Xavier, Yusuf and Zaman were partners in a firm sharing profits in the ratio of 4:3: 2. On 1.4.2014 their Balance sheet was as follows:
| Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Sundry Creditors Capital Accounts Xavier 1,20,000 Yusuf 90,000 Zaman 60,000
|
41,400
2,70,000
|
Cash at Bank Sundry Debtors 30,450 Less: Prov. For Bad debts 1,050 Stock Plant and Machinery Land and Building |
33,000
29,400 48,000 51,000 1,50,000 |
| 3,11,400 | 3,11,400 |
Yusuf had been suffering from ill health and thus gave notice of retirement from the firm. An agreement was, therefore, entered into as on 1.4.2014, the terms of which were as follows:
1) That land and building be appreciated by 10%
2) The provision for bad debts is no longer necessary
3) That stock be appreciated by 20%
4) That goodwill of the firm be fixed at Rs 54,000. Yusuf share of the same be adjusted into Xavier's and Zamna's Capital Accounts, who are going to share future profits in the ratio of 2:1
5) The entire capital of the newly constituted firm be readjusted by bringing in or paying necessary cash so that the future capitals of Xavier and Zaman will be in their profit sharing ratio.
Prepare Revaluation Account and Partner's Capital Account
Solution
| Revaluation Account | |||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
|
To Profit transferred to : Xavier’s Capital A/c 11,400 Yusuf’s Capital A/c 8,550 Zaman’s Capital A/c 5,700 |
25,650 |
By Land and Building A/c By Sundry Debtors A/c By Stock A/c
|
15,000 1,050 9,600
|
| 25,650 | 25,650 | ||
| Partner’s Capital Account | |||||||
| Dr. | Cr. | ||||||
| Particulars | Xavier | Yusuf | Zaman | Particulars | Xavier | Yusuf | Zaman |
| To Yusuf’s Capital A/c | 12,000 | 6,000 | By Balance b/d | 1,20,000 | 90,000 | 60,000 | |
| To Yusuf’s Loan A/c | 1,16,550 | By Revaluation Profit A/c | 11,400 | 8,550 | 5,700 | ||
| By Xavier’s Capital A/c | 12,000 | ||||||
| By Zaman’s Capital A/c | 6,000 | ||||||
| To Balance c/d | 1,19,400 | 59,700 | |||||
| 1,31,400 | 1,16,500 | 65,700 | 1,31,400 | 1,16,500 | 65,700 | ||
Working Notes:
WN1: Adjustment of Goodwill
Yusuf's share of Goodwill = `54000 xx 3/9 = 18000`
Xavier will pay = `18000 xx 2/3 = 12000`
Zaman will pay = `18000 xx 1/3 = 6000`
WN2 Adjustment of Capital
Adjusted Old Capital of Xavier = 1, 19,400
Adjusted Old Capital of Yusuf = 1, 16,500 ⇒ will be transferred to Loan A/c
Adjusted Old Capital of Zaman = 59,700
Total adjusted capital = 1, 19,400 + 59,700 = 1,79,100
New Profit Sharing Ratio = 2:1
Xavier's New Capital = `179100 xx 2/3 = 119400`
Zaman's New Capital = `179100 xx 1/3 = 59700`
Note: Since, here no information is given regarding the share acquired by Xavier and Zaman, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 4:2 or 2:1
