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### Problem 7: Homework

Pujari and Purohit are equal partners. Their Balance Sheet as on 31.03.2017 was as follows:

#### Balance Sheet as on 31.03.2017

[tex]\[
\begin{array}{|c|c|c|c|}
\hline
\text{Liabilities} & \text{Rs} & \text{Assets} & \text{Rs} \\
\hline
\text{Bills Payable} & 66,000 & \text{Cash} & 1,800 \\
\hline
\text{Sundry Creditors} & 12,800 & \text{Stock} & 23,600 \\
\hline
\text{Capital Accounts:} & & \begin{array}{l}
\text{Sundry Debtors} 25,000 \\
\text{Less: PDD} 5,000 \\
\end{array} & 20,000 \\
\hline
\text{Pujari} & 40,000 & \text{Furniture} & 4,000 \\
\hline
\text{Purohit} & 30,000 & \text{Buildings} & 40,000 \\
\hline
& 148,800 & & 89,400 \\
\hline
\end{array}
\][/tex]

On 01.04.2017, they admit Pandit as a new partner and offered him 1/4 share in the profit on the following terms:

a) He should bring in ₹ 30,000 as capital and ₹ 18,000 towards goodwill.
b) Half of the goodwill should be withdrawn by the old partners.
c) Stock and furniture to be depreciated by 10% each.
d) PDD is reduced by ₹ 3,000.

Prepare:
i) Revaluation Account
ii) Partners' Capital Accounts
iii) New Balance Sheet of the firm

(Ans: Profit on Revaluation Account ₹ 240, Capital Account: Pujari ₹ 44,620, Purohit ₹ 34,620, Pandit ₹ 30,000, Cash Account ₹ 40,800. Balance Sheet total ₹ 1,28,640)



Answer :

GinnyAnswer
Let's break down the problem and solve it step-by-step.

### Initial Balance Sheet as of 31.03.2017
Below is the provided balance sheet:

- Liabilities
- Bills Payable: ₹ 66,000
- Sundry Creditors: ₹ 12,800
- Capital Accounts:
- Pujari: ₹ 40,000
- Purohit: ₹ 30,000
- Total Liabilities: ₹ 148,800

- Assets
- Cash: ₹ 1,800
- Stock: ₹ 23,600
- Sundry Debtors: ₹ 25,000
- Less: PDD: ₹ 5,000
- Furniture: ₹ 4,000
- Buildings: ₹ 40,000
- Total Assets: ₹ 89,400

There seems to be a typo in the problem. Let’s correct it based on the total liabilities showing and maintain the balance:
- Sundry Debtors = ₹ 25,000
- Less: PDD = ₹ 5,000
- Net Sundry Debtors = ₹ 20,000

### Step 1: Admission of Pandit
Pandit brings in:
- Capital: ₹ 30,000
- Goodwill: ₹ 18,000

Half of the goodwill is withdrawn by the old partners.

### Step 2: Adjustments
1. Goodwill Withdrawal:
- Total Goodwill = ₹ 18,000
- Half withdrawn by old partners = ₹ 9,000
- Amount per partner (Pujari and Purohit) = ₹ 4,500 each

2. Depreciation Adjustments:
- Stock depreciated by 10%: [tex]\( 23,600 \times 10\% = 2,360 \)[/tex]
- New Stock Value: [tex]\( 23,600 - 2,360 = 21,240 \)[/tex]
- Furniture depreciated by 10%: [tex]\( 4,000 \times 10\% = 400 \)[/tex]
- New Furniture Value: [tex]\( 4,000 - 400 = 3,600 \)[/tex]

3. PDD Adjustment:
- Initial PDD: ₹ 5,000
- Reduced by ₹ 3,000
- New PDD Value: ₹ 2,000

### Step 3: Revaluation Account
- Debit Side:
- Depreciation on Stock: ₹ 2,360
- Depreciation on Furniture: ₹ 400

- Credit Side:
- Reduction in PDD: ₹ 3,000

Revaluation Profit Calculation:
- Revaluation Profit: [tex]\(₹ (3,000 - (2,360 + 400)) = ₹ 240\)[/tex]

### Step 4: Partners' Capital Accounts
#### Old Capital Balances:

- Pujari: ₹ 40,000
- Purohit: ₹ 30,000

#### Additions

- Pujari
- 50% of Goodwill withdrawn: [tex]\(₹ 4,500\)[/tex]
- Share of Revaluation Profit (50%): ₹ 120
- New Capital:
- [tex]\(₹ 40,000 + ₹ 4,500 + ₹ 120 = ₹ 44,620\)[/tex]

- Purohit
- 50% of Goodwill withdrawn: [tex]\(₹ 4,500\)[/tex]
- Share of Revaluation Profit (50%): ₹ 120
- New Capital:
- [tex]\(₹ 30,000 + ₹ 4,500 + ₹ 120 = ₹ 34,620\)[/tex]

- Pandit:
- Capital Contribution: ₹ 30,000

### Step 5: New Balance Sheet as on 01.04.2017

- Assets
- Cash: ₹ 1,800 + ₹ 30,000 + ₹ 18,000 - ₹ 9,000 = ₹ 40,800
- Stock: ₹ 21,240
- Sundry Debtors: ₹ 25,000 - ₹ 2,000 = ₹ 23,000
- Furniture: ₹ 3,600
- Buildings: ₹ 40,000

Total Assets: ₹ 128,640

- Liabilities
- Bills Payable: ₹ 66,000
- Sundry Creditors: ₹ 12,800
- Capital Accounts:
- Pujari: ₹ 44,620
- Purohit: ₹ 34,620
- Pandit: ₹ 30,000

Total Liabilities and Capital: ₹ 128,040

### Summary of Solutions:

1. Revaluation Profit: ₹ 240
2. Capital Accounts:
- Pujari: ₹ 44,620
- Purohit: ₹ 34,620
- Pandit: ₹ 30,000
3. Cash Account: ₹ 40,800
4. Balance Sheet Total: ₹ 128,640