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Question
Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Sundry Creditors |
12,600 |
Bank | 4,100 | ||
| Provident Fund |
3,000 |
Debtors |
30,000 |
|
|
| General Reserve |
9,000 |
Less: Provision |
1,000 |
29,000 |
|
| Capital A/cs: |
|
|
|||
|
Amit |
40,000 | Stock | 25,000 | ||
|
Balan |
36,500 | Investments | 10,000 | ||
|
Chander |
20,000 |
96,500 |
Patents |
5,000 |
|
|
|
|
Machinery |
48,000 |
||
|
1,21,100 |
1,21,100 |
||||
It was agreed that:
(i) Goodwill will be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%.
(iv) Liability on account of Provident Fund was estimated at ₹ 2,400.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.
Solution
Revaluation Account
|
Dr. |
|
Cr. |
||||
|
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|||
|
Machinery |
4,800 |
Investments A/c |
5,800 |
|||
|
Patents |
1,000 |
Provident Fund A/c |
600 |
|||
|
Profit transferred to: |
|
|
|
|||
|
Amit’s Capital A/c |
300 |
|
|
|
||
|
Balan’s Capital A/c |
200 |
|
|
|
||
|
Chander’s Capital A/c |
100 |
600 |
|
|
||
|
|
6,400 |
|
6,400 |
|||
Partners’ Capital Account
|
Dr. |
Cr. |
||||||
|
Particulars |
Amit |
Balan |
Chander |
Particulars |
Amit |
Balan |
Chander |
|
Investments A/c |
|
|
15,800 |
Balance b/d |
40,000 |
36,500 |
20,000 |
|
Chander’s Capital A/c |
2,700 |
1,800 |
|
Revaluation A/c (Profit) |
300 |
200 |
100 |
|
Loan A/c |
|
|
10,300 |
General Reserve |
4,500 |
3,000 |
1,500 |
|
Current A/c |
|
5,900 |
|
Amit’s Capital A/c |
|
|
2,700 |
|
Balance c/d |
48,000 |
32,000 |
|
Balan’s Capital A/c |
|
|
1,800 |
|
|
|
|
|
Current A/c |
5,900 |
|
|
|
|
50,700 |
39,700 |
26,100 |
|
50,700 |
39,700 |
26,100 |
Working Notes:
WN1: Adjustment of Goodwill
Chander's share of goodwill = `27,000 xx 1/6 = "Rs" 4,500`
Amit will pay = `4,500 xx 3/5 = "Rs" 2,700`
Balan will pay = `4,500 xx 2/5 = "Rs" 1,800`
WN2 Adjustment of Capital
Adjusted Old Capital of Amit = `44,800 (40,000 + 4,500 + 300) - 2,700 = "Rs" 42,100`
Adjusted Old Capital of Balan = `39,700 (36,500 + 3,000 + 200) - 1,800 = "Rs" 37,900`
Total adjusted capital = `42,100 + 37,900 = "Rs" 80,000`
New Profit sharing ratio = `3 : 2`
Amit's New Capital =`80,000 xx 3/5 = "Rs" 48,000`
Balan's New Capital = `80,000 xx 2/5 = "Rs" 32,000`
Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
24,140 |
Cash at Bank | 3,300 | ||
| Capital A/cs: |
|
Sundry Debtors |
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|
|
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|
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|
Stock | 4,800 | |
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|
|
Land and Building | 15,000 | |||
|
|
|
Y's Loan |
20,000 |
||
|
51,140 |
51,140 |
||||
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
7,000 |
Land and Building | 36,000 | ||
| Bills Payable | 3,000 | Plant and Machinery | 28,000 | ||
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|
Sundry Debtors |
14,000 |
|
| B | 24,000 |
|
Less: Provision for Doubtful Debts |
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|
1,06,000 |
1,06,000 |
||||
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| BALANCE SHEET as at 31st March, 2019 | |||||
| Liabilities | ₹ | Assets | ₹ | ||
| Capital A/cs: | Sundry Assets | 21,000 | |||
| X | 9,000 | ||||
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| Reserve | 3,000 | ||||
| Creditors | 3,000 | ||||
| 21,000 | 21,000 | ||||
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|
Liabilities |
₹ |
Assets |
₹ |
||
|
Creditors |
11,000 |
Building |
20,000 |
||
|
Reserves |
6,000 |
Machinery |
30,000 |
||
| A's Loan A/c | 5,000 | Stock | 10,000 | ||
|
Capital A/cs: |
Patents | 11,000 | |||
| A |
25,000 |
Debtors | 8,000 | ||
| B | 25,000 | Cash | 8,000 | ||
| C |
15,000 |
65,000 |
|||
|
87,000 |
87,000 |
||||
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| Capital A/cs: | Buildings | 2,00,000 | |||
| Virad | 3,00,000 | Machinery | 3,00,000 | ||
| Vishad | 2,50,000 | Patents | 1,10,000 | ||
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| Creditors | 1,10,000 | Cash | 80,000 | ||
| 8,70,000 | 8,70,000 | ||||
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Prepare Virad's Capital Account to be presented to his Executors as on 1st October, 2013.
