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Solution - Sahaj and Nimish Are Partners in a Firm. They Share Profits and Losses in the Ratio of 2: 1 Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the Reconstituted Firm. Identify the Value Being Conveyed in the Question - Preparation of Revaluation Account and Balance Sheet

ConceptPreparation of Revaluation Account and Balance Sheet

Question

Sahaj and Nimish are partners in a firm. They share profits and losses in the ratio of 2: 1. Since both of them are specially abled, sometimes they find it difficult to run the business on their own. Gauri, a common friend decides to help them. Therefore, they admitted her into a partnership for a 1/3rd share. She brought her share of goodwill in cash and proportionate capital. At the time of Gauri's admission, the Balance sheet of Sahaj and Nimish was as under:

Liabilities     Rs Assets Rs

Capital Accounts:

Sahaj             1,20,000

Nimish              80,000

General Reserve

Creditors

Employee's Provident Fund

 

 

2,00,000

30,000

30,000

40,000

Machinery

Furniture

Stock

Sundry Debtors

Cash

 

1,20,000

80,000

50,000

30,000

20,000

 

  3,00,000   3,00,000

It was decided to:

a. Reduce the value of a stock by `5,000.

b. Depreciate furniture by 10% and appreciate machinery by 5%.

c. Rs 3,000 of the debtors proved bad. A provision of 5% was to be created on Sundry Debtors for doubtful debts.

d. Goodwill of the firm was valued at Rs 45,000.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm. Identify the value being conveyed in the question.

Solution

Revaluation Account
Dr.   Cr.
Particulars Rs Particulars Rs

To Stock A/c

To Depreciation on Furniture A/c

To Bad Debts A/c

To Provision for Doubtful Debts A/c

5,000

8,000

3,000

1,350

By Machinery A/c

By Loss on Revaluation transferred to:

Sahaj A/c          7,567

Nimish A/c         3,783

6,000

 

 

11,350

  17,350   17,350

 

Partners’ Capital Account
Particulars Sahaj Nimish Gauri Particulars Sahaj Nimish Gauri
To Revaluation A/c (Loss) 7,567 3,783   By Balance b/d 1,20,000 80,000 `
        By Cash A/c     1,16,825
        By Premium for Goodwill A/c 10,000 5,000  
To Balance c/d 1,42,433 91,217 1,16,825 By General Reserve A/c 20,000 10,000  
  1,50,000 95,000 1,16,825   1,50,000 95,000 1,16,825

 

Balance Sheet
After Gauri's Admission
Liabilities Rs Assets Rs

Capital A/c

  Sahaj

  Nimish

  Gauri

Creditors

Employees' Provident Fund

 

 

1,42,433

91,217

1,16,825

30,000

40,000

 

Machinery (1,20,000+6,000)

Furniture (80,000 – 8,000)

Stock (50,000 – 5,000)

Sundry Debtors                                30,000

Less: Bad Debts                               (3,000)

Less: Provision for Doubtful Debts     (1,350)

Cash (20,000 + 15,000+ 1,16,825)

1,26,000

72,000

45,000

 

 

25,650

1,51,825

  4,20,475   4,20,475

Working Note

WN1 Calculation of Gauri's Share of Goodwill

Value of Firm's Goodwill = 45,000

Gauri 's Profit Share = 1/3 rd

Gauri 's Share of Goodwill = 45000 xx 1/3 = 15000

WN2 Calculation of Capital brought in by Gauri

Old Ratio = 2:1

Gauri is admitted for 1/3rd share

Let Total Profit be 1

∴ Remaining Profit = `1 - 1/3 = 2/3`

Sahaj's New Profit Share =`2/3 xx 2/3 = 4/9`

Nimish's New Profit Share = `1/3 xx 2/3  = 2/9`

Gauri's Profit Share = `1/3` or `3/9`

∴New Ratio Share = 4:2:3

Adjust Old Capital of Sahaj = 150000 - 7567 = 142433

Adjust Old Capital of Nimish = 95000 - 3783 = 91217

Total Adjusted capital Sahaj and Nimish = `142433 + 91217 = 233650`

Combined Share of Sahaj and Nimish = 4/9 + 2/9 = 6/9 or 2/3

Total Capital of the New Firm = Total Adjusted Capital of Sahaj and Nimish x Reciprocal of Total Combined Share of Sahaj and Nimish

= `233650 xx 3/2 = 350475`

Gauri's Capital = `350475 xx 1/3 = 116825`

The following are the values involved in the scenario depicted in the question.

  • Valuing friendship and helping friends
  • Sympathy and sensitivity towards differently abled individuals.
Is there an error in this question or solution?

APPEARS IN

2012-2013 (March) Delhi Set 2
Question 17.1 | 8 marks
2012-2013 (March) Delhi Set 1
Question 18.1 | 8 marks

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Solution for question: Sahaj and Nimish Are Partners in a Firm. They Share Profits and Losses in the Ratio of 2: 1 Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the Reconstituted Firm. Identify the Value Being Conveyed in the Question concept: Preparation of Revaluation Account and Balance Sheet. For the courses CBSE (Arts), CBSE (Commerce), CBSE (Science)
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