Question

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 31^st 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 24^th 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 1/2%` 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 1

 

Revaluation Account
Dr.						Cr.
Particulars		Amount Rs		Particulars	Amount Rs
Machinery		2,000		Land and Building	34,000
Stock		2,000
Provision for Doubtful Debt		300
Profit transferred to:
G’s Capital	20,790
E’s Capital	5,940
F’s Capital	2,970	29,700
		34,000			34,000

 

Partners’ Capital Account
Dr.				Cr.
Particulars	G	E	F		Particulars	G	E	F
Goodwill	28,000	8,000	4,000		Balance b/d	70,000	20,000	10,000
E’s Executors		28,340			General Reserve	14,000	4,0000	2,000
Balance c/d	76,790		10,970		Profit and Loss Suspense		6,400
					Revaluation	20,790	5,940	2,970
	1,04,790	36,340	14,970			1,04,790	36,340	14,970
					Balance b/d	76,790		10,970
Balance c/d (adjusted)	76,790		10,970
	76,790		10,970			76,790		10,970

Balance Sheet       after E’s death as on August 24,2011
Liabilities		Amount Rs	Assets		Amount Rs
Capital:			Land and Building		94,000
G’s	76,790		Machinery (40,000 – 2,000)		38,000
F's	10,970	87,760	Stock (7,000 – 2,000)		5,000
E’s Executors’ Loan		58,340	Debtors	12,000
Creditors		14,000	Less: Provision for Doubtful Debt	300	11,700
			Cash		5,000
			Profit and Loss Suspense		6,400
		1,60,100			1,60,100

E’s Executors’ Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
		E’s Capital	28,340
Balance c/d	58,340	E’s Loan	30,000
	58,340		58,340