Question

The Balance Sheet of Ram, Shyam, and Ghanshyam sharing profits and losses 3:2:1 respectively. Their position on 31-3-2019 were as follows.

Balance Sheet as on 31st March 2019
Liabilities	Amount ₹	Assets	Amount ₹
Capitals :		Bank	54,000
Ram	1,20,000	Debtors	90,000
Shyam	90,000	Building	60,000
Ghanshyam	60,000	Investment	1,50,000
Creditors	22,000
Bills payable	12,000
Loan	50,000
	3,54,000		3,54,000

Ghanshyam retired on 1st April 2019 on the following terms.

1. Building and Investment to be appreciated by 5% and 10% respectively.

2. Provision for Doubtful Debts to be created at 5% on Debtors.

3. The provision of ₹ 3,000 be made in respect of Outstanding Salary.

4. Goodwill of the firm is valued at  ₹ 90,000 and partners decide that goodwill should be written back.

5. The amount payable to the Retiring partner be transferred to his Loan A/c.

Prepare : Profit and Loss Adjustment A/c, Partners Capital A/c, Balance Sheet of New Firm.

Answer 1

Dr	In the books of Partnership Firm Profit and Loss Adjustment Account					Cr
Particulars			Amount (₹)	Particulars	Amount (₹)
To R.D.D. A/c			4,500	By Building A/c	3,000
To Provision for Outstanding Salary A/c			3,000	By Investments A/c	15,000
To Partners’ Capital A/cs: Profit
Ram `[3/6 xx 10,500]`		5,250	10,500
Shyam `[2/6 xx 10,500]`		3,500
Ghanshyam `[1/6 xx 10,500]`		1,750
			18,000		18,000

 

Dr	Partners’ Capital Accounts
Particulars	Ram (₹)	Shyam (₹)	Ghanshyam (₹)	Particulars	Ram (₹)	Shyam (₹)	Ghanshyam (₹)
To Goodwill A/c (Written off)	54,000	36,000	-	By Balanced b/d	1,20,000	90,000	60,000
To Ghanshyam's Loan A/c	-	-	76,750	By Goodwill A/c	45,000	30,000	15,000
To Balance c/d	1,16,250	87,500	-	By Profit and Loss Adjustment A/c (Profit)	5,250	3,500	1,750
	1,70,250	1,23,500	76,750		1,70,250	1,23,500	76,750

 

Balance Sheet as on 1st April 2019
Liabilities		Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Partners’ Capital A/cs :				Bank		54,000
Ram		1,16,250	2,03,750	Debtors	90,000	85,500
Shyam		87,500		Less: R.D.D. 5 % `[90,000 xx 5/100]`	4,500
Ghanshyam’s Loan A/c			76,750	Building	60,000	63,000
Creditors			22,000	Add: Appreciation @ 5% `[60,000 xx 5/100]`	3,000
Bills Payable			12,000	Investments	1,50,000	1,65,000
Loan			50,000	Add: Appreciation @ 10% `[1,50,000 xx 10/100]`	15,000
Provision for Outstanding Salary			3,000
			3,67,500			3,67,500

Working Notes : (1st April 2019)

Ram	Shyam	Ghanshyam
`3/6`	`2/6`	`cancel(1/6)`

Gain/Benefit Ratio = New Ratio - Old Ratio

Ram = `3/5 - 3/6 = (18 - 15)/30 = 3/30`

Shyam = `2/5 - 2/6 = (12 - 10)/30 = 2/30`

Gain Ratio = `3/5 : 2/5`

Goodwill A/c      ...Dr.	90,000
To Ram Capital A/c    `[3/6 xx 90,000]`		45,000
To Shyam Capital A/c    `[2/6 xx 90,000]`		30,000
To Ghanshaym Capital A/c    `[1/6 xx 90,000]`		15,000

 

Ram Capital A/c `[3/5 xx 90,000]`   ...Dr.	54,000
Shyam Capital A/c `[2/5 xx 90,000]`   ...Dr.	36,000
To Goodwill A/c		90,000