Govind and Sudeep are partners sharing profits and losses in the ratio of \(3 : 1\) respectively. Their Balance sheet as on 31.03.2025 is as follows :
Balance Sheet as on 31.03.2025
On 01.04.2025, they admitted Tarun into partnership on following terms :
a) Tarun should bring in ₹ 30,000 as capital for \(1/5^{\text{th}}\) share and ₹ 10,000 towards goodwill [As per A.S. -- 26].
b) Goodwill amount is withdrawn by old partners.
c) Depreciate furniture at 5%.
d) Appreciate building value by 10%.
e) Machinery revalued at ₹ 27,000.
Prepare :
i) Revaluation Account,
ii) Partners' Capital Accounts and
iii) New Balance Sheet of firm on 01.04.2025.
Show Hint
When goodwill is brought in cash and immediately withdrawn by the old partners, the net effect on the Cash balance for goodwill is zero. The Cash account increases only by the new partner's capital amount.
Step 1: Understanding the Concept:
When a new partner is admitted, the assets and liabilities of the firm are revalued to reflect their true current market value. Accumulated reserves and goodwill brought in by the new partner are distributed among the old partners.
Step 2: Detailed Explanation: Working Notes:
1. \textit{Sacrificing Ratio:} Since no new profit-sharing ratio is given, the old ratio (\(3:1\)) is assumed to be the sacrificing ratio.
2. \textit{Distribution of Goodwill:} Tarun brings ₹ 10,000 for goodwill.
- Govind's share = \(10,000 \times \frac{3}{4} = \text{₹ } 7,500\).
- Sudeep's share = \(10,000 \times \frac{1}{4} = \text{₹ } 2,500\).
(This amount is first credited to their Capital Accounts and then debited because it is withdrawn).
3. \textit{Distribution of General Reserve:} ₹ 20,000 is distributed in the old ratio (\(3:1\)).
- Govind gets ₹ 15,000; Sudeep gets ₹ 5,000.
