Question

Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2 . On 1st April, 2018 , they admitted Karuna as a new partner for 1/5th share in the profits of the firm . The Balance Sheet of the Kalpana and Kanika as on 1st April, 2018 was as follows:

Liabilities		₹	Assets			₹
Capital A/cs:			Land and Building			2,10,000
Kalpana	4,80,000		Plant			2,70,000
Kanika	2,10,000	6,90,000	Stock			2,10,000
General Reserve		60,000	Debtors		​1,32,000
Workmen's Compensation Fund		1,00,000	Less: Prov		12,000	1,20,000
Creditors		90,000	Cash			26,000
						1,30,000
		9,40,000				9,40,000

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It was agreed that;
(a) the value of Land and Building will be appreciated by 20% .
(b) the value of plant be increased by ​₹ 60,000.
(c) Karuna will bring ​₹ 80,000 for her share of goodwill premium.
(d) the liabilities of Workmen's Compensation Fund were determined at ​₹ 60,000.
(e) Karuna will bring in cash as capital to the extent of 1/5th share of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Answer 1

Revaluation Account
Dr.						Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Revaluation Profit				Land and Building A/c	42,000
Kalpana’s Capital A/c		61,200		Plant A/c	60,000
Kanika’s Capital A/c		40,800	1,02,000
			1,02,000		1,02,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars		Kalpana	Kanika	Karuna	Particulars	Kalpana	Kanika	Karuna
					Balance b/d	4,80,000	2,10,000
					Cash			2,43,000
Balance c/d		6,49,200	3,22,800	2,43,000	General Reserve	36,000	24,000
					Workmen Compensation Fund	24,000	16,000
					Revaluation A/c	61,200	40,800
					Premium for Goodwill	48,000	32,000
		6,49,200	3,22,800	2,43,000		6,49,200	3,22,800	2,43,000

Balance Sheet as on April 01, 2018 after Karuna’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		90,000	Cash in Hand		4,53,000
Capitals:			Debtors	1,32,000
Kalpana	6,49,200		Less: Provision for debtors	12,000	1,20,000
Kanika	3,22,800		Stock		2,10,000
Karuna	2,43,000	12,15,000	Land and Building		2,52,000
Liability for Workmen Compensation		60,000	Plant		3,30,000
		13,65,000			13,65,000

Working Notes:

WN1 Calculation of New share
Karuna is admitted for 1/5th share
Let the total share of the firm be 1
Remaining share $=1-\frac{1}{5}=\frac{4}{5}$
This remaining share will be shared among old partners in their old ratio i.e. 3 : 2
Kalpana's Share $=\frac{4}{5}\times \frac{3}{5}=\frac{12}{25}$
Kanika's Share $=\frac{4}{5}\times \frac{2}{5}=\frac{8}{25}$
New Ratio = 12 : 8 : 5

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio – New Ratio
$$\begin{gathered} \mathrm{Kalpana}=\frac{3}{5}-\frac{12}{25}=\frac{3}{25} \\ \mathrm{Kanika}=\frac{2}{5}-\frac{8}{25}=\frac{2}{25} \end{gathered}$$
Sacrificing Ratio = 3 : 2

WN2 Calculate of Karuna's Capital
Adjusted Capital of Kalpana = 6.49,200
Adjusted Capital of Kanika = 3,22,800
Total Adjusted Capital = 9,72,000 (6,49,200+3,22,800)