Skip to content
Exercises · Q13
Q.

S and T are partners sharing profits in the ratio of 3:2. Their Balance Sheet as at 31st March 2024 is given below:

Liabilities₹Assets₹
Capital — S1,00,000Land and Building1,20,000
Capital — T80,000Furniture20,000
General Reserve25,000Stock40,000
Creditors45,000Debtors 50,000 less Provision 2,00048,000
Bills Payable10,000Cash at Bank32,000
Total2,60,000Total2,60,000

U is admitted as a new partner for a 1/4th share in profits on the following terms: (1) U brings in ₹90,000 as capital and ₹20,000 as premium for goodwill, both in cash; (2) Land and Building is to be appreciated by ₹15,000; (3) Furniture is to be depreciated by 10%; (4) Provision for Doubtful Debts is to be increased to ₹3,000; (5) Stock is to be revalued at ₹36,000; (6) General Reserve is to be transferred to the old partners' capital accounts. Prepare the Revaluation Account, the Partners' Capital Accounts, and the Balance Sheet of the reconstituted firm.

Puducherry TnboardTextbookSubjectiveImportance★★★★★
8% · 3/40 Questions
🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

Step 1 — New Ratio and Sacrificing Ratio

U is given 1/4th share directly; remaining 3/4th shared by S and T in old ratio 3:2.

S's new share = 3/5 × 3/4 = 9/20; T's new share = 2/5 × 3/4 = 6/20; U's share = 1/4 = 5/20

New Ratio S : T : U = 9 : 6 : 5

S's sacrifice = 3/5 − 9/20 = 12/20 − 9/20 = 3/20; T's sacrifice = 2/5 − 6/20 = 8/20 − 6/20 = 2/20

Sacrificing Ratio S : T = 3 : 2

Step 2 — Revaluation Account

ItemEffectAmount (₹)
Land and Building appreciatedIncrease (gain)15,000
Furniture depreciated 10% of ₹20,000Decrease (loss)2,000
Provision for Doubtful Debts increased (₹3,000 − ₹2,000)Increase in provision (loss)1,000
Stock revalued from ₹40,000 to ₹36,000Decrease (loss)4,000
Dr. Revaluation Account₹Cr.₹
To Furniture A/c2,000By Land and Building A/c15,000
To Provision for Doubtful Debts A/c1,000
To Stock A/c4,000
To Profit transferred:
  S's Capital A/c (3/5 of 8,000)4,800
  T's Capital A/c (2/5 of 8,000)3,200
Total15,000Total15,000

Profit on Revaluation = ₹15,000 − ₹7,000 = ₹8,000, shared 3:2 → S ₹4,800, T ₹3,200.

Step 3 — Distribution of General Reserve

General Reserve ₹25,000, shared 3:2 → S's share = ₹15,000; T's share = ₹10,000.

Step 4 — Premium for Goodwill

U brings ₹20,000 premium for goodwill in cash, shared in sacrificing ratio 3:2 → S's share = ₹12,000; T's share = ₹8,000.

Step 5 — Partners' Capital Accounts

Dr. Capital AccountsS (₹)T (₹)U (₹)Cr.S (₹)T (₹)U (₹)
To Balance c/d1,31,8001,01,20090,000By Balance b/d1,00,00080,000—
By General Reserve A/c15,00010,000—
By Revaluation A/c (profit)4,8003,200—
By Premium for Goodwill A/c12,0008,000—
By Bank A/c (capital brought in)——90,000
Total1,31,8001,01,20090,000Total1,31,8001,01,20090,000

S's closing capital = 1,00,000 + 15,000 + 4,800 + 12,000 = ₹1,31,800

T's closing capital = 80,000 + 10,000 + 3,200 + 8,000 = ₹1,01,200

U's closing capital = ₹90,000 (capital only)

Step 6 — Bank Account (for reference) …

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.