Advertisement Remove all ads

Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance Sheet of the New Firm. - Accountancy

Ledger

The following was the Balance Sheet of Arun, Bablu and Chetan sharing profits and losses in the ratio of `6/14 : 5/14 : 3/14` respectively.

 

Liabilites

Amount

(Rs)

Assets

Amount

(Rs)

Creditors

 

9,000

Land and Buildings

24,000

Bills Payable

 

3,000

Furniture

3,500

Capital Accounts

 

 

Stock

14,000

 

Arun

19,000

 

Debtors

12,600

 

Bablu

16,000

 

Cash

900

 

Chetan

8,000

43,000

 

 

 

 

55,000

 

55,000

They agreed to take Deepak into partnership and give him a share of 1/8 on the following terms:
(a) that Deepak should bring in Rs 4,200 as goodwill and Rs 7,000 as his Capital;
(b) that furniture be depreciated by 12%;
(c) that stock be depreciated by 10% ;
(d) that a Reserve of 5% be created for doubtful debts;
(e) that the value of land and buildings having appreciated be brought upto Rs 31,000;
(f) that after making the adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of Deepak’s Capital to his share in the business, i.e., actual cash to be paid off to, or brought in by the old partners as the case may be.

Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance Sheet of the new firm.

Advertisement Remove all ads

Solution

Books of Arun, Bablu, Chetan and Deepak

Profit and Loss Adjustment Account

(Revaluation Account)

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Furniture

420

Land and Buildings

7,000

Stock

1,400

 

 

Reserve for Doubtful Debts

630

 

 

Profit on revaluation

 

 

 

Profit transferred to

 

 

 

 

Arun’s Capital

1,950

 

 

 

 

Bablu’s Capital

1,625

 

 

 

 

Chetan’s Capital

975

4,550

 

 

 

7,000

 

7,000

 

Cash Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

900

Arun’s Capital

1,750

Chetan’s Capital

625

Bablu’s Capital

1,625

Deepak’s Capital

7,000

Balance c/d

9,350

Premium for Goodwill

4,200

 

 

 

12,725

 

12,725

  

Balance Sheet

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Creditors

9,000

Land and Buildings

31,000

Bills Payable

3,000

Furniture

3,080

Capital Account

 

Stock

12,600

 

Arun

21,000

 

Debtor

12,600

 

 

Bablu

17,500

 

Less: Reserve for Doubtful Debt

630

11,970

 

Chetan

10,500

 

Cash

 

9,350

 

Deepak

7,000

56,000

 

 

 

 

68,000

 

 

68,000

Working Note: 1)

Partner’s Capital Account

Dr.

                                                                          Cr.

Particulars

Arun

Bablu

Chetan

Deepak

Particulars

Arun

Bablu

Chetan

Deepak

Bank

1,750

1,625

 

 

Balance b/d

19,000

16,000

8,000

 

Balance c/d

21,000

17,500

10,500

7,000

Cash A/c

 

 

 

7,000

 

 

 

 

 

Premium for goodwill

1,800

1,500

900

 

 

 

 

 

 

Revaluation

1,950

1,625

975

 

 

 

 

 

 

Bank

 

 

625

 

 

22,750

19,125

10,500

7,000

 

22,750

19,125

10,500

7,000

2) Calculation of New Profit Sharing Ratio

Deepak's Share = `1/8`

Remaining Share = 1 - `1/8` = `7/8`

Arun's New Share = `6/14 xx 7/8 = 42/112`

Bablu's New Share = `5/14 xx 7/8 = 35/112`

Chetan's New Share = `3/14 xx 7/8 = 21/112`

New Profit sharing ratio of Arun, Bablu, Chetan and Deepak

= `42/112 : 35/112 : 21/112 or 42/112 : 35/112 : 21/112 : 14/112`

= 42 : 35 : 21 : 14 or 6 : 5 : 3 : 2

3) Calculation of capital of Arun, Bablu, and Chetan in the new firm
Deepak bring Rs 7,000 for  `1/8` th share of profit.

Hence total capital of the new firm = 7,000 x `8/1` = 56,000

Arun's Capital = 56,000 x `6/16` = 21,000

Bablu's Capital = 56,000 x `5/16` = 17,500

Chetan's Capital = 56,000 x `3/16` = 10,500

Concept: Admission of a New Partner
  Is there an error in this question or solution?
Advertisement Remove all ads

APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 33 | Page 170
Advertisement Remove all ads
Advertisement Remove all ads
Share
Notifications

View all notifications


      Forgot password?
View in app×