Minaxi, Ramesh and Poonam were partners sharing profits and losses in the proportion to their capitals, Their Balance sheet of the firm on 31st March, 2012 was as under:
Balance Sheet as on 31st March, 2012
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | |
| Capital | Land and Building | 40,000 | ||
| Minaxi | 30,000 | Investment | 20,000 | |
| Ramesh | 20,000 | Debtors | 16,000 | 14,000 |
| Poonam | 10,000 | Less : R.D.D | 2,000 | |
| Creditors | 28,000 | Stock | 18,000 | |
| Reserve | 18,000 | Cash | 14,000 | |
| 1,06,000 | 1,06,000 | |||
Poonam died on 1st August, 2012 and the following adjustments were made
1) Assets revalued as under-Land & Building Rs 44,000, Investment Rs 18,000, Stock Rs 17,000.
2) All debtors were good.
3) Goodwill of the firm valued at two times the average profits of the last 4 years. No goodwill account to be shown in the books of the firm.
4) Poonam’s share of profit upto her death to be calculated on the basis of average profits of last two year.
5) Profits were Rs 6,000, Rs 12,000, Rs 7,000, Rs 11,000
Prepare:
1) Profits and loss adjustment A/c
2) Balance sheet as on 1st August 2012
Solution
Profit and Loss Adjustment Account
Dr. Cr.
| Particulars | Amount (Rs) | Particulars | Amount (Rs) | |
| Investment | 2,000 | Land and Building | 4,000 | |
| Stock | 1,000 | Reserve for Doubtful Debts | 2,000 | |
| Loss transferred to: | ||||
| Minaxi | 1,500 | 3,000 | ||
| Ramesh | 1,000 | |||
| Poonam | 500 | |||
| 6,000 | 6,000 | |||
| Liabilities | Amount (Rs) | Assets | Amount (Rs) | ||
| Creditors | 28,000 | Land and Building | 44,000 | ||
| Poonam's Legal Heir A/c | 17,000 | Debtors | 16,000 | ||
| Capital A/cs: | Cash | 14,000 | |||
| Minaxi | 38,700 | 64,500 | Investment | 20,000 | 18,000 |
| Ramesh | 25,800 | Less : Amortised | 2000 | ||
| Stock | 18,000 | 17,000 | |||
| Less : Depreciation | 1,000 | ||||
| Profit and loss Suspense A/c | 500 | ||||
| 1,09,500 | 1,09,500 | ||||
Working Notes:
Calculation of Gaining Ratio of Minaxi and Ramesh:
Old ratio = Minaxi : Ramesh : Poonam
= 3 : 2 : 1
New ratio of Minaxi and Ramesh = 3:2
Gaining Ratio = Old ratio - New ratio
Minaxi's Gain = `3/5 - 3/6 = 3/30`
Ramesh's Gain = `2/5 -2/6 = 2/30`
Gaining Ratio = 3:2
WN 1: Distribution of Reserve:
Minaxi will get = `18000 xx 3/6 = "Rs" 9000 `
Ramesh will get =`18000 xx 2/6 = "Rs" 6000`
Poonam will get = `18000 xx 1/6 = "Rs" 3000`
WN 2: Share of Profit of Poonam
Average Profit =`"Total Profit"/"Number of years"`
= `(7000 + 11000)/2` = Rs 9000
Poonam's share of profit =`9000 xx 4/12 xx 1/6` = Rs.500
WN 3: Calculation of Share of goodwill of Poonam
i) Total Profit = 6000+12000+7000+11000 = Rs 36000
ii) Average Profit =`36000/4 = Rs 9000`
iii) Goodwill = 9000 × 2 = Rs 18000
iv) Poonam's share of goodwill = `18000 xx 1/6 = 3000`
WN 4: Partners’ Capital Accounts
Partners’ Capital Accounts
Dr. Cr.
| Particulars | Minaxi | Ramesh | Poonam | Particulars | Minaxi | Ramesh | Poonam |
| Legal Heir’s A/c | 17,000 |
Balance b/d |
30,000 | 20,000 | 10,000 | ||
| Goodwill A/c | 1,800 | 1,200 | Reserve | 9,000 | 6,000 | 3,000 | |
| Balance c/d | 38,700 | 25,800 | Goodwill | 3,000 | |||
| Profit and Loss Suspense A/c | 500 | ||||||
| Profit and Loss Adjustment A/c (Profit) | 1500 | 1000 | 500 | ||||
| 40,500 | 27,000 | 17,000 | 40,500 | 27,000 | 17,000 |
