Page 106 - DEBKVOL-1

5.22 Double Entry Book Keeping—CBSE XII

Working Notes:
1. Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A B C Particulars A B C
` ` ` ` ` `
To Revaluation A/c (Loss) 26,600 11,400 ... By Balance b/d 50,000 40,000 ...
(WN 4) By Premium for Goodwill A/c 7,000 3,000 ...
To Cash A/c (Surplus) ... 7,000 ... By Reserve A/c 5,600 2,400 ...
(Balancing Figure) By Bank Overdraft A/c 20,000 ... ...
To Balance c/d (WN 2) 63,000 27,000 30,000 By Cash A/c ... ... 30,000
By Cash A/c (Deficit) 7,000 ... ...
(Balancing Figure)
89,600 45,400 30,000 89,600 45,400 30,000

2. Calculation of New Profit-sharing Ratio and Proportionate Capital:
C joins the firm for 1/4th share of profits. Therefore, 3/4th (i.e., 1 – 1/4) will be shared by A and B in the
ratio of 7 : 3.
A’s new share = 3/4 × 7/10 = 21/40; B’s new share = 3/4 × 3/10 = 9/40; C’s share = 1/4 or 10/40.
∴ New Profit-sharing Ratio = 21 : 9 : 10.
Total Capital of the new firm on the basis of C’s Capital = ` 30,000 × 4/1 = ` 1,20,000.
A’s Capital in New Firm = ` 1,20,000 × 21/40 = ` 63,000;
B’s Capital in New Firm = ` 1,20,000 × 9/40 = ` 27,000.
3. The partners decide to retain 20% of Reserve as Contingency Reserve. Therefore, the balance, i.e.,
` 8,000 is distributed between the old partners in their old profit-sharing ratio.
4. Dr. CASH ACCOUNT Cr.
Particulars ` Particulars `

To Balance b/d 36,000 By B’s Capital A/c 7,000
To C’s Capital A/c 30,000 By Balance c/d 76,000
To Premium for Goodwill A/c 10,000
To A’s Capital A/c 7,000
83,000 83,000

5. Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `

To Stock A/c (` 50,000 × 40/100)* 20,000 By Loss transferred to:
To Furniture A/c (` 30,000 × 60/100)** 18,000 A‘s Capital A/c (` 38,000 × 7/10) 26,600
B’s Capital A/c (` 38,000 × 3/10) 11,400 38,000
38,000 38,000
* Stock-in-Trade is to be reduced by 40% means deduct 40% of the book value of stock. Thus, stock is to be
shown at 60% of the book value.
** Furniture is to be reduced to 40% means 60% of the book value of furniture is to be written off.