Alpha and Beta are partners, sharing profits and losses in the proportion of 3/4 th and 1/4th As at 31st March, 2025, following is the Balance Sheet…

CA Foundation · Accounting · MTP · April 2025
Alpha and Beta are partners, sharing profits and losses in the proportion of 3/4 th and 1/4th As at 31st March, 2025, following is the Balance Sheet of Alpha and Beta. Balance Sheet as at 31 st March, 2025 Liabilities (₹) Assets (₹) Capital accounts Land and building 7,50,000 Alpha 8,55,000 Office furniture 30,000 Beta 4,65,000 13,20,000 Sundry Debtors 4,80,000 General reserve 1,80,000 Stock 6,00,000 Creditors 11,25,000 Bills receivable 90,000 Cash in hand 3,45,000 Cash at bank 3,30,000 26,25,000 26,25,000 They agreed to take Gama into Partnership on 1st April, 2025 on the following terms: (i) Goodwill is to be valued at 6,00,000. Gama is unable to bring cash for his share of goodwill. So, it was decided that due credit for goodwill be given to Alpha and Beta for their sacrifice in favour of Gama through Gama’s current account. (ii) Gama pays - 4,20,000 as his capital for 1/5 th 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 3,000 By Land and Building 1,50,000 To Stock 60,000 To Provision for doubtful debts 24,000 To Revaluation Profit Alpha (63,000 x 3/4) 47,250 Beta (63,000 x 1/4) 15,750 63,000 1,50,000 1,50,000 Partners’ Capital Accounts Particulars Alpha ₹ Beta ₹ Gama ₹ Particulars Alpha ₹ Beta ₹ Gama ₹ To Beta’s Current A/c (bal fig) - 1,35,750 - By Balance b/d 8,55,000 4,65,000 - To Balance c/d 12,60,000 4,20,000 4,20,000 By General reserve 1,35,000 45,000 - By Revaluation Profit 47,250 15,750 - By Bank A/c - - 4,20,000 By Gama’s Current A/c (Goodwill) 90,000 30,000 - By Alpha’s Current A/c (bal fig) 1,32,750 - - 12,60,000 5,55,750 4,20,000 12,60,000 5,55,750 4,20,000

Topics: Admission of a New Partner

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