Question

P and Q are partners sharing profits and losses in the ratio of 4:3. Their balance sheet as on 30^th June 2004 is as follows.

R is admitted into the firm on the basis of the following conditions. 

1. Sundry debtors should be revalued at Rs. 1,00,000. 

2. R should bring in Rs. 15000 as capital and Rs. 10000 as his share of goodwill. He will get 1/6 share in future profits. 

3. The capital accounts of all partners should be adjusted on the basis of their profit sharing ratio by bringing in or paying o the cash as the case may be. 

Prepare necessary ledger accounts and the new Balance sheet of the firm.

Answer 1

Working notes: 

Calculation of new ratio: Old Ratio between P & Q = 4 : 3 

R’s share = 1/6 

Remaining portion = 1 – 1/6 = 5/6 

P’s new share = 4/7 of 5/6 = 4/7 × 5/6 = 20/42 

Q’s new share = 3/7 of 5/6 = 3/7 × 5/6 = 15/42 

R’s share = 1/6 = 7/42

Calculation of capital required:

R’s capital for

1/6 share in profits = 15,000

Total capital of the firm= 15,000 × 6/1 = 90,000

P’s capital = 90,000 × 20/42 = 42,857

Q’s capital = 90,000 × 15/42 = 32,143

Revaluation A/c

Partners capital A/c

Cash A/c

Balance sheet as on 1^st July 2004