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M.94 An Aid to Accountancy—CBSE XII

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars P Q R Particulars P Q R
` ` ` ` ` `
To Q’s Capital A/c (WN 2) 2,10,000 ... 30,000 By Balance b/d 9,00,000 8,40,000 9,00,000
To Q’s Loan A/c ... 12,32,000 ... By General Reserve A/c 2,52,000 72,000 36,000
To R’s Current A/c ... ... 6,75,000 By Workmen Com-
(Balancing Figure) pensation Reserve A/c 2,80,000 80,000 40,000
To Balance c/d (WN 3) 18,97,000 ... 2,71,000 By P’s Capital A/c (WN 2) ... 2,10,000 ...
By R’s Capital A/c (WN 3) ... 30,000 ...
By P’s Current A/c (Bal. Fig.) 6,75,000 ... ...
21,07,000 12,32,000 9,76,000 21,07,000 12,32,000 9,76,000

BALANCE SHEET OF THE NEW FIRM as at 1st April, 2018
Liabilities ` Assets `
Creditors 3,60,000 Land (` 12,00,000 + ` 3,60,000) 15,60,000
Workmen Compensation Claim 1,40,000 Building (` 9,00,000 – ` 3,00,000) 6,00,000
Q’s Loan 12,32,000 Furniture (` 3,60,000 – ` 60,000) 3,00,000
R’s Current A/c 6,75,000 Stock 6,60,000
P’s Capital 18,97,000 Debtors 6,00,000
R’s Capital 2,71,000 21,68,000 Less: Provision for Doubtful Debts 30,000 5,70,000
Cash at Bank 2,10,000
P’s Current A/c 6,75,000
45,75,000 45,75,000

Working Notes:
1. After adjusting liability for Workmen’s Compensation ` 1,40,000, excess balance of Workmen Compensation
Reserve of ` 4,00,000 is distributed among the partners in their profit sharing ratio, i.e., 7 : 2 : 1.
2. Q’s share of Goodwill = ` 12,00,000 × 2/10 = ` 2,40,000, contributed by P and R in their gaining ratio, i.e., 7 : 1.
Thus, P’s contribution = ` 2,40,000 × 7/8 = ` 2,10,000; R’s contribution = ` 2,40,000 × 1/8 = ` 30,000.
3. Capital Adjustment between P and R in the New Firm : `
P’s Adjusted Capital (` 9,00,000 + ` 2,52,000 + ` 2,80,000 – ` 2,10,000) 12,22,000
R’s Adjusted Capital (` 9,00,000 + ` 36,000 + ` 40,000 – ` 30,000) 9,46,000
Combined Adjusted Capital of P and R (Total Capital of New Firm) 21,68,000
P’s Capital in the New Firm = ` 21,68,000 × 7/8 = ` 18,97,000;
R’s Capital in the New Firm = ` 21,68,000 × 1/8 = ` 2,71,000.
Or
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `

To Plant and Machinery A/c 10,000 By Land and Building A/c 25,000
To Gain (Profit) transferred to: By Provision for Doubtful Debts A/c 400
A’s Capital A/c 12,450 By Sundry Creditors A/c 1,200
B’s Capital A/c 4,150 16,600
26,600 26,600