Advertisements
Advertisements
Question
Kumar, Verma and Naresh were partners in a firm sharing Profit and Loss in the ratio of 3 : 2 : 2. On 23rd January, 2015 Verma died. Verma's share of profit till the date of his death was calculated at ₹ 2,350. Pass necessary Journal entry for the same in the books of the firm.
Solution
The Journal entry for transferring Verma’s share of profit to his capital account is given below
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
Profit and Loss Suspense A/c |
Dr. |
|
2,350 |
|
|
|
To Verma’ Capital A/c |
|
|
2,350 |
|
|
|
(Verma’s share of profit dispensed through his Capital Account) |
|
|
|
|
APPEARS IN
RELATED QUESTIONS
Harish, Paresh and Mahesh were three partners as sharing profits and losses in the ratio of 5:4:1. Paresh retired on 31st March, 2017. His capital on 1st April, 2016, was Rs. 80,000. During the year 2016-17, he made drawings of Rs. 5,000. He was to be charged interest on drawings of ` 100. The partnership deed provides that on the retirement of a partner, he will be entitled to:
(i) His share of capital.
(ii) Interest on capital @ 10% per annum.
(iii) His share of profit for the year of his retirement.
(iv) His share of goodwill in the firm.
(v) His share in the profit/loss on revaluation of assets and liabilities.
Additional information:
(a) Paresh's share in the profits of the firm for the year 2016-17 was Rs. 20,000.
(b) Goodwill of the firm was valued at Rs. 24,000.
(c) The firm suffered a loss of Rs.12,000 on the revaluation of assets and liabilities.
(d) It was decided to transfer the amount due to Paresh to his loan account bearing interest @ 6% per annum. The loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2018.
You are required to prepare:
(i) Paresh's Capital Account.
(ii) Paresh's Loan Account till it is finally closed.
A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?
X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally for X and Y. Calculate new profit sharing ratio?
A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profit-sharing ratio.
A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from the firm. Calculate new profit-sharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C.
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3 : 1.
(d) If B gives his share to A only.
Kanika, Disha and Kabir Were Partners Sharing Profits in the Ratio of 2 : 1 : 1. on 31st March, 2016, Their Balance Sheet Was as Under:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
|
Trade creditors |
53,000 | Bank | 60,000 | ||
| Employees' Provident Fund | 47,000 | Debtors | 60,000 | ||
| Kanika's Capital | 2,00,000 | Stock | 1,00,000 | ||
| Disha's Capital | 1,00,000 | Fixed assets | 2,40,000 | ||
| Kabir's Capital | 80,000 | Profit and Loss A/c | 20,000 | ||
| 4,80,000 | 4,80,000 | ||||
Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of three completed years preceding the date of retirement. The profits for the year:
2013-14 were ₹ 1,00,000 and for 2014-15 were ₹ 1,30,000.
(b) Fixed Assets were to be increased to ₹ 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.
X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at ₹ 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z after all adjustments on the date of retirement showed balance of ₹ 1,45,000 and ₹ 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners.
On 31st March, 2019, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
10,800 |
Cash at Bank | 13,000 | ||
| Bills Payable |
5,000 |
Debtors |
10,000 |
|
|
| Capital A/cs: |
|
Less: Provision for Doubtful Debts |
200 |
9,800 |
|
| A | 45,000 | Stock | 9,000 | ||
| B |
30,000 |
|
Machinery | 24,000 | |
| C |
15,000 |
90,000 |
Freehold Premises |
50,000 |
|
|
1,05,800 |
1,05,800 |
||||
B retired and following adjustments were agreed to determine the amount payable to B:
(a) Out of the amount of insurance premium debited to Profit and Loss Account, ₹ 1,000 be carried forward as prepaid Insurance.
(b) Freehold Premises be appreciated by 10%.
(c) Provision for Doubtful Debts is brought up to 5% on Debtors.
(d) Machinery be reduced by 5%.
(e) Liability for Workmen Compensation to the extent of ₹ 1,500 would be created.
(f) Goodwill of the firm be fixed at ₹ 18,000 and B's share of the same be adjusted into the accounts of A and C who will share future profits in the ratio of 3/4th and 1/4th.
(g) Total capital of the firm as newly constituted be fixed at ₹ 60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.
(h) B be paid ₹ 5,000 in cash and the balance be transferred to his Loan Account.
Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.
