Page 85 - ISCDEBK-12

4.12 Double Entry Book Keeping (Section A)—ISC XII

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars A B C Particulars A B C
` ` ` ` ` `
To B‘s Capital A/c (WN 3) 3,000 ... 3,000 By Balance b/d 40,000 21,000 20,000
To B’s Loan A/c ... 40,550 ... By General Reserve A/c 9,000 6,000 3,000
To Bank A/c (WN 2) 3,258 ... ... By A’s Capital A/c (WN 3) ... 3,000 ...
To Balance c/d (WN 2) 54,067 ... 27,033 By C’s Capital A/c (WN 3) ... 3,000 ...
By Revaluation A/c (Profit) 11,325 7,550 3,775
By Bank A/c (WN 2) ... ... 3,258
60,325 40,550 30,033 60,325 40,550 30,033

BALANCE SHEET as at 1st April, 2018 (After B’s Retirement)
Liabilities ` Assets `
Sundry Creditors 12,500 Cash at Bank 1,500
Loan—B 40,550 Sundry Debtors 15,000
Capital A/cs: Less: Provision for Doubtful Debts 750 14,250
A 54,067 Stock 10,000
C 27,033 81,100 Investments 7,500
Office Equipments (` 14,000 + ` 1,900) 15,900
Furniture 10,000
Building 75,000
1,34,150 1,34,150

Working Notes:
1. The typewriter purchased was wrongly debited to Office Expense Account, but should have been debited
to Office Equipments Account. In effect, depreciation for 6 months (from 1st October, 2017 and 31st March,
2018) has not been provided. Therefore, ` 2,000 – ` 100 (depreciation for 6 months) = ` 1,900 should be
debited (added) to Office Equipments Account and also credited to Revaluation Account.
2. Ascertainment of required Closing Capital:
Adjusted capitals of A and C after B’s retirement are: `
A (` 40,000 + ` 9,000 + ` 11,325 – ` 3,000) 57,325
C (` 20,000 + ` 3,000 + ` 3,775 – ` 3,000) 23,775
Total capital of the new firm 81,100
Thus, ` 81,100 will be shared by A and C in their new ratio, i.e., 2 : 1
A’s New Capital = ` 54,067; and C’s New Capital = ` 27,033.
In effect, A will withdraw ` 3,258 (i.e., ` 57,325 – ` 54,067) and C will bring ` 3,258 (i.e., ` 27,033 – ` 23,775).
3. Adjustment of Goodwill:
(i) Calculation of Gaining Ratio:
Gain of a Partner = New Share – Old Share
2 3 43- 1 1 1 21- 1
A’s Gain = - = = ; C’s Gain = - = = ;
3 6 6 6 3 6 6 6
1 1
Gaining Ratio of A and C = : = 11 : .
6 6
(ii) Firm’s Goodwill = ` 18,000
B’s Share of Goodwill = ` 18,000 × 2/6 = ` 6,000, which is to be contributed by A and C in their gaining
ratio, i.e., 1 : 1.
Thus, A’s Contribution = ` 6,000 × 1/2 = ` 3,000; and C’s Contribution = ` 6,000 × 1/2 = ` 3,000.