Question

‘B’ and ‘C’ were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as on 31-3-2011 was as follows: 

Balance Sheet of B and C                                as on 31-3-2011
Liabilities		Amount Rs	Assets	Amount Rs
Capital:			Land and Building	80,000
‘B’	60,000		Machinery	20,000
‘C’	40,000	1,00,000	Furniture	10,000
			Debtors	25,000
Provision for bad debts		1,000	Cash	16,000
Creditors		60,000	Profit and Loss Account	10,000
		1,61,000		1,61,000

 

D’ was admitted to the partnership for 1/5^th share in the profits on the following terms:

(i) The new profit sharing ratio was decided as 2:2:1.

(ii) D will bring Rs 30,000 as his capital and Rs 15,000 for his share of goodwill.

(iii) Half of goodwill amount was withdrawn by the partner who sacrificed his share of profit in favour of ‘D’.

(iv) A provision of 5% for bad and doubtful debts was to be maintained.

(v) An item of Rs 500 included in Sundry Creditors was not likely to be paid.

(vi) An provision of Rs 800 was to be made for claims for damages against the firm.

After making the above adjustments the Capital Accounts of ‘B’ and ‘C’ were to be adjusted on the basis of D’s Capital. Actual cash wash to be brought in or to be paid off as the case may be.

Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new firm.  

 

Answer 1

Revaluation Account
Dr.							Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Provision for Bad and doubtful debts		1,250		Sundry Creditors		500
Less: Old Provision		1,000	250	Revaluation loss transferred to:
Provision of Claims			800	B’s Capital	330
				C’s Capital	220	550
			1,050			1,050

 

Partners’ Capital Account
Dr.				Cr.
Particulars	B	C	D		Particulars	B	C	D
Cash A/c	7,500	–	–		Balance b/d	60,000	40,000	–
Realisation A/c (Loss)	330	220	–		Cash A/c	–	–	30,000
Profit and Loss A/c	6,000	4,000			Premium for Goodwill A/c	15,000	–	–
Cash A/c (Balancing figure)	1,170	–	–		Cash A/c (WN2)	–	–	–
Balance c/d (adjusted)	60,000	60,000	30,000		Cash A/c (Balancing figure)	–	24,220	–
	75,000	64,220	30,000			75,000	64,220	30,000

 

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Capital:			Land and Building		80,000
B	60,000		Machinery		20,000
C	60,000		Furniture		10,000
D	30,000	1,50,000	Debtors	25,000
Creditors (60,000 – 500)		59,500	Less: Provision for Doubtful Debts	(1,250)	23,750
Claim for Damages		800	Cash		76,550
		2,10,300			2,10,300

 

Cash A/c
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	16,000	B’s Capital A/c (7,500 + 1,170)	8,670
D’s Capital A/c	30,000
Premium for Goodwill	15,000
C’s Capital A/c	24,220	Balance c/d	76,550
	85,220		85,220