Gini, Bini and Mini were in partnership sharing profits and losses in the ratio of 5:2:2. Their Balance Sheet as at 31st March, 2021 was as follows:
|Balance Sheet as at 31st March,2021|
|Bank Overdraft Workmen's||61,500||Debtors 38,000|
|Compensation Reserve Capitals:||32,000||Less: Provision For Doubtful Debts (2,300)||35,700|
On 31st March, 2021, Gini retired from the firm. All the partners agreed to revalue the assets and liabilities on the following basis:
(i) Bad debts amounted to ₹ 5,000. A provision for doubtful debts was to be maintained at 10% on debtors.
(ii) Partners have decided to write off existing goodwill.
(iii)Goodwill of the firm was valued at ₹ 54,000 and be adjusted into the Capital Accounts of Bini and Mini, who will share profits in future in the ratio of 5:4.
(iv)The assets and liabilities valued as: Inventories ₹1,30,000; Machinery ₹ 82,000; Furniture ₹1,95,000 and Building ₹ 6,00,000.
(v) Liability of ₹23,000 is to be created on account of Claim for Workmen Compensation.
(vi) There was an unrecorded investment in shares of ₹ 25,000. It was decided to pay off Gini by giving her unrecorded investment in full settlement of her part payment of ₹ 28,000 and remaining amount after two months.
Prepare Revaluation Account and Partners’ Capital Accounts as on 31st March, 2021.
|Bad Debts||2700||By Furniture A/c||15000|
|Provision for doubtful debts||3300||By Building A/c||30000|
|To Stock A/c||4000||By Investments A/c||28000|
|To Machinery A/c||18000|
|To Profit transferred to|
|Gini's Capital A/c||25000|
|Bini's Capital A/c||10000|
|Mini's Capital A/c||10000|
|PARTNERS CAPITAL ACCOUNT|
|To Goodwill A/c||35000||14000||14000||By Balance b/d||460000||300000||290000|
|To Gini's Capital A/c||18000||12000||By Bini's Capital A/c||18000|
|To Investment||28000||By Mini's Capital A/c||12000|
|To Gini's Loan A/c||457000||By Workmen compensation||5000||2000||2000|
|To Balance c/d||280000||276000||By Revaluation A/c||25000||10000||10000|
Working Notes :-
Goodwill of the firm = 54000
Calculation of Gaining Ratio :- Gaining Ratio = New profit Share - Old profit Share
Old Ratio = 5 : 2 : 2
New Ratio = 5 : 4
Bini's Gain = 5/9 - 2/9 = 3/9
Mini's Gain = 4/9 - 2/9 = 2/9
Gini's share of Goodwill = 54000 x 5/9 = 30000
This share of goodwill will be contributed by Bini and Mini in their gaining ratio, 3:2
Bini's Contribution = 30000 x 3/5 = 18000
Mini's Contribution = 30000 x 2/5 = 12000
*Workmen Compensation Reserve of 23000 will be credited to workmen compensation claim(as a liability) and the balance will be credited to partners capital accounts which is 9000 (32000 - 23000)