J, H and K were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2015, their Balance Sheet was as follows:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Creditors |
42,000 |
Land and Building | 1,24,000 | ||
| Investment Fluctuation Fund | 20,000 | Motor Vans | 40,000 | ||
| Profit and Loss Account | 80,000 | Investments | 38,000 | ||
| Capital A/cs: J | 1,00,000 | Machinery | 24,000 | ||
| H | 80,000 | Stock |
|
30,000 |
|
| K | 40,000 |
2,20,000 |
Debtors | 80,000 |
|
| Less: Provision |
6,000 |
74,000 |
|||
|
|
|
Cash |
32,000 |
||
|
3,62,000 |
3,62,000 |
||||
On the above date, H retired and J and K agreed to continue the business on the following terms:
(i) Goodwill of the firm was valued at ₹ 1,02,000.
(ii) There was a claim of ₹ 8,000 for workmen's compensation.
(iii) Provision for bad debts was to be reduced by ₹ 2,000.
(iv) H will be paid ₹ 14,000 in cash and balance will be transferred in his Loan Account which will be paid in four equal yearly instalments together with interest @ 10% p.a.
(v) The new profit-sharing ratio between J and K will be 3 : 2 and their capitals will be in their new profit-sharing ratio. The capital adjustments will be done by opening Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. Their Balance Sheet as on 31st March, 2018 is given below:
| Liabilities | ₹ | Assets | ₹ | |
| Capital A/cs: | Building | 18,00,000 | ||
| A | 11,00,000 | Investments | 4,00,000 | |
| B | 11,40,000 | Stock | 6,00,000 | |
| C | 7,60,000 | 30,00,000 | Debtors | 10,00,000 |
| Workmen Compensation Reserve | 10,00,000 | Cash and Bank | 6,00,000 | |
| Creditors | 2,00,000 | |||
| Employees' Provident Fund | 2,00,000 | |||
| 44,00,000 | 44,00,000 | |||
C retires on 30th June, 2018 and it was mutually agreed that:
(a) Building be valued at ₹ 22,00,000.
(b) Investments to be valued at ₹ 3,00,000.
(c) Stock be taken at ₹ 8,00,000.
(d) Goodwill of the firm be valued at two years' purchase of the average profit of the past five years.
(e) C's share of profits up to the date of retirement be calculated on the basis of average profit of the preceding three years.
The profits of the preceding five years were as under:
| Year | 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
| Profits (₹) | 4,00,000 | 5,00,000 | 6,00,000 | 8,00,000 | 7,00,000 |
(f) Amount payable to C to be transferred to his Loan Account carrying interest @ 10% p.a.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet as at 30th June, 2018.
P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided in the Partnership Deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profit credited to his account during the last four completed years.
R died on 1st January, 2018. The firm's profits for the last four years ended 31st December, were as:
2014 − ₹ 1,20,000; 2015 − ₹ 80,000; 2016 − ₹ 40,000; 2017 − ₹ 80,000.
(a) Determine the amount that should be credited to R in respect of his share of Goodwill.
(b) Pass Journal entry without raising Goodwill Account for its adjustment.
Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2 : 1. The firm closes its books on 31st March every year. On 30th September, 2014 Momita died. According to the provisions of Partnership Deed the legal representatives of a deceased partner are entitled for the following in the event of his/her death:
(a) Capital as per the last Balance Sheet.
(b) Interest on capital at 6% per annum till the date of her death.
(c) Her share of profit to the date of death calculated on the basis of average profit of last four years.
(d) Her share of goodwill to be determined on the basis of three years' purchase of the average profit of last four years. The profits of last four years were:
| Year | 2010-11 | 2011-12 | 2012-13 | 2013-14 |
| Profit (₹ ) | 30,000 | 50,000 | 40,000 | 60,000 |
The balance in Momita's Capital Account on 31st March, 2014 was ₹ 60,000 and she had withdrawn ₹ 10,000 till date of her death. Interest on her drawings was ₹ 300.
Prepare Momita's Capital Account to be presented to her executors.
A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C as partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of firm's goodwill. Goodwill of the firm has been valued at ₹ 1,00,000. Pass necessary journal entries to record this arrangement.
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 |
||||
B died on 30th June, 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(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.
(c) His share of profit for the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June, 2018 were as ₹ 12,00,000. The rate of profit during past three years had been 10% on sales.
(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.
Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:
|
Liabilities |
₹ |
Assets |
₹ |
||
|
Trade Creditors |
40,000 |
Building |
2,00,000 |
||
|
General Reserve |
45,000 |
Plant and Machinery |
80,000 |
||
|
Capital A/cs: |
Stock | 35,000 | |||
| Akhil |
1,95,000 |
Debtors | 80,000 | ||
| Nikhil | 1,20,000 | Cash at Bank | 85,000 | ||
| Sunil |
80,000 |
3,95,000 |
|||
|
4,80,000 |
4,80,000 |
||||
Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) ₹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 2014-15 − ₹ 80,000 Profit; 2015-16 − ₹ 1,00,000 Loss; 2016-17 − ₹ 1,20,000 Profit; 2017-18 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account.
The Balance Sheet of X, Y and Z as at 31st March, 2018 was:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Bills Payable |
2,000 |
Cash at Bank |
5,800 |
||
|
Employees' Provident Fund |
5,000 |
Bills Receivable |
800 |
||
|
Workmen Compensation Reserve |
6,000 |
Stock | 9,000 | ||
| General Reserve | 6,000 | Sundry Debtors | 16,000 | ||
| Loans | 7,100 | Furniture | 2,000 | ||
|
Capital A/cs: |
Plant and Machinery | 6,500 | |||
| X | 22,750 | Building | 30,000 | ||
| Y |
15,250 |
Advertising Suspense | 6,000 | ||
| Z |
12,000 |
50,000 |
|||
|
76,100 |
76,100 |
||||
The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2017-18: ₹ 24,000; 2016-17: ₹ 16,000; 2015-16: ₹ 20,000 and 2014-15: ₹ 10,000 and 2013-14: ₹ 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock ₹ 10,000; Debtors ₹ 15,000; Furniture ₹ 1,500; Plant and Machinery ₹ 5,000; Building ₹ 35,000. A Bill Receivable for ₹ 600 was found worthless.
(d) A Sum of ₹ 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.
X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Creditors |
2,00,000 |
Building |
2,00,000 |
||
|
Employees' Provident Fund |
1,50,000 |
Machinery |
3,00,000 |
||
|
General Reserve |
36,000 |
Furniture | 1,10,000 | ||
| Investment Fluctuation Reserve | 14,000 | Investment (Market value ₹ 86,000) | 1,00,000 | ||
|
Capital A/cs: |
Debtors | 80,000 | |||
| X |
3,00,000 |
Cash at Bank | 1,90,000 | ||
| Y | 2,50,000 | Advertisement Suspense | 1,20,000 | ||
| Z |
1,50,000 |
7,00,000 |
|||
|
11,00,000 |
11,00,000 |
||||
X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 212 years' purchase of average of four completed years' profit which were:
| Year | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
| Profits (₹) | 1,70,000 | 1,80,000 | 1,90,000 | 1,80,000 |
(ii) X's share of profit from the closure of last accounting year till date of death be calculated on the basis of last years' profit.
(iii) Building undervalued by ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furniture overvalued by ₹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X's executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.
R and S are partners sharing profits in the ratio of 5 : 3. T joins the firm as a new partner. R gives 1/4th of his share and S gives 1/5th of his share to the new partner. Find out new profit-sharing ratio.
X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April, 2019, they decide to share profits and losses equally. Calculate each partner's gain or sacrifice due to the change in ratio.
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share and B surrenders 2/5th of his share in favour of C. For the purpose of C's admission, goodwill of the firm is valued at ₹ 75,000 and C brings in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.
X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to share future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. They also decide to record the effect of the following accumulated profits, losses and reserves without affecting their book values by passing a single entry .
| Book Values (₹) | |
| General Reserve | 6,000 |
| Profit and Loss A/c (Credit) | 24,000 |
| Advertisement Suspense A/c | 12,000 |
Pass an Adjustment Entry.
A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when:
(i) no information is given; (ii) there is no claim against it.
X, Y and Z who are sharing profits in the ratio of 5 : 3 : 2, decide to share profits in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. Workmen Compensation Reserve appears at ₹ 1,20,000 in the Balance Sheet as at 31st March, 2019 and Workmen Compensation Claim is estimated at ₹ 1,50,000. Pass Journal entries for the accounting treatment of Workmen Compensation Reserve.
A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the journal entry to distribute 'Investments Fluctuation Reserve' of ₹ 20,000 at the time of change in profit-sharing ratio, when investment (market value ₹ 95,000) appears in the books at ₹ 1,00,000.
Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2019. The extract of their Balance Sheet as at 31st March, 2019 is as follows:
| Liabilities | ₹ | Assets | ₹ |
| Investments Fluctuation Reserve | 60,000 | Investments (At Cost) | 4,00,000 |
Pass the Journal entries in each of the following situations:
(i) When its Market Value is not given;
(ii) When its Market Value is ₹ 4,00,000;
(iii) When its Market Value is ₹ 4,24,000;
(iv) When its Market Value is ₹ 3,70,000;
(v) When its Market Value is ₹ 3,10,000.
