The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of $2 : 3$ as at $31^{s t}$ March, 2016 is given below:
Liabilities (Rs.) Assets (Rs.)
Madhu's Capital
Vidhi's Capital
General Reserve
Bills Payable 5,20,000
3,00,000
30,000
1,50,000 Land and Building
Machinery
Stock
Debtors 3,00,000
Less: Provision (10,000)
Bank 3,00,000
2,80,000
80,000
2,90,000
50,000
10,00,000 10,00,000
Madhu and Vidhi decided to admit Gayatri as a new partner from $1^{s t}$ April, 2016 and their new profit-sharing ratio will be $2 : 3 : 5$ . Gayatri brought $R s . 4, 00, 000$ as her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at $R s . 3, 00, 000$ .
(b) Land and Building was found undervalued by $R s . 26, 000$ .
(c) Provision for doubtful debts was to be made equal to $5 %$ of the debtors.
(d) There was a claim of $R s . 6, 000$ on account of workmen compensation.
Prepare Revaluation Account, Partners Capital Account and the Balance Sheet of the reconstituted firm.

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Solution

(i) REVALUATION A/C
Dr. Cr.
Particulars Amount Particulars Amount
To Provision for
Doubtful Debts a/c 5000 By Land and Building a/c 26000
To Workmen Compensation a/c 6000
To Profit transferred to:
- Madhu's Capital a/c
- Vidhi's Capital a/c
6000
9000
26000 26000
(ii) PARTNER'S CAPITAL A/C
Dr. Cr.
Particulars Madhu Vidhi Gayatri Particulars Madhu Vidhi Gayatri
By Balance b/d 520000 300000
By General Reserve a/c 12000 18000
By Cash a/c 400000
By Premium for
Goodwill a/c 60000 90000
To Balance b/d 598000 417000 400000 By Revaluation a/c 6000 9000
598000 417000 400000 598000 417000 400000

(iii) BALANCE SHEET
Liabilities Amount Assets Amount
Capital a/cs:
- Madhu
- Vidhi
- Gayatri
598000
417000
400000 Land and Building 326000
Bills Payable 150000 Machinery 280000
Workmen Compensation
Reserve 6000 Stock 80000
Debtors 300000
(-) Provision (15000)
for doubtful debts 285000
Bank (50000+400000+150000) 600000
1571000 1571000

Working Note:
Calculation of sacrificing ratio:
Madhu's sacrifice= 2/5-2/10
= 2/10
Vidhi's sacrifice= 3/5-3/10
= 3/10
Sacrificing ratio= 2:3

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Similar questions

Q. 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

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.

Q. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:


Liabilities		Amount (₹)	Assets	Amount (₹)
Creditors		50,000	Land	50,000
Bills Payable		20,000	Building	50,000
General Reserve		30,000	Plant	1,00,000
Capital A/cs:			Stock	40,000
A	1,00,000		Debtors	30,000
B	50,000		Bank	5,000
C	25,000	1,75,000
		2,75,000		2,75,000

From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ₹ 1,50,000.
(ii) Land will be revalued at ₹ 80,000 and building be depreciated by 6%.
(iii) Creditors of ₹ 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

Q. A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new partner from 1st April, 2019. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as at 31st March, 2019 is given below:


Liabilities		₹	Assets		₹
A's Capital	1,76,000		Goodwill		34,000
B's Capital	2,54,000	4,30,000	Land and Building		60,000
Workmen Compensation Reserve		20,000	Investment (Market value ₹ 45,000)		50,000
Investments Fluctuation Reserve		10,000	Debtors	1,00,000
Employee's Provident Fund		34,000	Less: Provision for Doubtful Debts	10,000	90,000
C's Loan		3,00,000	Stock		3,00,000
			Bank Balance		2,50,000
			Advertising Suspense A/c		10,000



		7,94,000			7,94,000

Terms of C's admission are as follows:
(i) C contributes proportionate capital and 60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years' purchase of super profit of last three completed years. Profits for the years ended 31st March were:
2017 − ₹ 4,80,000; 2018 − ₹ 9,30,000; 2019 − ₹ 13,80,000.
The normal profit is ₹ 5,30,000 with same amount of capital invested in similar industry.
(iii) Land and Building was found undervalued by ₹ 1,00,000.
(iv) Stock was found overvalued by ₹ 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is ₹ 11,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet.

Q. Following is the Balance Sheet of A and B , who shared Profits and Losses in the ratio of 2 : 1 , as at 1st April, 2018:

BALANCE SHEET OF A AND B as on 1st April, 2018
Liabilities		₹	Assets	₹
Capital A/cs:			Land ad Buildings	2,90,000
A	3,00,000		Furniture	80,000
B	2,00,000	5,00,000	Stock	2,40,000
Reserve		1,50,000	Debtors	1,50,000
Creditors		2,00,000	Bank	60,000
			Cash	30,000

		8,50,000		8,50,000

On the above date , the partners changed their profit-sharing ratio to 3 : 2 . For this purpose, the goodwill of the firm was valued at ₹ 3,00,000 . The partners also agreed for the following:
(a) The value of Land and Building will be ₹ 5,00,000;
(b) Reserve is to be maintained at ₹ 3,00,000.
(c) The total capital of the partners in the new firm will be ₹ 6,00,000 , which will be shared by the partners in their new profit-sharing ratio .
Prepare Revaluation Account , Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Q. Following is the Balance Sheet of

A

and

B

, who shared Profits and Losses in the ratio

2 : 1

as at

1 s t

April,

2018

Liabilities	Rs.	Assets	Rs.
Capital A/cs $A$ 3,00,000 $B$ 2,00,000	5,00,000	Land and Buildings	2,90,000
Reserve	1,50,000	Furniture	80,000
Creditors	2,00,000	Stock	2,40,000
		Debtors	1,50,000
		Bank	60,000
		Cash	30,000
	8,50,000		8,50,000

On the above date, the partners changed their profit-sharing ratio to

3 : 2

. For this purpose, the goodwill of the firm was valued at Rs.

3, 00, 000

. The partners also agreed for the following :
(a) The value of Land and Building will be Rs.

5, 00, 000

;
(b) Reserve is to be maintained at Rs.

3, 00, 000

6, 00, 000

, which will be shared by the partners in their new profit sharing ratio.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

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

Particulars	Amount	Particulars	Amount
To Provision for Doubtful Debts a/c	5000	By Land and Building a/c	26000
To Workmen Compensation a/c	6000
To Profit transferred to: - Madhu's Capital a/c - Vidhi's Capital a/c	6000 9000
	26000		26000

Particulars	Madhu	Vidhi	Gayatri	Particulars	Madhu	Vidhi	Gayatri
				By Balance b/d	520000	300000
				By General Reserve a/c	12000	18000
				By Cash a/c			400000
				By Premium for Goodwill a/c	60000	90000
To Balance b/d	598000	417000	400000	By Revaluation a/c	6000	9000
	598000	417000	400000		598000	417000	400000