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

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Kushal Kumar Kavita Particulars Kushal Kumar Kavita
` ` ` ` ` `
To Revaluation A/c (Loss) 3,000 1,000 1,000 By Balance b/d 3,00,000 2,80,000 3,00,000
To Kavita’s Capital A/c 6,000 2,000 ... By General Reserve A/c* 12,000 4,000 24,000
(Goodwill) By Kushal’s Capital A/c ... ... 6,000
To Cash A/c (10%) ... ... 33,100 (Goodwill)
To Kavita’s Loan A/c (90%) ... ... 2,97,900 By Kumar’s Capital A/c ... ... 2,000
(Goodwill)
To Kumar’s Current A/c ... 1,35,000 ... By Kushal’s Current A/c 1,35,000 ... ...
(Bal. Fig.) (Bal. Fig.)
To Balance c/d (WN 1) 4,38,000 1,46,000 ...
(Adjusted Capital)
4,47,000 2,84,000 3,32,000 4,47,000 2,84,000 3,32,000

* Excess General Reserve = Existing General Reserve – Required in new firm = ` 1,20,000 – ` 80,000 = ` 40,000.
Out of ` 40,000, Kavita’s share in General Reserve ` 24,000 (i.e., ` 1,20,000 × ` 1/5) is credited to her
Capital Account, remaining ` 16,000 is distributed between Kushal and Kumar in the ratio of 3 : 1.

BALANCE SHEET OF THE RECONSTITUTED FIRM
as at 1st April, 2018
Liabilities ` Assets `
Creditors 1,20,000 Cash (WN 2) 36,900
Bills Payable 1,80,000 Debtors 2,00,000
Kavita’s Loan A/c 2,97,900 Less: Provision for Doubtful Debts 15,000 1,85,000
General Reserve 80,000 Stock 2,20,000
Capital A/cs: Furniture 1,00,000
Kushal 4,38,000 Building 2,00,000
Kumar 1,46,000 5,84,000 Land 5,20,000
Kumar’s Current A/c 1,35,000 Kushal’s Current A/c 1,35,000
13,96,900 13,96,900

Working Notes:
1. Calculation of Adjusted Capital of Remaining Partners in the New Firm: `
Kushal’s Capital before adjustment [` 3,00,000 + ` 12,000 – ` 3,000 – ` 6,000] 3,03,000
Kumar’s Capital before adjustment [` 2,80,000 + ` 4,000 – ` 1,000 – ` 2,000] 2,81,000
Total Capital 5,84,000
Adjusted Capital of Kushal = ` 5,84,000 × = ` 4,38,000;

Adjusted Capital of Kumar = ` 5,84,000 × = ` 1,46,000.

2. Dr. CASH ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 70,000 By Kavita’s Capital A/c 33,100
By Balance c/d 36,900
70,000 70,000