Reconstitution of a Partnership Firm · Existing Partners and Goodwill- Nature and Methods of its...
Transcript of Reconstitution of a Partnership Firm · Existing Partners and Goodwill- Nature and Methods of its...
Reconstitution of a
Partnership Firm:Change in Profit Sharing Ratio among the
Existing Partners and Goodwill- Nature
and Methods of its Valuation
Reconstitution of a
Partnership Firm:Learning Objectives:• Reconstitution of Partnership
• Sacrificing Ratio
• Gaining Ratio
• Goodwill
• Methods of valuation of Goodwill
• Reserves and Accumulated profits
• Revaluation of Assets and Liabilities
• Adjustment of Capitals.
Reconstitution of a Partnership
FirmsA change in the nature of relationship among
the members, effected through a fresh
agreement under which the existing business
continues is called reconstitution.
Modes of Reconstitution
Change in profit sharing ratio
Admission of a partner
Retirement of a partner
Death of a partner
Amalgamation of two partnership firms
Goodwill
GoodwillGoodwill is the value of reputation of a firm
It is in respect of the profits expected in future
over and above the normal profits
GoodwillOver a period of time a well established
business develops an advantage of good
name, reputation and wide business
connections which help the business to earn
more profits
In accounting, the monetary value of
such advantage is known as goodwill
Features of Goodwill
It is an intangible asset
It is a valuable asset
It is helpful in earning excess profits
It is difficult to place an exact value on
goodwill
It is valuable only when entire business is
sold
Factors Affecting Goodwill
Location of Business:
If it is centrally located in a place having more
customer traffic, the goodwill tends to be high.
Factors Affecting GoodwillNature of Business:
The firm which produces the products having a
stable demand is able to earn more profits and
therefore has more goodwill.
Factors Affecting GoodwillEfficiency of Management:
Based on the efficiency of management, the
productivity and the profitability of an
organization be higher and it determines the value of
goodwill
Factors Affecting Goodwill
Time Factor:
A business concern running profitably for a
longer period will have more goodwill since it
is better known to the customers.
Factors Affecting Goodwill
Market Situation:
The monopoly or limited competition enables
the business to earn more profit, which leads
to higher goodwill.
Factors Affecting Goodwill
Special Advantages:
Import licenses, well known foreign collaboration,
patents, trademarks etc. will help to earn more profit
which leads to higher goodwill for the firm
Factors Affecting Goodwill
Future Competition:
The likelihood or possibility of increased
competition in future would definitely
reduce the value of Goodwill.
Classification of Goodwill
Purchased Goodwill:
Purchased goodwill is the goodwill which is
acquired by making a payment.
Example:
When a business is purchased, the excess of
purchase consideration over its net assets
(Assets – Liabilities) is referred to as
purchased goodwill.
Classification of Goodwill
Self-Generated Goodwill or Inherent Goodwill:
It is internally generated goodwill which arises
from a number of characteristics which an on
going business possesses.
Need for Valuation
of
Goodwill
Need for Valuation of Goodwill
Change in profit sharing ratio among the
existing partners.
2:11:1
Need for Valuation of Goodwill
Admission of a partner
Need for Valuation of Goodwill
Retirement of a partner
Need for Valuation of Goodwill
Death of a partner
Need for Valuation of Goodwill
Dissolution of a firm or sale of partnership
business
Need for Valuation of Goodwill
Amalgamation of firms
Methods of
Valuation of
Goodwill
Average Profit
Method
Methods of Valuation of Goodwill
Average Profit Method
Here the goodwill is valued at an agreed
number of ‘years’ purchase of the average
profits of the past a few years
20+30+40
-------------- =30
3
Methods of Valuation of Goodwill
Average Profit Method
20+30+40
-------------- =30
3
This method is based on the assumption that a
new business will not be able to earn any profits
during the first few years of its operations
Methods of Valuation of Goodwill
Average Profit Method
Eg: Net profit of a business for the last 3 years
was Rs. 10000, 20000 and 30000, the partners
decided to calculate the goodwill based on 2
years purchase of average profit
:. Average Profit =
(10000 + 20000 + 30000) / 3 = 20000
Goodwill = 20000 x 2 = 40000
Weighted
Average Profit
Method
Methods of Valuation of Goodwill
Weighted Average Profit Method
Year Profit Weight
2017 20,000 1
2018 30,000 2
2019 50,000 3
Here weights are assigned for each year’s profit
Methods of Valuation of Goodwill
Weighted Average Profit Method
Total 10 1,50,000
Weighted Average Profit = 1,50,000 / 10 = 15,000
Goodwill = 15,000 x 3 = 15,000
(Based on 3 years purchase of weighted average profit)
Year Profit Weight Product
2016 5,000 1 5,000
2017 10,000 2 20,000
2018 15,000 3 45,000
2019 20,000 4 80,000
Methods of Valuation of Goodwill
Weighted Average Profit Method
Steps:
