Raj and Dev are partners sharing profits and losses 3:2 respectively. Their position on 31 st March, 2011 is as follows:


Their Balance Sheet is as follows:

Balance Sheet as on 31st March, 2011

Liabilities
Amount
Rs.
Amount
Rs.
Assets
Amount
Rs.
Amount
Rs.
Capital A/c


Buildings

100000
Raj

100000
Furniture

10000
Dev

75000
Stock

31000
Creditors

10000
Debtors
50000

Bills Payable

5000
(-) R.D.D.
-1000
49000
General Reserve

15000
Bank Balance

15000


205000


205000
 
1. On 1st April, 2011 they admitted Manoj on following terms:


2. Building should be revalued for Rs. 1,25,000.

3. Depreciate furniture at 12 ½ % p.a. and stock at 10% p.a.

4. R.D.D. should be maintained as it is.

5. The Capital Accounts of partners should be adjusted in their new 
profit sharing ratio through bank account.

Prepare, Profit & Loss Adjustment A/c, Capital Accounts of partners and Balance Sheet of the new firm and show how you have calculated new ratio  and new capital.

Solution:

In the books of Partnership firm.

Profit and Loss Adjustment Account

Particulars
Rs.
Rs.
Particulars
Rs.
Rs.
To Furniture A/c

1250
By Buildings A/c

25000
To Stock A/c

3100



To Partners' Capital A/c
[Profit]





Raj
12390




Dev
8260
20650











25000


25000


Partner's Capital Accounts

Particulars
Raj
Dev
Manoj
Particulars
Raj
Dev
Manoj
To Balance c/d
240000
160000
100000
By Balance b/d
100000
75000
-




By General Reserve
9000
6000
-




By Bank A/c
-
-
100000




By Goodwill A/c
15000
10000
-




By Profit & Loss Adjustment A/c
12390
8260
-




By Bank A/c
(Additional capital )
103610
60740
-

240000
160000
100000

240000
160000
100000


Balance Sheet as on 1st April, 2011


Liabilities
Amount
Amount
Assets
Amount
Amount
Partners' Capital A/c


Buildings
100000

Raj
240000

(+) Appreciation
25000
125000
Dev
160000

Furniture
10000

Manoj
100000
500000
(-) Depreciation @ 12 ½ %
-1250
8750
Creditors

10000
Stock
31000

Bills Payable

5000
(-) Depreciation @ 10%
-3100
27900



Debtors
50000




(-) R.D.D.
-1000
49000



Bank Balance

304350


515000


515000

Calculation of New Ratio:

Old Ratio of Raj and Dev is 3:2

Share given to New partner Manoj is 1/5.

We know that,

New Ratio = (Balance Ratio of 1) × Old Ratio.

Raj's New Ratio = (1 – 1/5 )× 3/5 = 12/25

Dev's New Ratio = (1 – 1/5) × 2/5 = 8/25

And Manoj's New Ratio = (1/5 ) × (5/5) {To Make Base 25}


∴ Manoj's New Ratio = 5/25


∴ New ratio of Raj, Dev and Manoj is (12/25) :(8/25): (5/25)

i.e. 12:8:5.


Now, Capital balance of all partners will be adjusted in their new profit sharing ratio through bank account as follows:

Total Capital of the Firm = New partner's Capital × Reciprocal of new partner's profit sharing ratio.

∴ Total Capital of the Firm = 1,00,000 × (5/1) = Rs. 5,00,000

Now, Raj's New Capital = 5,00,000 × (12/25)  = Rs. 2,40,000

Dev's New Capital = 5,00,000 × (8/25) = Rs. 1,60,000

We Know the New Capital of Manoj  and that is Rs. 1,00,000.


∴ New capital of Raj, Dev and Manoj are Rs. 2,40,000, Rs. 1,.60,000 and Rs. 1,00,000 respectively.