(a) Vijaya, Kavitha and Roseline are partners who share profits and losses in their Capital ratio. Their Balance Sheet as on 31.12.2017 is as follows.
Balance Sheet as on 31st December 2017
| Liabilities | ₹ | ₹ | Assets | ₹ |
|---|---|---|---|---|
| Capital account | Plant and Machinery | 45,000 | ||
| Vijaya | 30,000 | Stock | 22,000 | |
| Kavitha | 30,000 | Debtors | 15,000 | |
| Roseline | 20,000 | 80,000 | Cash at bank | 10,000 |
| General Reserve | 8,000 | Cash in hand | 4,000 | |
| Creditors | 8,000 | |||
| 96,000 | 96,000 |
Roseline died on 31.3.2018. On the death of Roseline, the following adjustments are made.
- Plant and Machinery is to be valued at ₹ 54,000
- Stock is to be depreciated by ₹ 1,000
- Goodwill of the firm is valued at ₹ 24,000
- Share of profit of Roseline is to be calculated from the closing of the last Financial year to the date of death on the basis of the average of the three completed years' profits before death. Profit for 2015, 2016 and 2017 were ₹ 66,000, ₹ 60,000 and ₹ 66,000 respectively. Prepare the necessary ledger accounts and the Balance Sheet immediately after the death of Roseline. OR
(b) Following is the balance sheet of Sivakami Ltd., as on 31st March 2019.
| Particulars | ₹ |
|---|---|
| I. EQUITY AND LIABILITIES | |
| 1. Shareholders' Funds — Equity Share Capital | 2,00,000 |
| 2. Non-Current liabilities — Long-term borrowings | 50,000 |
| 3. Current liabilities | |
| (a) Short-term borrowings | 17,000 |
| (b) Trade Payables | 25,000 |
| (c) Other current liabilities — Expenses Payable | 3,000 |
| (d) Short-term provisions | 5,000 |
| Total | 3,00,000 |
| II. ASSETS | |
| 1. Non-Current Assets — Fixed Assets (a) Tangible assets | 1,50,000 |
| 2. Current Assets | |
| (a) Inventories | 45,000 |
| (b) Trade receivables | 70,000 |
| (c) Cash and Cash equivalents | 30,000 |
| (d) Other Current assets — Prepaid Expenses | 5,000 |
| Total | 3,00,000 |
Calculate : (i) Current ratio (ii) Quick ratio
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Start your 14-day free trial to unlock the full solution →(a) Revaluation profit ₹8,000 (3:3:2); reserve ₹8,000 shared; Roseline's goodwill ₹6,000 borne by Vijaya & Kavitha equally; her profit share ₹4,000; claim ₹34,000 to executor; balance sheet ₹1,08,000 (P&L suspense ₹4,000 on assets). (b) Current ratio 3:1, quick ratio 2:1.
(a) Death of Roseline
Profit share ratio = capital ratio = 30:30:20 = 3:3:2.
Revaluation A/c
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Stock | 1,000 | By Plant & machinery (54,000 − 45,000) | 9,000 |
| To Profit — Vijaya 3,000; Kavitha 3,000; Roseline 2,000 | 8,000 | ||
| 9,000 | 9,000 |
Working – General Reserve ₹8,000 in 3:3:2 → Vijaya 3,000, Kavitha 3,000, Roseline 2,000.
Working – Goodwill: Roseline's share = 24,000 × 2/8 = ₹6,000, borne by Vijaya & Kavitha in gaining ratio 1:1 (₹3,000 each).
Working – Share of profit to death: Average profit (2015-17) = (66,000+60,000+66,000)/3 = ₹64,000; Roseline's share for 3 months = 64,000 × 3/12 × 2/8 = ₹4,000 (debited to P&L Suspense A/c).
Roseline's Capital A/c
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Roseline's Executor A/c | 34,000 | By Balance b/d | 20,000 |
| By General reserve | 2,000 | ||
| By Revaluation profit | 2,000 | ||
| By Vijaya & Kavitha (goodwill) | 6,000 | ||
| By P&L Suspense (profit share) | 4,000 | ||
| 34,000 | 34,000 |
Continuing partners' capitals: Vijaya = 30,000 + 3,000 (reserve) + 3,000 (reval.) − 3,000 (goodwill) = ₹33,000; Kavitha = same = ₹33,000.
Balance Sheet immediately after death
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital — Vijaya 33,000; Kavitha 33,000 | 66,000 | Plant & machinery | 54,000 |
| Roseline's executor A/c | 34,000 | Stock (22,000 − 1,000) | 21,000 |
| Creditors | 8,000 | Debtors | 15,000 |
| Cash at bank | 10,000 | ||
| Cash in hand | 4,000 |
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