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Kushal Kumar and Kavita Were Partners in a Firm Sharing Profit in the Ratio 3:1:1. on 1st April 2012 Their Balance Sheet Was as Follows: Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of Kushal and Kumar After Kavita'S Retirement. - CBSE (Arts) Class 12 - Accountancy

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Question

Kushal Kumar and Kavita were partners in a firm sharing profit in the ratio 3:1:1. On 1st April 2012 their Balance Sheet was as follows:

Balance Sheet of Kushal, Kumar and Kavita as on 1st April 2012

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

Creditors

Bill payable

General Reserve

Capital:

       Kushi       3,00,000

       Kumar     2,80,000

       Kavita     3,00,000  

1,20,000

1,80,000

1,20,000

 

 

 

8,80,000

Cash

Debtors               2,00,000

  Less: Provision    10,000  

Stock

Furniture

Building

Land

70,000

 

1,90,000

2,20,000

1,20,000

3,00,000

4,00,000

  13,00,000   13,00,000

On the above date, Kavita retired and the following was agreed:

i. Goodwill of the firm was valued at Rs.40,000.

ii. The land was to be appreciated by 30% and the building was to be depreciated by Rs.1,00,000.

iii. Value of furniture was to be reduced by Rs.20,000.

iv. Bad debts reserve is to be increased to Rs.15,000.

v. 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her Loan Account.

vi. Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.

Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita's retirement.

Solution

Revaluation Account
Particulars Amount(Rs.) Particulars Amount(Rs.)

To Building A/c

To Furniture A/c

To Provision for bad-debts

 

 

 

1,00,000

20,000

5,000

 

 

 

By Land

By Revaluation A/c

     Kushal           3,000

     Kumar           1,000

     Kavita           1,000

 

1,20,000

 

 

 

5,000

 

  1,25,000   1,25,000

 

Partners’ Capital Account
Particulars Kushal Kumar Kavita Particulars Kushal Kumar Kavita

To Kavita’s Capital A/c

To Revaluation loss A/c

To Kumar Current A/c

To Cash A/c

To Kavita’s Loan A/c

 

To Balance c/d

 

6,000

3,000

 

 

 

 

4,98,000

 

2,000

1,000

1,35,000

 

 

 

1,66,000

 

 

1,000

 

33,100

2,97,900

 

 

 

By Balance b/d

By General Reserve A/c

By Kushal’s Capital A/c

By Kumar’s Capital A/c

By Kushal’s Capital A/c

 

 

 

3,00,000

72,000

 

 

1,35,000

 

 

 

2,80,000

24,000

 

 

 

 

 

 

3,00,000

24,000

6,000

2,000

 

 

 

 

  5,07,000 3,04,000 3,32,000   5,07,000 3,04,000 3,32,000

 

Balance Sheet
As on April 01, 2012 after Kavita’s retirement

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

Kushal’s Capital A/c

Kumar’s Capital A/c

Bill payable

Creditors

Kavita’s Loan A/c

Kushal’s Current A/c

 

 

4,98,000

1,66,000

1,80,000

1,20,000

2,97,900

1,35,000

 

 

Land

Building

Furniture

Stock

Cash A/c (70,000–33,100)

Debtors                      2,00,000

    Less :Provision           15,000  

Kumar’s Current A/c

5,20,000

2,00,000

1,00,000

2,20,000

36,900

 

1,85,000

1,35,000

  13,96,900   13,96,900

Working Note:

Total Capital of Kushal = 3,72,000 – 3,000 = 3,69,000

Total Capital of Kumar = 3,04,000 – 1,000 =3,03,000

Total Capital of new firm = 3,69,000 + 3,03,000 = 6,72,000

The new capital has to be in the new profit sharing ratio = 3:1

Therefore, Kushal's new capital =`672000xx3/4=504000`

Kumar's new Capital `=6,72,000xx1/4=168000`

  Is there an error in this question or solution?
Solution Kushal Kumar and Kavita Were Partners in a Firm Sharing Profit in the Ratio 3:1:1. on 1st April 2012 Their Balance Sheet Was as Follows: Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of Kushal and Kumar After Kavita'S Retirement. Concept: Preparation of Revaluation Account and Balance Sheet.
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