X, Y and Z were partners in a firm sharing profit’s in the firm of 5:3:2. On 31-3-2015 their Balance Sheet was as follows:
Balance sheet of X,Y and Z as on 31st march,2015
| Liabilities | Amount(Rs.) | Assets | Amount(Rs.) |
|
Creditors Investment Fluctuation Fund P & L Account Capital: X 50,000 Y 40,000 Z 20,000
|
21,000 10,000 40,000
1,10,000
|
Land and Building Motor Vans Investments Machinery Stock Debtors 40,000 Less: 3,000 Cash |
62,000 20,000 19,000 12,000 15,000
37,000 16,000 |
| 1,81,000 | 1,81,000 |
On the above date Y retired and X and Z agreed to continue the business on the following terms:
(1) Goodwill of the firm was valued at Rs.51,000
(2) There was a claim of 4,000 for Workmen’s Compensation.
(3) Provision for bad debts was to be reduced by 1,000
(4) Y will be paid 8,200 in cash and the balance will be transferred in his loan account which will be paid in four equally yearly instalments together with interest @ 10% p.a.
(5) The new profit sharing ratio between X and Z will be 3:2 and their capitals will be in their new profit sharing ratio. The Capital adjustments will be done by opening current Accounts
Prepare Revaluation Account. Partner’s Capital Accounts and the Balance Sheet of reconstituted firm.
Solution
Revaluation Account
Dr. Cr.
| Particulars | Amount(Rs.) | Particulars | Amount(Rs.) |
|
To Claim for Workman Compensation
|
4,000
|
By Provision for Doubtful Debts
By Loss on Revaluation X’s Capital A/c 1,500 Y’s Capital A/c 900 Z’s Capital A/c 600
|
1,000
3,000
|
| 4,000 | 4,000 |
Partner’s Capital Account
Dr. Cr.
| Particulars | X (Rs.) | Y (Rs.) | Z (Rs.) | Particulars | X (Rs.) | Y (Rs.) | Z (Rs.) |
|
Revaluation A/c Y’s Capital A/c Cash A/c Y’s Loan A/c
Balance c/d |
1,500 5,100
68,400 |
900
8,200 61,200
|
600 10,200
19,200 |
Balance b/d IFF P&L A/c X’s Capital Z’s Capital
|
50,000 5,000 20,000
|
40,000 3,000 12,000 5,100 10,200
|
20,000 2,000 8,000
|
| 75,000 | 70,300 | 30,000 | 75,000 | 70,300 | 30,000 | ||
|
Current A/c
Balance c/d |
15,840
52,560 |
35,040 |
Balance b/d Current A/c
|
68,400
|
19,200 15,840
|
||
| 68,400 | 35,040 | 68,400 | 35,040 |
Balance Sheet as on March 31,2015
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
|
Creditors Capitals X 52,560 Z 35,040 X’s Current A/c Claim for Workmen Compensation Y’s Loan A/c
|
21,000
87,600 15,840 4,000 61,200
|
Land and Building Motor Vans Investment Machinery Stock Debtors 40,000 Less: Provision 2,000 Cash (16000 - 8200) Z’s Current A/c
|
62,000 20,000 19,000 12,000 15,000
38,000 7,800 15,840
|
| 1,89,640 | 1,89,640 |
Working Notes :
WN 1: Calculation of Gaining Ratio
X's = (3/5) - (5/10) = 1/10
Z's = (2/5) - (2/10) = 2/10
Gaining Ratio = 1 : 2
WN 2: Adjustment of Goodwill
Y's Share of Goodwill = 51,000 x (3/10) = 15,300
15,300 will be debited to gaining partners (X and Z) in the ratio of 1:2
X's Share = 15,300 x (1/3) = 5,100
Z's share = 15,300 x (2/3) = 10,200
WN 3: Adjustment of Capital
Adjusted Capital of X = 50,000 + 5,000 + 20,000 – 1,500 – 5,100 = 68,400
Adjusted Capital of Z = 20,000 + 2,000 + 8,000 – 600 – 10,200 = 19,200
Total Adjusted Capital = 68,400 + 19,200 = 87,600
X's New Capital = 87,600 x (3/5) = 52,560
Z's New Capital = 87,600 x (2/5) = 35,040
Z’s New Capital > Z’s Adjusted Capital (Z owes 15,840 to the firm)
X’s New Capital < X’s Adjusted Capital (Firm owes 15,840 to X)
WN 4 Amount transferred to Y’s Loan A/c
Amount to be transferred = (Credit side – Debit side) – Cash paid
= (70,300 – 900) – 8,200
= 61,200
