Q. 3. Jayesh and Kamal are partners in a firm sharing profits and losses in the ratio 3 : 1. The following is their Balance Sheet as on 31st March, 2016:
Balance Sheet as on 31st March, 2016
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital accounts: | Building | 60,000 | |
| Jayesh | 60,000 | Stock | 40,000 |
| Kamal | 50,000 | Sundry debtors | 31,000 |
| Current accounts: | Cash | 4,000 | |
| Jayesh | 3,000 | Profit and loss account | 5,000 |
| Kamal | 2,000 | ||
| Sundry creditors | 21,000 | ||
| General reserve | 4,000 | ||
| 1,40,000 | 1,40,000 |
They admitted Vimal as a partner on 1st April, 2016 in the firm on the following terms:
(1) She should bring ₹ 40,000 as her capital for 1/4th share in future profits and ₹ 20,000 as her share of goodwill.
(2) Building is found overvalued by 20% and stock is found undervalued by 20% in the books. These assets are to be adjusted at their proper values.
(3) ₹ 1,000 are to be maintained as reserve for doubtful debts.
Prepare:
- Revaluation account.
- Old partners' current accounts.
- Balance Sheet of the firm after Vimal's admission.
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Start your 14-day free trial to unlock the full solution →Building (overvalued 20%) falls by ₹ 10,000 and stock (undervalued 20%) rises by ₹ 10,000; with a new R.D.D. of ₹ 1,000 the Revaluation Account shows a loss of ₹ 1,000 (Jayesh 750, Kamal 250). Goodwill ₹ 20,000 (sacrificing ratio 3 : 1) and general reserve ₹ 4,000 are credited, and the P&L debit balance ₹ 5,000 is debited, to the old partners' current accounts, leaving Jayesh ₹ 16,500 and Kamal ₹ 6,500; the new Balance Sheet ties at ₹ 1,94,000.
Working notes:
- Building is overvalued by 20%: true value = 60,000 / 1.20 = 50,000, so it is reduced by ₹ 10,000.
- Stock is undervalued by 20%: true value = 40,000 / 0.80 = 50,000, so it is raised by ₹ 10,000.
- R.D.D. of ₹ 1,000 is newly created on debtors (31,000 - 1,000 = 30,000 net).
- New ratio: Vimal 1/4; Jayesh : Kamal share the balance 3/4 in old ratio 3 : 1, so Jayesh 9/16, Kamal 3/16, Vimal 4/16. Sacrifice: Jayesh 12/16 - 9/16 = 3/16, Kamal 4/16 - 3/16 = 1/16; sacrificing ratio 3 : 1, so goodwill ₹ 20,000 is credited 15,000 : 5,000.
(a) Revaluation Account:
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To R.D.D. A/c | 1,000 | By Stock A/c | 10,000 |
| To Building A/c | 10,000 | By Loss transferred to Current A/c: Jayesh 750, Kamal 250 | 1,000 |
| 11,000 | 11,000 |
(b) Partners' Current Accounts:
| Particulars | Jayesh (₹) | Kamal (₹) | Particulars | Jayesh (₹) | Kamal (₹) |
|---|---|---|---|---|---|
| To Profit and Loss A/c (loss 5,000 in 3:1) | 3,750 | 1,250 | By Balance b/d | 3,000 | 2,000 |
| To Revaluation A/c (loss) | 750 | 250 | By General Reserve (4,000 in 3:1) | 3,000 | 1,000 |
| To Balance c/d | 16,500 | 6,500 | By Goodwill A/c (20,000 in 3:1) | 15,000 | 5,000 |
| 21,000 | 8,000 | 21,000 | 8,000 |
(c) Balance Sheet of the new firm as on 1st April, 2016:
…
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