CBSE 2014, Set 2

Question

Shikhar and Rohit were partners sharing profits in the ratio of 7 : 3. On 1st April, 2013 they admitted Kavi as a new partner for 1/4 share. Kavi brought Rs 4,30,000 as capital and Rs 25,000 for goodwill premium. Balance Sheet (1.4.2013):

| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Shikhar's Capital | 8,00,000 | Land and Building | 3,50,000 |
| Rohit's Capital | 3,50,000 | Machinery | 4,50,000 |
| General Reserve | 1,00,000 | Debtors | 2,20,000 |
| Workmen's Compensation Fund | 1,00,000 | Less: Provision | (20,000) |
| Creditors | 1,50,000 | Stock | 3,50,000 |
| | | Cash | 1,50,000 |
| **Total** | **15,00,000** | **Total** | **15,00,000** |

Terms: (i) Land and Building appreciated by 20%. (ii) Machinery depreciated by 10%. (iii) Workmen's Compensation Fund liability determined at Rs 50,000. (iv) Capitals of Shikhar and Rohit adjusted on basis of Kavi's capital; excess/deficit settled in cash.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Edvaya · Accepted Answer

The correct answer is Subjective. **New Profit Sharing Ratio:** Old ratio Shikhar : Rohit = 7:3; Kavi gets 1/4; remaining 3/4 shared 7:3. Shikhar: 7/10 × 3/4 = 21/40; Rohit: 3/10 × 3/4 = 9/40; Kavi: 10/40. **New ratio = 21 : 9 : 10**; Sacrificing ratio = 7:3. **Goodwill distribution:** Rs 25,000 in ratio 7:3 → Shikhar Rs 17,500; Rohit Rs 7,500. **Workmen's Compensation surplus:** 1,00,000 − 50,000 = Rs 50,000 (gain) in ratio 7:3 → Shikhar Rs 35,000; Rohit Rs 15,000. **General Reserve** in ratio 7:3 → Shikhar Rs 70,000; Rohit Rs 30,000. **Revaluation Account:** | Dr. | Amount (Rs) | Cr. | Amount (Rs) | |---|---|---|---| | Machinery (depreciation 10%) | 45,000 | Land and Building (appreciation 20%) | 70,000 | | Profit — Shikhar (7/10) | 17,500 | | | | Profit — Rohit (3/10) | 7,500 | | | | **Total** | **70,000** | **Total** | **70,000** | **Partners' Capital Accounts:** | Dr. | Shikhar (Rs) | Rohit (Rs) | Kavi (Rs) | Cr. | Shikhar (Rs) | Rohit (Rs) | Kavi (Rs) | |---|---|---|---|---|---|---|---| | Cash paid out | 37,000 | 23,000 | — | Balance b/d | 8,00,000 | 3,50,000 | — | | Balance c/d | 9,03,000 | 3,87,000 | 4,30,000 | General Reserve | 70,000 | 30,000 | — | | | | | | WCF surplus | 35,000 | 15,000 | — | | | | | | Premium for Goodwill | 17,500 | 7,500 | — | | | | | | Revaluation Profit | 17,500 | 7,500 | — | | | | | | Cash (Kavi's capital) | — | — | 4,30,000 | | **Total** | **9,40,000** | **4,10,000** | **4,30,000** | **Total** | **9,40,000** | **4,10,000** | **4,30,000** | **Capital Adjustment:** Total firm capital = 4,30,000 × 4 = Rs 17,20,000 Shikhar's required capital = 17,20,000 × 21/40 = Rs **9,03,000** → pays out Rs 37,000 Rohit's required capital = 17,20,000 × 9/40 = Rs **3,87,000** → pays out Rs 23,000 **Balance Sheet of New Firm (after Kavi's admission):** | Liabilities | Amount (Rs) | Assets | Amount (Rs) | |---|---|---|---| | Workmen's Compensation Fund | 50,000 | Land and Building | 4,20,000 | | Creditors | 1,50,000 | Machinery (net of 10% dep.) | 4,05,000 | | Shikhar's Capital | 9,03,000 | Debtors | 2,20,000 | | Rohit's Capital | 3,87,000 | Less: Provision | (20,000) | | Kavi's Capital | 4,30,000 | Stock | 3,50,000 | | | | Cash | 5,45,000 | | **Total** | **19,20,000** | **Total** | **19,20,000** |

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Accountancy > Accounting For Partnership Firms > Admission Of A Partner

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Liabilities	Amount (Rs)	Assets	Amount (Rs)
Shikhar's Capital	8,00,000	Land and Building	3,50,000
Rohit's Capital	3,50,000	Machinery	4,50,000
General Reserve	1,00,000	Debtors	2,20,000
Workmen's Compensation Fund	1,00,000	Less: Provision	(20,000)
Creditors	1,50,000	Stock	3,50,000
		Cash	1,50,000
Total	15,00,000	Total	15,00,000