wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

PRACTICAL PROBLEM

Raj and Dev are partners sharing profits and losses 3:2 respectively. Their position on 31st March, 2011

Balance Sheet as on 31st March, 2011
Liabilities
Amount
Rs
Assets
Amount
Rs
Capital A/c’s
Raj
1,00,000
Buildings
1,00,000
Dev
75,000
Furniture
10,000
Creditors
10,000
Stock
31,000
Bills Payable
5,000
Debtors
50,000
General Reserve
15,000
(-) R.D.D.
1,000
49,000
Bank Balance
15,000
2,05,000
2,05,000

On 1st April, 2011 they admitted Manoj on following terms:

1) Manoj should bring in cash Rs 1,00,000 as a capital for 1/5th share in future profit and Rs 25,000 as goodwill.

2) Building should be revalued for Rs 1,25,000.

3) Depreciate furniture at 12 ½ % p.a. and stock at 10% p.a.

4) R.D.D. should be maintained as it is.

5) The Capital accounts of partners should be adjusted in their new profit sharing ratio through bank account.

Prepare, Profit and Loss Adjustment Account, Capital Accounts, Balance Sheet of new firm and show how you have calculated new ratio and new capital.

Open in App
Solution

Profit and Loss Adjustment Account
Dr.
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Furniture
1,250
Building
25,000
Stock
3,100
Profit transferred to:
Raj’s Capital
12,390
Dev’s Capital
8,260
20,650
25,000
25,000

Partners’ Capital Accounts
Dr.
Cr.
Particulars
Raj
Dev
Manoj
Particulars
Raj
Dev
Manoj
Balance c/d
1,36,390
99,260
1,00,000
Balance b/d
1,00,000
75,000
General Reserve
9,000
6,000
Profit and Loss Adjustment (Profit)
12,390
8,260
Cash
1,00,000
Premium for Goodwill
15,000
10,000
1,36,390
99,260
1,00,000
1,36,390
99,260
1,00,000
Balance c/d
2,40,000
1,60,000
1,00,000
Balance b/d
1,36,390
99,260
1,00,000
Bank
1,03,610
60,740
2,40,000
1,60,000
1,00,000
2,40,000
1,60,000
1,00,000

Balance Sheet
as on April 01, 2011 after Manoj’s admission
Liabilities
Amount
Rs
Assets
Amount
Rs
Creditors
10,000
Building
1,25,000
Bills Payable
5,000
Furniture
10,000
Capital:
Less: Depreciation @12.5%
1,250
8,750
Raj
2,40,000
Stock
31,000
Dev
1,60,000
Less: Depreciation @10%
3,100
27,900
Manoj
1,00,000
5,00,000
Debtors
50,000
Less: Reserve for Doubtful Debts
1,000
49,000
Cash (1,00,000+25,000)
1,25,000
Bank
1,79,350
5,15,000
5,15,000

Working Notes:

Calculation of Profit Sharing Ratio:


WN1: Adjustment of Capital

WN2: Distribution of General Reserve


WN3: Distribution of Manoj’s Share of Goodwill


WN4: Bank Account

Bank Account

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Balance b/d

15,000

Balance c/d

1,79,350

Capital A/s:

Raj

1,03,610

Dev

60,740

1,67,350

1,79,350

1,79,350


flag
Suggest Corrections
thumbs-up
0
similar_icon
Similar questions
View More
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Accounting Treatment
ACCOUNTANCY
Watch in App
Join BYJU'S Learning Program
CrossIcon