Question

Prina, Qadir, and Kian were partners in a firm sharing profits in the ratio of 7:2:1. On 31\textsuperscript{st March, 2023, their Balance Sheet was as follows:} \[ \begin{array}{|c|c|c|} Liabilities & Amount (\rupee) & Assets & Amount (\rupee)
Capitals: & & Land & 12,00,000
\quad Prina & 9,60,000 & Building & 9,00,000
\quad Qadir & 8,40,000 & Furniture & 6,00,000
\quad Kian & 9,00,000 & Stock & 6,60,000
General Reserve & 3,00,000 & Debtors & 6,00,000
Workmen’s Compensation Reserve & 5,40,000 & Less: Provision for Doubtful Debts (30,000) & 5,70,000
Creditors & 3,60,000 & Cash at Bank & 2,10,000
Total & 39,00,000 & Total & 39,00,000
\end{array} \] Adjustments on Qadir’s Retirement:
(i) Goodwill of the firm valued at \rupee 12,00,000.
(ii) Land appreciated by 30\%, and building depreciated by \rupee 3,54,000.
(iii) A provision of 6\% maintained on debtors.
(iv) Workmen’s compensation liability determined at \rupee 1,40,000.
(v) Qadir’s amount transferred to loan account.
(vi) Total capital fixed at \rupee 16,00,000, adjusted in the new profit ratio.

Hint:

Allocate goodwill and reserves in the old profit ratio, adjust revaluations, and transfer the retiring partner's share to a loan account.

Answer 1

Revaluation Account: \[ \begin{array}{|c|c|c|} Particulars & Debit (\rupee) & Credit (\rupee)
To Building (Depreciation) & 3,54,000 &
To Provision for Doubtful Debts & 36,000 &
To Workmen’s Compensation Liability & 4,00,000 &
By Land (Appreciation) & & 3,60,000
Total & 7,90,000 & 7,90,000
\end{array} \] Partners’ Capital Account: \[ \begin{array}{|c|c|c|c|c|} Particulars & Prina (\rupee) & Qadir (\rupee) & Kian (\rupee) & Total (\rupee)
By Balance b/d & 9,60,000 & 8,40,000 & 9,00,000 & 27,00,000
By General Reserve (7:2:1) & 2,10,000 & 60,000 & 30,000 & 3,00,000
By Revaluation (7:2:1) & 2,75,000 & 78,600 & 39,300 & 3,92,900
To Qadir’s Loan A/c & & 10,00,000 & & 10,00,000
To Current A/c (Adjustment) & 2,75,000 & & 25,000 & 3,00,000
Balance c/d & 12,70,000 & & 9,95,000 & 22,65,000
\end{array} \]