Question

Kavya, Manya and Navita were partners sharing profits as 50%, 30% and 20% respectively. On 31-3-2016, their Balance Sheet was as under:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		1,40,000	Fixed Assets		8,90,000
General Reserve		1,00,000	Investments		2,00,000
Capitals:		15,00,000	Stock		1,30,000
Kavya	6,00,000		Debtors	4,00,000	3,70,000
Manya	5,00,000		Less: Provision for Bad Debts	30,000
Navita	4,00,000		Bank		1,50,000
		17,40,000			17,40,000

On the above date, Kavya retired and Manya and Navita agreed to continue the business on the following terms:

1. Firm’s goodwill was valued at ₹ 60,000 and it was decided to adjust Kavya’s share of goodwill in the capital accounts of continuing partners.
2. There was a claim for workmen’s compensation to the extent of ₹ 4,000.
3. Investments were revalued at ₹ 2,13,000.
4. Fixed Assets were to be depreciated by 10%.
5. Kavya was to be paid ₹ 20,000 through a bank draft and the balance was transferred to her loan account which will be paid in two equal annual instalments together with interest @ 10% p.a.

Prepare Revaluation A/c, Partner’s Capital accounts and Kavya’s Loan Account till it is finally paid.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Workmen’s compensation claim A/c	4,000	By Investments		13,000
To Fixed Assets A/c	89,000	By Loss t/f to Capital A/cs:
		Kavya	40,000
		Manya	24,000
		Navita	16,000	80,000
	93,000			93,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	Kavya	Manya	Navita	Particulars	Kavya	Manya	Navita
To Revaluation A/c - Loss	40,000	24,000	16,000	By Balance b/d	6,00,000	5,00,000	4,00,000
To Kavya’s Capital A/c	-	18,000	12,000	By General Reserve A/c	50,000	30,000	20,000
To Bank A/c	20,000	-	-	By Manya’s Capital A/c	18,000	-	-
To Kavya’s Loan A/c	6,20,000	-	-	By Navita’s Capital A/c	12,000	-	-
To Balance c/d	47,000	-	25,000
	6,80,000	5,30,000	4,20,000		6,80,000	5,30,000	4,20,000

 

Dr.	Kavya’s Loan A/c				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
31-03	To Bank A/c	3,72,000	01-04	By Kavya’s Capital A/c	6,20,000
			31-03	By Interest A/c	62,000
		6,82,000			6,82,000
31-03	To Bank A/c	3,41,000	01-04	By Balance b/d	3,10,000
			31-03	By Interest A/c	31,000
		3,41,000			3,41,000

Working Note:

Calculation of Partner’s share in firm’s Goodwill

Goodwill of the firm = ₹ 60,000

Kavya’s share in firm’s Goodwill = `60,000xx5/10` = ₹ 30,000

Manya & Navita would contribute it in their gaining ratio i.e., 3 : 2

Manya = `30,000xx3/5` = ₹ 18,000

Navita = `30,000xx2/5` = ₹ 12,000