Question

30.        Madhuri and Arsh were partners in a firm sharing profits and losses in the ratio of 3 : 1. Their Balance Sheet as at 31st March, 2019, was as follows :

                         Liabilities                         Amount                          Assets                         Amount 

                          Capitals :                                                   Machinery         4,70,000

      Madhuri             3,00,000                                                                        Investments                                 1,10,000

      Arsh                   2,00,000                                 5,00,000 Debtors                  1,20,000                                             

       Workmen compensation fund                            60,000         Less : provision for d/d  10,000                     1,10,000

                         Creditors                        1,90,000                          Stock                        1,40,000

    Employees provident fund                                 1,10,000                                        Cash                                     30,000

                                         8,60,000                                  8,60,000

 

On 1st  April, 2019, they admitted Jyoti into partnership for 1/4th share in the profits of the firm. Jyoti brought proportionate capital and Rs 40,000 as her share of goodwill premium. The following terms were agreed up on :

 

(i)    Provision for doubtful debts was to be maintained at 10% on debtors.

(ii)  Stock was undervalued by Rs 10,000.

(iii)      An old customer whose account was written off as bad,  paid Rs 15,000. (iv) 20% of the investments were taken over by Arsh at book value.

(v)    Claim on account of workmen’s compensation amounted to Rs 70,000.

(vi)  Creditors included a sum of Rs 27,000 which was not likely to be claimed.

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Answer 1

Answer:

ANSWER

(i) REVALUATION ACCOUNT

Dr. Cr.

Particulars Amount Particulars Amount

To Employee provident fund a/c 5000 By Provision for Doubtful Debts /ac 600

To Fixed Assets a/c 10000 By Loss transferred to:

- X's Capital a/c

- Y's Capital a/c

11500

6900

To Stock a/c 3000

To Creditors a/c 1000

19000 19000

(ii) PARTNER'S CAPITAL A/C

Dr. Cr.

Particulars X Y Z Particulars X Y Z

To Revaluation a/c 11500 6900 By Balance b/d 70000 31000

To Profit and loss a/c 1500 900 By Cash a/c 20000

To Balance c/d 72625 25375 20000 By Workmen Compensation Fund a/c 3625 2175

By Premium for Goodwill a/c 12000

85625 33175 20000 85625 33175 20000

(iii) BALANCE SHEET

Liabilities Amount Assets Amount

Capital a/cs:

- X

- Y

- Z

72625

25375

20000 Cash at Bank(5000+20000+12000) 37000

Creditors 16000 Debtors

20000

Provident Fund

15000 Fixed Assets 70000

Stock (25000-3000) 22000

149000 149000

Working Note:

Calculation of New profit sharing ratio:

Old ratio= 5:3

Z is admitted for 1/8th share

Z acquired entire share from X.

X's new share= 5/8-1/8

= 4/8

New profit sharing ratio= 4:3:1