Question

1. (Accumulated Profits, Balance Sheet) A, B and C carry on business in partnership,
C wishes to retire from the firm. A and B agree to carry on the business taking over the
assets at a valuation as agreed by the three partners and discharging the liabilities of
the firm. The following is the position of the firm as on 30th September 2016, the date
of dissolution
Liabilities
₹
Assets
Sundry creditors
18,900 Plant
4,000
Loans
7,000 Furniture
750
Capitals
Stock
10,000
А
3,000 Debtors
18,000
B
4,000 Bills receivable
4,000
с C
1,000 Cash in hand
50
Profit and loss A/C
3,000 Cash at bank
100
36.900
36,900
The agreed values of the assets are as follows:
Plant 3,050 ; Furniture 500 ; Stock less 20% : Debtors (less discounts and bad debts)
* 16.500. Provision for doubtful bills 1,000.
Prepare the capital accounts ,revaluation a/c and balance sheet.
​

Answer 1

Answer:

(i) Calculation of new profit sharing ratio:

A's old share= 3/5

B's old share= 2/5

C is admitted for 1/8th share.

Remaining share= 1-[1/8]

= 7/8

A's new share= 3/5 * 7/8 = 21/40

B's new share= 2/5 * 7/8 = 14/40

C's share= 1/8 * 5/5= 5/40

New profit sharing ratio= 21:14:5

(ii) JOURNAL

1. Cash a/c... Dr. 20880

To C's Capital a/c 15000

To Premium for Goodwill a/c 5880

(Being capital and premium for goodwill brought in by C)

2. Premium for Goodwill a/c... Dr. 5880

To A's Capital a/c 3528

To B's Capital a/c 2352

(Being premium for goodwill distributed among the partners in the ratio of 3:2)

PARTNER'S CAPITAL A/C

Dr. Cr.

Particulars A B C Particulars A B C

By Balance b/d 51450 36750 Nil

By Cash a/c Nil Nil 15000

To Balance c/d 54978 39102 15000 By Premium for Goodwill a/c 3528 2352 Nil

Total 54978 39102 15000 Total 54978 39102 15000

(iii) BALANCE SHEET

( after admission of C)

Liabilities Amount

(in Rs.) Assets Amount

(in Rs.)

Cash (1500+20880) 22380

Capital

- A

- B

- C

54978

39102

15000 Debtors 19500

Creditors 11800 Stock 28000

Furniture 2500

Machinery 48500

Total 120880 Total 120880

Working Note:

1. Calculation of goodwill:

Average profit= [21000+24000+25560]/3

= 23520

Goodwill= 23520 * 2

= 47040

2. C's share of Goodwill= 47040 * 1/8

= 5880

Distribution among partners:

A's share= 5880 * 3/5= 3528

B's share= 5880 * 2/5= 2352

hope it will help you and you can understand it