Q. The Balance Sheet of A and B as on 31st December is below. They share profit and losses in the ratio 2 : 1.
| Liabilities | Rs. | Assets | Rs. |
| A's Capital B's Capital General Reserve Creditors Employees compensation fund Provision for Doubtful debts |
30,000 30,000 24,000 16,000 12,000 10,000 |
Freehold property Furniture Stock Debtors Cash Profit & Loss A/c |
20,000 6,000 12,000 60,000 8,000 6,000 |
| 1,22,000 | 1,22,000 |
C is a student from the tribal region of Western Ghats Hills. He completed his MBA and speicalised Marketing. So A and B decided to admit C into the firm from 1. 1 .2016 subject to the following terms and conditions :
1. C will bring in propionate capital for 1/4th share and required amount of goodwill.
2. Goodwill should be valued at 2 years purchase of 3 years average profits or losses of the previous years: NP 2012 Rs. 24,000, NP Rs. 2013 Rs. 36,000, NP 2014 Rs. 60,000
3. Depreciation is to be provided on furniture at 10% and property at 15%
4. Stock is to be revalued at Rs. 10,500.
5. Mohan, a debtor whose account written off the from the books paid Rs. 1,100.
6. Provision for doubtfui debts should be maintained at 10 % on Debtors.
Prepare revaluation account and capital accounts of the partners and Balance sheet.
Comment on the old partners intention of taking C as partner in the firm.
Dear Student,
Working Notes:
Calculation of Goodwill
Calculation of C's Capital
A's Adjusted Capital = Total of Dr- Total of Cr.
= 64,000 - 4,000 = 60,000
B's Adjusted Capital = Total of Dr- Total of Cr.
= 47,000 - 2,000 = 45,000
Total Adjusted Capital (of A&B) = 1,05,000
| Revaluation Account | |||||
| Dr. | Cr. | ||||
| Particulars | Amount Rs | Particulars | Amount Rs | ||
| Furniture | 600 | Bad-Debts Recovered | 1,100 | ||
| Property | 3,000 | Provision for DD | 4,000 | ||
| Stock | 1,500 | ||||
| 5,100 | 5,100 | ||||
| Dr. | Partners’ Capital Accounts | Cr. | |||||||
| Particulars | A | B | C | Particulars | A | B | C | ||
| P&L A/c | 4,000 | 2,000 | Balance b/d | 30,000 | 30,000 | ||||
| Balance c/d | 60,000 | 45,000 | 35,000 | Cash A/c | 35,000 | ||||
| Premium for Goodwill A/c | 10,000 | 5,000 | |||||||
| WCF A/c | 8,000 | 4,000 | |||||||
| General Reserve A/c | 16,000 | 8,000 | |||||||
| 64,000 | 47,000 | 35,000 | 64,000 | 47,000 | 35,000 | ||||
| Balance Sheet | ||||
| Liabilities | Amount Rs | Assets | Amount Rs | |
| Creditors | 16,000 | Cash | 69.100 | |
| Capital A/c | Debtors | 60,000 | ||
| A | 60,000 | Stock | 10,500 | |
| B | 45,000 | Freehold Property | 17,000 | |
| C | 35,000 | 1,40,000 | Furniture | 5,400 |
| Provision | 6,000 | |||
| 1,62,000 | 1,62,000 | |||
Working Notes:
Calculation of Goodwill
Calculation of C's Capital
A's Adjusted Capital = Total of Dr- Total of Cr.
= 64,000 - 4,000 = 60,000
B's Adjusted Capital = Total of Dr- Total of Cr.
= 47,000 - 2,000 = 45,000
Total Adjusted Capital (of A&B) = 1,05,000