P, Q and R were partners in a firm sharing profits in the ration of 2:3:5. On 31-03-2004, thier balance sheet was as follows
LIABILITIES
Creditors - 70,000
Capital Accounts:
P: 80,000
Q: 70,000
R: 60,000
Total : 2,80,000
ASSETS
Bank: 45000
Debtor: 40,000
Less 5000 = 35000
Stock: 50,000
Building 1,40,000
Profit And Loss A/c: 10,000
Total 2,80,000
On the above date, R retired from the firm due to illness on the following terms:
- Building to be deprecidated by 40,000
- Provision for doubtful debts was to be maintained at 20% on debtors
- Salary outstanding Rs 5,000 was to be recorded and creditors of Rs 4,000 will not be claimed.
- Goodwill of the firm was valued at Rs 72,000 and the same was to be treated without opeining a goodwill account.
- R was to be paid Rs 15,000 in cash, through Bank and the balance was to be transferred to his Loan account.
Prepare Revaluation Account, Partners Capital Accounts and the Balance Sheet of P and Q after R's Retirement.
Revaluation Account | ||||
Dr. | Cr. | |||
Particulars | Amount Rs | Particulars | Amount Rs | |
Building | 40,000 | Creditors | 4,000 | |
Provision for Doubtful Debts (8,000 – 5,000) | 3,000 | Loss on Revaluation transferred to: |
| |
Salary Outstanding | 5,000 | P | 8,800 |
|
| Q | 13,200 |
| |
|
| R | 22,000 | 44,000 |
| 48,000 |
| 48,000 | |
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|
| |
Partners’ Capital Account | |||||||
Dr. | Cr. | ||||||
Particulars | P | Q | R | Particulars | P | Q | R |
Profit and Loss A/c | 5,000 | 3,000 | 2,000 | Balance b/d | 80,000 | 70,000 | 60,000 |
Revaluation A/c (Loss) | 8,800 | 13,200 | 22,000 | P’s Capital A/c |
|
| 14,400 |
R’s Capital A/c | 14,400 | 21,600 |
| Q’s Capital A/c |
|
| 21,600 |
Bank A/c |
|
| 15,000 |
|
|
| |
R’s Loan A/c |
|
| 57,000 |
|
|
| |
Balance c/d | 51,800 | 32,200 |
|
|
|
|
|
| 80,000 | 70,000 | 96,000 |
| 80,000 | 70,000 | 96,000 |
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Balance Sheet as at March 31, 2004 | |||||
Liabilities | Amount Rs | Assets | Amount Rs | ||
Salary Outstanding | 5,000 | Bank (45,000 – 15,000) | 30,000 | ||
Creditors | 66,000 | Debtors | 40,000 |
| |
R’s Loan A/c | 57,000 | Less: Provision for Doubtful Debt | (8,000) | 32,000 | |
Capital A/c : |
| Stock | 50,000 | ||
P | 51,800 |
| Building (1,40,000 – 40,000) | 1,00,000 | |
Q | 32,200 | 84,000 |
|
| |
| 2,12,000 |
| 2,12,000 | ||
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|
| ||
Working Notes
WN1 Adjustment of Goodwill
Total Goodwill of the Firm = 72,000
It is to be adjusted by the Gaining partners i.e. by P and Q in the gaining ratio 2:3