Question

A and B are partners in a firm sharing profits in the ratio of 3 : 2 . They admit C as a partner on 1st April, 2018 on which date the Balance Sheet of the firm was:

Liabilities		₹	Assets	₹
Capital A/cs:			Building	50,000
A	60,000		Plant and Machinery	30,000
B	40,000	1,00,000	Stock	20,000
Creditors		20,000	Debtors	10,000
			Bank	10,000
		1,20,000		1,20,000

You are required to prepare the Revaluation Account , Partners' Capital Accounts and Balance Sheet of the new firm after considering the following;
(a) C brings in ₹ 30,000 as capital for 1/4th share. He also brings ₹ 10,000 for his share of goodwill.
(b) Part of the Stock which had been included at cost of ₹ 2,000 had been badly damaged in storage and could only expect to realise ₹ 400.
(c) Bank Charges had been overlooked and amounted to ₹ 200 for the year 2017-18.
(d) Depreciation on Building of ₹ 3,000 had been omitted for the year 2017-18.
(e) A credit for goods for ₹ 800 had been omitted from both purchases and creditors although the goods had been correctly included in Stock.
(f) An expense of ₹ 1,200 for insurance premium was debited in the Profit and Loss Account of 2017-18 but ₹ 600 of this are related to the period after 31st March, 2018.

Answer 1

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Stock (2,000 – 400)	1,600
Bank (charges)	200	Prepaid Insurance	600
Building	3,000
Creditors	800	Loss transferred to
		A Capital	3,000
		B Capital	2,000
	5,600		5,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	3,000	2,000		Balance b/d	60,000	40,000
				Bank			30,000
				Premium for Goodwill	6,000	4,000
Balance c/d	63,000	42,000	30,000
	66,000	44,000	30,000		66,000	44,000	30,000

Balance Sheet as on April 01, 2018 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Capital A/cs:			Building (50,000 – 3,000)	47,000
A	63,000		Plant and Machinery	30,000
B	42,000		Stock (20,000 – 1,600)	18,400
C	30,000	1,35,000	Debtors	10,000
Creditors (20,000 + 800)		20,800	Bank	49,800
			Prepaid Insurance	600
		1,55,800		1,55,800

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	10,000	Revaluation (Bank charges)	200
C’s Capital	30,000
Premium for Goodwill	10,000	Balance c/d	49,800
	50,000		50,000

Working Notes:

WN1 Sacrificing Ratio
Old Ratio (A and B) 3 : 2
Sacrificing Ratio = 3 : 2

WN2 Distribution of Premium for Goodwill