P, Q and R were partners in a firm sharing profits in the ratio of 3:2:1. On 31-3-2015 their Balance Sheet was as follows :
Balance Sheet of P,Q and R as on 31-3-2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors General Reserve Capitals P 1,80,000 Q 1,20,000 R 60,000
|
2,52,000 63,000
3,60,000
|
Bank Debtors Stock Investments Furniture Machinery
|
51,000 69,000 3,30,000 90,000 30,000 1,05,000
|
| 6,75,000 | 6,75,000 |
On the above date S was admitted as a new partner and it was decided that:
(i) The new profit sharing ratio between P, Q, R and S will be 2:2:1:1.
(ii) Goodwill of the firm was valued at Rs.2, 70,000 and S will bring his share of goodwill premium in cash.
(iii) The market value of investments was Rs.64,000.
(iv) Machinery will be reduced to Rs.87,000.
(v) A creditor of Rs.9,000 was not likely to claim the amount and hence to be written-off.
(vi) S will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account. Partners' Capital Accounts and the Balance Sheet of P, Q, R and S.
Solution
Revaluation Account
Dr. Cr.
| Particulars | Amount(Rs.) | Particulars | Amount(Rs.) |
|
To Investment To Machinery
|
26,000 18,000
|
By Creditors By Loss on Revaluation P’s Capital A/c 17,500 Q’s Capital A/c 11,667 R’s Capital A/c 5,833
|
9,000
35,000
|
| 44,000 | 44,000 |
Partner’s Capital Account
Dr. Cr.
| Particulars | P(Rs) | Q(Rs) | R(Rs) | S(Rs) | Particulars | P(Rs) | Q(Rs) | R(Rs) | S(Rs) |
|
Reval. A/c Balance c/d
|
17,500 2,39,000
|
11,667 1,29,333
|
5,833 64,667
|
86,600
|
Balance c/d Gen. Reserve Prem For G/w Cash A/c
|
1,80,000 31,500 45,000
|
1,20,000 21,000
|
60,000 10,500
|
86,600
|
| 2,56,500 | 1,41,000 | 70,500 | 86,600 | 2,56,500 | 1,41,000 | 70,500 | 86,600 |
Balance Sheet
as on March 31,2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Capitals : P 2,39,000 Q 1,29,333 R 64,667 S 86,600
|
2,43,000
5,19,600
|
Bank (51,000 + 86,600 + 45,000) Debtors Stock Investments Furniture Machinery
|
1,82,600 69,000 3,30,000 64,000 30,000 87,000
|
| 7,62,600 | 7,62,600 |
Working Notes :
WN 1 : Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio - New Ratio
P's = (3/6) - (2/6) = 1/6
Q's = (2/6) - (2/6) = Nil
R's = (1/6) - (1/6) = Nil
WN 2 : Adjustment of Goodwill
S's Share of Goodwill = 2,70,000 x (1/6) = 45,000
45,000 will be credited to P's Capital A/c, as he is the only sacrificing partner
WN 3 : Calculation of S’s Proportionate Capital
Adjusted Old Capital of P = 1,80,000 + 31,500 + 45,000 – 17,500 = 2,39,000
Adjusted Old Capital of Q = 1,20,000+ 21,000 – 11,667 = 1,29,333
Adjusted Old Capital of R = 60,000 + 10,500 – 5,833 = 64,667
Total Adjusted Capital = 2,39,000 + 1,29,333 + 64,667 = 4,33,000
S’s Proportionate Capital = Total Adjusted Capital x S’s Profit Share x Reciprocal of Combined New Share of Old Partners
= 4,33,000 x (1/6) x (6/5) = 86,600
