Question

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:

Liabilities		Amount (₹)	Assets		Amount (₹)
Sundry Creditors		12,600	Bank		4,100
Provident Fund		3,000	Debtors	30,000
General Reserve		9,000	Less: Provision	1,000	29,000
Capital A/cs:
Amit	40,000		Stock		25,000
Balan	36,500		Investments		10,000
Chander	20,000	96,500	Patents		5,000
			Machinery		48,000
		1,21,100			1,21,100

It was agreed that:
(i) Goodwill will be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%.
(iv) Liability on account of Provident Fund was estimated at ₹ 2,400.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.

Answer 1

Revaluation Account
Dr.						Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Machinery			4,800	Investments A/c	5,800
Patents			1,000	Provident Fund A/c	600
Profit transferred to:
Amit’s Capital A/c		300
Balan’s Capital A/c		200
Chander’s Capital A/c		100	600
			6,400		6,400

Partners’ Capital Account
Dr.				Cr.
Particulars	Amit	Balan	Chander	Particulars	Amit	Balan	Chander
Investments A/c			15,800	Balance b/d	40,000	36,500	20,000
Chander’s Capital A/c	2,700	1,800		Revaluation A/c (Profit)	300	200	100
Loan A/c			10,300	General Reserve	4,500	3,000	1,500
Current A/c		5,900		Amit’s Capital A/c			2,700
Balance c/d	48,000	32,000		Balan’s Capital A/c			1,800
				Current A/c	5,900
	50,700	39,700	26,100		50,700	39,700	26,100

Working Notes:

WN1: Adjustment of Goodwill

WN2 Adjustment of Capital
$$\begin{gathered} \mathrm{Adjusted}\mathrm{Old}\mathrm{Capital}\mathrm{of}\mathrm{Amit}=44,800(40,000+4,500+300)-2,700=\mathrm{Rs}42,100 \\ \mathrm{Adjusted}\mathrm{Old}\mathrm{Capital}\mathrm{of}\mathrm{Balan}=39,700(36,500+3,000+200)-1,800=\mathrm{Rs}37,900 \\ \mathrm{Total}\mathrm{Adjusted}\mathrm{Capital}=42,100+37,900=\mathrm{Rs}80,000 \\ \mathrm{New}\mathrm{Profit}\mathrm{Sharing}\mathrm{Ratio}=3:2 \\ \mathrm{Amit}\text{'}\mathrm{s}\mathrm{New}\mathrm{Capital}=80,000\times \frac{3}{5}=\mathrm{Rs}48,000 \\ \mathrm{Balan}\text{'}\mathrm{s}\mathrm{New}\mathrm{Capital}=80,000\times \frac{2}{5}=\mathrm{Rs}32,000 \end{gathered}$$
Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.