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Question
Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1. From 1st April, 2019 they decided to share profits equally. The Partnership Deed provides that in the event of any change in profit-sharing ratio, goodwill shall be valued at three years' purchase of average profit of last five years. The profits and losses of past five years are:
Profit − Year ended 31st March, 2015 − ₹ 1,00,000; 2016 − ₹ 1,50,000; 2018 − ₹ 2,00,000; 2019 − ₹ 2,00,000.
Loss − Year ended 31st March, 2017 − ₹ 50,000.
Pass the Journal entry showing the working.
Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
2019 |
|
|
|
|
|
|
April 1 |
Abbas’s Capital A/c |
Dr. |
|
60,000 |
|
|
|
To Mandeep’s Capital A/c |
|
|
|
60,000 |
|
|
(Adjustment entry made for change in ratio) |
|
|
||
Working Notes:
WN1: Calculation of Sacrifice or Gain
Mandeep : Vinod : Abbas = 3 : 2 : 1 (Old ratio)
Mnadeep : vinod : abbas = 1 : 1: 1 (new ratio)
sacrificing (or gaining ratio) = Old ratio - new ratio
Mnadeep's share = `3/6 - 1/3 = (3-2)/6 = 1/6` (sacrifice)
Vinod's share = `2/6 - 1/3 = (2-2)/6 = 0`
Abba's share = `1/6 - 1/3 = (1-2)/6 = -1/6` (gain)
WN2: Valuation of Goodwill
Goodwill = average profit x no. of years purchase
= `1,20,000 xx 3`
= Rs 3,60,000
Average profit = `"total profits of past years given"/"number of years"`
= `(1,00,000 + 1,50,000 + 2,00,000 - 50,000)/5`
= Rs 1,20,000
WN3: Adjustment of Goodwill
Amount debited to abbas capital A/c = `3,60,000 xx 1/6` = Rs 60,000 (share of gain)
Amount credited to mandeep's capital A/c = `3,60,000 xx 1/6` = Rs 60,000 (share of sacrifice)
APPEARS IN
RELATED QUESTIONS
Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2015 was as follows:
Books of Suri, Narang and Bajaj
Balance Sheet as on April 1, 2015
|
Liabilities |
Amt (Rs.) |
Assets |
Amt |
|||
|
Bills Payable |
12,000 |
Freehold Premises |
40,000 |
|||
|
Sundry Creditors |
18,000 |
Machinery |
30,000 |
|||
|
Reserves |
12,000 |
Furniture |
12,000 |
|||
|
Capital Accounts: |
|
Stock |
22,000 |
|||
|
Narang |
30,000 |
|
Sundry Debtors |
20,000 |
|
|
|
Suri |
20,000 |
|
Less: Reserve |
1,000 |
19,000 |
|
|
Bajaj |
28,000 |
88,000 |
for Bad Debt |
|
||
|
|
|
|
Cash |
7,000 |
||
|
|
1,30,000 |
|
1,30,000 |
|||
Bajaj retires from the business and the partners agree to the following:
a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.
b) Machinery and furniture are to be depreciated by 10% and 7% respectively.
c) Bad Debts reserve is to be increased to Rs 1,500.
d) Goodwill is valued at Rs 21,000 on Bajaj’s retirement.
e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts.
Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.
Why i is it necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted?
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?
P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio?
From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 : 5 : 4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5 : 4 : 1. P retires from the firm.
R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1 : 2. Calculate the new profit-sharing ratio.
A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at ₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.
Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at ₹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.
Ramesh wants to retire from the firm. The gain (profit) on revaluation on that date was ₹ 12,000. Mohan and Rahul want to share this in their new profit-sharing ratio of 3 : 2. Ramesh wants this to be shared equally. How is the profit to be shared? Give reasons.
X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z retires from the firm on 31st March, 2019. On the date of Z's retirement, the following balances appeared in the books of the firm:
General Reserve ₹ 1,80,000
Profit and Loss Account (Dr.) ₹ 30,000
Workmen Compensation Reserve ₹ 24,000 which was no more required
Employees' Provident Fund ₹ 20,000.
Pass necessary Journal entries for the adjustment of these items on Z's retirement.
X, Y and Z were in partnership sharing profits and losses in the proportions of 3 : 2 : 1. On 1st April, 2019, Y retired from the firm. On that date, their Balance Sheet was:
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
| Trade Creditors | 30,000 | Cash in Hand | 15,000 | |
| Bills Payable | 45,000 | Cash at Bank | 75,000 | |
| Expenses Owing | 45,000 | Debtors | 1,50,000 | |
| General Reserve | 1,35,000 | Stock | 1,20,000 | |
| Capital A/cs: | Factory Premises | 2,25,000 | ||
|
X |
1,50,000 | Machinery | 80,000 | |
|
Y |
1,50,000 | Loose Tools | 40,000 | |
|
Z |
1,50,000 | 4,50,000 | ||
| 7,05,000 | 7,05,000 | |||
The terms were:
(a) Goodwill of the firm was valued at ₹ 1,35,000 and adjustment in this respect was to be made in the continuing Partners' Capital Accounts without raising Goodwill Account.
(b) Expenses Owing to be brought down to ₹ 37,500.
(c) Machinery and Loose Tools are to be valued @ 10% less than their book value.
(d) Factory Premises are to be revalued at ₹ 2,43,000.
Show Revaluation Account, Partners' Capital Accounts and prepare the Balance Sheet of the firm after the retirement of Y.
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.
