Question

PRACTICAL PROBLEM

Pai, Amba and Manoj are partners in a firm sharing profit and losses in the proportion to their capitals. Their Balance Sheet as on 31.3.2012 is as follow:

Balance Sheet as on 31st March, 2012
Liabilities	Amount Rs	Assets	Amount Rs
Capitals		Cash	3,000
Pai	30,000	Stock	12,000
Amba	30,000	Debtors	20,000
Manoj	15,000	Plant	13,000
Creditors	7,000	Building	20,000
Outstanding Expenses	15,000	Motor Van	31,000
Profit and Loss A/c	20,000	Goodwill	18,000
	1,17,000		1,17,000

On the above date Pai retired and the following adjustments have been agreed upon

1) Goodwill was revalued at Rs 15,000

2) Assets and Liabilities were revalued as under debtors Rs 17,000 stock at 90% of book value Building Rs 35,000 Plant Rs 11,500 Motor Van Rs 29, 500, Outstanding expenses Rs 18,000

3) Amba and Manoj contributed additional capital of Rs 20,000 and Rs 10,000 respectively

4) Balance due to Mr. Pai is transferred to his loan account after paying him Rs 1,000/-

Prepare:- Profit and Loss adjustment A/c,. Partner’s Capital A/c’s and Balance Sheet of new firm

Answer 1

Profit and Loss Adjustment Account
Dr.	Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Reserve for Discount on Debtors			3,000	Building	15,000
Stock			1,200
Plant			1,500
Motor van			1,500
Outstanding Expenses			3,000
Goodwill			3,000
Profit transferred to:
Pai’s Capital		720
Amba’s Capital		720
Manoj’s Capital		360	1,800
			15,000		15,000

Partners’ Capital Accounts
Dr.	Cr.
Particulars		Pai	Amba	Manoj	Particulars	Pai	Amba	Manoj
Cash A/c		1,000			Balance b/d	30,000	30,000	15,000
Loan A/c		37,720			Profit and Loss Adjustment A/c (Profit)	720	720	360
Balance c/d			58,720	29,360	Profit and Loss A/c	8,000	8,000	4,000
					Cash A/c		20,000	10,000
		38,720	58,720	29,360		38,720	58,720	29,360

Balance Sheet as on April 01, 2012 after Pai’s retirement
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		7,000	Stock	12,000
Outstanding Expenses		18,000	Less: Depreciation	1,200	10,800
Capital A/cs:			Building		35,000
Amba	58,720		Debtors	20,000
Manoj	29,360	88,080	Less: Reserve for Doubtful Debts	3,000	17,000
Loan A/c of Pai		37,720	Motor Van	31,000
			Less: Depreciation	1,500	29,500
			Goodwill		15,000
			Plant	13,000
			Less: Depreciation	1,500	11,500
			Cash		32,000
		1,50,800			1,50,800

Working Notes:

WN1: Distribution of Profit and Loss A/c

Cash Account
Dr.			Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Balance b/d		3,000	Pai’s Capital A/c	1,000
Capital A/cs:			Balance c/d	32,000
Amba	20,000
Manoj	10,000	30,000
		33,000		33,000