Question

The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st March, 2016 is given below:

Liabilities		₹	Assets		₹
Madhu's Capital		5,20,000	Land and Building		3,00,000
Vidhi's Capital		3,00,000	Machinery		2,80,000
General Reserve		30,000	Stock		80,000
Bills Payable		1,50,000	Debtors	3,00,000
			Less: Provision	10,000	2,90,000
			Bank		50,000
		10,00,000			10,00​,000

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Madhu and Vidhi decided to admit Gayatri as a new partner from 1st April, 2016 and their new profit-sharing ratio will be 2 : 3 : 5. Gayatri brought ₹ 4,00,000 as her capital and her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at ₹ 3,00,000.
(b) Land and Building was found undervalued by ₹ 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors.
(d) There was a claim of ₹ 6,000 on account of workmen compensation.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer 1

Revaluation Account
Dr.							Cr.
Particulars				Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts				5,000	Land &Building	26,000
Claim against Workmen Compensation				6,000
Revaluation Profit
	Madhu’s Capital		6,000
	Vidhi’s Capital		9,000	15,000
				26,000		26,000

Partners’ Capital Account
Dr.								Cr.
Particulars	Madhu	Vidhi	Gayatri	Particulars	Madhu	Vidhi	Gayatri
Balance c/d	5,98,000	4,17,000	4,00,000	Balance b/d	5,20,000	3,00,000
				Bank			4,00,000
				General Reserve	12,000	18,000
				Premium for Goodwill	60,000	90,000
				Revaluation	6,000	9,000
	5,98,000	4,17,000	4,00,000		5,98,000	4,17,000	4,00,000

Balance Sheet as on March 31, 2016
Liabilities		Amount (₹)	Assets		Amount (₹)
Bills Payable		1,50,000	Bank (50,000 + 4,00,000 + 1,50,000)		6,00,000
Claim for Workmen Compensation		6,000	Sundry Debtors	3,00,000
Capital:			Less: Provision for Doubtful Debt	15,000	2,85,000
Madhu	5,98,000		Stock		80,000
Vidhi	4,17,000		Machinery		2,80,000
Gayatri	4,00,000	14,15,000	Land &Building		3,26,000
		15,71,000			15,71,000

Working Notes:

WN1: Calculation of Gayatri’s Share of Goodwill

$\mathrm{Gayatri}\text{'}s\mathrm{share}=3,00,000\times \frac{5}{10}=1,50,000\left(\mathrm{to}\mathrm{be}\mathrm{shared}\mathrm{in}2:3\right)$

WN1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio – New Ratio

$\begin{array}{l}\mathrm{Madhu}=\frac{2}{5}-\frac{2}{10}=\frac{2}{10}\\ \mathrm{Vidhi}=\frac{3}{5}-\frac{3}{10}=-\frac{3}{10}\end{array}$