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# 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 - CBSE (Arts) Class 12 - Accountancy

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?

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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 Concept: Preparation of Revaluation Account and Balance Sheet.
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