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Raj and Dev Are Partners Sharing Profits and Losses 3:2 Respectively. Their Position on 31st March, 2011 - Book Keeping and Accountancy

Ledger

Raj and Dev are partners sharing profits and losses 3:2 respectively. Their position on 31st March, 2011

                  Balance Sheet as on 31st March, 2011

Liabilities Amount (Rs) Assets   Amount (Rs)
Capital A/c’s   Buildings   100000
Raj 100000 175000 Furniture   10000
Dev 75000 Stock   31000
Creditors 10000 Debtors 50000 49000
Bills Payable 5000 (-) R.D.D 1000
General Reserve 15000 Bank Balance 15000
  205000   205000

On 1st April, 2011 they admitted Manoj on following terms:

1) Manoj should bring in cash Rs 1,00,000 as a capital for 1/5th share in future profit and Rs 25,000 as goodwill.

2) Building should be revalued for Rs 1,25,000.

3) Depreciate furniture at 12 ½ % p.a. and stock at 10% p.a.

4) R.D.D. should be maintained as it is.

5) The Capital accounts of partners should be adjusted in their new profit sharing ratio through bank account.

Prepare, Profit and Loss Adjustment Account, Capital Accounts, Balance Sheet of new firm and show how you have calculated new ratio and new capital.

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Solution

                      Profit and Loss Adjustment Account
Dr.                                                                                         Cr.

Particulars Amount (Rs) Particulars Amount
(Rs)
Furniture 1250 Building 25000
Stock 3100    
Profit transferred to:    
Raj’s Capital 12390 20650  
Dev’s Capital 8260  
  25000   25000

 

                                   Partners’ Capital Accounts
Dr.                                                                                          Cr.

Particulars Raj

Dev

Manoj Particulars Raj

Dev

Manoj
Balance c/d 136390 99260 100000 Balance b/d 100000 75000  
        General Reserve 9000 6000  
      Profit and Loss Adjustment (Profit) 12390 8260  
      Cash     100000
      Premium for Goodwill 15000 10000  
  136390 99260 100000   136390 99260 100000
Balance c/d 240000 160000 100000 Balance b/d 136390 99260 100000
        Bank 103610 60740  
  240000 160000 100000   240000 160000 100000

          Balance Sheet
as on April 01, 2011 after Manoj’s admission
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 10000 Building 125000
Bills Payable 5000 Furniture 10000 8750
Capital :   Less : Depreciation @ 12.5% 1250
Raj 240000 500000 Stock 31000 27900
Dev 160000 Less : Depreciation @ 10% 3100
Manoj 100000 Debtors 50000 49000
      Less : Reserve for Doubtful Debts 1000
    Cash (100000 - 25000)   125000
    Bank   179350
  515000   515000

Working Notes: 
Calculation of Profit Sharing Ratio:

Old Ratio = Raj : Dev = 3 : 2

Manoj's Share = `1/5`

Let the total share of firm = 1

Remaining share of the firm = `1-1/5 = 4/5`

Raj's New Share =`4/5 - 3/5 = 12/25`

Dev's New Share = `4/5 - 2/5 = 8/12`

New profit sharing ratio of Raj , Dev and Manoj =`12/25 : 8/25 : 1/5 = (12 : 8 : 5)/25`

Sacrificing Ratio = Old Ratio - New Ratio

Raj's Sacrifice =`3/5 - 12/25 = 3/25`

Dev's Sacrifice = `2/5 - 8/25 = 2/25`

Sacrificing Ratio of Raj and Dev = 3:2

WN 1: Adjustment of Capital

Total capital of the New firm
= Share of Capital brought in by Manoj × Reciprocal of Manoj's Share Manoj's Capital = Rs 100000

Total Capital of the New firm = `100000 xx 5/1 = "Rs" 500000`

Raj's Capital = `500000 xx 12/25 = "Rs" 240000`

Dev's Capital = `500000 xx 8/25 = "Rs" 160000`

Manoj's Capital = `500000 xx 5/25 = "RS" 100000`

WN 2: Distribution of General Reserve 

Raj will get =`15000 xx 3/5 = "Rs" 9000`

Dev will get = `15000 xx 2/5 = "Rs" 6000`

WN 3: Distribution of Manoj’s Share of Goodwill 

Raj will get =`25000 xx 3/5 = "Rs" 15000`

Dev will get = `25000 xx 2/5 = "Rs" 10000`

WN 4: Bank Account

                                      Bank Account
Dr.                                                                                         Cr.

Particulars Amount (Rs) Particulars Amount (Rs)
Balance b/d 15000 Balance c/d 179350
Capital A/c:      
Raj 103610 167350  
Dev 60740  
  179350   179350
  Is there an error in this question or solution?
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APPEARS IN

Micheal Vaz Accounts - Book Keeping and Accountancy HSC 12th Standard Maharashtra State Board
Chapter 3 Reconstitution of Partnership (Admission of Partner)
Practical Problems | Q 6 | Page 111
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