Question

Shubhi and Revanshi were partners in a firm sharing profits and losses in the ratio of \(3 : 2\). Their Balance Sheet as at 31st March 2023 was as follows: \[ \begin{array}{|l|r|l|r|} \hline Liabilities & Amount (\rupee) & Assets & Amount (\rupee)
\hline \text{Capitals:} & & \text{Fixed Assets} & 90,000
\quad \text{Shubhi} & 60,000 & \text{Stock} & 38,000
\quad \text{Revanshi} & 32,000 & \text{Debtors} & 30,000
\text{General Reserve} & 30,000 & \text{Cash} & 52,000
\text{Bank Loan} & 18,000 & &
\text{Creditors} & 70,000 & &
\hline Total & 2,10,000 & Total & 2,10,000
\hline \end{array} \] \vspace{0.5cm} Adjustments: Pari brings \rupee50,000 as her capital and \rupee50,000 as her share of premium for goodwill for \( \frac{1}{4} \) share in the profits of the firm. Fixed assets were depreciated by 30\%. Stock was revalued at \rupee45,000. Bank loan was paid off. Capitals of Shubhi and Revanshi were adjusted based on Pari’s capital, with actual cash being paid or brought in. \vspace{0.5cm}

Hint:

Always prepare the Revaluation Account first, followed by the Capital Accounts. Adjust goodwill and capital contributions proportionately based on the new partner’s share.

Answer 1

Revaluation Account: \[ \begin{array}{|l|r|l|r|} \hline Particulars & Amount (\rupee) & Particulars & Amount (\rupee)
\hline \text{To Fixed Assets (Depreciation @ 30\%)} & 27,000 & \text{By Stock (Increase in Value)} & 7,000
\hline \text{To Profit transferred to:} & & &
\quad \text{Shubhi (3/5)} & 12,000 & &
\quad \text{Revanshi (2/5)} & 8,000 & &
\hline Total & 47,000 & Total & 47,000
\hline \end{array} \] \vspace{0.5cm} Partners’ Capital Accounts: \[ \begin{array}{|l|r|r|r|} \hline Particulars & Shubhi (\rupee) & Revanshi (\rupee) & Pari (\rupee)
\hline \text{To Bank (Adjustment)} & 20,000 & 10,000 & -
\text{To Balance c/d} & 80,000 & 40,000 & 50,000
\hline \text{By Balance b/d} & 60,000 & 32,000 & -
\text{By General Reserve} & 18,000 & 12,000 & -
\text{By Revaluation Profit} & 12,000 & 8,000 & -
\text{By Premium for Goodwill} & 30,000 & 20,000 & -
\text{By Bank (Capital Brought In)} & - & - & 50,000
\hline Total & 1,20,000 & 72,000 & 50,000
\hline \end{array} \] \vspace{0.5cm} Working Notes: 1. Revaluation Account: - Depreciation on fixed assets = \( 30\% \times 90,000 = 27,000 \). - Increase in stock value = \( 45,000 - 38,000 = 7,000 \). - Net revaluation profit = \( 7,000 - 27,000 = -20,000 \), shared in the ratio \( 3 : 2 \).
2. Goodwill Adjustment: - Pari’s share = \( \frac{1}{4} \). - Total goodwill = \( 50,000 \times 4 = 2,00,000 \). - Shubhi’s share = \( \frac{3}{5} \times 1,50,000 = 90,000 \). - Revanshi’s share = \( \frac{2}{5} \times 1,50,000 = 60,000 \). - Premium brought by Pari = \rupee50,000, shared as: - Shubhi = \rupee30,000. - Revanshi = \rupee20,000.
3. Capital Adjustment: - After all adjustments, Pari’s capital is \rupee50,000. Shubhi and Revanshi adjust their capitals to maintain proportionate ratios. \vspace{0.5cm}