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PRACTICAL PROBLEM

Minaxi, Ramesh and Poonam were partners sharing profits and losses in the proportion to their capitals, Their Balance sheet of the firm on 31st March, 2012 was as under:

Balance Sheet as on 31st March, 2012
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital
Land and Building
40,000
Minaxi
30,000
Investment
20,000
Ramesh
20,000
Debtors
16,000
Poonam
10,000
Less: R.D.D.
2,000
14,000
Creditors
28,000
Stock
18,000
Reserve
18,000
Cash
14,000
1,06,000
1,06,000

Poonam died on 1st August, 2012 and the following adjustments were made

1) Assets revalued as under-Land & Building Rs 44,000, Investment Rs 18,000, Stock Rs 17,000.

2) All debtors were good.

3) Goodwill of the firm valued at two times the average profits of the last 4 years. No goodwill account to be shown in the books of the firm.

4) Poonam’s share of profit upto her death to be calculated on the basis of average profits of last two year.

5) Profits were Rs 6,000, Rs 12,000, Rs 7,000, Rs 11,000

Prepare:

1) Profits and loss adjustment A/c

2) Balance sheet as on 1st August 2012

Open in App
Solution

Profit and Loss Adjustment Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Investments
2,000
Land and Building
4,000
Stock
1,000
Reserve for Doubtful Debts
2,000
Loss transferred to:
Minaxi
1,500
Ramesh
1,000
Poonam
500
3,000
6,000
6,000

Balance Sheet
as on Aug 01, 2012 after Poonam’s death
Liabilities
Amount
Rs
Assets
Amount
Rs
Creditors
28,000
Land and Building
44,000
Poonam’s Legal Heir’s A/c
17,000
Debtors
16,000
Capital A/cs:
Cash
14,000
Minaxi
38,700
Investments
20,000
Ramesh
25,800
64,500
Less: Amortised
2,000
18,000
Stock
18,000
Less: Depreciation
1,000
17,000
Profit and Loss Suspense A/c
500
1,09,500
1,09,500

Working Notes:

Calculation of Gaining Ratio of Minaxi and Ramesh:


WN1: Distribution of Reserve:

WN2: Share of Profit of Poonam

WN3: Calculation of Share of goodwill of Poonam


WN4: Partners’ Capital Accounts

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Minaxi
Ramesh
Poonam
Particulars
Minaxi
Ramesh
Poonam
Legal Heir’s A/c
17,000
Balance b/d
30,000
20,000
10,000
Goodwill A/c
1,800
1,200
Reserve
9,000
6,000
3,000
Balance c/d
38,700
25,800
Goodwill
3,000
Profit and Loss Suspense A/c
500
Profit and Loss Adjustment A/c (Profit)
1,500
1,000
500
40,500
27,000
17,000
40,500
27,000
17,000

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