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Partner's Capital Account Adjustments(Death)

Balance Sheet...

Question

Balance Sheet as on 31.03.2012
Liabilities Amount
Rs. Assets Amount
Rs.
Capital:
Ram
Madan
General reserve
Sundry creditors
1,00,00
1,00,00
40,000
55,300 Plant and machinery
Furniture
Sundry debtors 92,600
Less: R.D.D 1,000
Stock
Cash in hand
Cash at bank 90,000
15,000
91,000
68,000
4,200
27,100
2,95,300 2,95,300
Ram and Madan were partners in a firm sharing profits and losses equally. Following was their balance Sheet as on 31.03.2012:
On $1^{s t}$ April, 2012, Soham was admitted as a partner in the firm on the following terms:
(1) Soham is to bring in Rs. 1,00,000 as his capital. He is to be given ${\frac{1}{3}}^{r d}$ share in future profits.
(2) Goodwill of the firm to be raised at Rs. 30,000. It was decided that 'goodwill' should not appear in the books of the new firm.
(3) Furniture to be depreciated by 10%. Stock was valued at Rs. 70, 500.
Prepare:
(1) Profit and Loss Adjustment Account.
(2) Partner's Capital Accounts.
(3) Balance Sheet of the new firm.

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Solution

Calculation of new ratio
Ram & Madan are partners in equal ratio
New ratio $=$ old ratio $\times$ balance ratio
Ram $= \frac{1}{2} \times 2 \times 3 = \frac{2}{6}$
Madam $= \frac{1}{2} \times 2 \times 3 = \frac{2}{6}$
Soham $= \frac{1}{3} \times \frac{2}{2} = \frac{2}{6}$

Therefore new ratio $= 1 : 1 : 1$

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Q. Rani and Geeta are partners sharing profits and losses 3 : 2 respectively. Their position on

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On

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(2) Building should be revalued at Rs. 1,25,000.
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PRACTICAL PROBLEM

Suresh and Ramesh are partners in a business sharing Balance sheet as on 31^st March, 2013 is as follows:

Balance Sheet as on 31^st March, 2013
Liabilities		Amount Rs	Amount Rs	Assets	Amount Rs	Amount Rs
Capital A/c’s				Building		30,000
	Suresh	50,000		Machinery		10,000
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Creditors			57,000	Debtors	40,000
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Reserve fund			9,000	Stock		30,000
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They admitted Kailash on 1^st April, 2013 as a partner on the following terms:

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PRACTICAL PROBLEM

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2) Building should be revalued for Rs 1,25,000.

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4) R.D.D. should be maintained as it is.

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Mohan and Mahesh were partners in a firm sharing profit in the ratio of 3 : 2. On 1st April, 2012, they admitted Nusrat as a partner in the firm. The Balance Sheet of Mohan and Mahesh on that date was as under :

BALANCE SHEET OF MOHAN AND MAHESH

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$\begin{matrix} Liabilities & Amount & Assets & Amount (Rs) & (Rs) Creditors & 2, 10, 000 & Cash in Hand & 1, 40, 000 Workmen's Compensation Fund & 2, 50, 000 & Debtors & 1, 60, 000 General Reserves & 1, 60, 000 & Stock & 1, 20, 000 Capital : & Machinery & 1, 00, 000 Mohan & 1, 00, 000 & Buildings & 2, 80, 000 Mahesh & 80, 000 - ------ - & 1, 80, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 8, 00, 000 & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 8, 00, 000 \end{matrix}$

It was agreed that :

(i) The value of building and stock be appreciated to Rs 3,80,000 and Rs 1,60,000 respectively.

(ii) The liabilities of Workmen's Compensation Fund was determined at Rs 2,30,000.

(iii) Nusrat brought in her share of goodwill Rs 1,00,000 in cash.

(iv) Nusrat was to bring further cash as would make her capital equal to 20% of the combined capital of Mohan and Mahesh after above revaluation and adjustment are carried out.

(v) The further profit sharing ratio will be Mohan 2/5th, Mahesh 2/5th, Nusrat 1/5th. Prepare Revaluation Account Partners' Capital Account and Balance Sheet of the new firm. Also show clearly the calculation of capital brought by Nusrat.

Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3 : 1 : 1. On 1st April, 2012, their Balance Sheet was as follows:

BALANCE SHEET OF KUSHAL, KUMAR AND KAVITA
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$\begin{matrix} Liabilities & Amount & Assets & Amount (Rs) & (Rs) Creditors & 1, 20, 000 & Cash in Hand & 70, 000 Bills Payable & 1, 80, 000 & Debtors & 2, 00, 000 General Reserves & 1, 20, 000 & Less : Provision & 10, 000 - ------ - & 1, 90, 000 Capital : & Stock & 2, 20, 000 Kushal & 3, 00, 000 & Furniture & 1, 20, 000 Kumar & 2, 80, 000 - -------- - & Building & 3, 00, 000 Kavita & 3, 00, 000 - -------- - & 8, 80, 000 & Land & 4, 00, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 13, 00, 000 & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 13, 00, 000 \end{matrix}$

On the above date Kavita retired and the following was agreed.

(i) Goodwill of the firm was valued at Rs 40,000.

(ii) Land was to be appreciated by 30% and building was to be depreciated by Rs 1,00,000.

(iii) Value of furniture was to be reduced by Rs 20,000.

(iv) Bad debts reserve is to be increased to Rs 15,000.

(v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her loan account.

(vi) Capital of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any, in their capital account will be adjusted through current accounts.

Prepare Revaluation Account, Partner's Capital Account and Balance Sheet of Kushal and Kumar after Kavita's retirement.

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Liabilities	Amount Rs.	Assets	Amount Rs.
Capital: Ram Madan General reserve Sundry creditors	1,00,00 1,00,00 40,000 55,300	Plant and machinery Furniture Sundry debtors 92,600 Less: R.D.D 1,000 Stock Cash in hand Cash at bank	90,000 15,000 91,000 68,000 4,200 27,100
	2,95,300		2,95,300

Calculation of new ratioRam & Madan are partners in equal ratioNew ratio = old ratio × balance ratioRam =12×2×3=26Madam =12×2×3=26Soham =13×22=26Therefore new ratio =1:1:1