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Question
Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2013 they admitted Karuna as a new partners for 1/5th share in the profits of the firm. The Balance Sheet of Kalpana and Kanika as on 1st April, 2013, was as follows:
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Balance Sheet of Kalpana and Kanika as on 1st April, 2013 |
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Liabilities |
Amount Rs |
Assets |
Amount Rs |
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Capitals |
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Land and Building |
2,10,000 |
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Kalpana |
4,80,000 |
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Plant |
2,70,000 |
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Kanika |
2,10,000 |
6,90,000 |
Stock |
2,10,000 |
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General Reserve |
60,000 |
Debtors |
1,32,000 |
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Workmen’s Compensation Fund |
1,00,000 |
Less: Provision |
–12,000 |
1,20,000 |
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Creditors |
90,000 |
Cash |
1,30,000 |
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9,40,000 |
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9,40,000 |
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It was agreed that
(i) the value of Land and Building will be appreciated by 20%.
(ii) the value of plant be increased by Rs 60,000.
(iii) Karuna will bring Rs 80,000 for her share of goodwill premium.
(iv) the liabilities of Workmen's Compensation Fund were determined at Rs 60,000.
(v) Karuna will bring in cash as capital to the extent of `1/5`th share of the total capital of the new firm.
Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of the new firm.
Solution
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Revaluation Account |
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Dr. |
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Cr. |
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Particulars |
Amount Rs |
Particulars |
Amount Rs |
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Revaluation Profit |
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Land and Building A/c |
42,000 |
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Kalpana’s Capital A/c |
61,200 |
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Plant A/c |
60,000 |
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Kanika’s Capital A/c |
40,800 |
1,02,000 |
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1,02,000 |
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1,02,000 |
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Partners’ Capital Accounts |
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Dr. |
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Cr. |
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Particulars |
Kalpana |
Kanika |
Karuna |
Particulars |
Kalpana |
Kanika |
Karuna |
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Balance b/d |
4,80,000 |
2,10,000 |
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Cash |
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2,43,000 |
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Balance c/d |
6,49,200 |
3,22,800 |
2,43,000 |
General Reserve |
36,000 |
24,000 |
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Workmen Compensation Fund |
24,000 |
16,000 |
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Revaluation A/c |
61,200 |
40,800 |
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Premium for Goodwill |
48,000 |
32,000 |
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6,49,200 |
3,22,800 |
2,43,000 |
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6,49,200 |
3,22,800 |
2,43,000 |
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Balance Sheet as on April 01, 2012 after Karuna’s admission |
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Liabilities |
Amount Rs |
Assets |
Amount Rs |
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Creditors |
90,000 |
Cash in Hand |
4,53,000 |
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Capitals: |
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Debtors |
1,32,000 |
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Kalpana |
6,49,200 |
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Less: Provision for debtors |
12,000 |
1,20,000 |
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Kanika |
3,22,800 |
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Stock |
2,10,000 |
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Karuna |
2,43,000 |
12,15,000 |
Land and Building |
2,52,000 |
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Liability for Workmen Compensation |
60,000 |
Plant |
3,30,000 |
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13,65,000 |
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13,65,000 |
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Notes
Karuna is admitted for 1/5th share
Let the total share of the firm be 1
Remaining share= `1-1/5=4/5`
This remaining share will be shared among old partners in their old ratio i.e. 3 : 2
Kalpana's Share=`4/5xx3/5=12/25`
Kanika's Share =`4/5xx2/5=8/25`
New Ratio=`12:8:5`
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio
Kalpana= `3/5-12/25=3/25`
Kanika = `2/5-8/25=2/25`
Sacrificing Ratio = 3 : 2
Adjusted Capital of Kalpana = 6.49,200
Adjusted Capital of Kanika = 3,22,800
Total Adjusted Capital = 9,72,000 (6,49,200+3,22,800)
Karuna's Capital= Adjusted Capital of kalpana and kanika`xx`karuna's share`xx` Reciprocal of thee firm's share
Karuna's Capital= `9,72,000xx1/5xx5/4=Rs 2,43,000`
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| (Being entry for goodwill treatment passed) |
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Amount ₹ |
Assets | Amount ₹ |
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| Balance Sheet as on 31st March, 2023 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital Accounts: | Building | 1,08,000 | ||
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Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of new [um.
