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Amit, Balan and Chander Were Partners in a Firm Sharing Profits in the Proportion of `1/2, 1/3 and 1/6`Respectively. Chander Retired on 1-4-2014. the Balance Sheet of the Firm on the Date of Chander'S Retirement Was as Follows - CBSE (Arts) Class 12 - Accountancy

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Question

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of `1/2, 1/3 and 1/6`respectively. Chander retired on 1-4-2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:

Balance Sheet of Amit, Balan and Chander as on 1-4-2014
Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

Provident Fund

General Reserve

Capitals

    Amit        40,000

    Balan       36,500

   Chander    2,000

12,600

3,000

9,000

 

 

 

96,500

Bank

Debtors            30,000

Less: Provision    1,000

Stock

Investments

Patents

Machinery

4,100

 

29,000

25,000

10,000

5,000

48,000

  1,21,100   1,21,100

It was agreed that:

(a) Goodwill will be valued at Rs 27,000.
(b) Depreciation of 10% was to be provided on machinery.
(c) Patents were to be reduced by 20%.
(d) Liability on account of Provident Fund was estimated at Rs 2,400.
(e) Chander took over investments for  Rs 15,800.
(f) Amit and Balan decided to adjust their capitals in a proportion of their profit sharing ratio by
opening current accounts.

Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.

Solution

Revaluation Account
Dr. Cr
Particulars Rs Particulars Rs

To Machinery A/c

To Patents A/c

To Profit transferred to:

   Amit’s Capital A/c        300

   Balan’s Capital A/c       200

   Chander’s Capital A/c   100

4,800

1,000

 

 

 

600

By Investments A/c

By Provident Fund A/c

 

 

 

 

5,800

600

 

 

 

 

  6,400   6,400

 

Partner’s Capital Account
Dr.   Cr.
Particulars Amit Balan Chander Particulars Amit Balan Chander

To Investments A/c

To Chander Capital A/c

To Loan A/c

To Current A/c

To Balance c/d

 

 

2,700

 

 

48,000

 

 

1,800

 

5,900

32,000

 

15,800

 

10,300

 

 

 

By Balance b/d

By Revaluation A/c (Profit)

By General Reserve A/c

By Amit’s Capital A/c

By Balan’s Capital A/c

By Current A/c

40,000

300

4,500

 

 

5,900

36,500

300

3,000

 

 

 

20,000

100

1,500

2,700

1,800

 

 

50,700

39,700

26,100

 

50,700

39,700

26,100

Working Notes:

WN1: : Adjustment of Goodwill

Chander's Share of Goodwill = `27000 xx 1/6 = 4500`

Amit will pay = `4500 xx 3/5 = 2700`

Balan will pay = `4500 xx2/5 = 1800`

WN2 Adjustment of Capital:

Adjusted Old Capital of Amit = 44,800 (40,000 + 4,500 + 300) – 2,700 = 42,100
Adjusted Old Capital of Balan = 39,700 (36,500 + 3,000 + 200) – 1,800 =37,900
Total Adjusted Capital = 42,100 + 37,900 = 80,000
New Profit Sharing Ratio = 3:2

Amit's New Capital = `80000 xx 3/5  = 48000`

Balan's New Capital = `80000 xx 2/5 = 32000`

Note : Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio

  Is there an error in this question or solution?
Solution Amit, Balan and Chander Were Partners in a Firm Sharing Profits in the Proportion of `1/2, 1/3 and 1/6`Respectively. Chander Retired on 1-4-2014. the Balance Sheet of the Firm on the Date of Chander'S Retirement Was as Follows Concept: Preparation of Revaluation Account and Balance Sheet.
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