Question

Shyamlal and Sanjay were in partnership business sharing profits and losses in the ratio of 2 : 3 respectively. Their Balance Sheet as at 31st March, 2019 was:

Liabilities		₹	Assets	₹
Sundry Creditors		12,435	Cash in Hand	710
Capital A/cs:			Cash at Bank	11,925
Shyamlal	34,050		Sundry Debtors	5,500
Sanjay	34,050	68,100	Stock	18,000
			Furniture	4,400
			Building	40,000
		80,535		80,535

On 1st April, 2019, they admitted Shanker into partnership for 1/3rd share in future profits on the following terms:
(a) Shanker is to bring in ₹ 30,000 as his capital and ₹ 20,000 as goodwill which is to remain in the business.
(b) Stock and Furniture are to be reduced in value by 10%.
(c) Building is to be appreciated by ₹ 15,000.
(d) Provision of 5% is to be made on Sundry Debtors for Doubtful Debts.
(e) Unaccounted Accrued Income of ₹ 2,400 to be provided for. A debtor, whose dues of ₹ 4,800 were written off as bad debts, paid 50% in full settlement.
(f) Outstanding Rent amounted to ₹ 4,800.
Show Profit and Loss Adjustment Account (Revaluation Account), Capital Accounts of Partners and opening Balance Sheet of the new firm.

Answer 1

Profit and Loss Adjustment Account
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Stock		1,800	Building	15,000
Furniture		440	Accrued Income	2,400
Provision for Doubtful Debts		275	Bad Debts Recovered	2,400
Outstanding Rent		4,800
Profit transferred to
Shyamlal Capital	4,994
Sanjay Capital	7,491	12,485
		19,800		19,800

Partners’ Capital Account
Dr.							Cr.
Particulars	Shyamlal	Sanjay	Shanker	Particulars	Shyamlal	Sanjay	Shanker
				Balance b/d	34,050	34,050
				Cash A/c			30,000
				Premiumf or Goodwill	8,000	12,000
Balance c/d	47,044	53,541	30,000	Revaluation	4,994	7,491
	47,044	53,541	30,000		47,044	53,541	30,000

Balance Sheet as on April 01, 2019 after Shanker’s admission
Liabilities		Amount (₹)	Assets		Amount (₹)
Sundry Creditors		12,435	Cash in Hand (710 + 50,000 + 2,400)		53,110
Capital A/cs:			Cash at Bank		11,925
Shyamlal	47,044		Sundry Debtors	5,500
Sanjay	53,541		Less: Provision for D. Debts	275	5,225
Shanker	30,000	1,30,585	Stock (18,000 – 1,800)		16,200
Outstanding Rent		4,800	Building (40,000 + 15,000)		55,000
			Furniture (4,400 – 440)		3,960
			Accrued Income		2,400
		1,47,820			1,47,820

Working Notes:


WN1
Distribution of Premium for Goodwill (in sacrificing ratio)

$$\begin{gathered} \mathrm{Shyamlal}\mathrm{will}\mathrm{get}=20,000\times \frac{2}{5}=\mathrm{Rs}8,000 \\ \mathrm{Sanjay}\mathrm{will}\mathrm{get}=20,000\times \frac{3}{5}=\mathrm{Rs}12,000 \end{gathered}$$

WN2
Distribution of Profit from Profit and Loss Adjustment Account (in old ratio)