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Question
The Balance Sheet of the Anu, Renu, and Dinu is as follows, the partners are sharing profits and losses in the proportion of 2:2:1 respectively.
| Balance Sheet as on 31st March 2019 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Creditors | 8,000 | Bank | 5,000 | |
| Bills Payable | 2,000 | Debtors | 20,000 | 19,000 |
| General Reserve | 5,000 | Less: R.D.D | 1,000 | |
| Capital Account: | Furniture | 15,000 | ||
| Anu | 40,000 | Machinery | 4,000 | |
| Renu | 30,000 | Freehold Property | 27,000 | |
| Dinu | 15,000 | Goodwill | 30,000 | |
| 1,00,000 | 1,00,000 | |||
Dinu retires from the firms on 1st April 2019 on the following terms.
1. The assets are to be revalued as freehold property ₹ 30,000, Machinery ₹ 5000, Furniture ₹ 12000, All debtors are good.
2. Goodwill of the firm is valued at thrice the average profit for the preceding five years. Profits of the firm for the year.
| 2014-15 | ₹ 14,500 |
| 2015-16 | ₹ 10,500 |
| 2016-17 | ₹ 10,000 |
| 2017-18 | ₹ 16,000 |
| 2018-19 | ₹ 10,000 |
3. Dinu should be paid ₹ 3,000 by cheque.
4. The Balance of Dinu’s capital A/c should be kept in the business as a loan.
Prepare: Profit and loss adjustment A/c, Capital Accounts of partners, Balance Sheet of the new firm.
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Solution
|
In the books of Partnership Firm |
||||
|
Dr. |
Profit and Loss Adjustment Account |
Cr. |
||
| Particulars | Amount (₹) | Amount (₹) | Particulars | Amount (₹) |
| To Furniture A/c | 3,000 | By Freehold Property A/c | 3,000 | |
| To Goodwill A/c - Loss | 1,500 | By Machinery A/c | 1,000 | |
| To Partner’s Capital A/cs: Profit | 500 | By R.D.D. A/c | 1,000 | |
| Anu | 200 | |||
| Renu | 200 | |||
| Dinu | 100 | |||
| 5,000 | 5,000 | |||
| Dr. | Partners’ Capital Accounts | Cr. | |||||
| Particulars | Anu (₹) |
Renu (₹) | Dinu (₹) | Particulars | Anu (₹) |
Renu (₹) | Dinu (₹) |
| To Bank A/c | - | - | 3000 | By Balance b/d | 40,000 | 30,000 | 15,000 |
| To Loan A/c | - | - | 13,100 | By General reserve A/c | 2,000 | 2,000 | 1,000 |
| To Balance c/d | 42,200 | 32,200 | - | By Profit and Loss Adjustment A/c (Profit) | 3,440 | 3,440 | 1,720 |
| 42,200 | 32,200 | 16,100 | 42,200 | 32,200 | 16,100 | ||
| Balance Sheet as on 1st April 2019 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Partner's Capital A/c: | 74,400 | Bank | 2,000 | ||
| Anu | 42,200 | Debtors | 20,000 | ||
| Renu | 32,200 | Furniture | 15,000 | 12,000 | |
| Dinu's Loan A/cs | 13,100 | (-) Depreciation | 3,000 | ||
| Creditors | 8,000 | Machinery | 4,000 | 5,000 | |
| Bill Payable | 2,000 | (+) Appreciation | 1,000 | ||
| Freehold Property | 27,000 | 30,000 | |||
| (+) Appreciation | 3,000 | ||||
| Goodwill | 28,500 | ||||
| 97,500 | 97,500 | ||||
Working Notes:
1. Average profit = `"Total Profit"/"No. of years"`
= `(1000+ 10,500 + 10,000 + 16,000 + 10,000)/5`
= `(47,500)/5`
= ₹ 9,500
Goodwill = Avg. profit × No. of years
= 9,500 × 3 years
= ₹ 28,500
Goodwill value given in balance sheet = ₹ 30,000
New value arrived at = ₹ 28,500
Loss due to revaluation = ₹ 1,500
To be recorded in P & Loss Adj. A/c – Dr. Side.
In asset side of Balance sheet, write ₹ 28,500 for Goodwill.
2. Balance of Bank A/c = Opening Balance − Cheque given to Dinu
= 5,000 – 3,000
= ₹ 2,000
