Question

Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2017 was as follows:

Liabilities	Amount Rs	Assets	Amount Rs
Creditors	49,000	Cash	8,000
Reserves	18,500	Debtors	19,000
Digvijay’s Capital	82,000	Stock	42,000
Brijesh’s Capital	60,000	Buildings	2,07,000
Parakaram’s Capital	75,500	Patents	9,000
	2,85,000		2,85,000

Brijesh retired on March 31, 2017 on the following terms:

(i) Goodwill of the firm was valued at Rs 70,000 and was not to appear in the books.

(ii) Bad debts amounting to Rs 2,000 were to be written off.

(iii) Patents were considered as valueless.

Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Digvijay and Parakaram after Brijesh’s retirement.

Answer 1

Books of Digvijay and Parakaram Revaluation Account
Dr.				Cr.
Particular		Amount Rs	Particular		Amount Rs
Bad Debts		2,000
Patents		9,000	Loss transferred to Capital Account:
			Digvijay		4,400
			Brijesh		4,400
			Parakaram		2,200
		11,000			11,000

Partners’ Capital Account
Dr.						Cr.
Particularss	Digvijay	Brijesh		Parakaram	Particularss		Digvijay	Brijesh	Parakaram
Brijesh’s Capital A/c	18,667			9,333	Balance b/d		82,000	60,000	75,500
Revaluation (Loss)	4,400	4,400		2,200	Digvijay’s Capital A/c			18,667
Brijesh’s Loan		91,000			Parakaram’s Capital A/c			9,333
Balance c/d	66,333			67,667	Reserves		7,400	7,400	3,700
	89,400	95,400		79,200			89,400	95,400	79,200

Balance Sheet as on March 31, 2017
Liabilities	Amount Rs	Assets		Amount Rs
Creditors	49,000	Cash		8,000
Brijesh’s Loan	91,000	Debtors	19,000
		Less: Bad Debts	2,000	17,000
Digvijay’s Capital A/c	66,333	Stock		42,000
Parakaram’s Capital A/c	67,667	Buildings		2,07,000
	2,74,000			2,74,000

Note: As sufficient balance is not available to pay the amount due to Brijesh, the balance of his Capital Account transferred to his Loan Account.

Working Note:

1. Brijesh’s Share of Goodwill

Total goodwill of the firm ´ Retiring Partner’s Share

2. Gaining Ratio = New Ratio – Old Ratio

Digvijay’s Share

Parakaram’s Share

Gaining ratio between Digvijay and Parakaram = 4 : 2 or 2 : 1