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Question

A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 3 respectively. Their Balance Sheet as at 31st March, 2018 is:

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

7,000

Land and Building 36,000
Bills Payable 3,000 Pland and Machinery 28,000
Reserves 20,000 Electronic Typewriter 8,000
Stock 20,000
Capital A/cs:

Sundry Debtors

14,000

A 32,000

Less: Provision for D. Debts

2,000

12,000

B

24,000

Bank 2,000
C 20,000 76,000

1,06,000

1,06,000


On 1st April, 2018, B retires from the firm on the following terms:
(a) Goodwill of the firm is to be valued at ₹ 14,000.
(b) Stock, Land and Building are to be appreciated by 10%.
(c) Plant and Machinery and Electronic Typewriter are to be depreciated by 10%.
(d) Sundry Debtors are considered to be good.
(e) There is a liability of ₹ 2,000 for the payment of outstanding salary to the employee of the firm . This liability has not been shown in the above Balance Sheet but the same is to be recorded now .
(f) Amount payable to B is to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C after B's retirement.

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Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Plant and Machinery
(28,000 × 10%)

2,800

Stock
(20,000 × 10%)

2,000

Electronic Typewriter
(8,000 × 10%)

800

Land and Building
(36,000 × 10%)

3,600

Outstanding Salary

2,000

Provision for Doubtful Debts

2,000

Profit transferred to:

A’s Capital A/c

800

B’s Capital A/c

600

C’s Capital A/c

600

2,000

7,600

7,600

Partners’ Capital Accounts

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

B’s Capital A/c

2,400

1,800

Balance b/d

32,000

24,000

20,000

Reserves

8,000

6,000

6,000

B’s Loan A/c

34,800

Revaluation A/c

800

600

600

A’s Capital A/c

2,400

Balance c/d

38,400

24,800

C’s Capital A/c

1,800

40,800

34,800

26,600

40,800

34,800

26,600

Balance Sheet

an on April 01, 2018 (after B’s Retirement)

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

7,000

Land and Building (36,000 + 3,600)

39,600

Bills Payable

3,000

Plant and Machinery (28,000 – 2,800)

25,200

B’s Loan

34,800

Electronic Typewriter (8000 – 800)

7,200

Capital A/cs:

Stock (20,000 + 2,000)

22,000

A

38,400

Sundry Debtors

14,000

C

24,800

Bank

2000

Outstanding Salary

2,000

1,10,000

1,10,000


Working Note:

Adjustment of Goodwill

Old Ratio (A, B and C) = 4 : 3 : 3

B retires from the firm.

∴ Gaining Ratio = 4 : 3

Goodwill of the firm = Rs 14,000

B’s Share of Goodwill =

This share of goodwill is to be distributed between A and C in their gaining ratio (i.e. 4 : 3).


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Q. Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2 . On 31st March,2018 their Balance Sheet was:

Liabilities

Assets

Sundry Creditors

16,000

Cash in Hand

1,200

Public Deposits 61,000 Cash at Bank 2,800
Bank Overdraft 6,000 Stock 32,000
Outstanding Liabilities 2,000 Prepaid Insurance 1,000

Capital A/cs:

Sundry Debtors

28,000

Less : Provision for D.D.

800

28,000

Deepika

48,000












Rajshree

40,000

88,000

Plant and Machinery

48,000

Land and Building 50,000
Furniture 10,000

1,73,000

1,73​,000

​​

On the above date , the partners decided to admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika , Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in ₹ 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners' therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at ₹ 60,000, Stock at ₹ 40,000 and the Provision for Doubtful Debts is to be maintained at ₹ 4,000. Value of Land and Building has appreciated by 20% . Furniture has been depreciated by 10%.
(e) There is and additional liability of ₹ 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities , stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account , Partners' Capital Accounts and Balance Sheet of Deepika , Rajshree and Anshu.

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