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M.30 Management Accounting (Section B)—ISC XII

Working Notes:
1. Calculation of New Profit-sharing Ratio:
Let the total share be = 1, Srijan’s Share = 1/4, Remaining Share = 1 – 1/4 = 3/4
Vrindan’s New Share = 3/4 × 2/3 = 2/4; Kundan’s New Share = 3/4 × 1/3 = 1/4
Thus, New Profit-Sharing Ratio of Vrindan, Kundan and Srijan = 2/4 : 1/4 : 1/4 or 2 : 1 : 1.
2. Srijan’s actual share of profit = ` 1,52,000 × 1/4 = ` 38,000.
3. Deficiency = Guaranteed Amount of Profit – Actual Share of Profit
= ` 50,000 – ` 38,000 = ` 12,000.
4. Deficiency is to be borne by Vrindan and Kundan in the ratio of 2 : 1 as follows:
Vrindan’s contribution = ` 12,000 × 2/3 = ` 8,000;
Kundan’s contribution = ` 12,000 × 1/3 = ` 4,000.
3.

Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Investment A/c 5,000 By Accrued Income A/c 500
To Gain (Profit) transferred to: By Bad Debts Recovered A/c (WN 1) 5,800
Madan’s Capital A/c 6,780 By Unexpired Insurance A/c 5,000
Mohan’s Capital A/c 4,520 11,300 By Patents A/c 5,000
16,300 16,300

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Madan Mohan Gopal Particulars Madan Mohan Gopal
` ` ` ` ` `
To Goodwill A/c 18,000 12,000 ... By Balance b/d 60,000 40,000 ...
To Balance c/d 99,780 66,520 41,575 By General Reserve A/c 30,000 20,000 ...
By Revaluation A/c 6,780 4,520 ...
By Workmen Comp.
Reserve A/c (WN 2) 6,000 4,000 ...
By Premium for
Goodwill A/c 15,000 10,000 ...
By Bank A/c (WN 3) ... ... 41,575
1,17,780 78,520 41,575 1,17,780 78,520 41,575

BALANCE SHEET OF THE RECONSTITUTED FIRM as at 1st April, 2019
Liabilities ` Assets `
Creditors 28,000 Cash at Bank (WN 4) 82,375
Workmen Compensation Claim 2,000 Debtors 65,000
Capital Accounts: Less: Provision for Doubtful Debts 5,000 60,000
Madan 99,780 Stock 30,000
Mohan 66,520 Investments 45,000
Gopal 41,575 2,07,875 Patents 15,000
Accrued Income 500
Unexpired Insurance 5,000
2,37,875 2,37,875