Question

A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1 . Their Balance Sheet as on 31st March, 2015 was as follows:

From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that: 

(i) Goodwill of the firm will be valued at Rs 1,50,000. 

(ii) Land will be revalued at Rs. 80,000 and building be depreciated by 6%. 

(iii) Creditors of Rs. 6,000 were not likely to be claimed and hence should be written off. Prepare Revaluation Account , Partners Capital Accounts and Balance Sheet of the reconstituted firm.

Answer 1

Revaluation Account

Dr.			Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Building A/c		3,000	Land A/c	30,000
Revaluation Profit			Creditors A/c	6,000
A	16,500
B	11,000
C	5,500	33,000
		36,000		36,000

Partners’ Capital Account

Dr.				Cr.
Particulars	A	B	C	Particulars	A	B	C
A’s Capital A/c			25,000	Balance b/d	1,00,000	50,000	25,000
Balance c/d	1,56,500	71,000	10,500	R/v Profit	16,500	11,000	5,500
				General Reserve	15,000	10,000	5,000
				C’s Capital A/c	25,000
	1,56,500	71,000	35,500		1,56,500	71,000	35,500

Balance Sheet
as on March 31, 2015 

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital A/c			Land	50,000
A	1,56,500		Add: Increase	30,000	80,000
B	71,000		Building	50,000
C	10,500	2,38,000	Less: Dep.	3,000	47,000
			Plant		1,00,000
Creditors	50,000		Bank		5,000
Less: Written-off	6,000	44,000	Stock		40,000
Bills Payable		20,000	Debtors		30,000
		3,02,000			3,02,000

Working Notes:

Old ratio- 3 : 2 : 1

New ratio- 1 : 1 : 1

S/R of A = Old ratio - New ratio

\(= \frac 36 - \frac 13\)

\(= \frac 16\)  (sacrificing)

S/R of B = Old ratio - New ratio

\(= \frac 26 - \frac 13\)

\(= \frac 06\)

S/R of C = Old ratio - New ratio

\(= \frac 16 - \frac 13\)

\(= \frac 16\)  (gaining)

C will compensate A, since he is gaining

C's capital A/c Dr.         25,000

        To A's capital A/c               25,000

Answer 2

Working Note: