Pand Q are partners in a firm sharing profits and losses in the ratio of 5:3. On 31 March
2019, their Balance Sheet was as under:
Liabilites
Bills Payable
Creditors
General Reserve
Capital A/cs:
P
2,00,000
Q
1,50,000
5,000
39,000
16,000
Assets
Cash
Stock
Debtors 49,000
Less . PDD 1,000
15,000
45,000
48,000
3,50,000
Plant and Machinery
Land and Building
1,02,000
2,00,000
4,10,000
4,10,000
On 15 April, 2019, R is admitted as a partner in the firm on the following terms:
i) R brings 1,00,000 as capital for 1/4th share in the profits. The new profit-sharing ratio
will be 2.1.1
11) Goodwill of the firm on R's admission was valued at 1,20,000. R could not bring his share
of goodwill in cash. Both P and Q agreed to grant time of 2 years to R to either adjust against
share of profit or bring the amount in the firm.
ii) Stock was valued at 40,500 and Provision for Doubtful Debts was raised by 1,500.
iv) Machinery was depreciated by 2,000 and Land and Building was appreciated by 2%.
v) Creditors include 1,000 which were not likely to be paid.
vi) Firm had to pay 15,000 for settling a dispute with an ex-employee.
vii) An old computer previously written off was sold for '15,000.
Prepare Revaluation Account, Partner's Capital Accounts, Cash Account and the Balance
Sheet of the firm on R's Admission.
Answers
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Answer:
Calculation of New profit sharing Ratio
Let total share be 1.
Share of incoming partner= 1-1/8=7/8
P's New Share= 7/8*5/8=35/64
Q's New Share =7/8*3/8=21/64
R's share = 8/64
Share of partners in profit :
P's share=4,00,000*35/64=2,18,750
Q's share=4,00,000*21/64=1,31,250
R's share=4,00,000*8/64=50,000
R's share of deficiency i.e 25,000 is to be borne by P and Q in the ratio of 3:2.
PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars Amount
To profit transferred to :
P's capital A/c 2,18,750
Less:R's share (15,000)
Q's capital A/c 1,31,250
Less:R's share (10,000)
R's capital A/c 50,000
Add:share from P&Q 25,000 4,00,000 By net profit 4,00,000
Total 4,00,000 Total 4,00,000
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