Mohan and Mahesh were partners in a firm sharing profit in the ratio 3:2. On 1st April 2012, they admitted Nusrat as a partner in the firm. The Balance Sheet of Mohan and Mahesh on that date was as under:
Balance Sheet of Mohan and Mahesh as on 1st April 2012
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Workman’s Compensation Fund General Reserve Capital: Mohan 1,00,000 Mahesh 80,000
|
2,10,000 2,50,000 1,60,000
1,80,000
|
Cash in hand Debtors Stock Machinery Building
|
1,40,000 1,60,000 1,20,000 1,00,000 2,80,000
|
| 8,00,000 | 8,00,000 |
It was agreed that:
i. The value of Building and Stock be appreciated to Rs.3,80,000 and Rs.1,60,000 respectively.
ii. The liabilities of workmen's compensation fund was determined at Rs.2,30,000.
iii. Nusrat brought in her share of goodwill Rs.1,00,000 in cash.
iv. Nusrat was to bring further cash as would make her capital equal to 20% of the combined capital of Mohan and Mahesh after above revaluation and adjustments are carried out.
v. The future profit sharing ratio will be Mohan 2/5, Mahesh 2/5, Nusrat 1/5.
Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of the new firm. Also show clearly the calculation of Capital brought by Nusrat.
Solution
| Revaluation Account |
|||
| Dr. | Cr. | ||
| Particulars | Amount(Rs.) | Particulars | Amount(Rs.) |
|
To Revaluation Profit Mohan’s Capital A/c 84,000 Mahesh’s Capital A/c 56,000
|
1,40,000
|
By Building A/c By Stock A/c
|
1,00,000 40,000
|
| 1,40,000 | 1,40,000 | ||
| Partners’ Capital Account |
|||||||
| Particulars | Mohan | Mahesh | Nusrat | Particulars | Mohan | Mahesh | Nusrat |
|
To Balance c/d
|
3,92,000
|
2,08,000
|
1,20,000
|
By Balance b/d By Cash A/c By General Reserve A/c By Workman Comp. Fund A/c By Revaluation A/c By Premium for Goodwill A/c
|
1,00,000
96,000 12,000 84,000 1,00,000
|
80,000
64,000 8,000 56,000
|
1,20,000
|
| 3,92,000 | 2,08,000 | 1,20,000 | 3,92,000 | 2,08,000 | 1,20,000 | ||
| Balance Sheet As on April 01, 2012 after Nusrat's admission |
|||
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
|
Creditors A/c Capital A/c: Mohan 3,92,000 Mahesh 2,08,000 Nusrat 1,20,000 Liability for Workman Compensation
|
2,10,000
7,20,000 2,30,000
|
Cash in Hand A/c (1,40,000+1,20,000+1,00,000) Debtors Stock Machinery Building
|
3,60,000 1,60,000 1,60,000 1,00,000 3,80,000
|
| 11,60,000 | 11,60,000 | ||
Working Note:
WN 1: Calculation of Sacrificing Ratio
Sacrificing Ratio= Old Ratio –New Ratio
Mohan = (3/5) - (2/5) = 1/5
Mahesh = (2/5) - (2/5) = 0
As in this case, the entire sacrifice has been made by Mohan, so the entire goodwill of its 1,00,000 is credited to his Capital A/c
WN 2: Calculation of Nusrat's Capital
Adjusted Capital of A = 3,92,000
Adjusted Capital of B = 2,08,000
Total Adjusted Capital = 6,00,000 (3,92,000+2.08,000)
Nusrat brings 20% of the total adjusted capital i.e. its 1,20,000 (20% of 6,00,000)
