PRACTICAL PROBLEMShedge- Mayekar and Raut were partners sharing profits and losses in the ratio of 4- 3- 3 - Their Balance Sheet on 31st March 2012 was as given below-Balance Sheet as on 31st March- 20121-c- Liabilities 1-c- Amount Rs 1c- Assets Amount Rs Capitals Furniture 4-200 Shedge 15-000 Stock 13-000 Mayekar 10-000 Debtors 10-000 Raut 10-000 Bill Receivable 18-000 Creditors 8-000 Cash-Bank 2-000 Bank Overdraft 10-000 Profit and Loss A-c Loss 5-800 2 - 3 5 3 - 0 0 0 5 3 - 0 0 0 2 Raut retired from the business on above date and it was agreed that the amount due to Raut to be paid immediately by availing overdraft facility1 His share of goodwill was raised at Rs 3-5002 Revalue furniture Rs 4-000 and stock Rs 16-0003 Create R-D-D- at 5 - on Debtors-4 Make provision for outstanding printing bill Rs 6-000 - Prepare profit and loss adjustment A-c- Capital A-c and Balance Sheet of continuing partners assuming that goodwill is written off by the continuing partners-

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Revaluation of Assets

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Question

PRACTICAL PROBLEM

Shedge, Mayekar and Raut were partners sharing profits and losses in the ratio of 4: 3: 3.
Their Balance Sheet on 31^st March 2012 was as given below:-

Balance Sheet as on 31^st March, 2012

Liabilities

Amount

Rs

Assets

Amount

Rs

Capitals

Furniture

4,200

Shedge

15,000

Stock

13,000

Mayekar

10,000

Debtors

10,000

Raut

10,000

Bill Receivable

18,000

Creditors

8,000

Cash/Bank

2,000

Bank Overdraft

10,000

Profit and Loss A/c (Loss)

5,800

53,000

53,000

Raut retired from the business on above date and it was agreed that the amount due to Raut to be paid immediately by availing overdraft facility

1) His share of goodwill was raised at Rs 3,500

2) Revalue furniture Rs 4,000 and stock Rs 16,000

3) Create R.D.D. at 5% on Debtors.

4) Make provision for outstanding printing bill Rs 6,000. Prepare profit and loss adjustment A/c, Capital A/c and Balance Sheet of continuing partners assuming that goodwill is written off by the continuing partners.

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Solution

Profit and Loss Adjustment Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Furniture

200

Stock

3,000

Reserve for Doubtful Debts

500

Loss to be transferred to:

Provision for Outstanding Printing Bill

6,000

Shedge’s Capital

1,480

Mayekar’s Capital

1,110

Raut’s Capital

1,110

3,700

6,700

6,700

Partners’ Capital Accounts

Dr.

Cr.

Particulars

Shedge

Mayeker

Raut

Particulars

Shedge

Mayeker

Raut

Profit and Loss Adjustment A/c (Loss)

1,480

1,110

1,110

Balance b/d

15,000

10,000

10,000

Profit and Loss A/c (Loss)

2,320

1,740

1,740

Goodwill

3,500

Goodwill (written off)

2,000

1,500

Bank A/c

10,650

Balance c/d

9,200

5,650

15,000

10,000

13,500

15,000

10,000

13,500

Balance Sheet

as on April 01, 2012 after Raut’s retirement

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

8,000

Furniture

4,200

Bank Overdraft

18,650

Less: Depreciation

200

4,000

Capital A/cs:

Stock

16,000

Shedge

9,200

Debtors

10,000

Mayeker

5,650

14,850

Less: Provision for doubtful debts

500

9,500

Provision for Outstanding Printing Bill

6,000

Bills Receivable

18,000

47,500

47,500

Working Notes:

WN1: Distribution of Profit and Loss A/c (Loss)

WN2: Goodwill written off

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Similar questions

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 31^st 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

PRACTICAL PROBLEM

Shailesh, Anil and Das were partners sharing profits and losses in the ratio at 3:3:2.
Their Balance Sheet as on 31.3.2012 is as below:

Balance Sheet as on 31^st March, 2012
Liabilities	Amount Rs	Assets	Amount Rs
Capitals		Building	10,000
Shailesh	11,000	Machinery	10,700
Anil	15,000	Furniture	10,000
Das	8,000	Debtors	5,000
Bills Payable	1,900	Stock	6,600
Creditors	9,000	Cash	6,600
Reserve fund	4,000
	48,900		48,900

In 1^st April, 2012 Mr. Das retired from the firm on following terms:

1) Shailesh and Anil’s share in reserve fund should be continued in new firm.

