Ownclasses

B and C were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as on 31-3-2011 was as follows:

 

Balance Sheet of B and C

as on 31-3-2011

 

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital:

 

 

Land and Building

80,000

B

60,000

 

Machinery

20,000

C

40,000

1,00,000

Furniture

10,000

 

 

 

Debtors

25,000

Provision for bad debts

1,000

Cash

16,000

Creditors

 

60,000

Profit and Loss Account

10,000

 

 

 

 

 

 

1,61,000

 

1,61,000

 

 

 

 

           

 

D was admitted to the partnership for 1/5th share in the profits on the following terms:
(i) The new profit sharing ratio was decided as 2:2:1.
(ii) D will bring Rs 30,000 as his capital and Rs 15,000 for his share of goodwill.
(iii) Half of goodwill amount was withdrawn by the partner who sacrificed his share of profit in favour of D.
(iv) A provision of 5% for bad and doubtful debts was to be maintained.
(v) An item of Rs 500 included in Sundry Creditors was not likely to be paid.
(vi) An provision of Rs 800 was to be made for claims for damages against the firm.
After making the above adjustments the Capital Accounts of B and C were to be adjusted on the basis of D Capital. Actual cash was to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new firm. 

Answer

Dr                                            Revaluation a/c                                                   Cr

Particulars

Amount (Rs)

Particulars

Amount(Rs)

Provision for bad and doubtful debt        1250

Less

Old provision      1000

Claim for damages

 

 

 

250

800

Sundry creditors

Loss transferred to partners’ capital a/c

B                       330

C                       220

500

 

 

 

550

 

 

1050

 

1050

 

                                              Partner’s capital a/c

 

Particulars

B

C

D

Particulars

B

C

D

Goodwill a/c

Realisation a/c

Profit and loss a/c

Cash a/c

(bf)

Balance c/d

7500

330

 

6000

 

1170

 

60,000

 

 

220

 

4000

 

 

 

60,000

 

 

 

 

 

 

 

30,000

By

Balance b/d

Cash a/c

Premium for good will a/c

 

Cash a/c

(bf)

 

60,000

 

15,000

 

 

 

40,000

 

 

 

 

24220

 

 

30,000

 

75,000

64,220

30,000

 

75,000

64,220

30,000

 

Working note:
Old profit sharing ratio: 3:2
New profit sharing ratio: 2:2:1
Sacrificing ratio: B:  3/5-2/5=1/5
                         C: 2/5-2/5=0=1/5:0

 

Adjustment of capital:
D’s capital: 30000
Total capital =30000*5/1=150000
B’s capital= 150000*2/5=60000
C’s capital=150000*2/5=60000

 

Computation of cash balance 

particulars

Amount

Particulars

Amount

Opening balance

D’s capital a/c

Premium a/c

C’s capital a/c

 

16,000

30,000

15,000

24,220

B’s capital a/c

(7500+1170)

 

Balance c/d

8670

 

 

76,550

 

85,220

 

85,220

 

Balance Sheet

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital:

 

  Land and Building

80,000

B

60,000

 

  Machinery

20,000

C

60,000

 

  Furniture

10,000

D

30,000

      1,50,000

  Debtors

25,000

 

Creditors (60,000 – 500)

        59,500

Less: Provision for Doubtful Debts

(1,250)

23,750

Claim for Damages

             800

  Cash

76,550

 

 

 

 

 

 

 

 

 

 

 

 

 

2,10,300

 

2,10,300