Question

Shikhar and Rohit were partners in a firm sharing profits in the ratio of 7 : 3. On 1st April, 2013, they admitted Kavi as a new partner for 1/4th share in profits of the firm. Kavi brought ₹ 4,30,000 as his capital and ₹ 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:

BALANCE SHEET OF SHIKHAR AND ROHIT as at 1st April, 2013
Liabilities		₹	Assets		₹
Capital A/cs:			Land and Building		3,50,000
Shikhar	8,00,000		Machinery		4,50,000
Rohit	3,50,000	11,50,000	Debtors	2,20,000
General Reserve		1,00,000	Less: Provision	20,000	2,00,000
Workmen's Compensation Fund		1,00,000	Stock		3,50,000
Creditors		1,50,000	Cash		1,50,000
		15,00,000			15,00,000

It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of Machinery will be depreciated by 10%.
(c) the liabilities of Workmen's Compensation Fund were determined at ₹ 50,000.
(d) capitals of Shikhar and Rohit will be adjusted on the basis of Kavi's capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Answer 1

Revaluation Account
Dr.						Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Machinery		45,000	Land and Building	70,000
Profit transferred to:
Shikhar’s Capital A/c	17,500
Rohit’s Capital A/c	7,500	25,000
		70,000		70,000

Partners’ Capital Accounts
Dr.						Cr.
Particulars		Shikhar	Rohit	Kavi	Particulars		Shikhar	Rohit	Kavi
					Balance b/d		8,00,000	3,50,000
Balance c/d		9,40,000	4,10,000	4,30,000	General Reserve		70,000	30,000
					Workmen’s Compensation Fund		35,000	15,000
					Cash A/c				4,30,000
					Premium for Goodwill		17,500	7,500
					Revaluation A/c (Profit)		17,500	7,500
		9,40,000	4,10,000	4,30,000			9,40,000	4,10,000	4,30,000
Cash A/c		37,000	23,000		Balance b/d		9,40,000	4,10,000	4,30,000
Balance c/d		9,03,000	3,87,000	4,30,000
		9,40,000	4,10,000	4,30,000			9,40,000	4,10,000	4,30,000

Balance Sheet as on April 01, 2013 after Kavi’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Liability for Workmen’s Compensation		50,000	Land and Building		4,20,000
Creditors		1,50,000	Machinery	4,50,000
Capitals:			Less: Depreciation @10%	45,000	4,05,000
Shikhar	9,03,000		Debtors	2,20,000
Rohit	3,87,000		Less: Provision	20,000	2,00,000
Kavi	4,30,000	17,20,000	Stock		3,50,000
			Cash		5,45,000
		19,20,000			19,20,000

Calculation of Profit Sharing Ratio:

WN1: Distribution of Goodwill brought in by Kavi:

WN2: Distribution of Workmen’s Compensation Fund

WN3: Distribution of General Reserve:

WN4: Adjustment of Capital: