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21. The Balance Sheet of Bhavesh and Chandra, who share profits and losses in the ratio of [tex]$3:1$[/tex], as at [tex]31^{\text{st}}[/tex] March, 2018 was as follows:

Balance Sheet as on [tex]31^{\text{st}}[/tex] March, 2018

\begin{tabular}{|l|r|lr|r|}
\hline
\multicolumn{2}{|c|}{\textbf{Liabilities}} & \multicolumn{2}{c|}{\textbf{Assets}} \\
\hline
Creditors & 20,000 & Bank & 20,000 \\
Workmen's Compensation Reserve & 30,000 & Debtors & 13,000 \\
General Reserve & 24,000 & Less: Provision & 1,000 & 12,000 \\
Bhavesh's Capital & 32,000 & Bills Receivable & 10,000 \\
Chandra's Capital & 28,000 & Stock & 20,000 \\
& & Land \& Building & 30,000 \\
& & Goodwill & 42,000 \\
\hline
Total & 1,34,000 & Total & 1,34,000 \\
\hline
\end{tabular}

Alia was admitted on 1.4.2018 for a [tex]$\frac{1}{5}$[/tex] share on the following terms:

1. Alia shall bring Rs. 20,000 for her share of Goodwill and the necessary amount for her share of Capital in cash.
2. Anju, an old customer whose account was written off as bad, has paid Rs. 400 in cash in full settlement of his dues.
3. The market value of Land and Building to be taken as Rs. 40,000.
4. Workmen's Compensation Reserve is to be increased by Rs. 10,000.
5. Unaccounted Accrued Incomes of Rs. 200 are to be accounted for.
6. The capitals of all partners are to be in the new profit-sharing ratio, taking the old partners' total capital as the base after adjustment. Actual cash is to be paid off or brought in by the partners for adjusting their Capital Accounts.



Answer :

GinnyAnswer
To address the problem posed, let’s go through the necessary steps one by one.

### Step 1: Calculate Total Liabilities and Total Assets as of March 31, 2018

Using the figures from the balance sheet:

Total Liabilities
- Creditors: Rs. 20,000
- Workmen's Compensation Reserve: Rs. 30,000
- General Reserve: Rs. 24,000
- Bhavesh’s Capital: Rs. 32,000
- Chandra’s Capital: Rs. 28,000

Total Liabilities: Rs. 20,000 + Rs. 30,000 + Rs. 24,000 + Rs. 32,000 + Rs. 28,000 = Rs. 134,000

Total Assets
- Bank: Rs. 20,000
- Debtors: Rs. 13,000 – Rs. 1,000 (Provision) = Rs. 12,000
- Bills Receivable: Rs. 10,000
- Stock: Rs. 20,000
- Land & Building: Rs. 30,000
- Goodwill: Rs. 42,000

Total Assets: Rs. 20,000 + Rs. 12,000 + Rs. 10,000 + Rs. 20,000 + Rs. 30,000 + Rs. 42,000 = Rs. 134,000

Match confirmed: Both total liabilities and total assets are Rs. 134,000.

### Step 2: Adjustments for Alia's Admission
Alia is coming in with a 1/5 share.

#### (1) Goodwill Contribution
Alia brings Rs. 20,000 as her share of goodwill.

#### (2) Payment from Old Customer
An old customer, Anju, pays off Rs. 400 in cash. This amount increases the bank balance.

#### (3) Revaluation of Land & Building
The market value of the land and building is now Rs. 40,000 instead of the previously recorded Rs. 30,000. This is a Rs. 10,000 increase.

#### (4) Increase in Workmen's Compensation Reserve
The workmen’s compensation reserve is increased by Rs. 10,000, bringing it to Rs. 40,000.

#### (5) Account for Unaccounted Accrued Income
Recognize an unaccounted accrued income of Rs. 200.

### Step 3: Calculate New Capital Requirements
Calculation of New Workmen’s Compensation Reserve:
Old reserve: Rs. 30,000
Increase: Rs. 10,000
New reserve: Rs. 40,000

Calculation for New Total Capital:
- Original Bhavesh's Capital: Rs. 32,000
- Original Chandra's Capital: Rs. 28,000
- Total old capital: Rs. 32,000 + Rs. 28,000 = Rs. 60,000

Considering:
- Alia’s goodwill contribution: Rs. 20,000
- Increase in land and building value: Rs. 10,000
- Increase in workmen's compensation reserve: Rs. 10,000
- Unaccounted incomes: Rs. 200
- Old customer’s payment: Rs. 400

New Total Capital = 60,000 + 20,000 + 10,000 + 10,000 + 200 + 400 = Rs. 100,600

### Step 4: Determine New Profit Sharing Ratio and Capital Contributions
Alia will join with a 1/5 share:
Bhavesh: 3 parts
Chandra: 1 part
Alia: 1 part
The new total ratio is 3 (Bhavesh) + 1 (Chandra) + 1 (Alia) = 5

Calculate each partner's new capital based on the new profit-sharing ratio (3:1:1):
- Bhavesh’s new capital: [tex]\( \frac{3}{5} \times 100,600 = Rs. 60,360 \)[/tex]
- Chandra’s new capital: [tex]\( \frac{1}{5} \times 100,600 = Rs. 20,120 \)[/tex]
- Alia’s new capital: [tex]\( \frac{1}{5} \times 100,600 - 20,000 \ (goodwill) = Rs. 120 \)[/tex] (including her initial Rs. 20,000 contribution for goodwill)

### Step 5: Determine Capital Adjustments
Bhavesh:
Old capital: Rs. 32,000
New capital: Rs. 60,360
Bhavesh needs to bring in: Rs. 60,360 - Rs. 32,000 = Rs. 28,360

Chandra:
Old capital: Rs. 28,000
New capital: Rs. 20,120
Chandra will withdraw: Rs. 28,000 - Rs. 20,120 = Rs. 7,880

Alia:
Initial capital to bring: Rs. 20,000 (goodwill)
New capital required: Rs. 120
Alia gets back: Rs. 20,000 - Rs. 120 = Rs. 19,880

### Final Summary:
- Bhavesh needs to bring Rs. 28,360 cash.
- Chandra will withdraw Rs. 7,880 cash.
- Alia will withdraw Rs. 19,880 cash after adjusting her Rs. 20,000 contribution towards goodwill.

In conclusion, all necessary adjustments ensure the partners' capitals are aligned with the new profit-sharing ratio.

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