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Solution - A. B and C Were Partners in a Firm Sharing Profits in the Ratio of 5: 3: 2. on 31-3-2015 Their Balance Sheet Was as Follows - CBSE (Science) Class 12 - Accountancy

ConceptPreparation of Revaluation Account and Balance Sheet

Question

A. B and C were partners in a firm sharing profits in the ratio of 5: 3: 2. On 31-3-2015 their Balance Sheet was as follows:

                                                              Balance Sheet of A,B and C as on 31-3-2015

Liabilities Amount(Rs) Assets Amount(Rs.)

Creditors

Investment Fluctuation Fund

P & L Account

Capitals

     A                                                       1,50,000

     B                                                       1,20,000

     C                                                          60,000

 

 

63,000

30,000

1,20,000

 

 

 

3,30,000

 

 

Land & Building

Motor Vans

Investments

Machinery

Stock

Debtors                                                     1,20,000

       Less : Provision                                       9,000

Cash

 

1,86,000

60,000

57,000

36,000

45,000

 

 

 

 

  5,43,000   5,43,000

 

On the above date B retired and A and C agreed to continue the business on the following terms:

(1) Goodwill of the firm was valued at Rs.1, 53,000.

(2) Provision for bad debts was to be reduced by Rs.3,000.

(3) There was a claim of Rs.12,000 for workmen compensation.

(4) B will be paid Rs.24,600 in cash and the balance will be transferred to his loan account which will be paid in four equal yearly instalments together with interest 10% p.a.

(5) The new profit sharing ratio between A and C will be 3:2 and their capital will be in their new profit sharing ratio. The capital adjustments will be done by opening current accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C.

Solution

                                                                        Revaluation Account

Dr.                                                                                                                                                      Cr.

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Claim for Workman Compensation

 

 

 

 

12,000

 

 

 

 

By Provision for Doubtful Debts

By Loss on Revaluation

             A’s Capital A/c           4,500

             B’s Capital A/c           2,700

             C’s Capital A/c           1,800

3,000

 

 

 

9,000

  12,000   12,000

 

Partner’s Capital Account

Dr.                                                                                                                                                                                                             Cr.

Particulars A (Rs.) B (Rs.) C (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.)

Revaluation A/c

B’s Capital A/c

Cash A/c

B’s Loan A/c

Balance c/d

4,500

15,300

 

 

2,05,200

2,700

 

24,600

1,83,600

 

1,800

30,600

 

 

57,600

Balance b/d

IFF

P&L A/c

A’s Capital

C’s Capital

1,50,000

15,000

60,000

 

 

1,20,000

9,000

36,000

15,300

30,600

60,000

6,000

24,000

 

 

  2,25,000 2,10,900 90,000   2,25,000 2,10,900 90,000

Current A/c

Balance c/d

47,520

1,57,680

 

 

 

1,05,120

Balance b/d

Current A/c

2,05,200

 

 

 

57,600

47,520

  2,05,200   1,05,120   2,05,200   1,05,120

 

                                                                   Balance Sheet

                                                               as on March 31,2015

Liabilities Amount (Rs.) Assets Amount (Rs.)

Creditors

Capitals

     A                                1,57,680

     C                                1,05,120

                                     ___________

A’s Current A/c

Claim for Workmen Comp.

B’s Loan A/c

 

 

63,000

 

 

 

2,62,800

47,520

12,000

1,83,600

 

 

Land and Building

Motor Vans

Investment

Machinery

Stock

Debtors                               1,20,000

Less : Provision                         6,000

                                             _______

Cash (32,000 – 14,000)

K’s Current A/c

1,86,000

60,000

57,000

36,000

45,000

 

 

1,14,000

23,400

47,520

  5,68,920   5,68,920

Working Notes : 

WN1: Calculation of Gaining Ratio

Gaining Ratio = New Ratio - Old Ratio

A's = (3/5) - (5/10) = 1/10

C's = (2/5) - (2/10) = 2/10

Gaining Ratio = 1:2

WN 2 : Adjustment of Goodwill

B's Share of Goodwill = 1,53,000 x (3/10) = 45,900

45,900 will be debited to gaining partners (A and C) in the ratio of 2:1

A's share = 45,900 x (1/3) = 15,300

C's share = 45,900 x (2/3) = 30,400

WN 3 Adjustment of Capital

Adjusted Capital of A = 1, 50,000 + 15,000 + 60,000 – 4,500 – 15,300 = 2,05,200

Adjusted Capital of C = 60,000 + 6,000 + 24,000 – 1,800 – 30,600 = 57,600

Total Adjusted Capital = 2, 05,200 + 57,600 = 2, 62,800

A's New Capital = 2,62,800 x (3/5) = 1,57,680

C's New Capital = 2,62,800 x (2/5) = 1,05,120

C’s New Capital > C’s Adjusted Capital (C owes 47,520 to the firm)

A’s New Capital < A’s Adjusted Capital (Firm owes 47,520 to A)

WN 4 Amount transferred to B’s Loan A/c

Amount to be transferred = (Credit side – Debit side) – Cash paid

                                      = (2,10,900 – 2,700) – 24,600 = 1,83,600

Is there an error in this question or solution?

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