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Question
Nishant and Yogesh were partners sharing profits and losses in the ratio 3 : 1. Their Balance Sheet as on 31st March, 2022 was as follows:
| Balance Sheet as on 31st March, 2022 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital Accounts: | 1,56,000 | Cash in hand | 37,500 | ||
| Nishant | 75,000 | Bills Receivable | 45,000 | ||
| Yogesh | 81,000 | Debtors | 75,000 | 67,500 | |
| Reserve Fund | 24,000 | Less: R.D.D. | 7,500 | ||
| Creditors | 45,000 | Furniture | 30,000 | ||
| Stock | 45,000 | ||||
| 2,25,000 | 2,25,000 | ||||
They admitted Niharika for `1/5`th share on 1st April, 2022 on the following terms:
1. Niharika shall bring ₹ 60,000 as her capital.
2. Niharika shall pay her share of goodwill in cash. Goodwill will be calculated on the basis of 4 years’ purchase of profits of last 5 years.
Profits since last five years are given as under:
| 2016-17 | ₹ 30,000 |
| 2017-18 | ₹ 22,500 |
| 2018-19 | ₹ 37,500 |
| 2019-20 | ₹ 15,000 |
| 2020-21 | ₹ 22,500 |
3. Assets were revalued as under:
Furniture ₹ 22,500, Bills Receivable ₹ 60,000, Stock ₹ 30,000, R.D.D. to be increased upto ₹ 15,000.
4. Bills payable of ₹ 7,500 have been omitted from books.
Prepare:
- Revaluation Account
- Partners’ Capital Account
- Balance Sheet of the New firm.
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Solution
| In the books of the firm | ||||
| Dr. | Revaluation Account | Cr. | ||
| Particulars | Amount (₹) | Particulars | Amount (₹) | Amount (₹) |
| To Furniture A/c | 7,500 | By Bills Receivable A/c | 15,000 | |
| To Stock A/c | 15,000 | By Revaluation Loss Transferred to old partner’s capital A/c OR (3 : 1) | 22,500 | |
| To R.D.D. A/c | 7,500 | Nishant | 16,875 | |
| To Bills Receivable A/c | 7,500 | Yogesh | 5,625 | |
| 37,500 | 37,500 | |||
| Dr. | Partners’ Capital Account | Cr. | |||||
| Particulars | Nishant | Yogesh | Niharika | Particulars | Nishant | Yogesh | Niharika |
| To Revaluation Loss b/d | 16,875 | 5,625 | - | By Balance b/d | 75,000 | 81,000 | - |
| To Balance c/d (Bal. fig.) | 91,425 | 86,475 | 60,000 | By Reserve Fund (OR 3 : 1) | 18,000 | 6,000 | - |
| By Cash A/c | - | - | 60,000 | ||||
| By Goodwill A/c (SR 3 : 1) | 15,300 | 5,100 | - | ||||
| 1,08,300 | 92,100 | 60,000 | 1,08,300 | 92,100 | 60,000 | ||
| Balance Sheet as on 1st April, 2022 (New Firm) | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital A/cs: | 2,37,900 | Furniture | 30,000 | 22,500 | |
| Nishant | 91,425 | Less: Depreciation | 7,500 | ||
| Yogesh | 86,475 | Bills Receivable | 45,000 | 60,000 | |
| Niharika | 60,000 | Add: Appreciated | 15,000 | ||
| Creditors | 45,000 | Stock | 45,000 | 30,000 | |
| Bills Payable | 7,500 | Less: Depreciation | 15,000 | ||
| Debtors | 75,000 | 60,000 | |||
| Less: RDD | 15,000 | ||||
| Cash in hand | 1,17,900 | ||||
| 2,90,400 | 2,90,400 | ||||
| Dr. | Cash A/c | Cr. | |
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Balance b/d | 37,500 | By Balance c/d (Bal. fig.) | 1,17,900 |
| To Niharika’s Capital A/c | 60,000 | ||
| To Goodwill A/c | 20,400 | ||
| 1,17,900 | 1,17,900 | ||
| Dr. | Goodwill A/c | Cr. | |
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Niharika’s Capital A/c | 15,300 | By Cash A/c | 20,400 |
| To Yogesh’s Capital A/c | 5,100 | ||
| 20,400 | 20,400 | ||
Working Notes:
Calculation of Niharika’s share in goodwill:
(1) Average profit = `"Total profit"/"No. of years"`
= `(30,000+22,500+37,500+15,000+22,500)/5`
= `(1,27,500)/5`
= 25,500
(2) Goodwill = Average Profit × No. of years of Purchases
= 25,500 × 4
= ₹ 1,02,000
∴ Niharika’s share in Goodwill is 1/5th, i.e. 1,02,000 × `1/5`
= ₹ 20,400
