X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3. Their Balance Sheet as at 31st March, 2019 was:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Sundry Creditors | 40,000 | Cash at Bank | 40,000 | |
| Outstanding Expenses | 15,000 | Sundry Debtors | 2,10,000 | |
| General Reserve | 75,000 | Stock | 3,00,000 | |
| Capital A/cs: | Furniture | 60,000 | ||
| X | 4,00,000 | Plant and Machinery | 4,20,000 | |
| Y | 3,00,000 | |||
| Z | 2,00,000 | 9,00,000 | ||
| 10,30,000 | 10,30,000 | |||
From 1st April, 2019, they agree to alter their profit-sharing ratio as 4 : 3 : 2. It is also decided that:
(a) Furniture be taken at 80% of its value.
(b) Stock be appreciated by 20%.
(c) Plant and Machinery be valued at ₹ 4,00,000.
(d) Outstanding Expenses be increased by ₹ 13,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve.
You are required to pass a single Journal entry to give effect to the above. Also, prepare Balance Sheet of the new firm.
Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
2019 |
X's Capital A/c |
Dr. |
|
2,500 |
|
|
April 1 |
To Z's Capital A/c |
|
|
|
2,500 |
|
|
(Revaluation Profit and General Reserve adjusted on change in profit sharing ratio) |
|
|
|
|
Balance Sheet
as on 01st April, 2019
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
|
Sundry Creditors |
40,000 |
Cash at Bank |
40,000 |
|
|
Outstanding Expenses |
15,000 |
Sundry Debtors |
2,10,000 |
|
|
General Reserve |
75,000 |
Stock |
3,00,000 |
|
|
Capital Accounts: |
|
Furniture |
60,000 |
|
|
X |
3,97,500 |
|
Plant and Machinery |
4,20,000 |
|
Y |
3,00,000 |
|
|
|
|
Z |
2,02,500 |
9,00,000 |
|
|
|
|
10,30,000 |
|
10,30,000 |
|
Working Notes:
WN 1 Calculation of Sacrificing (or Gaining) Ratio
Old Ratio (X, Y and Z) = 5 : 4 : 3
New Ratio (X, Y and Z) = 4 : 3 : 2
Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio
X's share = `5/12 - 4/9 = (15-16)/36 = -1/36` (gain)
Y's share = `4/12 - 3/9 = (12-12)/36` = Nil
Z's share = `3/12 -2/9 = (9-8)/36 = 1/36` (sacrifice)
WN 2 Calculation of Profit or Loss on Revaluation
|
Particulars |
Amount |
|
|
Increase in Stock |
60,000 |
(Cr.) |
|
Decrease Furniture |
(12,000) |
(Dr.) |
|
Decrease in Plant and Machinery |
(20,000) |
(Dr.) |
|
Increase in Outstanding Expenses |
(13,000) |
(Dr.) |
|
Profit on Revaluation |
15,000 |
(Cr.) |
WN 3 Adjustment of Profit on Revaluation and General Reserve
Amount for Adjustment = Profit on Revaluation + General Reserve
= 15,000 + 75,000 = Rs 90,000
Amount to be debited to X's capital = `90,000 xx 1/36` = Rs 2,500
Amount to be credited to Z's capital = `90,000 xx 1/36` = Rs 2,500
WN 4
Partners’ Capital Accounts
|
Dr. |
Cr. |
||||||
|
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
|
Z's Capital A/c |
2,500 |
– |
– |
Balance c/d |
4,00,000 |
3,00,000 |
2,00,000 |
|
|
|
|
|
X's Capital A/c |
– |
– |
2,500 |
|
Balance c/d |
3,97,500 |
3,00,000 |
2,02,500 |
|
|
|
|
|
|
4,00,000 |
3,00,000 |
2,02,500 |
|
4,00,000 |
3,00,000 |
2,02,500 |
