Question

Ishu and Vishu are partners, sharing profits in the ratio of 3 : 2. Their balance sheet as on 31st March, 2017 was as follows :

Nishu was admitted on that date for 1/6th share on the following terms :

1. Nishu will bring Rs 56,000 as his share of capital,
2. Goodwill of the firm is valued at Rs 84,000 and Nishu will bring his share of goodwill in cash,
3. Plant and machinery be appreciated by 20%.
4. All debtors are good,
5. There is a liability of Rs 9,800 included in sundry creditors that is not likely to arise,
6. Capital of Ishu and Vishu will be adjusted on the basis of Nishu’s capital and any excess or deficiency will be made by withdrawing or bringing in cash by concerned partner.

Prepare Revaluation Account, Partners’ Capital Account and the Balance Sheet of the firm after the above adjustments.

Answer 1

Working Note: 1. Sacrifice Ratio of Ishu and Vishu = 3:2

[Note: Cash at Bank = 87,000 + (56,000 +14,000+14,920)-22,720 = Rs.1,49,200]