The Balance – Sheet of A, B and C who are sharing profits in the ratio of 2:3:1 as at 31st March,2005 is given below:

Balance- Sheet

LIABILITIES AMOUNT ASSETS AMOUNT

Capitals: Goodwill 12,000

A 1,00,000 Land and Building 2,50,000

B 2,00,000 Investments 50,000

C 3,00,000 6,00,000 Stock 80,000

Workmen comp. Res. 20,000 Debtors 3,00,000

Inv. Fluc. Reserve 10,000 Bank 2,96,000

Prov. for D/D 10,000 Adv. Susp. a/c 12,000

Creditors 3,60,000

10,00,000 10,00,000

C retires from the firm on 1st april,2005 and A and B decided to share future profit and losses in the ratio of 3:2 . 50% is to be paid immediately and the balance in two equal annual instalments together with interest @ 10%p.a.

A] G/w is to be valued at 2 years’ purchase of avg. Profits of last three years. The profits were 48,000, 93,000 and 1,38,000 respectively.

B] Land and Building was found overvalued by RS. 25,000 and stock was found undervalued by Rs. 8,000

C] Provision for D/D is to be made equal to 5% of the debtors

D] Claim on account of workmen compensation reserve is Rs. 8,000

Prepare Revaluatio A/C , Partner’s Capital A/C and Balance- Sheet.

Revaluation Account

Dr.

Cr.

Particulars

Amount

Particulars

Amount

Stock A/c

8,000

Land and Building A/c

25,000

Provision for Doubtful Debts A/c

15,000

 

 

 

(–) Old Provision

(10,000)

5,000

 

 

Profit on Revaluation transferred to:

 

 

 

A

4,000

 

 

 

B

6,000

 

 

 

C

2,000

12,000

 

 

 

 

25,000

 

25,000

 

 

 

 

 

 

 

Partner’s Capital Accounts

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

Goodwill

4,000

6,000

2,000

Balance b/d

1,00,000

2,00,000

3,00,000

Advertisement Suspense A/c

4,000

6,000

2,000

Workmen Compensation Reserve

4,000

6,000

2,000

Bank A/c (50%)

-

-

1,35,333

Investment Fluctuation Reserve

3,333

5,000

1,667

C’s Loan A/c (50%)

A’s Capital A/c

-

 

-

-

 

18,600

1,35,334

 

31,000

Revaluation A/c (Profit)

4,000

6,000

2,000

Balance c/d

1,52,933

1,86,400

-

B’s capital A/c

18,600

-

-

 

 

 

 

C’s capital A/c

31,000

-

-

 

1,60,933

2,17,000

3,05,667

 

1,60,933

2,17,000

3,05,667

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2006

Liabilities

Amount

Assets

Amount

Capital A/cs:

 

Land and Building

(2,50,000 + 25,000)

 

2,75,000

A

1,52,933

 

Investments

50,000

B

1,86,400

3,39,333

Stock

(80,000 – 8,000)

 

72,000

Workmen Compensation

 

Debtors

3,00,000

 

Reserve

8,000

(–) Provisions

(15,000)

2,85,000

Creditors

3,60,000

Bank

1,60,667

C’s Loan

1,35,334

 

 

 

8,42,667

 

8,42,667

 

 

 

 

 

 

Working Notes :

WN 1

Old Ratio (A, B and C) = 2 : 3 : 1

New Ratio (A and B) = 3 : 2

Gaining Ratio = New Ratio – Old Ratio

Here, B is sacrificing th share.

 

WN 2 

Calculation of goodwill of the firm

Goodwill = Average profits × No. of Years Purchase

  = Rs 93,000 × 2 = Rs 1,86,000

 

Journal

Date

Particulars

Amount

Amount

 

A’s capital A/c

Dr.

49,600

 

 

 To C’s capital A/c

 

 

31,000

 

 To B’s capital A/c

 

 

18,600

 

Bank Account

Dr.

Cr.

Particulars

Amount

Particulars

Amount

Balance b/d

2,96,000

C’s Capital A/c

1,35,333

 

 

Balance c/d

1,60,667

 

2,96,000

 

2,96,000

 

 

 

 

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