question_answer

Anil and Sunil are partners in a firm sharing profits in the ratio of 3 : 2. They decided that w.e.f. 1st April, 2018, they will share the profits equally. The balance sheet of Anil and Sunil as at 31st March, 2018 is given below: Balance Sheet as at 31st March, 2018

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Creditors		48,000	Cash in Hand	32,000
Outstanding Expenses		12,000	Debtors	28,800
Capital A/cs			Stock	67,200
Anil	2,40,000		Furniture	49,600
Sunil	2,40,000	4,80,000	Machinery	3,62,400
		5,40,000		5,40,000

Capital of the firm was fixed at Rs. 6,40,000 to be contributed by partners in the new profit sharing ratio. The    difference will be adjusted in cash. Goodwill of the firm is to be valued on the basis of two year's purchase of super profit. The average net profit expected in future by the firm is Rs. 80,000 p. a. The normal rate of return on capital employed in similar business is 10%. Prepare partner's capital account and balance sheet of the reconstituted firm.

Answer:

Dr                                                         Partners' Capital Account                                                        Cr

Particulars	Anil (Rs.)	Sunil (Rs.)	Particulars	Anil (Rs.)	Sunil (Rs.)
To Anil	-	3,200	By Balance b/d	2,40,000	2,40,000
To Balance c/d	3,20,000	3,20,000	By Sunil	3,200	-
			By Cash	76,800	83,200
			(Balancing figure)
	3,20,000	3,20,000		3,20,000	3,23,200

                                                            Balance Sheet as at 1st April, 2018

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Creditors		48,000	Cash in Hand	1,92,000
			(32,000 + 76,800 + 83,200)
Outstanding Expenses		12,000	Debtors	28,800
Capitals			Stock	67,200
Anil	3,20,000		Furniture	49,600
Sunil	3,20,000	6,40,000	Machinery	3,62,400
		7,00,000		7,00,000

Working Notes 1. Average Profit = Rs. 80,000 Normal Profit = \[6,40,000\times \frac{10}{100}\,Rs.\,\,64,000\] Super Profit = Average Profit - Normal Profit = 80,000 - 64,000 =Rs. 16,000 Goodwill = \[16,000\times 2=Rs.\,32,000~\] 2. Calculation of Sacrificing as Gaining Ratio \[Anil=\frac{3}{5}-\frac{1}{2}=\frac{6-5}{10}=\frac{1}{10}\,Sacrifice\] \[Sunil=\frac{2}{5}-\frac{1}{2}=\frac{4-5}{10}=\left( \frac{1}{10} \right)\,\,Gain\]