question_answer
The balance Sheet of A, B, and C, who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2018 was as follows: Balance Sheet As at 31st March, 2018 | Liabilities | | Amt (Rs.) | Assets | Amt (Rs.) |
| Creditors | | 1,10,000 | Bank | 88,000 |
| Employees Provident fund | | 22,000 | Debtors | 2,20,000 |
| Profit and Loss A/c | | 1,87,000 | Stock | 1,76,000 |
| Capital A/cs | | | Fixed Assets | 1,32,000 |
| A | 88,000 | | | |
| B | 1,36,400 | | | |
| C | 72,600 | 2,97,000 | | |
| | | 6,16,000 | | 6,16,000 |
A retired on 31st March, 2018. It was agreed that: (i) Goodwill of the firm was valued Rs. 1,76,000. (ii) Fixed assets are to be depreciated by Rs. 5,500. (iii) Make a provision for doubtful debts at 5% on debtors. (iv) New profit sharing ratio of B and C will be 2 : 3. (v) A liability for claim, included in creditors for Rs. 22,000 is settled at Rs. 17,600. The amount to be paid to A by B and C in such a way that their capital are proportionate to their profit sharing ratio and leave a balance of Rs. 33,000 in the bank. Prepare revaluation account and partners? capital account. Or X and Y were partners in a firm sharing profits in the ratio of 3 : 2 : On 1st April, 2017, they admitted Z as a partner in the firm. The balance sheet of X and Y on the date was as under: Balance Sheet as at 1st April, 2017 | Liabilities | | Amt (Rs.) | Assets | Amt (Rs.) |
| Creditors | | 1,05,000 | Cash in Hand | 70,000 |
| Workmen?s Compensation Fund | | 1,25,000 | Debtors | 80,000 |
| General Reserve | | 80,000 | Stock | 60,000 |
| Capital A/cs | | | Machinery | 50,000 |
| X | 50,000 | | Building | 1,40,000 |
| Y | 40,000 | 90,000 | | |
| | | 4,00,000 | | 4,00,000 |
It was agreed that: (i) The value of building and stock be appreciated to Rs. 1,90,000 and Rs. 80,000 respectively. (ii) The liabilities of workmen's compensation fund was determined at Rs. 1,15,000. (iii) Z brought in her share of goodwill ?50,000 in cash. (iv) Z was to bring further cash as would make her capital equal to 20% of the combined capital of X and Y after above revaluation and adjustments are carried out. (v) The future profit sharing ratio will be X 2/5th, Y 2/5th, Z l/5th. Prepare revaluation account, partner's, capital accounts and balance sheet of the new firm. Also, show clearly the calculation of capital brought by Z.
Answer:
Dr Revaluation Account Cr | Particulars | Amt (Rs.) | Particulars | | Amt (Rs.) |
| To Fixed Assets | 5,500 | By Creditors | | 4,400 |
| To Provision for Doubtful Debts | 11,000 | By Loss transferred to | | |
| | | A?s Capital A/c | 6,050 | |
| | | B?s Capital A/c | 3,630 | |
| | | C?s Capital A/c | 2,420 | 12,100 |
| | 16,500 | | | 16,500 |
Dr Partner?s Capital Account Cr | Particulars | A (Rs.) | B (Rs.) | C (Rs.) | Particulars | A (Rs.) | B (Rs.) | C (Rs.) |
| To Revaluation A/c | 6,050 | 3,630 | 2,420 | By Balance b/d | 88,000 | 1,36,400 | 72,600 |
| (Loss) | | | | By Profit and Loss A/c | 93,500 | 56,100 | 37,400 |
