Question

PRACTICAL PROBLEM

Vaibhav and Vilas were partners sharing profit and losses in the ratio of 2:3 respectively. Their Balance Sheet as on 31^st March, 2012 was as follows.

Balance Sheet as on 31st March, 2012
Liabilities		Amount Rs	Assets	Amount Rs
Capital A/c’s	Vaibhav	50,000	Land & Building	25,000
	Vilas	50,000	Plant	30,000
Creditors		70,000	Furniture	2,000
			Stock	50,000
			Debtors	58,000
			Cash	5,000
		1,70,000		1,70,000

They agreed to admit Vivek as a partner on 1^st April 2012 on the following terms:

1) Vivek will have 1/4^th share in future profits for which he shall bring Rs 25,000 as his capital and Rs 20,000 as his share of goodwill.

2) Land & Building are valued at Rs 30,000 and while stock is valued at Rs 55,000.

3) Plant is taken over by Vilas 10% discount.

4) Depreciate furniture by 10%.

5) Provision for bad and doubtful debts is to be maintained at 5% on debtors.

6) The capital account of all the partners to be adjusted in their new profit sharing ratio and excess amount to be transferred to their loan account.

Answer 1

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars		Amount Rs		Particulars	Amount Rs
Plant		3,000		Land & Building	5,000
Furniture		200		Stock	5,000
Provision for Bad and Doubtful Debts		2,900
Profit transferred to:
Vaibhav	1,560
Vilas	2,340	3,900
		10,000			10,000

Partners’ Capital Accounts
Dr.				Cr.
Particulars	Vaibhav	Vilas	Vivek	Particulars	Vaibhav	Vilas	Vivek
Plant	27,000			Balance b/d	50,000	50,000
Balance c/d	32,560	64,340	25,000	Profit and Loss Adjustment (Profit)	1,560	2,340
				Cash			25,000
				Premium for Goodwill	8,000	12,000
	57,560	64,340	25,000		57,560	64,340	25,000
Balance b/d	30,000	45,000	25,000	Balance b/d	32,560	64,340	25,000
Loan A/c	2,560	19,340
	32,560	64,340	25,000		32,560	64,340	25,000

Balance Sheet as on April 01, 2012 after Vivek’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Creditors		70,000	Land & Building		30,000
Capital			Furniture	2,000
Vaibhav	30,000		Less: Depreciation @10%	200	1,800
Vilas	45,000		Stock		55,000
Vivek	25,000	1,00,000	Debtors	58,000
Loan A/c:			Less: Provision for Bad and Doubtful Debts	2,900	55,100
Vaibhav	2,560		Cash		50,000
Vilas	19,340	21,900
		1,91,900			1,91,900

Working Notes:

Calculation of New Profit Sharing Ratio

WN1: Distribution of Vivek’s Share of Goodwill


WN2: Calculation of Adjustment of Capital