A and B are partners sharing in the ratio 3 : 2 and their balance sheet is as follows :
Liabilities Amount Assets Amount
Creditors 3,600 cash 1,000
Bills Payables 2,000 debtors 3,400
General Reserve 2,400 Stock 2,400
Capital
A 15,000 Machinery 4,200
B 8,000 Building 20,000
_________ ______
31,000 31,000
The other terms of agreement on C’s admission were as follows:
C will bring Rs.10,000 as goodwill and 15,000 as capital.
a) Building will be valued at Rs. 18,500 and machinery at Rs. 5,000.
b) A provision of 5% will be credit on debtors for bad debts.
Capital accounts of A and B will be adjusted as per C’s capital profit sharing ration is ¼
In the new firm. Prepare revaluation account, partner capital account and balance sheet of A, B and C.
Zahra, the solution to your query is as follows.
Working Notes:
Calculation of New Profit Sharing Ratio
Adjustment of Capital of Partners
| Revaluation Account | ||||||
| Dr. | Cr. | |||||
| Particulars | Amount Rs |
Particulars | Amount Rs |
|||
| Building | 1,500 | Machinery | 800 | |||
| Provision for Doubtful Debt | 170 | Loss transferred to: | ||||
| A’s Capital A/c | 522 | |||||
| B’s Capital A/c | 348 | 870 | ||||
| 1,670 | 1,670 | |||||
| Partners’ Capital Account | |||||||||
| Dr. | Cr. | ||||||||
| Particulars | A | B | C | Particulars | A | B | C | ||
| Revaluation A/c (Loss) | 522 | 348 | Balance b/d | 15,000 | 8,000 | ||||
| General Reserve | 1,440 | 960 | |||||||
| Premium for Goodwill | 6,000 | 4,000 | |||||||
| Balance c/d | 27,000 | 18,000 | 15,000 | Cash A/c | 15,000 | ||||
| Cash A/c | 5,082 | 5,388 | |||||||
| 27,522 | 18,348 | 15,000 | 27,522 | 18,348 | 15,000 | ||||
| New Balance Sheet | |||||
| Liabilities | Amount Rs |
Assets | Amount Rs |
||
| Capital | Building | 20,000 | |||
| A | 27,000 | Less: Depreciation | 1,500 | 18,500 | |
| B | 18,000 | Machinery | 4,200 | ||
| C | 15,000 | 60,000 | Add: Appreciation | 800 | 5,000 |
| Creditors | 3,600 | Debtors | 3,400 | ||
| Bills Payable | 2,000 | Less: Prov. For BD | 170 | 3,230 | |
| Stock | 2,400 | ||||
| Cash | 36,470 | ||||
| 65,600 | 65,600 | ||||
Working Notes:
| Cash Account | |||||
| Dr. | Cr. | ||||
| Particulars | Amount Rs |
Particulars | Amount Rs |
||
| Balance c/d | 1,000 | Balance b/d | 36,470 | ||
| C’s Capital A/c | 15,000 | ||||
| Premium for goodwill | 10,000 | ||||
| A’s Capital A/c | 5,082 | ||||
| B’s Capital A/c | 5,388 | ||||
| 36,470 | 36,470 | ||||
Calculation of New Profit Sharing Ratio
Adjustment of Capital of Partners
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