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 |
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(–) Old Provision | (10,000) | 5,000 |
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Profit on Revaluation transferred to: |
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A | 4,000 |
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B | 6,000 |
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C | 2,000 | 12,000 |
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| 25,000 |
| 25,000 |
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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 | - | - |
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| 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 |
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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 |
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Reserve | 8,000 | (–) Provisions | (15,000) | 2,85,000 | |
Creditors | 3,60,000 | Bank | 1,60,667 | ||
C’s Loan | 1,35,334 |
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| 8,42,667 |
| 8,42,667 | ||
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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 |
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| To C’s capital A/c |
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| 31,000 |
| To B’s capital A/c |
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| 18,600 |
Bank Account | ||||
Dr. | Cr. | |||
Particulars | Amount | Particulars | Amount | |
Balance b/d | 2,96,000 | C’s Capital A/c | 1,35,333 | |
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| Balance c/d | 1,60,667 | |
| 2,96,000 |
| 2,96,000 | |
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