Ownclasses

'G', 'E' and 'F' were partners in a firm sharing profits in the ratio of 7:2:1. The Balance Sheet of the firm as on 31st March, 2011 was as follows:

Balance Sheet of 'G', 'E' and 'F'

as on 31st March, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Capitals:

 

Goodwill

40,000

G

70,000

 

Land & Buildings

60,000

E

20,000

 

Machinery

40,000

F

10,000

1,00,000

Stock

7,000

General Reserve

20,000

Debtors

12,000

Loan from E

30,000

Cash

5,000

Creditors

14,000

 

 

 

1,64,000

 

1,64,000

 

 

 

 

 

E died on 24th August 2011. Partnership deed provides for the settlement of claims on the death of a partner of a partner in addition to his capital as under:
(i) The share of profit of deceased partner to be computed up to the date of death on the basis of average profits of the past three years which was Rs 80,000.
(ii) His share in profit/loss on revaluation of assets and re-assessment of liabilities which were as follows:
Land and Buildings were revalued at Rs 94,000, Machinery at Rs 38,000 and Stock at Rs 5,000. A provision of 2.5% was to be created on debtors for bad and doubtful debts.
(iii) The net amount payable to 'E's executors was transferred to his Loan Account, to be paid later on.
Prepare Revaluation Account, Partner's Capital Accounts, E's Executor A/c and Balance Sheet of 'G' and 'F' who decided to continue the business keeping their capital balances in their new profit sharing ratio. Any surplus or deficit to be transferred to current accounts of the partners.

Answer

Revaluation a/c

Particulars

Amount (Rs)

Particulars

Amount (Rs)

Machinery

Stock

Provision for doubtful debt

Profit transferred to:

G’s capital            20,790

E’s capital              5,940

F’s capital              2,970

2,000

2,000

300

 

 

 

29700

Land and building

34,000

 

34,000

 

34000

 

  

Partner’s Capital a/c

Particulars

G

E

F

Particulars

G

E

F

Goodwill

E’s executors

 

Balance c/d

28,000

 

 

76,790

 

8,000

 

28,340

4,000

 

 

10,970

Balance b/d

General reserve

P & L Suspense a/c

Revaluation

70,000

14,000

 

 

 

20790

20,000

40,000

 

6400

 

5940

10,000

2,000

 

 

 

2970

 

1,04,790

36,340

 

 

1,04,790

36,340

14970

 

 

Balance c/d

(adjusted)

 

 

76,790

 

 

 

10,970

 

 

Balance b/d

 

 

76,790

 

 

 

10,970

76,790

 

10,970

 

76,790

 

10,970

 

 

 

 

 

 

 

                   

 

Balance sheet after

E’s death as on Aug 24/2011

Liabilities

Amount(Rs)

Assets

Amount (Rs)

Capital

G’S capital 76,790

F’s capital 10,970

 

E’s executors loan

Creditors

 

 

87,756

 

58,340

14,000

 

 

 

Land and building

Machinery(40000-2000)

Stock (7000-2000)

Debtors                   12000

Less provision for

doubtful debts             300

Cash

Profit and loss suspense

 

94,000

38000

5000

 

 

11700

5000

6400

 

1,60,100

 

1,60,100

 

 

 

E’s executor’s a/c

Dr                                                                                                                       Cr

Particulars

Amount( Rs)

Particulars

Amount (Rs)

Balance c/d

58,340

E’s capital a/c

E’s Loan a/c

28,340

30,000

 

58,340

 

58,340

 

Working Note:
Capital after adjustment
G                 76790
F                  10970

Combined capital(G+F)= 87760
Adjusted capital:
G=87760*7/8=76790
F=87760*1/8= 10970

Share of E’s profit =80,000*(2/10)*(146/365)= Rs 6,400