Question

Leena and Rohit are partners in a firm sharing profits in the ratio of 3 : 2. On 31st March, 2018, their Balance Sheet was as follows:

BALANCE SHEET OF LEENA AND ROHIT as at 31-3-2018
Liabilities	₹	₹	Assets	₹	₹
Sundry Creditors		80,000	Cash		42,000
Bills Payable		38,000	Debtors	1,32,000	1,30,000
General Reserve		50,000	Less: Provision for Doubtful Debts	2,000
Capital:		3,00,000	Stock		1,46,000
Leena	1,60,000		Plant and Machinery		1,50,000
Rohit	1,40,000
		4,68,000			4,68,000

On the above date Manoj was admitted as a new partner for `1/5`th share in the profits of the firm on the following terms:

1. Manoj brought proportionate capital. He also brought his share of the goodwill premium of ₹ 80,000 in cash.
2. 10% of the general reserve was to be transferred to provision for doubtful debts.
3. Claim on account of workmen’s compensation amounted to ₹ 40,000.
4. Stock was overvalued by ₹ 16,000.
5. Leena, Rohit and Manoj will share future profits in the ratio of 5 : 3 : 2.

Prepare the Revaluation Account, the Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer 1

Dr.	Revaluation Account				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Workmen’s Compensation Claim A/c		40,000	By Loss on Revaluation transferred to:		56,000
To Stock A/c		40,000	Leena’s Capital A/c	33,600
			Rohit’s Capital A/c	22,400
		56,000			56,000

 

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Leena (₹)	Rohit (₹)	Manoj (₹)	Particulars	Leena (₹)	Rohit (₹)	Manoj (₹)
To Revaluation A/c	33,600	22,400		By Balance b/d	1,60,000	1,40,000
To Balance c/d	1,93,400	1,75,600	92,250	By Cash A/c (Capital)			92,250
				By General Reserve	27,000	18,000
				By Goodwill Premium A/c	40,000	40,000
	2,27,000	1,98,000	92,250		2,27,000	1,98,000	92,250

 

Balance Sheet of the New Firm as at 31st March, 2018
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		80,000	Cash		2,14,250
Bills Payable		38,000	Debtors (1,32,000 − 7,000)		1,25,000
Workmen’s Compensation Claim		40,000	Stock		1,30,000
Capitals:		4,61,250	Plant and Machinery		1,50,000
Leena	1,93,400
Rohit	1,75,600
Manoj	92,250
		6,19,250			6,19,250

Working Notes:

Sacrificing Ratio:

Sacrificing Share = Old Share − New Share

Leena’s Sacrifice = `3/5 - 5/10`

= `(3 xx 2)/(5 xx 2) - 5/10`

= `6/10 - 5/10`

= `(6 - 5)/10`

= `1/10`

Rohit’s Sacrifice = `2/5 - 3/10`

= `(2 xx 2)/(3 xx 2) - 3/10`

= `4/10 - 3/10`

= `(4 - 3)/10`

= `1/10`

Sacrificing Ratio  of Leena and Rohit is 1 : 1.

Manoj’s Proportionate Capital:

Based on a Revaluation Loss of ₹56,000, Leena and Rohit's adjusted capital totals ₹ 3,69,000.

Manoj’s Capital = `3,69,000 xx 1/4`

= 92,250