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Question
Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2018 their Balance Sheet was as under:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
| Sundry Creditors | 13,800 | Furniture | 16,000 | ||
| General Reserve | 23,400 | Land and Building | 56,000 | ||
| Investment Fluctuation Fund | 20,000 | Investments | 30,000 | ||
| Bhavya's Capital | 50,000 | Trade Receivables | 18,500 | ||
| Sakshi's Capital | 40,000 | Cash in Hand | 26,700 | ||
| 1,47,200 | 1,47,200 | ||||
The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:
(i) Investments to be valued at ₹ 20,000.
(ii) Goodwill of the firm be valued at ₹ 24,000.
(iii) General Reserve not to be distributed between the partners.
You are required to pass necessary Journal entries in the books of the firm. Show workings.
Solution
In the books of bhavya and sakshi
Journal
|
Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
|
2018 |
|
|
|
|
|
|
March 31 |
Investment Fluctuation Fund A/c |
Dr. |
|
20,000 |
|
|
|
To Investments A/c |
|
|
|
10,000 |
|
|
To Bhavya’s Capital A/c |
|
|
|
6,000 |
|
|
To Sakshi’s Capital A/c |
|
|
|
4,000 |
|
|
(Being depreciation in the value of investment provided for and excess amount distributed) |
|
|
|
|
|
March 31 |
Sakshi’s Capital A/c (24,000×1/10) |
Dr. |
|
2,400 |
|
|
|
To Bhavya’s Capital A/c (24,000×1/10) |
|
|
|
2,400 |
|
|
(Being adjustment for goodwill due to change in profit-sharing ratio) |
|
|
|
|
|
March 31 |
Sakshi’s Capital A/c (23,400×1/10) |
Dr. |
|
2,340 |
|
|
|
To Bhavya’s Capital A/c (23,400×1/10) |
|
|
|
2,340 |
|
|
(Being adjustment for general reserve not distributed) |
|
|
|
Working Notes:
|
Particulars |
Bhavya |
Sakshi |
|
Old Ratio |
3/5 |
2/5 |
|
New Ratio |
1/2 |
1/2 |
|
Gain/Sacrifice |
(3/5 – 1/2)= 1/10 (Sacrifice) |
(2/5 – 1/2)= (-1/10) (Gain) |
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|||
| Creditors |
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Cash | 1,20,000 | |||
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|
Profit and Loss Account |
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|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
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|
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||||
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(d)
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| Liabilities | ₹ | Assets | ₹ | ||
| Capital A/cs: | Sundry Assets | 21,000 | |||
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| 21,000 | 21,000 | ||||
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|
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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Prepare B's Capital Account and his Executors' Account.
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|
Liabilities |
₹ |
Assets |
₹ |
||
|
Sundry Creditors |
40,000 |
Goodwill |
25,000 |
||
|
Bills Payable |
15,000 |
Leasehold |
1,00,000 |
||
|
Workmen Compensation Reserve |
30,000 |
Patents | 30,000 | ||
|
Capital A/cs: |
Machinery | 1,50,000 | |||
| R | 1,50,000 | Stock | 50,000 | ||
| S |
1,25,000 |
Debtors | 40,000 | ||
| T |
75,000 |
3,50,000 |
Cash at Bank | 40,000 | |
|
4,35,000 |
4,35,000 |
||||
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| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
| Sundry Creditors | 18,000 | Goodwill | 12,000 | ||
| Investments Fluctuation Reserve | 7,000 | Patents | 52,000 | ||
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| Y | 95,000 | Sundry Debtors | 24,000 | ||
|
Z |
74,000 | 3,04,000 | Less: Provision for Doubtful Debts | 4,000 | 20,000 |
| Loan to Z | 1,000 | ||||
| Cash at Bank | 600 | ||||
| Profit and Loss A/c | 1,50,000 | ||||
| Z's Drawings | 12,000 | ||||
| 3,36,000 | 3,36,000 | ||||
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Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm.
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Find New Profit-sharing Ratio:
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| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Sundry Creditors | 40,000 | Cash at Bank | 40,000 | |
| Outstanding Expenses | 15,000 | Sundry Debtors | 2,10,000 | |
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| Y | 3,00,000 | |||
| Z | 2,00,000 | 9,00,000 | ||
| 10,30,000 | 10,30,000 | |||
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BALANCE SHEET OF RAM, MOHAN, SOHAN AND HARI
as on 1st April, 2016
| Liabilities | ₹ | Assets | ₹ | |
| Capital A/cs: | Fixed Assets | 9,00,000 | ||
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