Question

Ram and Madan were partners in a firm sharing profits and losses equally. Following was their balance sheet as on 31.03.2012:

Balance Sheet as on 31.03.2012

Liabilities	Amount	Assets	Amount
Capital:		Plant and machinery	90,000
Ram	1,00,000	Furniture	15,000
Madan	1,00,000	Sundry debtors        92,600
General reserve	40,000	Less: R.D.D.            1,600	91,000
Sundry creditors	55,300	Stock	68,000
		Cash in hand	4,200
		Cash at bank	27,100
	2,95,300		2,95,300

On 1st April, 2012, Soham was admitted as a partner in the firm on the following terms:
(1) Soham is to bring in Rs. 1,00,000 as his capital. He is to be given 1/3rd share in future profits.
(2) Goodwill of the firm to be raised at Rs. 30,000. It was decided that ‘goodwill’ should not appear in the books of the new firm.
(3) Furniture to be depreciated by 10%. Stock was valued at `Rs . 70,500.

Prepare:
(1) Profit and Loss Adjustment Account.
(2) Partners’ Capital Accounts.
(3) Balance Sheet of the new firm.

Answer 1

In the books of Partnership Firm

Profit and Loss Adjustment Account

Particulars	Amount	Amount	Particulars	Amount	Amount
To Furniture A/c (Depreciation)		1500	By Stock A/c (Appreciation in Value)		2500
To partners’ Capital Account.(Profit)
Ram	500
Madan	500	1000
		2500			2500

Partners Capital Accounts

Particulars	Ram	Madan	Sohan	Particualrs	Ram	Madan	Sohan
To Goodwill A/c	10000	10000	10000	By Balance b/d	100000	100000
				By General Reserves A/c	20000	20000	-
				By Bank A/c (Capital Contribution)	-	-	100000
				By Goodwill A/c	15000	15000
				By Profit & Loss Adj. A/c (Profit)	500	500
To Balance C/d	125500	125500	90000
	135500	135500	100000		135500	135500	100000

Balance Sheet as on 1st April, 2012

Liabilities	Amount	Amount	Assets	Amount	Amount
Sundry Creditors		55300	Plant  & Machinery		90000
Partners’ Capital A/c			Furniture:	15000
Ram	125500		Less: Depreciation @10%	1500	13500
Madan	125500		Sundry Debtors		91000
Sohan	90000	341000	Stock	68000
			Add: Increase in value	2500	70500
			Cash in Hand		4200
			Cash at Bank		127100
		396300			396300

Goodwill A/c

Particulars	Amount	Amount	Particulars	Amount	Amount
To Ram’s Capital A/c		15000	By Ram’s Capital A/c		10000
To Madan’s Capital A/c		15000	By Madan’s Capital A/c		10000
			By Shohan’s Capital A/c		10000
		30000			30000

Bank A/c

Particulars	Amount	Amount	Particulars	Amount	Amount
To Balance b/d		27100
To Sohan’s Capital A/c		100000	By Balance C/d		127100
		127100			127100

     Working note 

1) Calculation of new ratio 

old ratio =`1/2:1/2`

share given to sohan =`1/3`

balance ratio= 1- share given to new partner 

=`1-1/3`

=`2/3`

New ratio = balance ratio x old ratio 

∴ Ram's new ratio = `2/3xx1/2=2/6`

madan's new ratio=`2/3xx1/2=2/6`

Sohan's new ratio =`1/3xx 2/2=2/6`

∴ new ratio=`2/6 : 2/6 : 2/6`

=`1/3 : 1/3 : 1/3`

`=1 : 1 : 1`