Ram and Shyam are partners, sharing profits and losses in the proportion of 3/4th and - 1/4th As at 31st March, 2025, following is the Balance Sheet…
CA Foundation · Accounting · MTP · January 2026
Ram and Shyam are partners, sharing profits and losses in the proportion of 3/4th and - 1/4th As at 31st March, 2025, following is the Balance Sheet of Ram and Shyam. Balance Sheet as at 31st March, 2025 Liabilities (₹) Assets (₹) Capital accounts Cash in hand 1,15,000 Ram 2,85,000 Cash at bank 1,10,000 Shyam 1,55,000 4,40,000 Sundry Debtors 1,60,000 Creditors 3,75,000 Stock 2,00,000 General reserve 60,00 Bills receivable 30,000 Land and building 2,50,000 Office furniture 10,000 8,75,000 8,75,000 They agreed to take Mohan into Partnership on 1st April, 2025 on the following terms: (i) Goodwill is to be valued at 2,00,000. Mohan is unable to bring cash for his share of goodwill. So, it was decided that due credit for goodwill be given to Ram and Shyam for their sacrifice in favour of Mohan through Mohan’s current account. (ii) Mohan pays - 1,40,000 as his capital for 1/5th share in the future profits. (iii) Stock and Furniture to be reduced by 10%. (iv) A provision @5% for doubtful debts to be created on debtors. (v) Land and building to be appreciated by 20%. (vi) Capital Accounts of the partners be readjusted on the basis of their profit sharing arrangement and any excess or deficiency is to be transferred to their Current Accounts. Prepare Revaluation Account and Partners Capital Accounts .
Suggested Answer and Working Notes:
Revaluation Account Particulars Amount ₹ Particulars Amount ₹ To Furniture 1,000 By Land and Building 50,000 To Stock 20,000 To Provision for doubtful debts 8,000 To Revaluation Profit Ram (₹ 21,000 x 3/4) 15,750 Shyam (₹ 21,000 x 1/4) 5,250 21,000 50,000 50,000 Partners’ Capital Accounts Ram ₹ Shyam ₹ Mohan ₹ Ram ₹ Shyam ₹ Mohan ₹ To Shyam’s Current A/c (bal fig) - 45,250 - By Balance b/d 2,85,000 1,55,000 – To Balance c/d 4,20,000 1,40,000 1,40,000 By General reserve 45,000 15,000 - By Revaluation Profit 15,750 5,250 By Bank A/c - - 1,40,000 By Mohan’s Current A/c (Goodwill) 30,000 10,000 - By Ram’s Current A/c (bal fig) 44,250 - - 4,20,000 1,85,250 1,40,000 4,20,000 1,85,250 1,40,000 Working Notes: 1. Calculation of total Capital Mohan’s capital contribution of 1,40,000 consists of1/5 th of capital. Therefore, total capital of firm should be - 1,40,000 x 5 = 7,00,000 Hence,5,60,000 (₹ 7,00,000 -1,40,000) will be shared by Ram and Shyam in the ratio of3:1 i.e., Ram’s capital - 4,20,000 and Shyam’s capital - 1,40,000 2. Calculation of New Profit Sharing ratio Ram = 3/4 x 4/5 = 12/20 = 3/5 Shyam = 1/4 X 4/5 = 4/20 = 1/5 Mohan = 1/5= 4/20 = 1/5 or - 3 :1 :1 OR Calculation of sacrificing ratio Partners New share Old share Sacrifice Gain Ram 3/5 3/4 -3/20 - Shyam 1/5 1/4 -1/20 - Mohan 4/20 - - 1/5 3. Goodwill Mohan’s share in Goodwill = 40,000 (₹ 2,00,000x 1/5) is adjusted through Mohan’s Current Account. Account because capitals of old partners are also adjusted on the basis of Mohan’s Capital. Therefore, Journal entry for goodwill will be Mohan’s Current A/c Dr.40,000 To Ram’s Capital A/c - 30,000 To Shyam’s Capital A/c - 10,000
Topics: Admission of a New Partner
Related Questions in this Topic
- X and Y are partners in a firm, sharing Profits and Losses in the ratio of 3: 2. The Balance Sheet of X and Y as on 31st...
- The Balance Sheet of a Partnership Firm M/s Batra & Associates consisted of two partners Rohan and Kunal who were sharin...
- X and Y are partners in a LLP namely Alpha LLP sharing profits and losses in the ratio of 2:1. The Balance Sheet of the ...
- Ram and Shyam are partners sharing profits and losses in the ratio of 3:2. The Balance Sheet of the firm as at 31 st Ma...
- Alpha and Beta are partners, sharing profits and losses in the proportion of 3/4 th and 1/4th As at 31st March, 2025, f...