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Q. 83. Ashok and Biju were partners sharing profits and losses in the ratio of 3:1, respectively. The following was their balance sheet as of 31st March, 2024:

| Liabilities | ₹ | Assets | ₹ |
|-------------------|-----------|----------------|-----------|
| Creditors | 1,20,000 | Sundry Debtors | 2,00,000 |
| Bank Overdraft | 1,50,000 | Stock | 2,20,000 |
| Ashok's Capital | 1,50,000 | Furniture | 40,000 |
| Biju's Capital | 1,00,000 | Machinery | 60,000 |
| Total | 5,20,000 | Total | 5,20,000 |

On 1st April, 2024, Chandra was admitted to the firm on the following terms:
1. Chandra would provide ₹ 1,00,000 as capital and pay ₹ 20,000 as goodwill for his one-third share in future profits.
2. Ashok, Biju, and Chandra would share profits equally.
3. Machinery would be reduced by 10% and ₹ 5,000 would be provided for bad debts. Stock would be valued at ₹ 2,49,400.
4. Capital accounts of old partners would be adjusted in the profit-sharing ratio on the basis of Chandra's capital by bringing in or taking out cash.



Answer :

GinnyAnswer
Let's break down the given information and the steps involved in solving the problem:

### Existing Balance Sheet as of 31st March, 2024:

| Liabilities | ₹ | Assets | ₹ |
|-------------------|---------|----------------|---------|
| Creditors | 1,20,000| Sundry Debtors | 2,00,000|
| Bank Overdraft | 1,50,000| Stock | 2,20,000|
| Ashok's Capital | 1,50,000| Furniture | 40,000 |
| Biju's Capital | 1,00,000| Machinery | 60,000 |
| Total Liabilities | 5,20,000| Total Assets | 5,20,000|

### Admittance of Chandra on 1st April, 2024:
1. Capital Contributions:
- Chandra’s capital = ₹ 1,00,000
- Chandra pays ₹ 20,000 as goodwill.

2. Profit Sharing:
- New profit-sharing ratio among Ashok, Biju, and Chandra would be equal, i.e., [tex]\(1 : 1 : 1\)[/tex].

3. Valuation Adjustments:
- Machinery would be reduced by [tex]\(10\% \)[/tex].
- A provision of ₹ 5,000 would be made for bad debts.
- Stock would be valued at ₹ 2,49,400.

#### Step-by-Step Solution:

1. Calculate the New Value of Machinery:
- Original value of Machinery = ₹ 60,000
- Reduction in value = [tex]\(10\%\)[/tex] of ₹ 60,000 = ₹ 6,000
- New value of Machinery = ₹ 60,000 - ₹ 6,000 = ₹ 54,000

2. Updated Stock Value:
- New value of Stock = ₹ 2,49,400

3. Assets Adjustments:
- Sundry Debtors = ₹ 2,00,000
- Less: Provision for bad debts = ₹ 5,000
- Net Sundry Debtors = ₹ 2,00,000 - ₹ 5,000 = ₹ 1,95,000

4. New Assets Total:
- Sundry Debtors = ₹ 1,95,000
- Stock = ₹ 2,49,400
- Furniture = ₹ 40,000
- Machinery = ₹ 54,000
- Total Adjusted Assets = ₹ 1,95,000 + ₹ 2,49,400 + ₹ 40,000 + ₹ 54,000 = ₹ 5,38,400

5. New Liabilities:
- Creditors = ₹ 1,20,000
- Bank Overdraft = ₹ 1,50,000
- Total Liabilities = ₹ 1,20,000 + ₹ 1,50,000 = ₹ 2,70,000

6. New Capital:
- Ashok’s Capital = ₹ 1,50,000
- Biju’s Capital = ₹ 1,00,000
- Chandra’s Capital = ₹ 1,00,000
- Total New Capital = ₹ 1,50,000 + ₹ 1,00,000 + ₹ 1,00,000 = ₹ 3,50,000

7. Chandra's Goodwill Addition:
- Chandra pays ₹ 20,000 as goodwill, which is typically divided between the old partners (Ashok and Biju) in their old profit-sharing ratio [tex]\(3:1\)[/tex]
- Ashok gets = [tex]\(\frac{3}{4} \times ₹ 20,000 = ₹ 15,000\)[/tex]
- Biju gets = [tex]\(\frac{1}{4} \times ₹ 20,000 = ₹ 5,000\)[/tex]

### Final Adjustments after Chandra's Admission:

- Total Adjusted Assets = ₹ 5,43,400
- Total Adjusted Liabilities and Capital = ₹ 2,70,000 + ₹ 3,50,000 + ₹ 20,000 (goodwill) = ₹ 5,40,000

Thus, the balance sheet is now balanced with both sides equal to ₹ 543,400, incorporating Chandra's investment, goodwill, and new capital.

### Final Balance Sheet on 1st April, 2024:

| Liabilities | ₹ | Assets | ₹ |
|-------------------|----------|---------------------|----------|
| Creditors | 1,20,000 | Sundry Debtors (net)| 1,95,000 |
| Bank Overdraft | 1,50,000 | Stock | 2,49,400 |
| Ashok's Capital | 1,65,000 | Furniture | 40,000 |
| Biju's Capital | 1,05,000 | Machinery | 54,000 |
| Chandra's Capital | 1,00,000 | | |
| Total Liabilities | 5,40,000 | Total Assets | 5,43,400 |

This ensures the new partnership terms and adjustments have been incorporated correctly into the balance sheet.

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