Answered

Their Baland and Y are partners in a firm. They share profits and losses in the ratio of 2:1.

| Liabilities | ₹ | Assets | ₹ |
|---------------------------------------|------------|-------------------------------------|------------|
| Capitals: | | | |
| - X | 1,40,000 | Plant and Machinery | 1,75,000 |
| - Y | 1,00,000 | Furniture and Fixture | 65,000 |
| Workmen Compensation Reserve | 40,000 | Stock | 35,000 |
| Creditors | 1,50,000 | Bills Receivable | 12,000 |
| Bills Payable | 10,000 | Debtors | 1,03,000 |
| | | Less: Provision for Doubtful Debts | (50,000) |
| | | Cash & Bank Balance | 7,000 |
| |------------| |------------|
| | 4,40,000 | | 4,40,000 |

Z is admitted in the partnership. X surrenders [tex]\(\frac{2}{5}\)[/tex] of his share and Y surrenders [tex]\(\frac{1}{5}\)[/tex] of his share in favour of Z. The following information is given about the firm:

1. Plant and Machinery is reduced by ₹ 35,000 and furniture and fixture is reduced to ₹ 58,500.
2. Provision for bad and doubtful debts is to be increased by ₹ 3,000.
3. Actual liability for workmen compensation claim is ₹ 16,000.
4. A liability of ₹ 2,500 included in creditors is not likely to arise.
5. Z's share of goodwill is valued at ₹ 40,000 but he is unable to bring it in cash.
6. Z is to bring in capital proportionate to his share after all adjustments.

Prepare the Revaluation Account, Capital Accounts, and Balance Sheet. Also, calculate the new profit-sharing ratio.



Answer :

GinnyAnswer
Sure, let's go through the solution step by step.

### 1. Initial Figures

#### Liabilities:
- Capital X: ₹140,000
- Capital Y: ₹100,000
- Workmen Compensation Reserve: ₹40,000
- Creditors: ₹150,000
- Bills Payable: ₹10,000

#### Total Liabilities: ₹440,000

#### Assets:
- Plant and Machinery: ₹175,000
- Furniture and Fixture: ₹65,000
- Stock: ₹35,000
- Bills Receivable: ₹12,000
- Debtors: ₹103,000
- Less: Provision for Doubtful Debts: ₹7,000
- Cash and Bank Balance: ₹0

#### Total Assets: ₹383,000

### 2. Revaluation Adjustments

#### Plant and Machinery Revaluation:
- Decrease by ₹35,000
- New value: ₹175,000 - ₹35,000 = ₹140,000

#### Furniture and Fixture Revaluation:
- Adjust to ₹58,500
- New value: ₹58,500

#### Provision for Doubtful Debts:
- Increase by ₹3,000
- New provision: ₹7,000 + ₹3,000 = ₹10,000

#### Workmen Compensation Liability:
- Actual claim: ₹16,000

#### Adjustment in Creditors:
- Liability of ₹2,500 not likely to arise
- New value: ₹150,000 - ₹2,500 = ₹147,500

### 3. Adjusted Figures

#### Revalued Total Assets:
- Plant and Machinery: ₹140,000
- Furniture and Fixture: ₹58,500
- Stock: ₹35,000
- Bills Receivable: ₹12,000
- Debtors: ₹103,000
- Less: Provision for Doubtful Debts: ₹10,000

- Total Assets:
- ₹140,000 + ₹58,500 + ₹35,000 + ₹12,000 + (₹103,000 - ₹10,000) + ₹0 = ₹338,500

### 4. Computation of New Capital

#### Capital Contributions:
- X shares are 3/5.
- Y shares are 4/5.

##### Sharing Ratio Surrendered to Z:
- X Surrenders: 2/5 of his share.
- New Share: 3/5 - 2/5 = 1/5
- Y Surrenders: 1/5 of his share.
- New Share: 4/5 - 1/5 = 3/5

#### Total Goodwill of Z:
- Valued at ₹40,000

#### Total Capital After Admission of Z:
- X Contribution:
- Initial Capital: ₹140,000
- Plus Goodwill Part: 3/5 of ₹40,000 = ₹24,000
- Total: ₹140,000 + ₹24,000 = ₹164,000

- Y Contribution:
- Initial Capital: ₹100,000
- Plus Goodwill Part: 4/5 of ₹40,000 = ₹32,000
- Total: ₹100,000 + ₹32,000 = ₹132,000

- Remaining Goodwill Share for Z:
- Goodwill Part: 1/5 of ₹40,000 = ₹8,000
- (To make total goodwill, subtract X and Y elements):
- ₹40,000 - (₹24,000 + ₹32,000) = -[tex]\(₹8,000\)[/tex] (So, Z's effective capital: [tex]\(-(₹156,000)\)[/tex])

### Final Capital Accounts:

- Final Capital X: ₹164,000
- Final Capital Y: ₹132,000
- Final Capital Z: -₹156,000

### Summary:

[tex]\[ \text{Total Liabilities:} \quad ₹440,000 \quad (\text{including new liabilities}) \][/tex]

[tex]\[ \text{Total Initial Assets:} \quad ₹383,000 \quad \][/tex]

[tex]\[ \text{Total Revalued Assets:} \quad ₹338,500 \quad \][/tex]

[tex]\[ \text{Final Capital X:} \quad ₹164,000 \quad \][/tex]

[tex]\[ \text{Final Capital Y:} \quad ₹132,000 \quad \][/tex]

[tex]\[ \text{Final Capital Z:} \quad ₹-156,000 \quad \][/tex]

These figures illustrate the new total assets and liabilities, and capital accounts post-admission of the new partner Z after revaluation.