Given below is the Balance sheet of Amar, Akbar and Anthony who were sharing profits and losses equally:
| Balance Sheet as on 31st March, 2020 | | | | |
| --- | --- | --- | --- | --- |
| Liabilities | Amount ₹ | Assets | | Amount ₹ |
| Creditors | 31,000 | Cash | | 39,000

Question

Given below is the Balance sheet of Amar, Akbar and Anthony who were sharing profits and losses equally:
| Balance Sheet as on 31st March, 2020 |  |  |  |  |
| --- | --- | --- | --- | --- |
| Liabilities | Amount ₹ | Assets |  | Amount ₹ |
| Creditors | 31,000 | Cash |  | 39,000 |
| General Reserve | 24,000 | Debtors | 32,000 |  |
| Capital Accounts: |  | Less: R.D.D | 4,000 | 28,000 |
| Amar | 57,400 | Furniture |  | 30,000 |
| Akbar | 63,600 | Machinery |  | 80,000 |
| Anthony | 60,000 | Motor Car |  | 50,000 |
|  |  | Profit and Loss A/c |  | 9,000 |
|  | 2,36,000 |  |  | 2,36,000 |
Amar retired on 1st April, 2020 from the firm on the following terms:
Furniture to be valued at ₹ 28,000, Machinery ₹ 76,000 and Motor car ₹ 47,600.
R.D.D. to be maintained at 5% on debtors.
Goodwill of the firm is to be valued at ₹ 30,000. However, only Amar’s share is to be raised in the books.
A part payment of ₹ 20,000 to be made to Amar and the balance to be transferred to his Loan Account.
Prepare:
Profit and Loss Adjustment A/c.
Partners’ Capital Account.
Balance Sheet of the New firm.

Accepted Answer

>

> [!TLDR]
> Revaluation gives a **loss of ₹6,000** (shared equally, ₹2,000 each). General Reserve ₹24,000 and the P&L (Dr) accumulated loss ₹9,000 are shared equally. Only Amar's goodwill share = 1/3 × 30,000 = **₹10,000** is raised (Goodwill A/c Dr, Amar's Capital Cr). Amar's capital works out to **₹70,400**; ₹20,000 is paid and **₹50,400** goes to his Loan A/c. New firm Balance Sheet totals **₹2,11,000**.
>
> **Working Note 1 — Revaluation of assets/liabilities**
>
> | Item | Old ₹ | New ₹ | Effect |
> | --- | --- | --- | --- |
> | Furniture | 30,000 | 28,000 | Loss 2,000 |
> | Machinery | 80,000 | 76,000 | Loss 4,000 |
> | Motor Car | 50,000 | 47,600 | Loss 2,400 |
> | R.D.D. (5% of 32,000 = 1,600; was 4,000) | 4,000 | 1,600 | Profit 2,400 |
>
> **Profit and Loss Adjustment Account**
>
> | Dr — Particulars | ₹ | Cr — Particulars | ₹ |
> | --- | --- | --- | --- |
> | To Furniture A/c | 2,000 | By R.D.D. A/c | 2,400 |
> | To Machinery A/c | 4,000 | By Loss transferred to Capital A/cs: |  |
> | To Motor Car A/c | 2,400 |   Amar 2,000 |  |
> |  |  |   Akbar 2,000 |  |
> |  |  |   Anthony 2,000 | 6,000 |
> | **Total** | **8,400** | **Total** | **8,400** |
>
> **Working Note 2 — reserves, losses and goodwill (shared equally, 1:1:1)**
>
> - General Reserve ₹24,000 → ₹8,000 each (credited).
> - P&L A/c (Dr balance, accumulated loss) ₹9,000 → ₹3,000 each (debited).
> - Goodwill: only Amar's share raised = 1/3 × ₹30,000 = ₹10,000 (Goodwill A/c Dr, Amar's Capital A/c Cr). It stays in the books as an asset.
>
> **Partners' Capital Account**
>
> | Particulars | Amar ₹ | Akbar ₹ | Anthony ₹ | Particulars | Amar ₹ | Akbar ₹ | Anthony ₹ |
> | --- | --- | --- | --- | --- | --- | --- | --- |
> | To P&L A/c (loss) | 3,000 | 3,000 | 3,000 | By Balance b/d | 57,400 | 63,600 | 60,000 |
> | To P&L Adjustment A/c (rev. loss) | 2,000 | 2,000 | 2,000 | By General Reserve | 8,000 | 8,000 | 8,000 |
> | To Cash A/c | 20,000 | — | — | By Goodwill A/c | 10,000

Balance Sheet as on 31st March, 2020
Liabilities	Amount ₹	Assets		Amount ₹
Creditors	31,000	Cash		39,000
General Reserve	24,000	Debtors	32,000
Capital Accounts:		Less: R.D.D	4,000	28,000
Amar	57,400	Furniture		30,000
Akbar	63,600	Machinery		80,000
Anthony	60,000	Motor Car		50,000
		Profit and Loss A/c		9,000
	2,36,000			2,36,000
Amar retired on 1st April, 2020 from the firm on the following terms:
Furniture to be valued at ₹ 28,000, Machinery ₹ 76,000 and Motor car ₹ 47,600.
R.D.D. to be maintained at 5% on debtors.
Goodwill of the firm is to be valued at ₹ 30,000. However, only Amar’s share is to be raised in the books.
A part payment of ₹ 20,000 to be made to Amar and the balance to be transferred to his Loan Account.
Prepare:
Profit and Loss Adjustment A/c.
Partners’ Capital Account.
Balance Sheet of the New firm.

Dr — Particulars	₹	Cr — Particulars	₹
To Furniture A/c	2,000	By R.D.D. A/c	2,400
To Machinery A/c	4,000	By Loss transferred to Capital A/cs:
To Motor Car A/c	2,400	Amar 2,000
		Akbar 2,000
		Anthony 2,000	6,000
Total	8,400	Total	8,400

Particulars	Amar ₹	Akbar ₹	Anthony ₹	Particulars	Amar ₹	Akbar ₹	Anthony ₹
To P&L A/c (loss)	3,000	3,000	3,000	By Balance b/d	57,400	63,600	60,000
To P&L Adjustment A/c (rev. loss)	2,000	2,000	2,000	By General Reserve	8,000	8,000	8,000
To Cash A/c	20,000	—	—	By Goodwill A/c	10,000	—	—
To Amar's Loan A/c	50,400	—	—
To Balance c/d	—	66,600	63,000
Total	75,400	71,600	68,000	Total	75,400	71,600	68,000
…

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