Question

Rani and Geeta are partners sharing profits and losses 3:2 respectively. Their position on 31st March, 2013 was as follows

Balance sheet as on 31st March, 2013.

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)	Amount (Rs.)
Capital Accounts		Building		100000
Rani	100000	Furniture		10000
Geeta	75000	Stock		31000
Creditors	10000	Debtors	50000
Bills Payable	5000	Less: R.D.D.	-1000	49000
General Reserve	15000	Bank Balance		15000
	205000			205000

On 1st April, 2013 hey admitted suvarna on the following terms:

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

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

(3) Depreciate furniture @ 12.5 % and stock @ 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 account and balance sheet of the new firm.

Answer 1

In the books of the firm

Profit and Loss Adjustment A/c

Particulars	Amount Rs.	Amount Rs.	Particulars	Amount Rs.	Amount Rs.
To Furniture A/c		1250	By Building A/c		25000
To Stock A/c		3100
To Revaluation Profit :
Rani Capital A/c	12390
Geeta Capital A/c	8260	20650
		25000			25000

Partners’ Capital Accounts

Particulars	Rani	Geeta	Suvarna	Particulars	Rani	Geeta	Suvarna
				By Balance b/d	100000	75000
				By Bank A/c			100000
				By General Reserve A/c	9000	6000
				By Goodwill A/c	15000	10000
				By Profit and Loss Adjustment A/c	12390	8260
To Balance C/d	240000	160000	100000	By Bank A/c	103610	60740
	240000	160000	100000		240000	160000	100000

Balance Sheet as on 1st April, 2013

Liabilities	Amount Rs.	Amount Rs.	Assets	Amount Rs.	Amount Rs.
Capital A/c:			Building	100000
Rani	240000		Add: Appreciation	25000	125000
Geeta	160000		Furniture	10000
Suvarna	100000	500000	Less: Depreciation	1250	8750
Creditors		10000	Stock	31000
Bills Payable		5000	Less: Written off	3100	27900
			Debtors	50000
			Less: R.D.D.	1000	49000
			Bank Balance		304350
		515000			515000

Working notes :

Suvarna’s share =`1/5`

Therefore, rani’s share = `4/5 xx 3/5 = 12/25`

Geeta’s share = `4/5 xx 2/5 = 8/25`

New ratio = 12 : 8 : 5

New capital = 100000 x 5 = 500000