Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March, 2018, who have agreed to share profits and losses in proportion of their capitals :

Liabilities

₹

Assets

₹

Capital A/cs

Land and Building

4,00,000

Kusum
4,00,000 Machinery 6,00,000

Sneh
6,00,000 Closing Stock 2,00,000

Usha
4,00,000 14,00,000 Sundry Debtors

Employees' Provident Fund 70,000 Less: Provision for Doubtful Debts 2,20,000

Workmen Compensation Reserve
30,000
Cash at Bank

21,429

2,00,000

Sundry Creditors 1,00,000 2,00,000

16,00,000

16,00,000

On 31st March, 2018, Kusum retired from the firm and the remaining partners decided to carry on the business . It was agreed to revalue the assets and reassess the liabilities on that date , on the following basis:
(a) Land and Building be appreciated by 30%.
(b) Machinery be depreciated by 30%.
(c) There were Bad Debts of ₹ 35,000.
(d) The claim against Workmen Compensation Reserve was estimated at ₹ 15,000.
(e) Goodwill of the firm was valued at ₹ 2,80,000 and Kusum's share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
(f) Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners .
(g) Amount due to Kusum be settled by paying ₹ 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account , Capital Accounts of Partners and Balance Sheet of the new firm after Kusum's retirement.

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Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery A/c

1,80,000

Land and Building A/c

1,20,000

Bad Debts A/c (35,000 – 20,000)

15,000

Loss on Revaluation transferred to:

Kusum

21,429

Sneh

32,142

Usha

21,429

75,000

1,95,000

1,95,000

Partners’ Capital Account

Dr.

Cr.

Particulars

Kusum

Sneh

Usha

Particulars

Kusum

Sneh

Usha

Revaluation A/c (Loss)

21,429

32,142

21,429

Balance b/d

4,00,000

6,00,000

4,00,000

Usha’s Capital A/c

–

–

80,000

Workmen Compensation Fund

4,286

6,428

4,286

Bank A/c

1,00,000

–

–

Usha’s Capital A/c

80,000

–

–

Kusum’s Loan A/c

3,62,857

–

–

Balance c/d

–

5,74,286

3,02,857

4,84,286

6,06,428

4,04,286

4,84,286

6,06,428

4,04,286

Balance c/d

–

6,00,000

8,00,000

Balance b/d

–

5,74,286

3,02,857

Bank A/c (WN3)

–

25,714

4,97,143

–

6,00,000

8,00,000

–

6,00,000

8,00,000

Balance Sheet

as at March 31, 2018

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

1,00,000

Land & Building

5,20,000

Employee’s Provident Fund

70,000

Machinery (6,00,000 – 1,80,000)

4,20,000

Workmen’s Compensation Claim

15,000

Stock

2,00,000

Kusum’s Loan

3,62,857

Sundry Debtors (2,20,000 – 35,000)

1,85,000

Capital A/c :

Bank

6,22,857

Sneh

6,00,000

Usha

8,00,000

14,00,000

19,47,857

19,47,857

Working Notes

WN 1 Calculation of Gaining Ratio

Old Ratio (Kusum, Sneh and Usha) = 2:3:2

New Ratio (Sneh and Usha) = 3:4

Gaining Ratio = New Ratio – Old Ratio

WN2 Adjustment of Goodwill

Total Goodwill of the Firm = 2,80,000

It is to be adjusted by the Gaining partners i.e. only by Usha

WN3 Adjustment of Capital

Particulars

Sneh

Usha

New Capital Balance

6,00,000

8,00,000

Adjusted Old Capital Balance

5,74,286

3,02,857

Cash brought in by the Partner

25,714

4,97,143

WN4

Cash at Bank A/c

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

2,00,000

Kusum’s Capital A/c

1,00,000

Sneh’s Capital A/c

25,714

Balance c/d

6,22,857

Usha’s Capital A/c

4,97,143

7,22,857

7,22,857

Suggest Corrections

Similar questions

Q. Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March, 2018, who have agreed to share profits and losses in proportion of their capitals :


Liabilities		₹	Assets		₹
Capital A/cs			Land and Building		4,00,000
Kusum	4,00,000		Machinery		6,00,000
Sneh	6,00,000		Closing Stock		2,00,000
Usha	4,00,000	14,00,000	Sundry Debtors
Employees' Provident Fund		70,000	Less: Provision for Doubtful Debts	2,20,000
Workmen Compensation Reserve		30,000	Cash at Bank	21,429	2,00,000
Sundry Creditors		1,00,000			2,00,000

		16,00,000			16,00,000

On 31st March, 2018, Kusum retired from the firm and the remaining partners decided to carry on the business . It was agreed to revalue the assets and reassess the liabilities on that date , on the following basis:
(a) Land and Building be appreciated by 30%.
(b) Machinery be depreciated by 30%.
(c) There were Bad Debts of ₹ 35,000.
(d) The claim against Workmen Compensation Reserve was estimated at ₹ 15,000.
(e) Goodwill of the firm was valued at ₹ 2,80,000 and Kusum's share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
(f) Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners .
(g) Amount due to Kusum be settled by paying ₹ 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account , Capital Accounts of Partners and Balance Sheet of the new firm after Kusum's retirement.

Following is the Balance Sheet of Aruna, Karuna and Varuna as at 31st March, 2009, who have agreed to share profits and losses in proportion of their capitals.

