(a) Veena and Pearl are partners in a firm sharing profits and losses in the ratio of 2 : 1. Their Balance Sheet as on 31st March 2018 is as follows.
| Liabilities | ₹ | ₹ | Assets | ₹ |
|---|---|---|---|---|
| Capital accounts : | Buildings | 60,000 | ||
| Veena | 60,000 | Machinery | 30,000 | |
| Pearl | 40,000 | 1,00,000 | Debtors | 20,000 |
| General Reserve | 30,000 | Stock | 10,000 | |
| Workmen Compensation Fund | 10,000 | Cash at bank | 30,000 | |
| Sundry Creditors | 10,000 | |||
| 1,50,000 | 1,50,000 |
Deri is admitted on 1.4.2018 subject to the following conditions :
- The new Profit sharing ratio among Veena, Pearl and Deri is 5 : 3 : 2.
- Deri has to bring a capital of ₹ 30,000.
- Stock to be depreciated by 20%.
- Anticipated claim on Workmen Compensation Fund is ₹ 1,000.
- Unrecorded investment of ₹ 11,000 has to be brought into books.
- The Goodwill of the firm is valued at ₹ 30,000 and Deri brought cash for his share of Goodwill. The existing partners withdraw the entire amount brought by Deri towards Goodwill. Prepare the necessary ledger accounts and Balance Sheet after admission. OR
(b) Saritha and Subha are partners, sharing profits and losses in the ratio of 5 : 3. The firm's Balance Sheet as on 31st Dec. 2022 was as follows.
| Liabilities | ₹ | ₹ | Assets | ₹ | ₹ |
|---|---|---|---|---|---|
| Capital accounts : | Buildings | 34,000 | |||
| Saritha | 48,000 | Furniture | 6,000 | ||
| Subha | 40,000 | 88,000 | Investments | 20,000 | |
| Creditors | 37,000 | Debtors | 40,000 | ||
| Outstanding Wages | 8,000 | Less : Provision for bad debts | 3,000 | 37,000 | |
| Bills receivable | 12,000 | ||||
| Stock | 16,000 | ||||
| Bank | 8,000 | ||||
| 1,33,000 | 1,33,000 |
On 31st December 2022 Arivumathi was admitted into the Partnership for 1/4 share of profit with ₹ 12,000 as Capital subject to the following adjustments.
- Furniture is to be re-valued at ₹ 5,000 and building is to be re-valued at ₹ 50,000.
- Provision for doubtful debts is to be increased to ₹ 5,500.
- An unrecorded investment of ₹ 6,000 is to be brought into account.
- An unrecorded liability ₹ 2,500 has to be recorded now. Prepare Revaluation Account and Capital Account of Partners after admission.
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Start your 14-day free trial to unlock the full solution →(a) Revaluation profit ₹9,000 (2:1); reserve ₹30,000 and WCF surplus ₹9,000 to old partners; goodwill ₹6,000 in sacrificing ratio 5:1 then withdrawn; capitals V 92,000/P 56,000/Deri 30,000; balance sheet ₹1,89,000. (b) Revaluation profit ₹16,000 (5:3); capitals S 58,000/Su 46,000/Ari 12,000.
(a) Veena, Pearl & Deri — Admission
Old ratio Veena:Pearl = 2:1; New ratio 5:3:2. Deri's share = 2/10 = 1/5.
Revaluation A/c
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Stock (20% of 10,000) | 2,000 | By Investment (unrecorded) | 11,000 |
| To Profit — Veena 6,000; Pearl 3,000 | 9,000 | ||
| 11,000 | 11,000 |
Working – Goodwill: Deri's share of goodwill = 30,000 × 2/10 = ₹6,000. Sacrificing ratio = Old − New: Veena 2/3 − 5/10 = 5/30; Pearl 1/3 − 3/10 = 1/30 ⇒ 5:1. Premium ₹6,000 → Veena ₹5,000, Pearl ₹1,000, then withdrawn in cash.
Working – WCF: 10,000 − claim 1,000 = ₹9,000 surplus to old partners 2:1 (Veena 6,000, Pearl 3,000); claim ₹1,000 kept as liability.
Working – General Reserve ₹30,000 to old partners 2:1 (Veena 20,000, Pearl 10,000).
Partners' Capital A/c
| Particulars | Veena ₹ | Pearl ₹ | Deri ₹ | Particulars | Veena ₹ | Pearl ₹ | Deri ₹ |
|---|---|---|---|---|---|---|---|
| To Cash (goodwill withdrawn) | 5,000 | 1,000 | — | By Balance b/d | 60,000 | 40,000 | — |
| To Balance c/d | 92,000 | 56,000 | 30,000 | By Cash (capital) | — | — | 30,000 |
| By General reserve | 20,000 | 10,000 | — | ||||
| By WCF surplus | 6,000 | 3,000 | — | ||||
| By Revaluation profit | 6,000 | 3,000 | — | ||||
| By Premium (goodwill) | 5,000 | 1,000 | — | ||||
| 97,000 | 57,000 | 30,000 | 97,000 | 57,000 | 30,000 |
Bank A/c: 30,000 (b/d) + 30,000 (Deri capital) + 6,000 (Deri goodwill) − 6,000 (goodwill withdrawn) = ₹60,000.
Balance Sheet after admission
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital — Veena 92,000; Pearl 56,000; Deri 30,000 | 1,78,000 | Buildings | 60,000 |
| Sundry creditors | 10,000 | Machinery | 30,000 |
| Provision for WCF claim | 1,000 | Debtors | 20,000 |
| Stock (10,000 − 2,000) | 8,000 | ||
| Investment | 11,000 | ||
| Bank | 60,000 | ||
| 1,89,000 | 1,89,000 |
(b) Saritha, Subha & Arivumathi — Revaluation & Capital A/c
Old ratio Saritha:Subha = 5:3.
Revaluation A/c
| Dr | ₹ | Cr | ₹ | …
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