Question

Shedge, Mayekar and Raut were partners sharing profits and losses in the ratio of 4: 3: 3.
Their Balance Sheet on 31^st March 2012 was as given below:-

             Balance Sheet as on 31^st March, 2012

 

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Capitals		Furniture	4,200
Shedge	15,000	Stock	13,000
Mayekar	10,000	Debtors	10,000
Raut	10,000	Bill Receivable	18,000
		Cash/Bank	2,000
		Profit and Loss A/c (Loss)	5,800
	53,000		53,000

Raut retired from the business on above date and it was agreed that the amount due to Raut to be paid immediately by availing overdraft facility

1) His share of goodwill was raised at Rs 3,500

2) Revalue furniture Rs 4,000 and stock Rs 16,000

3) Create R.D.D. at 5% on Debtors.

4) Make provision for outstanding printing bill Rs 6,000. Prepare profit and loss adjustment A/c, Capital A/c and Balance Sheet of continuing partners assuming that goodwill is written off by the continuing partners.

Answer 1

                 Profit and Loss Adjustment Account
Dr.                                                                                Cr.

Particulars	Amount (Rs)	Particulars		Amount (Rs)
Furniture	200	Stock		3,000
Reserve for Doubtful Debts	500	Loss to be transferred to:
Provision for Outstanding Printing Bill	6,000	Shedge’s Capital	1,480	3,700
		Mayekar’s Capital	1,110
		Raut’s Capital	1,110
	6,700			6,700

                   Partners’ Capital Accounts
Dr.                                                                                Cr.

Particulars	Shedge	Mayeker	Raut	Particulars	Shedge	Mayeker	Raut
Profit and Loss Adjustment A/c (Loss)	1,480	1,110	1,110	Balance b/d	15,000	10,000	10,000
Profit and Loss A/c (Loss)	2,320	1,740	1,740	Goodwill			3,500
Goodwill (written off)	2,000	1,500
Bank A/c			10,650
Balance c/d	9,200	5,650
	15,000	10,000	13,500		15,000	10,000	13,500

 

Balance Sheet

as on April 01, 2012 after Raut’s retirement

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		8,000	Furniture	4,200	4,000
Bank Overdraft		18,650	Less : Depreciation	200
Capital A/cs:			Stock		16,000
Shedge	9,200	14,850	Debtors	10,000	9,500
Mayeker	5,650		Less : Provision for doubtful debts	500
Provision for Outstanding Printing Bill		6,000	Bills Receivable		18,000
		47,500			47,500

Working Notes:

Old profit Sharing Ratio of Shedge , Mayeker and Raut = 4 : 3 : 3

New Profit Sharing Ratio of Shedge and Mayeker = 4 : 3

Gaining Ratio = New Ratio - Old Ratio

Shedge's Gain = `4/7 - 4/10 = 12/70`

Mayeker's Gain = `3/7 - 3/10 = 9/70`

Gaining Ratio = 12 : 9

WN 1: Distribution of Profit and Loss A/c (Loss) 

Shedge's Capital A/c = `5800 xx 4/10 = "Rs" 2320`

Mayekar's Capital A/c = `5800 xx 3/10 = "Rs" 1,740`

Raut's Capital A/c = `5800 xx 3/10 = "Rs" 1,740`

WN 2: Goodwill written off 

Shedge's Gain `= 3500 xx 12/21 = "Rs"2000`

Mayekar's Gain `= 3500 xx 9/21 = "Rs" 1500`