Mansi, Nishil and Naman are partners sharing profit and loss in the ratio of 4 : 3 : 3. Mansi retires on 31-3-2020. Balance-sheet of the firm on that day was as under:
Balance-Sheet
| Liabilities | Amt.(₹) | Assets | Amt.(₹) |
|---|---|---|---|
| Capital Accounts: Mansi 8,000; Nishil 5,000; Naman 2,000 | 15,000 | Goodwill | 1,000 |
| General reserve | 2,000 | Land-Building | 6,000 |
| Creditors | 8,000 | Furniture | 4,000 |
| Bills payable | 2,000 | Stock | 6,600 |
| Debtors | 9,000 | ||
| Cash | 400 | ||
| 27,000 | 27,000 |
Following conditions were decided at the time of retirement:
(1) Value of goodwill is ₹ 4,000.
(2) Value of fixed assets is to be appreciated by 20%.
(3) Stock is found overvalued by 10%.
(4) New profit-loss sharing ratio of Nishil and Naman is decided at 4 : 1.
(5) Amount due to Mansi is to be paid in cash and cash balance of ₹ 1,000 in the new firm is to be maintained. For this purpose Nishil and Naman brought cash in such a way as to make their capitals proportionate to their new profit sharing ratio.
Prepare necessary accounts and balance-sheet of the new firm.
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Start your 14-day free trial to unlock the full solution →Revaluation profit Rs 1,400 (4:3:3); Mansi's dues Rs 10,560 paid in cash; Nishil brings 10,680, Naman 480; new capitals 14,400 : 3,600 = 4:1; Balance-Sheet total Rs 28,000.
Old ratio 4:3:3; new ratio Nishil : Naman = 4:1. Gain (New - Old): Nishil 4/5 - 3/10 = +5/10; Naman 1/5 - 3/10 = -1/10. So Nishil gains 5/10, Naman sacrifices 1/10.
Goodwill (value Rs 4,000): Existing goodwill Rs 1,000 written off old ratio 4:3:3 (Mansi 400, Nishil 300, Naman 300). Mansi's share 4,000 x 4/10 = 1,600 credited to her; Nishil (gain 5/10) debited 2,000; Naman (sacrifice 1/10) credited 400.
Revaluation Account:
| Dr Particulars | Rs | Cr Particulars | Rs |
|---|---|---|---|
| To Stock (10% overvalued: 6,600 - 6,000) | 600 | By Fixed assets (20% of 10,000) | 2,000 |
| To Profit: Mansi 560; Nishil 420; Naman 420 | 1,400 | ||
| 2,000 | 2,000 |
(Fixed assets = Land-Building 6,000 + Furniture 4,000 = 10,000; +20% = 2,000. Stock overvalued 10%: market = 6,600/1.1 = 6,000, fall 600.)
Partners' Capital Accounts:
| Particulars | Mansi | Nishil | Naman | Particulars | Mansi | Nishil | Naman |
|---|---|---|---|---|---|---|---|
| To Goodwill (written off) | 400 | 300 | 300 | By Balance b/d | 8,000 | 5,000 | 2,000 |
| To Mansi's Capital (goodwill) | - | 2,000 | - | By General reserve (4:3:3) | 800 | 600 | 600 |
| To Cash (paid) | 10,560 | - | - | By Revaluation (4:3:3) | 560 | 420 | 420 |
| To Balance c/d | - | 14,400 | 3,600 | By Nishil & Naman (Mansi's goodwill) | 1,600 | - | 400 |
| By Cash (brought in) | - | 10,680 | 480 | ||||
| 10,960 | 16,700 | 4,080 | 10,960 | 16,700 | 4,080 | ||
| … |
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