Eduprobe
Question:
Chander and Damini were partners in a firm sharing profits and losses equally. On 31st March, 2017 their Balance Sheet was as follows: Balance Sheet of Chander and Damini as on 31.3.2017 Liabilities AmountRs. Assets AmountRs. Sundry Creditors 1,04,000 Cash at Bank 30,000 Capitals Chander 2,50,000 Damini 2,16,000 4,66,000 Bills Receivable 45,000 Debtors 75,000 Furniture 1,10,000 Land and Building 3,10,000 5,70,000 5,70,000 On 1.4.2017, they admitted Elina as a new partner for 1/3rd share in the profits on the following conditions: (i) Elina will bring Rs. 3,00,000 as her capital and Rs. 50,000 as her share of goodwill premium, half of which will be withdrawn by Chander and Damini. (ii) Debtors to the extent of Rs. 5,000 were unrecorded (iii) Furniture will be reduced by 10%
Solution:
1. Adjustment for unrecorded debtors:
Add Rs. 5,000 to the debtors account.
New Debtors = 75,000 + 5,000 = Rs. 80,000
2. Adjustment for Furniture:
Reduce the value of furniture by 10%.
Reduction = 10% of 1,10,000 = Rs. 11,000
New Furniture Value = 1,10,000 - 11,000 = Rs. 99,000
3. Goodwill Adjustment:
Elina brings Rs. 50,000 as goodwill. Half of this (Rs. 25,000) is withdrawn by Chander and Damini.
Chander receives Rs. 12,500 (25,000/2)
Damini receives Rs. 12,500 (25,000/2)
Goodwill is credited to the old partners' capital accounts.
4. Revaluation Account:
| Particulars | Debit (Rs.) | Credit (Rs.) |
|---|---|---|
| Furniture (Reduction) | 11,000 | |
| Debtors (Unrecorded) | 5,000 | |
| Goodwill (credited to old partners) | 50,000 | |
| Total | 16,000 | 50,000 |
Since the credit side exceeds the debit side by Rs. 34,000, this amount is transferred to the old partners' capital accounts in their profit-sharing ratio (1:1).
Chander's share = 34,000 / 2 = Rs. 17,000
Damini's share = 34,000 / 2 = Rs. 17,000
5. Partners' Capital Accounts:
| Partner | Old Capital | Goodwill Share | Revaluation Share | Elina's Capital | New Capital |
|---|---|---|---|---|---|
| Chander | 2,50,000 | 12,500 | 17,000 | 2,79,500 | |
| Damini | 2,16,000 | 12,500 | 17,000 | 2,45,500 | |
| Elina | 3,00,000 | 3,00,000 |
6. Balance Sheet after Admission of Elina:
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
|---|---|---|---|
| Sundry Creditors | 1,04,000 | Cash at Bank | 30,000 |
| Chander's Capital | 2,79,500 | Bills Receivable | 45,000 |
| Damini's Capital | 2,45,500 | Debtors | 80,000 |
| Elina's Capital | 3,00,000 | Furniture | 99,000 |
| Land and Building | 3,10,000 | ||
| Total | 9,29,000 | Total | 9,29,000 |
Note: The solution assumes that the 1/3rd share for Elina is based on the total profits after the adjustments and the introduction of her capital. The goodwill calculation and its distribution amongst the existing partners would depend on specific accounting standards and partnership agreements. This is a possible interpretation and other valid approaches might exist.