of 7 : 5. Their balance sheet as on 31^st March, 2019, is as follows:

Liabilities	₹	₹	Assets	₹
Capital accounts:			Land	80,000
Amal	70,000		Furniture	20,000
Vimal	50,000	1,20,000	Stock	25,000
Sundry creditors		30,000	Debtors	30,000
Profit and loss A/c		24,000	Debtors	19,000
		1,74,000		1,74,000

Nirmal is admitted as a new partner on 1.4.2018 by introducing a capital of ₹ 30,000 for 1/3 share in the future profit subject to the following adjustments.

Stock to be depreciated by ₹ 5,000
Provision for doubtful debts to be created for ₹ 3,000
Land to be appreciated by ₹ 20,000

Prepare revaluation account and capital account of partners after admission.

Rajan and Selva are partners sharing profits and losses in the ratio of 3 : 1. Their balance sheet as on 31^st March 2017 is as under:

Liabilities	₹	₹	Assets	₹
Capital accounts:			Building	25,000
Rajan	30,000		Furniture	1,000
Selva	16,000	46,000	Stock	20,000
General reserve		4,000	Debtors	16,000
Creditors		37,500	Bills receivable	3,000
			Cash at bank	12,500
			Profit and loss account	10,000
		87,500		87,500

On 1.4.2017, they admit Ganesan as a new partner on the following arrangements:

Ganesan brings ₹ 10,000 as capital for 1/5 share of profit.
Stock and furniture is to be reduced by 10%, a reserve of 5% on debtors for doubtful debts is to be created.
Appreciate buildings by 20%.

Prepare revaluation account, partners’ capital account and the balance sheet of the firm after admission.

Sundar and Suresh are partners sharing profits in the ratio of 3 : 2. Their balance sheet as on 1^st January, 2017 was as follows:

Liabilities	₹	₹	Assets	₹
Capital accounts:			Buildings	40,000
Sundar	30,000		Furniture	13,000
Suresh	20,000	50,000	Stock	25,000
Creditors		50,000	Debtors	15,000
General reserve		10,000	Bills receivable	14,000
Workmen compensation fund		15,000	Bank	18,000
		1,25,000		1,25,000

They decided to admit Sugumar into partnership for 1/4 share in the profits on the following terms:

Sugumar has to bring in ₹ 30,000 as capital. His share of goodwill is valued at ₹ 5,000. He could not bring cash towards goodwill.
That the stock be valued at ₹ 20,000.
That the furniture be depreciated by ₹ 2,000.
That the value of building be depreciated by 20%.

Prepare necessary ledger accounts and the balance sheet after admission.

The following is the balance sheet of James and Justina as on 1.1.2017. They share the profits and losses equally

Liabilities	₹	₹	Assets	₹
Capital accounts:			Building	70,000
James	40,000		Stock	30,000
Justina	50,000	90,000	Debtors	20,000
Creditors		35,000	Bank	15,000
Reserve fund		15,000	Prepaid insurance	5,000
		1,40,000		1,40,000

On the above date, Balan is admitted as a partner with a 1/5 share in future profits. Following are the terms for his admission:

Balan brings ₹ 25,000 as capital.
His share of goodwill is ₹ 10,000 and he brings cash for it.
The assets are to be valued as under:
Building ₹ 80,000; Debtors ₹ 18,000; Stock ₹ 33,000

Prepare necessary ledger accounts and the balance sheet after admission.

At the time of admission of a partner, what will be the effect of the following information?

Balance in Workmen compensation reserve ₹40,000. Claim for workmen compensation ₹45,000.

What would be the journal entry of when excess capital was withdrawn by the partner?

The account which is prepared to adjust the increase or decrease in the value of assets at the time of admission of a partner is called:

Balance in the Investment Fluctuation Reserve, after meeting the loss on revaluation of Investments, at the time of admission of a partner will be transferred to:

Which account will be prepared to record the adjusting amount of assets and liabilities?

If at the time of admission, there is some unrecorded liability, it will be:

Assertion (A): At the time of admission of a partner if there is any General Reserve, Reserve Fund or the balance of Profit & Loss Account appearing in the balance sheet, it should be transferred to old partners' capital/current accounts in their old profit sharing ratio.

Reason (R): The General reserve, Reserve Fund or the Balance of Profit and Loss Account are the result of the past profits when the new partner was not admitted.

Ganga and Jamuna are partners sharing profits in the ratio of 2 : 1. They admit Saraswati for 1/5th share in future profits. On the date of admission, Ganga’s capital was ₹ 1,02,000 and Jamuna’s capital was ₹ 73,000. Saraswati brings ₹ 25,000 as her share of goodwill and she agrees to contribute proportionate capital to the new firm. How much capital will be brought by Saraswati?

Indu, Vijay, and Pawan were partners in a firm sharing profits in the ratio of 4 : 3 : 3. They admitted Subhash into partnership with effect from 1^stApril, 2022. New profit sharing ratio among Indu, Vijay, Pawan, and Subhash will be 3 : 3 : 2 : 2. An extract of their Balance Sheet as at 31^st March, 2022, is given below:

Liabilities	Amount (₹)	Assets	Amount (₹)
Investment Fluctuation Reserve	80,000	Investment (Market Value ₹ 80,000)	90,000

Which of the following is the correct accounting treatment of ‘investment fluctuation reserve’ at the time of Subhash’s admission?

X and Y are partners in a firm with capital of ₹ 18,000 and ₹ 20,000. Z brings ₹ 10,000 for his share of goodwill, and he is required to bring proportionate capital for `1/3`rd share in profits. The capital contribution of Z will be ______.

The following is the Balance Sheet of Vivaan and Vihaan sharing Profits and Losses in the ratio of 3 : 2 as on 31 March, 2023.

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Accounts:		Building		1,08,000
Vivaan	1,20,000	Plant and Machinery		90,000
Vihaan	1,50,000	Stock		72,000
Sundry Creditors	90,000	Debtors	63,000	60,000
Bank Overdraft	15,000	Less: R.D .D.	3,000	60,000
		Bank		30,000
		Investments		15,000
	3,75,000			3,75,000

On 1-4-2023, Prihaan is admitted on the following terms:

(1) He is to pay ₹ 1,50,000 as his capital and ₹ 60,000 as his share of Goodwill.

(2) The new profit sharing ratio is to be 5 : 3 : 2.

(3) The assets are to be revalued as under:
Building ₹ 1,50,000, Plant and Machinery ₹ 72,000.

(4) R.D.D. to be increased up to ₹ 6,000

(5) The old partners decided to keep half of the amount of goodwill in the business.

(6) Sundry creditors are to be revalued at ₹ 99,000.

Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of new [um.

Kalpana and Kanika Were Partners in a Firm Sharing Profits in the Ratio of 3 : 2. on 1st April, 2013 They Admitted Karuna as a New Partners for 1/5th Share in the Profits of the Firm.

Advertisements

Advertisements

Question

Advertisements

Solution

Notes

APPEARS IN

RELATED QUESTIONS

Select a course

Kalpana and Kanika Were Partners in a Firm Sharing Profits in the Ratio of 3 : 2. on 1st April, 2013 They Admitted Karuna as a New Partners for 1/5th Share in the Profits of the Firm.

Advertisements

Advertisements

Question

Advertisements

SolutionShow Solution

Notes

APPEARS IN

RELATED QUESTIONS

Select a course

Solution