Ram and Shyam were in partnership sharing profits and Losses in the proportion of 3 : 1 respectively. Their Balance sheet as on 31st March, 2020 stood as follows:
| Balance Sheet as on 31st March, 2020 | | | | |
| --- | --- | --- | --- | --- |
| Liabilities | Amount (₹) | Ass

Question

Ram and Shyam were in partnership sharing profits and Losses in the proportion of 3 : 1 respectively. Their Balance sheet as on 31st March, 2020 stood as follows:
| Balance Sheet as on 31st March, 2020 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Liabilities | Amount (₹) | Assets | Amount (₹) |  |
| Sundry Creditors |  | 80,000 | Cash | 80,000 |
| Bills Payable |  | 42,000 | Sundry Debtors | 64,000 |
| Capital Accounts: |  |  | Land and Building | 32,000 |
| Ram | 1,20,000 | 1,60,000 | Stock | 40,000 |
| Shyam | 40,000 | Plant and Machinery | 60,000 |  |
| General Reserve |  | 16,000 | Furniture | 22,000 |
|  |  | 2,98,000 |  | 2,98,000 |
They admit Bharat into partnership on 1
st
April 2020. The term is that
He shall have to bring in cash ₹ 40,000 as his Capital for 1/5
th
share in future profit and ₹ 20,000 as his share of Goodwill.
A provision for 5% doubtful debts to be created on sundry debtors.
Stock should be appreciated by 5% and Land and Building be appreciated by 20%.
Furniture to be depreciated by 20%.
Capital Accounts of all partners be adjusted in their new profit-sharing ratio through Cash Account.
Prepare:
Profit and Loss Adjustment Account
Partners' Capital Account
Balance Sheet of the new firm.

Accepted Answer

>

> [!TLDR]
> Bharat is admitted for 1/5 share. Revaluation gives a small profit of ₹800; General Reserve ₹16,000 and Bharat's goodwill ₹20,000 go to the old partners; capitals are then equalised in the new ratio 3:1:1 through Cash. Final Balance Sheet total = ₹3,22,000.
>
> **Working Note 1 — New profit-sharing & sacrificing ratio**
> Bharat's share = 1/5, so old partners keep 4/5, shared 3:1.
> Ram = 4/5 × 3/4 = 12/20; Shyam = 4/5 × 1/4 = 4/20; Bharat = 4/20.
> New ratio = 12 : 4 : 4 = **3 : 1 : 1**.
> Sacrifice: Ram 15/20 − 12/20 = 3/20; Shyam 5/20 − 4/20 = 1/20 → sacrificing ratio **3 : 1**.
> Goodwill ₹20,000 in 3:1 → Ram ₹15,000, Shyam ₹5,000.
>
> **Working Note 2 — Revaluation items**
> RDD 5% on Debtors 64,000 = ₹3,200 (loss); Furniture 20% of 22,000 = ₹4,400 (loss); Stock 5% of 40,000 = ₹2,000 (gain); Land & Building 20% of 32,000 = ₹6,400 (gain).
>
> **Working Note 3 — Capital adjustment**
> Bharat's ₹40,000 = 1/5 share ⇒ total capital of firm = ₹2,00,000.
> Ram (3/5) = ₹1,20,000; Shyam (1/5) = ₹40,000; Bharat = ₹40,000. Surplus is paid out in cash.
>
> **Profit and Loss Adjustment (Revaluation) Account**
>
> | Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
> | --- | --- | --- | --- |
> | To R.D.D. (5% on Debtors) | 3,200 | By Stock A/c (5% appreciation) | 2,000 |
> | To Furniture A/c (20% dep.) | 4,400 | By Land & Building A/c (20% app.) | 6,400 |
> | To Profit t/f to Capital A/cs — Ram 600, Shyam 200 | 800 |  |  |
> | **Total** | **8,400** | **Total** | **8,400** |
>
> **Partners' Capital Accounts**
>
> | Dr. Particulars | Ram | Shyam | Bharat | Cr. Particulars | Ram | Shyam | Bharat |
> | --- | --- | --- | --- | --- | --- | --- | --- |
> | To Cash A/c (withdrawn) | 27,600 | 9,200 | — | By Balance b/d | 1,20,000 | 40,000 | — |
> | To Balance c/d | 1,20,000 | 40,000 | 40,000 | By Cash A/c | — | — | 40,000 |
> |  |  |  |  | By General Reserve | 12,000 | 4,000 | — |
> |  |  |  |  | By Revaluation A/c | 600 | 200 | — |
> |  |  |  |  | By Cas

Particulars	Amount (₹)	Particulars	Amount (₹)
To Furniture A/c (20% of 22,000)	4,400	By Stock A/c (10% of 40,000)	4,000
To R.D.D. A/c (5% of 64,000)	3,200	By Building A/c (5% of 32,000)	1,600
		By Loss on revaluation:
		Deepak (3/4)	1,500
		Abhishek (1/4)	500
Total	7,600	Total	7,600

Balance Sheet as on 31st March, 2020
Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors		80,000	Cash	80,000
Bills Payable		42,000	Sundry Debtors	64,000
Capital Accounts:			Land and Building	32,000
Ram	1,20,000	1,60,000	Stock	40,000
Shyam	40,000	Plant and Machinery	60,000
General Reserve		16,000	Furniture	22,000
		2,98,000		2,98,000
They admit Bharat into partnership on 1
st
April 2020. The term is that
He shall have to bring in cash ₹ 40,000 as his Capital for 1/5
th
share in future profit and ₹ 20,000 as his share of Goodwill.
A provision for 5% doubtful debts to be created on sundry debtors.
Stock should be appreciated by 5% and Land and Building be appreciated by 20%.
Furniture to be depreciated by 20%.
Capital Accounts of all partners be adjusted in their new profit-sharing ratio through Cash Account.
Prepare:
Profit and Loss Adjustment Account
Partners' Capital Account
Balance Sheet of the new firm.

Dr. Particulars	Amount (₹)	Cr. Particulars	Amount (₹)
To R.D.D. (5% on Debtors)	3,200	By Stock A/c (5% appreciation)	2,000
To Furniture A/c (20% dep.)	4,400	By Land & Building A/c (20% app.)	6,400
To Profit t/f to Capital A/cs — Ram 600, Shyam 200	800
Total	8,400	Total	8,400

Dr. Particulars	Ram	Shyam	Bharat	Cr. Particulars	Ram	Shyam	Bharat
To Cash A/c (withdrawn)	27,600	9,200	—	By Balance b/d	1,20,000	40,000	—
To Balance c/d	1,20,000	40,000	40,000	By Cash A/c	—	—	40,000
				By General Reserve	12,000	4,000	—
				By Revaluation A/c	600	200	—
				By Cash A/c (Goodwill)	15,000	5,000	—
Total	1,47,600	49,200	40,000	Total	1,47,600	49,200	40,000
…

Particulars	Deepak (₹)	Abhishek (₹)	Adinath (₹)	Particulars	Deepak (₹)	Abhishek (₹)	Adinath (₹)
To Revaluation A/c (loss)	1,500	500	—	By Balance b/d	1,20,000	40,000	—
To Cash A/c (withdrawn)	25,500	8,500	—	By Cash A/c (capital)	—	—	40,000
To Balance c/d	1,20,000	40,000	40,000	By Cash A/c (goodwill)	—	—	—
				By General Reserve A/c	12,000	4,000	—
				By Premium (Goodwill) A/c	15,000	5,000	—
Total	1,47,000	49,000	40,000	Total	1,47,000	49,000	40,000

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