Question

Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2019, they admitted Karuna as a new partner for 1/5th share in the profits of the firm. The Balance Sheet of Kalpana and Kanika as on 1st April, 2019 was as follows:

BALANCE SHEET OF KALPANA AND KANIKA as on 1st April, 2019
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: Provision		12,000	1,20,000
Creditors		90,000	Cash			26,000
						1,30,000
		9,40,000				9,40,000

​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 (₹)	Particulars	Amount (₹)
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, 2019 after Karuna’s admission
Liabilities		Amount (₹)	Assets		Amount (₹)
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)