Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2007 they admitted Vimalfor 1/5 share in the profits. The Balance Sheet of Ashishand Dutta as on Jan. 01, 2007 was as follows:
Balance Sheet of A and B as on 1.1.2007
Liabilites
Amount
Rs
Assets
Amount
Rs
Creditors
15,000
Land & Building
35,000
Bills Payable
10,000
Plant
45,000
Ashish Capital
80,000
Debtors
22,000
Dutta’s Capital
35,000
Less : Provision
2,000
20,000
Stock
35,000
Cash
5,000
1,40,000
1,40,000
It wasagreed that:
i ) The value ofLand and Building be increased by Rs 15,000.
ii)The value of plant be increased by 10,000.
iii)Goodwill of the firm be valued at Rs 20,000.
iv ) Vimal to bring in capital to the extent of 1/5th of thetotal capital of the new firm.
Record the necessary journalentries and prepare the Balance Sheet of the firm after Vimal’sadmission.
| Balance Sheet of A and B as on 1.1.2007
| ||||
| Liabilites | Amount Rs | Assets | Amount Rs | |
| Creditors | 15,000 | Land & Building | 35,000 | |
| Bills Payable | 10,000 | Plant | 45,000 | |
| Ashish Capital | 80,000 | Debtors | 22,000 |
|
| Dutta’s Capital | 35,000 | Less : Provision | 2,000 | 20,000 |
|
|
| Stock | 35,000 | |
|
|
| Cash | 5,000 | |
|
| 1,40,000 |
| 1,40,000 | |
|
|
|
|
| |
It wasagreed that:
ii)The value of plant be increased by 10,000.
iii)Goodwill of the firm be valued at Rs 20,000.
Record the necessary journalentries and prepare the Balance Sheet of the firm after Vimal’sadmission.
| Books of Ashish, Dutta and Vimal Journal
| ||||||
| Date | Particularss | L.F. | Amount Rs | Amount Rs | ||
| 2007 |
|
|
|
|
| |
| Jan 1 | Land and Building A/c | Dr. |
| 15,000 |
| |
|
| Plant A/c | Dr. |
| 10,000 |
| |
|
|
| To Revaluation A/c |
|
|
| 25,000 |
|
| (Increased in the value of assets) |
|
|
| ||
|
|
|
|
|
|
|
|
|
| Revaluation A/c | Dr. |
| 25,000 |
| |
|
|
| To Ashish’s Capital A/c |
|
|
| 15,000 |
|
|
| To Dutta’s Capital A/c |
|
|
| 10,000 |
|
| (Profit on revaluation transferred to partners capital account) |
|
|
| ||
|
|
|
|
|
|
|
|
|
| Cash A/c | Dr. |
| 36,000 |
| |
|
|
| To Vimal Capital A/c |
|
|
| 36,000 |
|
| (Capital brought by Vimal) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Vimal’s Current A/c | Dr. |
| 4,000 |
| |
|
|
| To Ashish’s Capital A/c |
|
|
| 2,400 |
|
|
| To Dutta’s Capital A/c |
|
|
| 1,600 |
|
| (Vimal’s share goodwill adjusted through his current account)
|
|
|
| ||
| Balance Sheet as on January 01, 2007
| ||||
| Liabilities | Amount Rs | Assets | Amount Rs | |
| Creditors | 15,000 | Land and Building | 50,000 | |
| Bills Payable | 10,000 | Plant | 55,000 | |
|
|
| Debtors | 22,000 |
|
| Ashish’s Capital Account | 97,400 | Less: Provision | 2,000 | 20,000 |
| Dutta’s Capital Account | 46,600 | Stock | 35,000 | |
| Vimal’s Capital Account | 36,000 | Cash | 41,000 | |
|
|
| Vimal’s Current Account | 4,000 | |
|
| 2,05,000 |
| 2,05,000 | |
|
|
|
|
| |
Working Note:
1)
| Partners’ Capital Account | ||||||||
| Dr. | Cr. | |||||||
| Particulars | Ashish | Dutta | Vimal | Particulars | Ashish | Dutta | Vimal | |
|
|
|
|
| Balance b/d | 80,000 | 35,000 |
| |
|
|
|
|
| Revaluation | 15,000 | 10,000 |
| |
| Balance c/d | 97,400 | 46,600 | 36,000 | Cash |
|
| 36,000 | |
|
|
|
|
| Vimal Current | 2,400 | 1,600 |
| |
|
|
|
|
|
|
|
|
| |
|
| 97,400 | 46,600 | 36,000 |
| 97,400 | 46,600 | 36,000 | |
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2)
| Vimal Current Account | ||||
| Dr. | Cr. | |||
| Particulars | Amount Rs | Particulars | Amount Rs | |
| Ashish’s Capital A/c | 2,400 |
|
| |
| Dutta’s Capital A/c | 1,600 | Balance c/d | 4,000 | |
|
|
|
|
| |
|
| 4,000 |
| 4,000 | |
|
|
|
|
| |
3) Calculation of New Profit Sharing Ratio
New Profit sharing ratio of Ashish, Dutta and Vimal
4) Sacrificing Ratio = Old Ratio – New Ratio
Ashish’s Sacrificing Share =
Dutta’s Sacrificing Share =
Sacrificing Ratio between Ashish and Dutta is 3:2
Note: Here, Goodwill has been adjusted through current account because Vimal has not brought his share of goodwill and he is to bring capital in proportion to total capital of the new firm after adjustment.
5) Capital of new firm on the basis of old partners adjusted capital:
Total adjusted capital of old partners
| Ashish’s Capital | = | 97,400 |
| Dutta’s Capital | = | 46,600 |
|
|
| 1,44,000 |
Remaining Share of Ashish and Dutta (old partners) in the new firm =
Capital of the new firm = 1,44,000 × =1,80,000
Vimal’s share in the capital of the new firm = 1,80,000 ´ =36,000.