Share

Books Shortlist
Your shortlist is empty

# Solution for 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 - CBSE (Arts) Class 12 - Accountancy

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 SheetAfter 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

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 Concept: Preparation of Revaluation Account and Balance Sheet.
S