X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 1 : 2. On 31st March, 2019, their Balance Sheet was:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
| Bills Payable |
12,000 |
Freehold Premises | 40,000 | ||
| Sundry Creditors | 28,000 | Machinery | 30,000 | ||
| General Reserve | 12,000 | Furniture | 12,000 | ||
| Capital A/cs: | Stock | 22,000 | |||
| X | 30,000 | Sundry Debtors |
20,000 |
|
|
| Y | 20,000 | Less: Provision for Doubtful Debts |
1,000 |
19,000 |
|
| Z | 28,000 |
78,000 |
Cash |
7,000 |
|
|
1,30,000 |
1,30,000 |
||||
Z retired on 1st April, 2019 from the business and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ₹ 1,500.
(d) Goodwill of the firm is valued at ₹ 21,000 on Z's retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of Z. Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.
X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 7. X retired from the firm. Y and Z decided to share future profits in the ratio of 2 : 3. The adjusted Capital Accounts of Y and Z showed balance of ₹ 49,500 and ₹ 1,05,750 respectively. The total amount to be paid to X is ₹ 1,35,750. This amount is to be paid by Y and Z in a manner that their capitals become proportionate to their new profit-sharing ratio. Calculate the amount to be brought in or to be paid to partners.
A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. B died on 30th June, 2018. For the year ended 31st March, 2019, proportionate profit of 2018 is to be taken into consideration. During the year ended 31st March, 2018, bad debts of ₹ 2,000 had to be adjusted. Profit for the year ended 31st March, 2018 was ₹ 14,000 before adjustment of bad debts. Calculate B's share of profit till the date of his death.
Ram, Manohar and Joshi were partners in a firm. Joshi died on 31st May, 2018. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed financial years of profits before death. Profits for the years ended 31st March, 2016, 2017 and 2018 were ₹ 7,000; ₹ 8,000 and ₹ 9,000 respectively. Calculate Joshi's share of profit till the date of his death and pass necessary Journal entry for the same.
X, Y and Z were partners sharing profits and losses in the ratio of 3 : 2 : 1. Y died on 30th June, 2018. Profit from 1st April, 2018 to 30th June, 2018 was ₹ 3,60,000. X and Z decided to share the future profits in the ratio of 3 : 2 respectively with effect from 1st July, 2018. Pass the necessary Journal entries to record Y's share of profit up to the date of death.
X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.
A, B and C were partners sharing profits in the ratio of 3 : 2 : 1. The firm closes its books on 31st March every year. B died on 30th June, 2018. On his death, Goodwill of the firm was valued at ₹ 6,00,000. B's share in profit or loss till the date of death was to be calculated on the basis of previous year's profit which was ₹ 15,00,000 (Loss). Pass necessary Journal entries for goodwill and his share of loss.
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.
Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:
|
Liabilities |
₹ |
Assets |
₹ |
||
|
Creditors |
10,000 |
Plant and Machinery |
40,000 |
||
|
General Reserve |
30,000 |
Furniture |
15,000 |
||
|
Capital A/cs: |
Investments | 20,000 | |||
| Sunny |
30,000 |
Debtors | 20,000 | ||
| Honey | 30,000 | Stock | 20,000 | ||
| Rupesh |
20,000 |
80,000 |
25,000 | ||
|
1,20,000 |
1,20,000 |
||||
Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.
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.
X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
|
Trade Creditors |
1,20,000 |
Cash at Bank |
1,80,000 |
||
|
Bills Payable |
80,000 |
Stock |
1,40,000 |
||
|
General Reserve |
60,000 |
Sundry Debtors | 80,000 | ||
|
Capital A/cs: |
Building | 3,00,000 | |||
| X |
7,00,000 |
Advance to Y | 7,00,000 | ||
| Y | 7,00,000 | Profit and Loss A/c | 3,20,000 | ||
| Z |
60,000 |
14,60,000 |
|||
|
17,20,000 |
17,20,000 |
||||
Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.
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.
B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of ₹ 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.
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.
X, Y and Z 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 there is a claim of ₹ 80,000 against it.
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.
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.
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.
X, Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4. Their Balance Sheet as at 31st March, 2019 stood as:
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/cs: | Sundry Assets | 7,00,000 | ||
| X | 2,10,000 | |||
| Y | 1,50,000 | |||
| Z | 1,20,000 | 4,80,000 | ||
| General Reserve | 65,000 | |||
| Profit and Loss A/c | 25,000 | |||
| Creditors | 1,30,000 | |||
| 7,00,000 | 7,00,000 | |||
Partners decided that with effect from 1st April, 2019, they will share profits and losses in the ratio of 3 : 2 : 1. For this purpose, goodwill of the firm was valued at ₹ 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve and profits.
Pass a Journal entry to record the change and prepare Balance Sheet of the constituted firm.
Ram, Mohan, Sohan and Hari were partners in a firm sharing profits in the ratio of 4 : 3 : 2 : 1. On 1st April, 2016, their Balance Sheet was as follows:
BALANCE SHEET OF RAM, MOHAN, SOHAN AND HARI
as on 1st April, 2016
| Liabilities | ₹ | Assets | ₹ | |
| Capital A/cs: | Fixed Assets | 9,00,000 | ||
| Ram | 4,00,000 | Current Assets | 5,20,000 | |
| Mohan | 4,50,000 | |||
| Sohan | 2,50,000 | |||
| Hari | 2,00,000 | 13,00,000 | ||
| Workmen Compensation Reserve | 1,20,000 | |||
| 14,20,000 | 14,20,000 | |||
From the above date, the partners decided to share the future profits in the ratio of 1 : 2 : 3 : 4. For this purpose the goodwill of the firm was valued at ₹ 1,80,000. The partners also agreed for the following:(a) The Claim for workmen compensation has been estimated at ₹ 1,50,000.
(b) Adjust the capitals of the partners according to the new profit-sharing ratio by opening Partners' Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
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.
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.
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.