| To A?s Capital A/c | - | 17,600 | 70,400 | By B?s Capital A/c | 17,600 | - | - |
| To Bank | 2,63,450 | 4,510 | - | By C?s Capital A/c | 70,400 | - | - |
| To Balance c/d | - | 1,66,760 | 2,50,140 | By Bank A/c | - | - | 2,12,960 |
| | 2,69,500 | 1,92,500 | 3,22,960 | | 2,69,500 | 1,92,500 | 3,22,960 |
Working Notes 1. Calculating of Gaining Ratio = New Ratio ? Old Ratio \[B=\frac{2}{5}-\frac{3}{10}=\frac{4-3}{10}=\frac{1}{10},\] \[C=\frac{3}{5}-\frac{2}{10}=\frac{6-2}{10}=\frac{4}{10}\,\Rightarrow Gaining\,Ratio\,=\,1\,:4\] 2. \[A's\,Share\,of\,Goodwill\,=\,1,76,000\times \frac{5}{10}=Rs.\,88,000\,tobe\,Contributed\,byB\,and\,C\,in\,1\,:4.\] 3. | Calculation of New Capital | Amt (Rs.) |
| Capital after Adjustement of A | 2,63,450 |
| Capital after Adjustement of B | 1,71,270 |
| Capital after Adjustement of C | 37,180 |
| (+) Bank | 33,000 |
| | 5,04,900 |
| | (88,000) |
| (-) Already in Bank | 4,16,900 |
\[B's\,New\,Capital\,=\,4,16,900\times \frac{2}{5}=Rs.\,1,66,760;\] \[C's\,New\,Capital\,=\,4,16,900\times \frac{3}{5}=Rs.\,2,50,140\] Or Dr Revaluation Account Cr | Particulars | | Amt (Rs.) | Particulars | Amt (Rs.) |
| To Profit Transferred to Capital A/cs | | | By Building A/c | 50,000 |
| X | 42,000 | | By Stock A/c | 20,000 |
| Y | 28,000 | 70,000 | | |
| | | 70,000 | | 70,000 |
Dr Partners? Capital Account Cr | Particulars | X (Rs.) | Y (Rs.) | Z (Rs.) | Particulars | X (Rs.) | Y (Rs.) | Z (Rs.) |
| To Balance c/d | 1,96,000 | 1,04,000 | 60,000 | By Balance b/d | 50,000 | 40,000 | - |
| | | | | By Revaluation A/c | 42,000 | 28,000 | - |
| | | | | By General Reserve A/c | 48,000 | 32,000 | - |
| | | | | By Workmen?s Compensation Fund A/c | 6,000 | 4,000 | - |
| | | | | By Premium for Goodwill A/c | 50,000 | - | - |
| | | | | By Cash A/c | - | - | 60,000 |
| | 1,96,000 | 104,000 | 60,000 | | 1,96,000 | 104,000 | 60,000 |
Balance Sheet As at?.. | Liabilities | | Amt (Rs.) | Assets | | Amt (Rs.) |
| Creditors | | 1,05,000 | Building | 140,000 | |
| Liabilities for Workmen?s Compensation Fund Capital A/cs | | 1,15,000 | (+) Appreciation | 50,000 | 1,90,000 |
| X | 1,96,000 | | Stock | 60,000 | |
| Y | 1,04,000 | | (+) Appreciation | 20,000 | 80,000 |
| Z | 60,000 | 3,60,000 | Machinery | | 50,000 |
| | | | Debtors | | 80,000 |
| | | | Cash in Hand (70,000+ 50,000+60,000) | | 1,80,000 |
| | | 5,80,000 | | | 5,80,000 |
Working Notes (i) Calculation of Sacrificing Ratio Sacrificing Ratio = Old Share ? New Share \[X=\frac{3}{5}-\frac{2}{5}=\frac{3-2}{5}=\frac{1}{5};\] \[Y=\frac{2}{5}-\frac{2}{5}=\frac{2-2}{5}=\,Nil\] Here, the entire sacrifice has been made by X. (ii) Calculation of Cash Brought in by Z as her Capital | Adjusted Capital of X | = Rs. 1,96,000 |
| Adjusted Capital of Y | = Rs. 1,04,000 |
| Total Adjusted Capital | = Rs. 3,00,000 |
Z?s Capital should be equal to 20% of the Combined Adjusted Capital of X and Y i.e. \[3,00,000\times 20%\,=\,Rs.\,60,000\]
