Page 142 - DEBKVOL-1

Chapter 6 Retirement of a Partner 6.9
.
(iii) Provision for Doubtful Debts is increased to 10%.
(iv) Investments are sold for ` 2,30,000.
(v) Claim on account of Workmen Compensation is ` 12,000.
(vi) Amount due to B is to be settled on the following basis:
50% on retirement and the balance 50% within one year.
(vii) The capital of the newly constituted firm is fixed at ` 6,00,000 to be divided among A and
C in the profit-sharing ratio. Adjustment is to be made in cash.

Calculate new profit-sharing ratio and prepare Revaluation Account and Partners’ Capital
Accounts.

Solution:
(i) Calculation of New Profit-sharing Ratio:
B’s share is 3/8 which he is surrendering in favour of A and C in the ratio of 4 : 5.
Therefore A will get 4/9 of 3/8 = 1/6 and C will get 5/9 of 3/8 = 5/24.
Total share of A in the new firm will be: 4/8 + 1/6 = 16/24 or 2/3.
Total share of C in the new firm will be: 1/8 + 5/24 = 8/24 or 1/3.
New Profit-sharing Ratio = 2 : 1.

(ii) Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 8,000 By Stock A/c 15,000
To Motor Car A/c (` 1,50,000 – ` 70,000) 80,000 By Building A/c 23,000
To Gain (Profit) transferred to: By Investments A/c 1,30,000
A’s Capital A/c 40,000 (` 2,30,000 – ` 1,00,000)
B’s Capital A/c 30,000
C’s Capital A/c 10,000 80,000
1,68,000 1,68,000

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To B’s Capital A/c 36,000 ... 45,000 By Balance b/d 2,00,000 3,00,000 2,00,000
(WN 1) By General Reserve A/c 40,000 30,000 10,000
To Cash A/c ... 2,22,000 ... By A’s Capital A/c ... 36,000 ...
(50% of dues) By C’s Capital A/c ... 45,000 ...
To B’s Loan A/c ... 2,22,000 ... By Revaluation A/c 40,000 30,000 10,000
To Balance c/d 4,00,000 ... 2,00,000 —Gain (Profit)
By Workmen Compensation
Reserve A/c (WN 3) 4,000 3,000 1,000
By Bank A/c (WN 2) 1,52,000 ... 24,000
4,36,000 4,44,000 2,45,000 4,36,000 4,44,000 2,45,000

Working Notes:
1. B sold his share to A and C in the ratio of 4 : 5. The consideration of ` 36,000 + ` 45,000 will be credited to his
Capital Account and the respective amount will be debited to A’s Capital Account and C’s Capital Account.