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.
A, B and C are sharing profits and losses in the ratio of 2 : 2 : 1. They decided to share profit w.e.f. 1st April, 2019 in the ratio of 5 : 3 : 2. They also decided not to change the values of assets and liabilities in the books of account. The book values and revised values of assets and liabilities as on the date of change were as follows:
| Book values (₹) | Revised values (₹) | |
| Machinery | 2,50,000 | 3,00,000 |
| Computers | 2,00,000 | 1,75,000 |
| Sundry Creditors | 90,000 | 75,000 |
| Outstanding Expenses | 15,000 | 25,000 |
Pass an adjustment entry.
Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2 : 2 : 3 : 3. On 1st April, 2016, their Balance Sheet was as follows:
BALANCE SHEET OF SURESH, RAMESH, MAHESH AND Ganesh
as on 1st April, 2016
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Capital A/cs: | Fixed Assets | 6,00,000 | ||
| Suresh | 1,00,000 | Current Assets | 3,45,000 | |
| Ramesh | 1,50,000 | |||
| Mahesh | 2,00,000 | |||
| Ganesh | 2,50,000 | 7,00,000 | ||
| Sundry Creditors | 1,70,000 | |||
| Workmen Compensation Reserve | 75,000 | |||
| 9,45,000 | 9,45,000 | |||
From the above date, the partners decided to share the future profits equally. For this purpose the goodwill of the firm was valued at ₹ 90,000. It was also agreed that:
(a) Claim against Workmen Compensation Reserve will be estimated at ₹ 1,00,000 and fixed assets will be depreciated by 10%.
(b) The Capitals of the partners will be adjusted according to the new profit-sharing ratio. For this, necessary cash will be brought or paid by the partners as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
Following is the Balance Sheet of A and B, who shared Profits and Losses in the ratio of 2 : 1, as at 1st April, 2019:
BALANCE SHEET OF A AND B
as on 1st April, 2019
| Liabilities | Amount (₹) |
Assets |
Amount (₹) |
|
| Capital A/cs: | Land ad Building | 2,90,000 | ||
| A | 3,00,000 | Furniture | 80,000 | |
| B | 2,00,000 | 5,00,000 | Stock | 2,40,000 |
| Reserve | 1,50,000 | Debtors | 1,50,000 | |
| Creditors | 2,00,000 | Bank | 60,000 | |
| Cash | 30,000 | |||
| 8,50,000 | 8,50,000 | |||
On the above date, the partners changed their profit-sharing ratio to 3 : 2. For this purpose, the goodwill of the firm was valued at ₹ 3,00,000. The partners also agreed for the following:
(a) The value of Land and Building will be ₹ 5,00,000;
(b) Reserve is to be maintained at ₹ 3,00,000.
(c) The total capital of the partners in the new firm will be ₹ 6,00,000, which will be shared by the partners in their new profit-sharing ratio.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
The incoming partner cannot acquire his share of profits:
Ravi, Vijay and Sujay were partners sharing profits in the ratio of `1/2 : 1/3 : 1/6`.
Vijay decided to retire, his share being taken up by the remaining partners in the ratio 1 : 4.
On Vijay’s retirement, a loss of ₹ 12,000 was determined upon revaluation of assets and liabilities.
You are required to:
- Calculate the new profit-sharing ratio of the remaining partners.
- Pass the journal entry to write off the loss on revaluation of assets and liabilities.
How is the new profit sharing ratio mathematically stated?
Akshat, Javed and Gaurav are partners in a firm sharing profits in the ratio of 5 : 3 : 7. Akshat died on 31st March, 2024. Javed and Gaurav decided to share the profits in reconstituted firm in the ratio 2 : 3. The capital accounts of the partners on 31st March, 2024, before considering the firm’s goodwill were:
| Akshat | ₹ 1,66,000 |
| Javed | ₹ 66,000 |
| Gaurav | ₹ 1,41,000 |
After considering the adjustment for goodwill, Akshat’s share was determined to be ₹ 1,81,000. It was decided that this amount would be paid to Akshat’s executor immediately by the firm through a cheque, the amount being contributed by Javed and Gaurav in such a manner that their capitals would become proportionate to their new profit-sharing ratio.
You are required to pass journal entries to record:
- The adjustment for self-generated goodwill of the firm.
- Cash brought in by Javed and Gaurav to pay off Akshat’s executor.
- Payment made to Akshat’s executor.