2) Goodwill of the firm is to be valued at Rs 4,000 however only Das’s share in it is to be raised in the books and written off immediately

3) Assets to be revalued as under stock Rs 6,300 machinery Rs 10,000 furniture Rs 10,200

4) R.D.D. to be maintained at 10% on debtors

5) Rs 100 to be written off from creditors

6) The amount payable to Mr. Das is to be transferred to his loan account

Prepare:- Profit and Loss adjustment A/c, Partners capital A/c and Balance Sheet of New firm on 1/04/2012

PRACTICAL PROBLEMS

Asha and Usha were partners sharing profits and losses in the ratio of 2:1. Prepare their statement Profit or Loss for the year ended 31^st March, 2012 from the following statement of Affairs as on 31^st March, 2011.

Liabilities	Amount Rs	Assets	Amount Rs
Creditors	33,000	Cash at Bank	6,000
Bills Payable	9,000	Cash in Hand	2,000
Capitals:	62,000	Building	41,000
Asha	32,000	Machinery	21,000
Usha		Furniture	10,000
		Stock	18,000
		Debtors	25,000
		Bills Receivable	13,000
	1,36,000		1,36,000

The assets and liabilities as on 31^st March 2012 were:

Sundry creditors Rs 35,000 Bill Receivable Rs 18,000 Bills payable Rs 15,000 cash in hand Rs 3,000, Stock Rs 32,000 Cash of bank Rs 6,000 Debtors Rs 38,000. There were no changes in fixed assets.

Further Information:

1) Asha and Usha had drawn Rs 10,000 and Rs 8,000 respectively for personal use.

2) They also brought additional capital of Rs 6,000 and Rs 4,000 respectively.

3) Building to be depreciated by 5% and machinery and furniture at 10%.

4) Charge interest at 10% p.a. on opening capitals and allow interest on drawings of Asha and Usha were Rs 700 and Rs 500 respectively.

PRACTICAL PROBLEM

Sanil, Nitish, Sapna were partners in a firm sharing profits and losses in the proportion of 1/2, 1/3 and 1/6 respectively. Their Balance Sheet as on 31^st March, 2012 was as follows:

Balance Sheet as on 31-03-2012
Liabilities	Amount Rs	Assets	Amount Rs
Bills Payable	30,000	Machinery	40,000
Capitals:		Furniture	5,000
Sanil	80,000	Sundry Assets	60,000
Nitish	50,000	Stock	30,000
Sapna	30,000	Debtors	32,000
		Bank	23,000
	1,90,000		1,90,000

Sapna decided to retire on 1^st April 2012 on following terms:-

1) Goodwill of the firm will be valued at Rs 30,000/-

2) Furniture was taken over by Sanil for Rs 4,700/-

3) Make a provision for unpaid expenses Rs 1,700/-

4) Out of the amount due to Sapna Rs 7,500/- to be paid by cheque and the remaining amount to be transferred to her loan account.

Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.

Books of Jain, Gupta and Malik Balance Sheet as on March 31, 2016
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		19,800	Land and Building	26,000
Telephone Bills Outstanding		300	Bonds	14,370
Accounts Payable		8,950	Cash	5,500
Accumulated Profits		16,750	Bills Receivable	23,450
			Sundry Debtors	26,700
Capitals :			Stock	18,100
Jain	40,000		Office Furniture	18,250
Gupta	60,000		Plants and Machinery	20,230
Malik	20,000	1,20,000	Computers	13,200
		1,65,800		1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.

A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.

The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.

Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

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Profit and Loss Adjustment Account
Dr.	Cr.
Particulars		Amount Rs	Particulars		Amount Rs

Furniture		200	Stock		3,000
Reserve for Doubtful Debts		500	Loss to be transferred to:
Provision for Outstanding Printing Bill		6,000	Shedge’s Capital	1,480
			Mayekar’s Capital	1,110
			Raut’s Capital	1,110	3,700
		6,700			6,700

Partners’ Capital Accounts
Dr.	Cr.
Particulars		Shedge	Mayeker	Raut	Particulars	Shedge	Mayeker	Raut
Profit and Loss Adjustment A/c (Loss)		1,480	1,110	1,110	Balance b/d	15,000	10,000	10,000
Profit and Loss A/c (Loss)		2,320	1,740	1,740	Goodwill			3,500
Goodwill (written off)		2,000	1,500
Bank A/c				10,650
Balance c/d		9,200	5,650
		15,000	10,000	13,500		15,000	10,000	13,500

Balance Sheet as on April 01, 2012 after Raut’s retirement
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		8,000	Furniture	4,200
Bank Overdraft		18,650	Less: Depreciation	200	4,000
Capital A/cs:			Stock		16,000
Shedge	9,200		Debtors	10,000
Mayeker	5,650	14,850	Less: Provision for doubtful debts	500	9,500
Provision for Outstanding Printing Bill		6,000	Bills Receivable		18,000
		47,500			47,500