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Solution - L, M and N Were Partners in a Firm Sharing Profit in the Ratio of 3:2:1. Their Balance Sheet on 31.3.2015 Was as Follows - Preparation of Revaluation Account and Balance Sheet

ConceptPreparation of Revaluation Account and Balance Sheet

Question

L, M and N were partners in a firm sharing profit in the ratio of 3:2:1. Their Balance Sheet on 31.3.2015 was as follows :

                                          Balance Sheet of L,M and N as on 31-3-2015

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

Creditors

General Reserve

Capitals

     L                               1,20,000

     M                                 80,000

     N                                  40,000 

 

1,68,000

42,000

 

 

 

2,40,000

 

Bank

Debtors

Stock

Investments

Furniture

Machinery

 

34,000

46,000

2,20,000

60,000

20,000

70,000

 

  4,50,000   4,50,000

On the above date O was admitted as a new partner and it was decided that:

(i) The new profit sharing ratio between L, M, N and 0 will be 2: 2: 1: 1.

(ii) Goodwill of the firm was valued at Rs.1,80,000 and O brought his share of goodwill premium in cash.

(iii) The market value of investments was Rs.36,000.

(iv) Machinery will be reduced to Rs.58,000.

(v) A creditor of Rs.6,000 was not likely to claim the amount and hence to be written-off.

(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.

Prepare Revaluation Account. Partner's Capital Accounts and the Balance Sheet of the New Firm

Solution

                                                          Revaluation Account

Dr.                                                                                                                                    Cr.

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

To Investment

To Machinery

 

 

 

 

 

24,000

12,000

 

 

 

 

 

By Creditors

 

By Loss on Revaluation

        L’s Capital A/c         15,000

        M’s Capital A/c        10,000

        N’s Capital A/c          5,000 

 

6,000

 

 

 

 

30,000

 

  36,000   36,000

 

                                                                                        Partner’s Capital Account

Dr.                                                                                                                                                                                                                 Cr.

Particulars L(Rs.) M(Rs.) N(Rs.) O(Rs.) Particulars L(Rs.) M(Rs.) N(Rs.) O(Rs.)

To Reval. A/c

 

To Balance c/d

 

15,000

 

1,56,000

 

10,000

 

84,000

 

5,000

 

42,000

 

 

 

56,400

 

By Balance c/d

General Reserve

Prem For G/w

Cash A/c

1,20,000

21,000

30,000

 

80,000

14,000

 

 

40,000

7,000

 

 

 

 

 

56,400

  1,71,000 94,000 47,000 56,400   1,71,000 94,000 47,000 56,400

 

                                                             Balance Sheet

                                                        as on March 31,2015

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

Creditors

Capitals :

   L                                1,56,000

   M                                  84,000

   N                                  42,000

   O                                  56,400  

 

1,62,000

 

 

 

 

3,38,400

 

Bank (34,000 + 56,400 + 30,000)

Debtors

Stock

Investments

Furniture

Machinery

 

1,20,400

46,000

2,20,000

36,000

20,000

58,000

 

  5,00400   5,00400

 

Working Notes :

WN1 : Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

L's = (3/6) - (2/6) = 1/6

M's = (2/6) - (2/6) = Nil

N's = (1/6) - (1/6) = Nil

WN 2: Adjustment of Goodwill

O's Share of Goodwill = 1,80,000 x (1/6) = 30,000

30,000 will be credited to L's Capital A/c, as he is the only sacrificing partner

WN 3: Calculation of O’s Proportionate Capital

Adjusted Old Capital of L = 1, 20,000 + 21,000 + 30,000 – 15,000 = `1, 56,000

 

 

Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `

 

Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `

Adjusted Old Capital of M = 80,000 + 14,000 – 10,000 = `84,000

 

Adjusted Old Capital of N = 40,000 + 7,000 – 5,000 = `

Adjusted Old Capital of N = 40,000 + 7,000 – 5,000 = `42,000

 

Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `

 

Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `

Total Adjusted Capital = 1, 56,000 + 84,000 + 42,000 = `2, 82,000

O’s Proportionate Capital = Total Adjusted Capital x O’s Profit Share x Reciprocal of Combined New Share of Old Partners

                                   `= 282000xx1/6xx6/5=56400`

 

Is there an error in this question or solution?

APPEARS IN

2015-2016 (March) All India Set 3
Question 17.1 | 8 marks
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Question 17.1 | 8 marks

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Solution for question: L, M and N Were Partners in a Firm Sharing Profit in the Ratio of 3:2:1. Their Balance Sheet on 31.3.2015 Was as Follows concept: Preparation of Revaluation Account and Balance Sheet. For the courses CBSE (Arts), CBSE (Commerce), CBSE (Science)
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