amrit and baldev were carrying on business in partnership sharing profits in the ratio of 3:2 respectively
liabilities
amrit capital 50000
baldev capital 25000
creditors 16000
bill payable 14000
assets
land and building 25000
furniture 10000
stock 46000
debtors 20000
less :provision for doubtful debts 600
cash at bank 4600
chetan is admitted into partnership on the following terms:
the new profit sharing ratio will be 5:3:2
land and buiding is to be appreciated by 5000 furniture is to be depreciated by 10% provision for doubtful debts is to increased by 300 and outstanding expense of 200 to be recorded
chetan will bring 20000 as his capital and 6000 as his share of goodwill
the capital of all partners will be in their profit sharing ratio amrit and baldev making adjustment in cash
prepare revaluation ,partner capital a/c,cash a/c and balance sheet
In the books of Amrit and Baldev Revaluation Account |
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Dr. | Cr. |
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Particulars | Amount Rs | Particulars | Amount Rs | |||
Furniture | 1,000 | Land and Building | 5,000 | |||
Provision for Doubtful Debts | 300 |
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Outstanding Expenses | 200 |
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Profit transferred to: |
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Amrit’s Capital A/c | 2,100 |
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Baldev’s Capital A/c | 1,400 | 3,500 |
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| 5,000 |
| 5,000 | |||
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Partners’ Capital Account | |||||||
Dr. | Cr. | ||||||
Particulars | Amrit | Baldev | Chetan | Amrit | Amrit | Baldev | Chetan |
Balance c/d | 55,100 | 29,400 | 20,000 | Balance b/d | 50,000 | 25,000 | |
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| Bank A/c | 20,000 | ||
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| Revaluation A/c (Profit) | 2,100 | 1,400 | |
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| Premium for Goodwill | 3,000 | 3,000 | |
| 55,100 | 29,400 | 20,000 |
| 55,100 | 29,400 | 20,000 |
Bank A/c | 5,100 | Balance b/d | 55,100 | 29,400 | 20,000 | ||
Balance c/d | 50,000 | 30,000 | 20,000 | Bank A/c | 600 | ||
| 55,100 | 30,000 | 20,000 |
| 55,100 | 30,000 | 20,000 |
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Balance Sheet as at … |
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Liabilities | Amount Rs | Assets | Amount Rs | |||
Creditors | 16,000 | Land and Building | 30,000 | |||
Bills Payable | 14,000 | Furniture | 9,000 | |||
Outstanding Expenses | 200 | Stock | 46,000 | |||
Capital A/c’s: |
| Debtors | 20,000 |
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Amrit | 50,000 |
| Less:Provision for Doubtful Debts | 900 | 19,100 | |
Baldev | 30,000 |
| Cash at Bank | 26,100 | ||
Chetan | 20,000 | 1,00,000 |
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| 1,30,200 |
| 1,30,200 | |||
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Cash at Bank A/c | |||
Dr. | Cr. | ||
Particulars | Amount Rs | Particulars | Amount Rs |
Balance b/d | 4,600 | Amrit’s Capital A/c | 5,100 |
Chetan’s Capital A/c | 20,000 | Balance c/d | 26,100 |
Premium for Goodwill | 6,000 |
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Baldev’s Capital A/c | 600 |
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| 31,200 |
| 31,200 |
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Working Notes
WN 1Calculation of New Ratio& Sacrificing Ratio
Old Ratio (Amrit and Baldev) = 3:2
New Ratio (Amrit, Baldev and Chetan) = 5:3:2
Sacrificing Ratio = Old Ratio – New Ratio
WN2: Treatment of Goodwill
Premium for Goodwill is to be shared by Sacrificing partners in their Sacrificing Ratio i.e. 1:1
∴ Amrit’s Share = 6,000 x ½ = 3,000
Baldev’s Share = 6,000 x ½ = 3,000
WN3Adjustment of Capital
Chetan’s Capital = 20,000
Chetan’s Share = 2/10
Total Capital of New Firm = Chetan’s Capital x Reciprocal of his Share
= 20,000 x 5
= 1,00,000
New profit Sharing Ratio = 5:3:2
Amrit’s Share = 50,000
Baldev’s Share = 30,000
Chetan’s Share = 20,000
Particulars | Amrit | Baldev |
New Capital Balance | 50,000 | 30,000 |
Adjusted Old Capital Balance | 55,100 | 29,400 |
Cash paid/ received by the partner | 5,100 | 600 |
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