Question

Suresh, Ramesh, Mahesh and Ganesh were partners in a firm sharing profits in the ratio of 2 : 2 : 3 : 3. On 1st April, 2016, their Balance Sheet was as follows:

BALANCE SHEET OF SURESH, RAMESH, MAHESH AND Ganesh as on 1st April, 2016
Liabilities		Amount (₹)	Assets	Amount (₹)
Capital A/cs:			Fixed Assets	6,00,000
Suresh	1,00,000		Current Assets	3,45,000
Ramesh	1,50,000
Mahesh	2,00,000
Ganesh	2,50,000	7,00,000
Sundry Creditors		1,70,000
Workmen Compensation Reserve		75,000
		9,45,000		9,45,000

From the above date, the partners decided to share the future profits equally. For this purpose the goodwill of the firm was valued at ₹ 90,000. It was also agreed that:
(a) Claim against Workmen Compensation Reserve will be estimated at ₹ 1,00,000 and fixed assets will be depreciated by 10%.
(b) The Capitals of the partners will be adjusted according to the new profit-sharing ratio. For this, necessary cash will be brought or paid by the partners as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer 1

Revaluation Account
Dr.		Cr.
Particulars	Amount (₹)	Particulars		Amount (₹)
Depreciation on Fixed Assets A/c	60,000	Revaluation Loss
Provision for Claim against WCF	25,000	Suresh’s Capital A/c	17,000
		Ramesh’s Capital A/c	17,000
		Mahesh’s Capital A/c	25,500
		Ganesh’s Capital A/c	25,500	85,000
	85,000			85,000

Partners’ Capital Account
Dr.				Cr.
Particulars	Suresh	Ramesh	Mahesh	Ganesh	Particulars	Suresh	Ramesh	Mahesh	Ganesh
Revaluation A/c	17,000	17,000	25,500	25,500	Balance b/d	1,00,000	1,50,000	2,00,000	2,50,000
Mahesh's Capital A/c	2,250	2,250			Suresh’s Capital A/c			2,250	2,250
Ganesh's Capital A/c	2,250	2,250			Ramesh’s Capital A/c			2,250	2,250
Cash A/c			25,250	75,250	Cash A/c	75,250	25,250
Balance c/d	1,53,750	1,53,750	1,53,750	1,53,750
	1,75,250	1,75,250	2,04,500	2,54,500		1,75,250	1,75,250	2,04,500	2,54,500

Balance Sheet
Liabilities		Amount (₹)	Assets	Amount (₹)
Capital A/c			Fixed Assets (Less depreciation)	5,40,000
Suresh	1,53,750		Current Assets	3,45,000
Ramesh	1,53,750
Mahesh	1,53,750
Ganesh	1,53,750	6,15,000
Claim against WCF		1,00,000
Sundry Creditors		1,70,000
		8,85,000		8,85,000

Working Notes
WN1:
Calculation of Gaining/Sacrificing Ratio

Adjustment for Goodwill

Suresh’s Capital A/c	Dr.		4,500
Ramesh’s Capital A/c	Dr.		4,500
To Mahesh’s Capital A/c				4,500
To Ganesh’s Capital A/c				4,500
(Gaining partners compensate sacrificing partners)

WN2: Calculation of Adjusted Capital
Suresh = 1,00,000 – 21,500 = Rs 78,500
Ramesh = 1,50,000 – 21,500 = Rs 1,28,500
Mahesh = 2,04,500 – 25,500 = Rs 1,79,000
Ganesh = 2,54,500 – 25,500 = Rs 2,29,000
Total Combined Capital = 6,15,000

WN3: Calculation of New Capital
$$\begin{gathered} \mathrm{Suresh}=6,15,000\times \frac{1}{4}=1,53,750 \\ \mathrm{Ramesh}=6,15,000\times \frac{1}{4}=1,53,750 \\ \mathrm{Mahesh}=6,15,000\times \frac{1}{4}=1,53,750 \\ \mathrm{Ganesh}=6,15,000\times \frac{1}{4}=1,53,750 \end{gathered}$$