The Balance Sheet of a Partnership Firm M/s Batra & Associates consisted of two partners Rohan and Kunal who were sharing Profits and Losses in…

CA Foundation · Accounting · MTP · September 2026
The Balance Sheet of a Partnership Firm M/s Batra & Associates consisted of two partners Rohan and Kunal who were sharing Profits and Losses in the ratio of 5:3 respectively. The position as on 31-03-2026 was as follows: Liabilities ₹ Assets ₹ Rohan's Capital 8,20,000 Land & Building 7,60,000 Kunal's Capital 6,60,000 Plant & Machinery 3,40,000 Profit & Loss A/c 2,24,000 Furniture 2,18,960 Trade Creditors 1,09,600 Stock 2,90,520 Sundry debtor 1,20,000 Cash at Bank 84,120 18,13,600 18,13,600 On the above date, Rohit was admitted as a partner on the following terms: (a) Rohit should get 1/5th of share of profits. (b) Rohit brought ₹ 4,80,000 as his capital and ₹ 64,000 for his share of Goodwill. (c) Plant and Machinery would be depreciated by 15% and Land & Buildings would be appreciated by 40%. (d) A provision for doubtful debts to be created at 5% on sundry debtors. (e) An unrecorded liability of ₹ 12,000 for repair to Buildings would be recorded in the books of accounts. (f) Immediately after Rohit's admission, Goodwill brought by him would be adjusted among old partners. Thereafter, the capital accounts of old partner would be adjusted through the current accounts of partnership in such a manner that the capital accounts of all the partnership would be in their profit-sharing ratio. Prepare Revaluation A/c, Capital Accounts of the partners, new profit-sharing ratio and Balance Sheet of the Firm after the admission of Rohit.

Suggested Answer and Working Notes:

Revaluation Account ₹ ₹ To Plant & Machinery (3,40,000 x 15%) 51,000 By Land & Building A/c 3,04,000 To Provision for Bad & Doubtful Debts (1,20,000 x 5%) 6,000 To Outstanding Repairs to Building 12,000 To Rohan's Capital A/c (5/8) 1,46,875 To Kunal's Capital A/c (3/8) 88,125 3,04,000 3,04,000 Capital Accounts of Partners Rohan Kunal Rohit Rohan Kunal Rohit To Rohan's Capital A/c 40,000 By Balance b/d 8,20,000 6,60,000 To Kunal's Capital A/c 24,000 By Revaluation A/c 1,46,875 88,125 To Kunal's Current A/c 1,36,125 By Profit & Loss A/c 1,40,000 84,000 To Balance c/d 12,00,000 7,20,000 4,80,000 By Bank 4,80,000 By Rohit's Capital A/c 40,000 24,000 By Rohan's Current A/c 53,125 12,00,000 8,56,125 5,44,000 12,00,000 8,56,125 5,44,000 Calculation of New Profit Sharing Ratio and gaining ratio: Rohit's Share of Profit = 1/5 = 2/10 Remaining Share = 1 – 1/5 = 4/5 Rohan's Share = 5/8 x 4/5 = 20/40 = 5/10 Kunal's Share = 3/8 x 4/5 = 12/40 = 3/10 New Profit sharing Ratio = 5:3:2 Gaining ratio = 5:3 (same as old profit sharing ratio among old partners) Balance sheet of Batra & Associates as on 31.3.2026 Liabilities ₹ Assets ₹ Capital Accounts: Land & Buildings 10,64,000 Rohan 12,00,000 Plant & Machinery 3,40,000 Kunal 7,20,000 Less: Depreciation 51,000 2,89,000 Rohit 4,80,000 24,00,000 Furniture 2,18,960 Kunal's Current A/c 1,36,125 Stock 2,90,520 Trade Creditors 1,09,600 Sundry Debtors 1,20,000 Outstanding Repairs to Building 12,000 Less: Provision 6,000 1,14,000 Cash at Bank 6,28,120 Rohan's current A/c 53,125 26,57,725 26,57,725 Working Note: Required Balance of Capital Accounts Rohit's Capital after writing off Goodwill = 5,44,000 – 64,000 = 4,80,000 Rohit's Share of Profit = 1/5 Thus, Capital of the firm shall be = 4,80,000 x 5 = 24,00,000 Rohan's Capital = 24,00,000 x 5/10 = 12,00,000 and Kunal's Capital = 24,00,000 x 3/10 = 7,20,000

Topics: Admission of a New Partner

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