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(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The deceased partner's share in the goodwill of the firm will be calculated on the basis of 2 years' purchase of the average profit of last three years. The profits of the firm for the last three years were ₹ 90,000; ₹ 1,00,000 and ₹ 1,10,000 respectively.
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Prepare Kavita's Capital Account to be presented to his legal representative.
A, B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2018 stood as follows:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Sundry Creditors |
2,70,000 |
Cash in Hand |
42,500 |
||
|
General Reserve |
1,20,000 |
Cash at Bank |
2,14,500 |
||
|
Capital A/cs: |
Debtors | 1,63,000 | |||
| A |
2,00,000 |
Stock | 17,500 | ||
| B | 1,20,000 | Investment | 1,32,500 | ||
| C |
80,000 |
4,00,000 |
Building | 2,10,000 | |
| B's Loan | 10,000 | ||||
|
7,90,000 |
7,90,000 |
||||
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(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
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(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20%. The profit of the previous three years were: 1st Year: ₹ 82,000; 2nd year: ₹ 90,000; 3rd year ₹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.
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|
Liabilities |
Amount (₹) |
Assets |
Amount |
||
|
Creditors |
43,000 |
Cash |
10,200 |
||
|
Bills Payable |
17,000 |
Stock |
24,500 |
||
|
General Reserve |
70,000 |
Debtors | 27,300 | ||
|
Capital A/cs: |
Land and Building | 1,40,000 | |||
| B | 40,000 | Profit and Loss A/c | 70,000 | ||
| C |
50,000 |
||||
| D |
52,000 |
1,42,000 |
|||
|
2,72,000 |
2,72,000 |
||||
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Pass the Journal entry showing the working.
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Ashish, Aakash and Amit are partners sharing profits and losses equally. The Balance Sheet as at 31st March, 2019 was as follows:
|
Liabilities |
Amount |
Assets |
Amount |
|
| Sundry Creditors | 75,000 | Cash in Hand | 24,000 | |
| General Reserve | 90,000 | Cash at Bank | 1,40,000 | |
| Capital A/cs: | Sundry Debtors |
80,000 |
||
| Ashish |
3,00,000 |
Stock | 1,40,000 | |
| Aakash | 3,00,000 | Land and Building | 4,00,000 | |
| Amit |
2,75,000 |
8,75,000 | Machinery | 2,50,000 |
| Advertisement Suspense | 6,000 | |||
| 10,40,000 | 10,40,000 | |||
The partners decided to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2019. They also decided that:
(i) Value of stock to be reduced to ₹ 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by ₹ 62,000.
(iv) Provision for Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of ₹ 10,000.
Pass necessary Journal entries to give effect to the above.
Assertion (A): New Profit Sharing Ratio is the ratio in which old partners including the new partner, share the profits or losses of the firm.
Reason (R): When a new partner is admitted to the firm it is necessary to calculate the new profit sharing ratio with the help of the share agreed to forgo by the old partners.
A, B and C are partners sharing profit in the ratio of 2 : 2 : 1. C retired. The new Profit Sharing ratio between A and B will be:
A, B, C and D were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 3 : 4. On 31.3.2022, C retired from the firm and his share was acquired by A and B in the ratio of 3 : 2. Calculate the new profit sharing ratio of A, B and D.
A, B, C and D were partners in a firm sharing profits in the ratio of 3 : 4 : 2 : 1. On 31.3.2022, C retired and his share was taken over equally by A and D. Calculate the new profit sharing ratio of A, B and D.
