Question

PRACTICAL PROBLEM

Following is the balance sheet of Harish and Girish

Balance Sheet as on 31st March, 2010
Liabilities		Amount Rs	Amount Rs	Assets	Amount Rs	Amount Rs
Creditors			38,000	Cash in Hand		37,000
Bills Payable			46,000	Stock		21,000
Profit and Loss A/c			16,000	Debtors	46,000
Capital A/c’s				(-) R.D.D.	6,000	40,000
	Harish	1,00,000		Equipments		12,000
	Girish	1,40,000	2,40,000	Furniture		25,000
				Plant		85,000
				Building		1,20,000
			3,40,000			3,40,000

They admitted Shirish on 1^st April 2010 on the following conditions:

1) For his 1/3^rd share in the future profits Shirish brings Rs 2,00,000 as his Capital.

2) It is decided to raise goodwill by Rs 90,000 and write it off fully after Shirish’s admission.

3) Equipments and plant to be depreciated by 20% and10% respectively and Building to be appreciated by 15%.

4) Bills Payable were retired for Rs 35,000

5) All debtors are considered good.

6) Furniture of the book value Rs 12,000 was taken over by Harish at 40% of the book value.

Prepare, revaluation A/c, Partner’s Capital Account and Balance Sheet of the new firm.

Answer 1

Profit and Loss Adjustment Account
Dr.						Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Plant			8,500	Bills Payable	11,000
Equipment			2,400	Reserve for Doubtful Debts	6,000
Furniture			7,200	Building	18,000
Profit transferred to :
Harish’s Capital		8,450
Girish’s Capital		8,450	16,900
			35,000		35,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars		Harish	Girish	Shirish	Particulars	Harish	Girish	Shirish
Plant		4,800			Balance b/d	1,00,000	1,40,000
Goodwill (Written off)		30,000	30,000	30,000	Profit and Loss A/c	8,000	8,000
Balance c/d		1,26,650	1,71,450	1,70,000	Profit and Loss Adjustment (Profit)	8,450	8,450
					Cash			2,00,000
					Premium for Goodwill	45,000	45,000
		1,61,050	2,01,450	2,00,000		1,61,050	2,01,450	2,00,000

Balance Sheet as on April 01, 2012 after Shirish’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		38,000	Stock		21,000
Capital			Debtors		46,000
Harish	1,26,650		Equipments	12,000
Girish	1,71,450		Less: 20% Depreciation	2,400	9,600
Shirish	1,70,000	4,68,100	Plant	85,000
			Less: 10% Depreciation	8,500	76,500
			Furniture	25,000
			Less: Taken by Harish	12,000	13,000
			Building		1,38,000
			Cash		2,02,000
		5,06,100			5,06,100

Working Notes:

Calculation of Profit Sharing Ratio

WN1: Distribution of Profit and Loss A/c

WN2: Distribution of Shirish’s Share of Goodwill

WN3: Writing off Goodwill

WN4:

WN5: Cash Account

Cash Account
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Balance b/d		37,000	Goodwill Written off	90,000
Premium for Goodwill		90,000	Bills Payable	35,000
Shirish’s Capital A/c		2,00,000	Balance c/d	2,02,000
		3,27,000		3,27,000