.) Rajesh & Rakesh
are partners in a firm Sharing Profit and losses in the
ratio of 3:2. Their balance sheet as on
31.3.20 stood as follows
liabilities
Creditors
41500
Cash at bank
General reserve 4000
Bills recevable
3ooo
Capital Account
Debtors 18.000
Less PDD 1000 17000
Stock
20000
Rajesh
30.000
rakesh
16000
Building
25.000
Machinary
4ooo
On 1-4-20 they admitted Shyam
as partner & offered
him 1/5th Share on the future Profit on the following terms
a. He has to bring in 10.000 as his Capital & 5000
towards Goodwill
b. Goodwill treatment as per AS 26.
Co Appreciate buildings by 20%
c.maintain at 5% PDD on debtors
d.Provide for outstanding repair bills 1000
Answers
Answer:
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Following is the calculation of revaluation on Shyam's admission :-
Given, old profit sharing ratio of Rajesh and Rakesh is 3:2
On, 1/4/20 Shyam was admitted as partner for 1/5th share.
1) capital brought by Shyam = ₹10,000. journal entry for this will be :-
bank a/c dr. 10,000
to Shyam's capital a/c 10,000
( being capital brought in by Shyam for 1/5th share )
2) goodwill brought by Shyam = ₹5,000. now given in question that goodwill will be treated as per AS 26 which means we will distribute it between old partners in their old profit sharing ratio which is 3:2. journal entry for this is :-
Shyam's capital a/c dr. 5,000
to Rajesh's capital a/c 3,000
to Rakesh's capital a/c 2,000
( being goodwill distributed between Rajesh and Rakesh )
Now in revaluation account :-
1) appreciate buildings by 20% = 25,000 * 20/100 = 5,000. this ₹5,000 will come in credit side of revaluation account as asset value is increased.
2) PBD @ 5 % on debtors = 18,000 * 5/100 = 900.
old PBD - new PBD = 1000 - 900 = 100. this ₹100 will come in credit side of revaluation account as liability is decreased.
3) outstanding repair bills of 1,000 will come in debit side of revaluation account as liability is increased.
now, profit on revaluation account = credit side total - debit side total
= ( 5000 + 100 ) - 1000 = 4,100, this profit will be distributed between Rajesh and Rakesh in their old profit sharing ratio which is 3:2. entry for this will be:-
revaluation a/c dr. 4,100
to Rajesh's capital a/c 2,460
to Rakesh's capital a/c 1,640
( being profit on revaluation distributed )