Question

Rupal, Shanu and Trisha were partners in a firm sharing profits and losses in the ratio of 4:3:1. Their Balance Sheet as at 31st March, 2024 was as follows:
\includegraphics[scale=0.8]{1.png}
(i) Trisha's share of profit was entirely taken by Shanu.
(ii) Fixed assets were found to be undervalued by Rs 2,40,000.
(iii) Stock was revalued at Rs 2,00,000.
(iv) Goodwill of the firm was valued at Rs 8,00,000 on Trisha's retirement.
(v) The total capital of the new firm was fixed at Rs 16,00,000 which was adjusted according to the new profit sharing ratio of the partners. For this necessary cash was paid off or brought in by the partners as the case may be.
Prepare Revaluation Account and Partners' Capital Accounts.

Hint:

Retirement Steps: 1. Calculate New \& Gaining Ratio (New - Old). 2. Prepare Revaluation A/c, distribute profit/loss in OLD ratio to ALL partners. 3. Adjust Goodwill: Debit Gaining Partners (Gaining Ratio), Credit Retiring Partner (Retiring partner's share of goodwill). 4. Distribute Reserves/Accumulated P/L in OLD ratio to ALL partners. 5. Calculate amount due to retiring partner and transfer to Loan A/c (or pay). 6. Adjust remaining partners' capitals if required: Calculate required capital (Total Capital x New Share), find surplus/deficit vs adjusted balance, adjust via cash/bank.

Answer 1

Working Notes:
1. New Profit Sharing Ratio \& Gaining Ratio:
Old Ratio (R:S:T) = 4:3:1 (Total 8 parts).
Trisha retires (share 1/8). Her share is taken entirely by Shanu.
Rupal's New Share = Old Share = 4/8.
Shanu's New Share = Old Share + Trisha's Share = 3/8 + 1/8 = 4/8.
New Ratio (Rupal : Shanu) = 4/8 : 4/8 = 1 : 1.
Gaining Ratio = New Share - Old Share.
Rupal: 4/8 - 4/8 = 0.
Shanu: 4/8 - 3/8 = 1/8.
Only Shanu gains (1/8).
2. Revaluation Account Adjustments:
- Fixed Assets Undervalued by Rs 2,40,000 (Increase Value) -$>$ Credit Revaluation.
- Stock Revalued at Rs 2,00,000 (Book Value Rs 2,80,000) -$>$ Decrease Value by Rs 80,000 -$>$ Debit Revaluation.
Net Effect = Cr 2,40,000 - Dr 80,000 = Cr 1,60,000 (Profit).
3. Goodwill Treatment:
Firm's Goodwill = Rs 8,00,000.
Trisha's Share of Goodwill = Rs 8,00,000 \( \times \) 1/8 = Rs 1,00,000.
Since only Shanu gains, Shanu will compensate Trisha.
Entry: Shanu's Capital A/c Dr. 1,00,000 To Trisha's Capital A/c Cr. 1,00,000.
4. Capital Adjustments:
Total Capital of New Firm = Rs 16,00,000.
New Ratio (R:S) = 1:1.
Rupal's Required Capital = 1/2 \( \times \) 16,00,000 = Rs 8,00,000.
Shanu's Required Capital = 1/2 \( \times \) 16,00,000 = Rs 8,00,000.
5. Calculation of Adjusted Capitals (before cash adjustment):
\quad Rupal: Opening Bal + Reserve (4/8 * 3.2L) + Revaluation Profit (4/8 * 1.6L) = 8L + 1.6L + 0.8L = Rs 10,40,000.
\quad Shanu: Opening Bal + Reserve (3/8 * 3.2L) + Revaluation Profit (3/8 * 1.6L) - Goodwill Adjustment = 6L + 1.2L + 0.6L - 1L = Rs 6,80,000.
6. Cash Brought in / Paid Off:
\quad Rupal: Required = 8L, Adjusted = 10.4L. Excess = 2.4L (Withdraws Cash).
\quad Shanu: Required = 8L, Adjusted = 6.8L. Deficit = 1.2L (Brings Cash).
Revaluation Account
\begin{longtable}{|l|r|l|r|} \hline Dr. & Amount (Rs) & Cr. & Amount (Rs)
\hline \endfirsthead \hline Dr. & Amount (Rs) & Cr. & Amount (Rs)
\hline \endhead \hline \endfoot \hline \endlastfoot To Stock A/c & 80,000 & By Fixed Assets A/c & 2,40,000
(Decrease in value) & & (Increase in value) &
To Profit transferred to Partners' & & &
Capital Accounts (Old Ratio 4:3:1): & & &
\quad Rupal (4/8) & 80,000 & &
\quad Shanu (3/8) & 60,000 & &
\quad Trisha (1/8) & 20,000 & 1,60,000 &
\hline Total & 2,40,000 & Total & 2,40,000
\hline \end{longtable} Partners' Capital Accounts
\begin{tabular}{|l|r|r|r||l|r|r|r|} \hline Dr. & Rupal (Rs) & Shanu (Rs) & Trisha (Rs) & Cr. & Rupal (Rs) & Shanu (Rs) & Trisha (Rs)
\hline To Trisha's Cap A/c (GW) & - & 1,00,000 & - & By Balance b/d & 8,00,000 & 6,00,000 & 2,00,000
To Trisha's Loan A/c & - & - & 3,60,000 & By General Reserve A/c (4:3:1) & 1,60,000 & 1,20,000 & 40,000
To Bank A/c (Cash withdrawn) & 2,40,000 & - & - & By Revaluation A/c (Profit) & 80,000 & 60,000 & 20,000
To Balance c/d & 8,00,000 & 8,00,000 & - & By Shanu's Cap A/c (GW) & - & - & 1,00,000
& & & & By Bank A/c (Cash brought in) & - & 1,20,000 & -
\hline Total & 10,40,000 & 9,00,000 & 3,60,000 & Total & 10,40,000 & 9,00,000 & 3,60,000
\hline \end{tabular}