Question

Shikhar and Rohit were partners in a firm sharing profits int he ratio of 7 : 3. On 1st April, 2013, they admitted Kavi as a new partner for 1/4th share in profits of the firm. Kavi brought ₹ 4,30,000 as his capital and ₹ 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:
It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of Machinery will be depreciated by 10%.
(c) the liabilities of Workmen’s Compensation Fund were determined at ₹ 50,000.
(d) capitals of Shikhar and Rohit will be adjusted on the basis of Kavi’s capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of the new firm.

Answer 1

Revaluation Account, Partners Capital Account is calculated below.

Explanation:

Calculation of Profit Sharing Ratio

Old Ratio of Shikhar and Rohit is given as 3:2

Kavi’s share after his admission as new partner = 1/4th of profit

Total share of the firm = 1

Remaining share = 1 – ¼= ¾

New Ratio will be calculated as:

Shikhar’s new ratio

$=\frac{7}{10} \times \frac{3}{4}=\frac{21}{40}$

Rohit’s new share

$=\frac{3}{10} \times \frac{3}{4}=\frac{9}{40}$

New ratio between Shikhar, Rohit and Kavi will be

$=\frac{21}{40}: \frac{9}{40}: \frac{1}{4}=\frac{21: 9: 10}{40}=21: 9: 1$

Sacrificing ratio = old ratio – new ratio  

Shikar’s sacrifice

$=\frac{7}{10}-\frac{21}{40}=\frac{28-21}{40}=\frac{7}{40}$

Rohit’s sacrifice

$=\frac{3}{10}-\frac{9}{40}=\frac{12-9}{40}=\frac{3}{40}$

Sacrificing ratio = 7:3

Calculation of Goodwill amount:

Goodwill amount will be calculated as:

Shikhar’s

$=25,000 \times \frac{7}{10}=17,500$

Rohit’s good will

$=25,000 \times \frac{3}{10}=7,500$

Calculation of Workmen’s compensation fund:

Shikhar’s share

$=50,000 \times \frac{7}{10}=35,000$

Rohit’s share

$=50,000 \times \frac{3}{10}=15,000$

General Reserve Distribution:

Shikhar

$=1,00,000 \times \frac{7}{10}=70,000$

Rohit

$=1,00,000 \times \frac{3}{10}=30,000$

Adjustment of Capital:

Capital Kavi brought = Rs. 4,30,000

Total Capital of the Firm = Capital brought in by Kavi $\times$ Reciprocal of her share

Total capital of firm

$=4,30,000 \times \frac{4}{1}=17,20,000$

Shikhar’s share of new capital

$=17,20,000 \times \frac{21}{40}=9,03,000$

Rohit’s share of new capital

$=17,20,000 \times \frac{9}{40}=3,87,000$