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Suresh and Ramesh Are Partners in a Business Sharing Balance Sheet as on 31st March, 2013 is as Follows: - Book Keeping and Accountancy

Ledger

Suresh and Ramesh are partners in a business sharing Balance sheet as on 31st March 2013 are as follows:

Balance Sheet as on 31st March 2013
Liabilities Amount (Rs) Amount
(Rs)
Assets Amount
(Rs)
Amount
(Rs)
Capital A/c’s   Building 30000
Suresh 50000 74000 Machinery 10000
Ramesh 24000 Furniture 9500
Creditors 57000 Debtors 40000 39000
Bills Payable 20000 (-) R.D.D 1000
Reserve fund 9000 Stock 30000
    Bills Receivable 7600
  Cash at Bank 33900
  160000   160000

They admitted Kailash on 1st April 2013 as a partner on the following terms:

1) Kailash will bring Rs 30,000 as his capital for 1/4th share in future profit and Rs. 12,000 as goodwill which will be withdrawn by old partners.

2) Stock and Machinery to be depreciated by 10%.

3) R.D.D. is to be maintained at 5% on debtors.

4) Building to be appreciated by 20% and furniture is revalued at Rs 10,000.

Prepare Profit and Loss Adjustment Account, Partner’s Capital Accounts, and Balance Sheet of the New firm.

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Solution

Dr. 
Profit and Loss Adjustment Account
 Cr.
Particulars
Amt (Rs)
Particulars
Amt (Rs)
Stock 3000 Building 6000
Machinery 1000 Furniture 500
Reserve for Doubtful Debts (R.D.D) 1000    
Profit transferred to:    
Suresh’s Capital 750 1500  
Ramesh’s Capital 750  
  6500   6500

                   

Dr. Partners’ Capital Accounts
  Cr.
Particulars Suresh Ramesh Kailash Particulars Suresh Ramesh Kailash
Cash (Goodwill withdrawn) 6000 6000   Balance b/d 50000 24000  
Balance c/d 55250 29250 30000 Reserve Fund 4500 4500  
        Profit and Loss Adjustment (Profit) 750 750  
      Cash     30000
      Premium for Goodwill 6000 6000  
  61250 35250 30000   61250 35250 30000
 
 
Balance Sheet as on April 01, 2013, after Kailash’s admission
Liabilities
Amt (Rs.)
Assets
Amt (Rs.)
Creditors 57000 Building 36000
Capital   Furniture 10000
Suresh 55250 114500 Bills Receivable 7600
Ramesh 29250 Sundry Debtors 40000 38000
Kailash 30000 Less: Reserve for Doubtful Debts (2000)
Bills Payable 20000 Machinery 10000 9000
      Less: Depreciation (1000)
      Stock 30000 27000
      Less: Depreciation (3000)
      Cash at Bank   63900
  191500   191500

Working Notes:

Calculation of New Profit Sharing Ratio

Old Ratio = Suresh : Ramesh = 1 : 1

Kailash's Share = `1/4`

Let the total share of firm = 1

Remaining share of firm = `1-1/4 = 3/4`

Suresh's New share = `3/4 xx 1/2 = 3/8`

Ramesh's New share = `3/4 xx 1/2 = 3/8`

New Profit Sharing Ratio = `3/8 : 3/8 : 1/4 = (3:3:2)/8`

Sacrificing Ratio = Old Ratio - New Ratio

Suresh's Sacrifice = `1/2 - 3/8 = 1/8`

Ramesh's Sacrifice = `1/2 - 3/8 = 1/8`

Sacrificing Ratio = 1: 1

WN 1: Distribution of Reserve Fund

Suresh will get = `9000 xx 1/2 = "Rs" 4500`

Ramesh will get = `9000 xx 1/2 = "Rs." 4500`

WN 2: Distribution of Dhiraj Kumar’s share of Goodwill

Suresh will get = `12000 xx 1/2 = "Rs." 6000`

Ramesh will get = `12000 xx 1/2 = "Rs."  6000`

WN 3: Cash Account

Dr.  Cash Account
Cr.
Particulars Amount
(Rs)
Particulars
Amount
(Rs)
Balance b/d 33900 Capital A/cs:  
Kailash's Capital A/c 30000 Suresh 6000 12000
Premium for goodwill A/c 12000 Ramesh 6000
    Balance c/d 63900
  75900   75900
  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 2 | Page 109
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