Project 10

Pradeep and Dhanraj were partners in a firm sharing profits in the ratio of 3 : 1. Their Balance
Sheet on 31st March, 2021 was:

Liabilities ` Assets `
Creditors 30,000 Cash 4,000
Bills Payable 1,000 Debtors 50,000
Reserve Fund 16,000 Less: Provision for Doubtful 5,000 45,000
Debts
Outstanding Salary 3,000 Stock 30,000
Capital A/cs: Bills Receivable 10,000
Pradeep 60,000 Patents 1,000
Dhanraj 20,000 80,000 Machinery 40,000

1,30,000 1,30,000

They admitted Leander as a new partner on this date. New profit-sharing ratio is agreed as 3 : 2
: 3. Leander brings in proportionate capital after the following adjustments:
(a) Leander brings ` 16,000 as his share of goodwill.
(b) Provisions for Doubtful Debts is to be reduced by ` 2,000.
(c) There is an old Printer valued at ` 2,400. It does not appear in the books of the firm. It is
now to be recorded.
(d) Patents are valueless.
Prepare Revaluation Account, Capital Accounts and opening Balance Sheet of Pradeep, Dhanraj
and Leander.
Answer:
Revaluation Account
Dr. Cr.
Particulars Amount Particulars Amount
` `
Patents 1,000 Provision for Doubtful 2,000
Debts
Profit on transferred Typewriter 2,400
to
Pradeep Capital 2,550
Dhanraj Capital 850
4,400 4,400
 Partners’ Capital Accounts
Dr. Cr.
Particulars Pradeep Dhanraj Leander Particulars Pradeep Dhanraj Leander
Balance b/d 60,000 20,000
Balance c/d 90,550 24,850 Reserve Fund 12,000 4,000
(after Revaluation 2,550 850
adjustments)
Premium for 16,000
Goodwill
90,550 24,850 90,550 24,850
Balance c/d 90,550 24,850
Cash 69,240
Balance c/d 90,550 24,850 69,240
90,550 24,850 69,240 90,550 24,850 69,240

Balance Sheet
as on March 31, 2021 after Leander’s admission
Liabilities Amount Assets Amount
` `
Creditors 30,000 Debtors 50,000
Bills Receivable 1,000 Less: Prov. for D. 3,000 47,000
Debts
Outstanding Salary 3,000 Stock 30,000
Capital A/cs: Bills Receivable 10,000
Pradeep 90,550 Machinery 40,000
Dhanraj 24,850 Typewriter 2,400
Leander 69,240 1,84,640 Cash 89,240

2,18,640 2,18,640

Working Notes

WN1

Pradeep Dhanraj Leander

Sacrificing Ratio =Old ratio- new ratio

Leander acquires his share of profit from Pradeep only. Therefore, amount for goodwill brought
by Leander will be taken by Pradeep alone.

WN2
Distribution of Revaluation Profit
Pradeep ‘s share =3,400×3/4=2,550
Dhanraj’s share=3,400×1/4=850

WN3
Distribution of Reserve Fund
Pradeep ‘s share =16,000×3/4=12,000
Dhanraj’s share=16,000×1/4=4,000

WN4
Calculation of Leander’s Capital
Combined Capital of Pradeep and Dhanraj after all adjustments = 90,550 + 24,850 = 1, 15,400
Combined share of profit of Pradeep and Dhanraj = 1 − Leander share =1-3/8=5/8
Total Capital of the firm on the basis of combined capital of Pradeep and Dhanraj
=1,15,400×8/5=1,84,640
Leander’s capital=1,84,640×3/8=69,240
WN5
Cash Account
Dr. Cr.
Particulars Amount Particulars Amount
` `
Balance b/d 4,000
Leander’s Capital 69,240
Premium for 16,000 Balance c/d 89,240
Goodwill

89,240 89,240