A, B and C were equal partners. Their Balance- Sheet as on 31st December,2002 was as follows :
Balance-Sheet LIABILITIES AMOUNT ASSETS AMOUNT
Bills Payable 20,000 Bank 20,000
Creditors 40,000 Stock 20,000
Gen. Reserve 30,000 Furniture 28,000
Profit and Loss a/c 6,000 Debtors 45,000
Capitals: Less: Prov. for D/D -5,000 40,000
A 60,000 Land and Building 1,20,000
B 40,000
C 22,000 1,32,000
2,28,000 2,28,000
B retired on 1st jan.2003. A and C decided to continue the business as equal partners on the following terms :
A] G/W of the firm was valued at Rs. 57,600
B] Provision for D/D is maintained at 10%
C] Land and Building is to be increased to Rs. 1,32,000
D] Furniture is to be reduced by Rs.8,000
E] Rent outstanding was Rs. 1,500
Remaining partners decided to bring sufficient cash in the business to pay off B and maintaining a bank balance of Rs. 24,800.
Prepare necessary Ledger a/cs and Balance- Sheet.
Revaluation Account | |||||||
Dr. |
| Cr. | |||||
Particulars | Amount | Particulars | Amount | ||||
Furniture A/c | 8,000 | Land and Building A/c | 12,000 | ||||
Outstanding Rent A/c | 1,500 | Provision for Doubtful Debts | 5,000 |
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Profit on Revaluation transferred to: |
| (–) New provision | (4,500) | 500 | |||
A’s Capital A/c | 1,000 |
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B’s Capital A/c | 1,000 |
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C’s Capital A/c | 1,000 | 3,000 |
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| 12,500 |
| 12,500 | ||||
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Partner’s Capital Accounts | ||||||||
Dr. | Cr. | |||||||
Particulars | A | B | C | Particulars | A | B | C | |
B’s Capital A/c | 9,600 | - | 9,600 | Balance b/d | 60,000 | 40,000 | 32,000 | |
Bank A/c | - | 72,200 | - | General Reserve | 10,000 | 10,000 | 10,000 | |
Balance c/d | 1,01,900 | - | 73,900 | Profit and Loss A/c | 2,000 | 2,000 | 2,000 | |
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| Revaluation A/c (Profit) | 1,000 | 1,000 | 1,000 | |
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| A’s Capital A/c | - | 9,600 | - | |
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| C’s Capital A/c | - | 9,600 | - | |
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| Bank A/c | 38,500 | - | 38,500 | |
| 1,11,500 | 72,200 | 83,500 |
| 1,11,500 | 72,200 | 83,500 | |
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Balance Sheet as on December 31, 2003 | |||||
Liabilities | Amount | Assets | Amount | ||
Capital A/c : |
| Bank | 24,800 | ||
A | 1,01,900 |
| Stock | 20,000 | |
C | 73,900 | 1,75,800 | Furniture | 20,000 | |
Bills Payable | 20,000 | Debtors | 45,000 |
| |
Creditors | 40,000 | (–) New Provision | (4,500) | 40,500 | |
Outstanding Rent | 1,500 | Land and Building | 1,32,000 | ||
| 2,37,300 |
| 2,37,300 | ||
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Note:
In the question, capital of the partners is given as:
A | 60,000 |
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B | 40,000 |
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C | 22,000 | 1,32,000 |
But, the total of this (i.e. 60,000 + 40,000 + 22,000) comes out be Rs 1,22,000. Therefore, it is assumed that capital of C is Rs 32,000 instead of Rs 22,000.
Working Notes:
WN1
Old Ratio (A, B and C) = 1 : 1 : 1
New Ratio (A and C) = 1 : 1
Gaining Ratio = New Ratio – Old Ratio
Gaining Ratio = 1 : 1
Goodwill of the Firm = Rs 57,600
B’s Share of Goodwill = 
This share is to be borne by A and C is their gaining ratio.
WN2
Calculation of Amount to be brought in by A and C | |||
Total Amount Due to B | = | Rs | 72,200 |
(+) Minimum Bank Balance | = | Rs | 24,800 |
(–) Existing Bank Balance | = | Rs | (20,000) |
Total amount to be brought is by A and C | = | Rs | 77,000 |
