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Ram, Mohan, Sohan and Hari Were Partners in a Firm Sharing Profits in the Ratio of 4 : 3 : 2 : 1. on 1st April, 2016, Their Balance Sheet Was as Follows: - CBSE (Arts) Class 12 - Accountancy

ConceptRetirement and Death of a Partner - Calculation of New Profit Sharing Ratio

Question

Ram, Mohan, Sohan and Hari were partners in a firm sharing profits in the ratio of 4 : 3 : 2 : 1. On 1st April, 2016, their Balance Sheet was as follows:

BALANCE SHEET OF RAM, MOHAN, SOHAN AND HARI

as on 1st April, 2016

 Liabilities ₹ Assets ₹ Capital A/cs: Fixed Assets 9,00,000 Ram 4,00,000 Current Assets 5,20,000 Mohan 4,50,000 Sohan 2,50,000 Hari 2,00,000 13,00,000 Workmen Compensation Reserve 1,20,000 14,20,000 14,20,000

From the above date, the partners decided to share the future profits in the ratio of 1 : 2 : 3 : 4. For this purpose the goodwill of the firm was valued at ₹ 1,80,000. The partners also agreed for the following:(a) The Claim for workmen compensation has been estimated at ₹ 1,50,000.
(b) Adjust the capitals of the partners according to the new profit-sharing ratio by opening Partners' Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Solution

Revaluation Account

 Dr. Cr. Particulars Amount (₹) Particulars Amount (₹) Provision for Workmen Compensation Claim 30,000 Revaluation Loss Ram’s Capital A/c 12,000 Mohan’s Capital A/c 9,000 Sohan’s Capital A/c 6,000 Hari’s Capital A/c 3,000 30,000 30,000 30,000

Partners’ Capital Account

 Dr. Cr. Particulars Ram Mohan Sohan Hari Particulars Ram Mohan Sohan Hari Revaluation A/c 12,000 9,000 6,000 3,000 Balance b/d 4,00,000 4,50,000 2,50,000 2,00,000 Ram’s Capital A/c 13,500 40,500 Sohan’s Capital A/c 13,500 4,500 Mohan’s Capital A/c 4,500 13,500 Hari’s Capital A/c 40,500 13,500 Current A/c’s 3,15,000 2,05,000 Current A/c’s 1,55,000 3,65,000 Balance c/d 1,27,000 2,54,000 3,81,000 5,08,000 4,54,000 4,68,000 4,05,000 5,65,000 4,54,000 4,68,000 4,05,000 5,65,000

Balance Sheet

 Liabilities Amount (₹) Assets Amount (₹) Capital A/c Fixed Assets 9,00,000 Ram 1,27,000 Current Assets 5,20,000 Mohan 2,54,000 Current A/c Sohan 3,81,000 Ram 3,15,000 Hari 5,08,000 12,70,000 Mohan 2,05,000 5,20,000 Current A/c Sohan 1,55,000 Hari 3,65,000 5,20,000 Claim against WCF 1,50,000 19,40,000 19,40,000

Working Notes

WN1: Calculation of Gaining/Sacrificing Ratio

(a) Sohan will compensate Ram and Mohan in the ratio 3 : 1

(b) Hari will compensate Ram and Mohan in the ratio of 3 : 1

 Sohan’s Capital A/c Dr. 18,000 Hari’s Capital A/c Dr. 54,000 To Ram’s Capital A/c 54,000 To Mohan’s Capital A/c 18,000 (Sohan and Hari will compensate Ram and Mohan in their gaining ratio)

Ram = 4,54,000 – 12,000 = Rs 4,42,000

Mohan = 4,68,000 – 9,000 = Rs 4,59,000

Sohan = 2,50,000 – 24,000 = Rs 2,26,000

Hari = 2,00,000 – 57,000 = Rs 1,43,000

Total Combined Capital = 12,70,000

WN3: Calculation of New Capital

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Solution Ram, Mohan, Sohan and Hari Were Partners in a Firm Sharing Profits in the Ratio of 4 : 3 : 2 : 1. on 1st April, 2016, Their Balance Sheet Was as Follows: Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio.
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