Balance Sheet of Aruna, Karuna and Varuna
as at 31st March, 2009
$\begin{matrix} Capital and Liabilities & Rs & Assets & Rs Capitals: & Land and Building & 2, 00, 000 Aruna 2, 00, 000 & Machinery & 3, 00, 000 Karuna 3, 00, 000 & Closing Stock & 1, 00, 000 Varuna 2, 00, 000 - -------- - & 7, 00, 000 & Sundry Debtors 1, 10, 000 General Reserve & 35, 000 & Less:Provision for Workmen Compensation Reserve & 15, 000 & Doubtful debts (10, 000) - -------- - & 1, 00, 000 Sundry Creditors & 50, 000 - ------ - & Cash at Bank & 1, 00, 000 - -------- - 8, 00, 000 - -------- - & 8, 00, 000 - -------- - \end{matrix}$

On 31st March, 2009 Aruna desired to retire from the firm and the remaining partners decided to carry on the business. It was agreed to ravalue the assets and re-assess the liabilities on the following basis :

(i) Land and building to be appreciated by 30%

(ii) Machinery be depreciated by 20%.

(iii) There were bad debts of Rs 17,000.

(iv) The claim on account of workmen's compensation was estimated at Rs 8,000.

(v) Goodwill of the firm was valued at Rs 1,40,000 and Aruna's share of Goodwill be adjusted against the Capital Accounts of the continuing partners Karuna and Varuna who have decided to share future profits in the ratio of 4 : 3 respectively.

(vi) Capital of the new firm in total will be the same as before the retirement of Aruna and will be in the new profit sharing ratio of the continuing partners.

(vii) Amount due to Aruna be settled by paying Rs 50,000 in cash and the balance by transferring to her loan account which will be paid later on.

Prepare Revaluation Account, Capital Accounts of partners and Balance Sheet of time firm after Aruna's retirement.

Q. The Balance Sheet of X , Y and Z who shared profits in the ratio of 5 : 3 : 2 , as on 31st March, 2018 was as follows:



Liabilities		₹	Assets	₹
Sundry Creditors		39,750	Bank( Minimum Balance)	15,000
Employees Provident Fund		5,250	Debtors	97,500
Workmen Compensation Reserve		22,500	Stock	82,500
Capital A/cs:			Fixed Assets	1,87,500
X	1,65,000
Y	84,000
Z	66,000	3,15,000
		3,82,500		3,82,500

Y retired on the above date and it was agreed that:
(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y's share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20% .
(iii) Stock be reduced to ₹ 75,000.
(iv) Y be paid amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio.
Prepare Revaluation Account , Capital Accounts of all partners and the Balance Sheet of the New Firm.

Q. Kushal Kumar and Kavita were partners in a firm sharing profit in the ratio of

3 : 1 : 1

1 s t A p r i l, 2012

their Balance Sheet was as follows:
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) Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.
Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita's retirement.

Q. Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2 : 2 : 3 : 3. On 1st April, 2016, their Balance Sheet was as follows:

BALANCE SHEET OF SURESH, RAMESH, MAHESH AND Ganesh as on 1st April, 2016
Liabilities		Amount (₹)	Assets	Amount (₹)
Capital A/cs:			Fixed Assets	6,00,000
Suresh	1,00,000		Current Assets	3,45,000
Ramesh	1,50,000
Mahesh	2,00,000
Ganesh	2,50,000	7,00,000
Sundry Creditors		1,70,000
Workmen Compensation Reserve		75,000


		9,45,000		9,45,000

From the above date, the partners decided to share the future profits equally. For this purpose the goodwill of the firm was valued at ₹ 90,000. It was also agreed that:
(a) Claim against Workmen Compensation Reserve will be estimated at ₹ 1,00,000 and fixed assets will be depreciated by 10%.
(b) The Capitals of the partners will be adjusted according to the new profit-sharing ratio. For this, necessary cash will be brought or paid by the partners as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

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Revaluation Account
Dr.		Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Machinery A/c	1,80,000	Land and Building A/c		1,20,000
Bad Debts A/c (35,000 – 20,000)	15,000	Loss on Revaluation transferred to:
		Kusum	21,429
		Sneh	32,142
		Usha	21,429	75,000
	1,95,000			1,95,000

Partners’ Capital Account
Dr.				Cr.
Particulars	Kusum	Sneh	Usha	Particulars	Kusum	Sneh	Usha
Revaluation A/c (Loss)	21,429	32,142	21,429	Balance b/d	4,00,000	6,00,000	4,00,000
Usha’s Capital A/c	–	–	80,000	Workmen Compensation Fund	4,286	6,428	4,286
Bank A/c	1,00,000	–	–	Usha’s Capital A/c	80,000	–	–
Kusum’s Loan A/c	3,62,857	–	–
Balance c/d	–	5,74,286	3,02,857
	4,84,286	6,06,428	4,04,286		4,84,286	6,06,428	4,04,286
Balance c/d	–	6,00,000	8,00,000	Balance b/d	–	5,74,286	3,02,857
				Bank A/c (WN3)	–	25,714	4,97,143
	–	6,00,000	8,00,000		–	6,00,000	8,00,000

Balance Sheet as at March 31, 2018
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		1,00,000	Land & Building	5,20,000
Employee’s Provident Fund		70,000	Machinery (6,00,000 – 1,80,000)	4,20,000
Workmen’s Compensation Claim		15,000	Stock	2,00,000
Kusum’s Loan		3,62,857	Sundry Debtors (2,20,000 – 35,000)	1,85,000
Capital A/c :			Bank	6,22,857
Sneh	6,00,000
Usha	8,00,000	14,00,000
		19,47,857		19,47,857

Cash at Bank A/c
Dr.		Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	2,00,000	Kusum’s Capital A/c	1,00,000
Sneh’s Capital A/c	25,714	Balance c/d	6,22,857
Usha’s Capital A/c	4,97,143
	7,22,857		7,22,857