1. Assign the weights for each year - 1, 2, 3 etc.
2. Find the Product - Weight X Profit
3. Find the Total of Products
4. Divide the Total of Products by Total Weights
5. Multiply the Weighted Average Profit X No. of
Years Purchase
Super Profit
Method
Methods of Valuation of Goodwill
Super Profit Method
Super Profit means the excess of the actual
profits earned by a business unit over and
above the normal return expected on
investment in similar class of business
A
10%B
10%
C
15% D
10%
E
10%
Methods of Valuation of Goodwill
Super Profit Method
Under this method:
Super Profit = Actual Profit – Normal Profit
Normal Profit = Capital Employed x NRR / 100
Goodwill = Super Profit X No. of years
Actual Profit may be the Average Profit
NRR = Normal Rate of Return
Methods of Valuation of GoodwillSuper Profit MethodExample:
Average Profit - 20,000, Capital Employed – 200,000
and NRR = 8% Goodwill based on 2 years purchase.
Super Profit = Actual Profit – Normal Profit
Normal Profit = Capital Employed x NRR / 100
= 200,000 X 8/100 = 16,000
Super Profit = 20,000 – 16,000 = 4,000
Goodwill = Super Profit X No. of years
= 4,000 x 2 Yrs = 8,000
Capitalization
Method
Capitalization of
Average Profit
Capitalization of
Super Profit
Methods of Valuation of Goodwill
Capitalization of Average Profit
Here the goodwill is ascertained by deducting
actual capital employed (net assets) from the
capitalized value of average profits
Goodwill = Capitalized value of average profit –
Actual capital employed
Methods of Valuation of Goodwill
Capitalization of Average Profit
Capitalized value of Avg. Profit =
Average Profit x 100 / Normal Rate of Return
Capital Employed =
Total Assets (Excluding Goodwill) – Outside
Liabilities
Methods of Valuation of Goodwill
Capitalization of Average Profit
Example:
Average Profit – 50,000, NRR – 10%,
Total Assets – 400,000 and Liabilities – 50,000
Capitalized value of average profit =
50,000 x 100/10 = 500,000
Capital Employed (net assets) =
400,000 – 50,000 = 350,000
Goodwill = 500,000 – 350,000 = 150,000
Methods of Valuation of Goodwill
Capitalization of Super Profit
Goodwill is ascertained by capitalizing
super profit
Goodwill =
Super Profit x 100 / Normal Rate of Return
Methods of Valuation of Goodwill
Capitalization of Super Profit
Example:
Super Profit = 20000 and NRR = 10%
Goodwill =
Super Profit x 100 / Normal Rate of Return
Goodwill = 20000 x 100/10 = 200,000
Meaning of Sacrificing Ratio
The ratio in which the partner or partners have agreed to
sacrifice their shares in profit in favour of other partner or
partners, is known as sacrificing ratio.
Sacrificing Ratio = Old Ratio – New Ratio
Meaning of Gaining Ratio
Gaining ratio arises when one partner gain some
share of profit from change in profit sharing ratio.
Gaining Ratio = New Ratio – Old Ratio
Calculation of Sacrificing Ratio
and Gaining Ratio
Example:
A and B were partners in a firm sharing profit and losses in the ratio of 2:1.
With effect from 1st July, 2019 they agreed to share profits and losses
equally. Calculate the individual partners gain or sacrifice due to change in
ratio.
Old Ratio = 2:1 and New Ratio = 1:1
Sacrificing Ratio = Old Ratio – New Ratio
Sacrificing Ratio = 2/3 – ½ = 1/6 (Sacrifice)
Gaining Ratio = New Ratio – Old Ratio
Gaining Ratio = 1/2 – 1/3 = 1/6 (Gain)
Treatment
of
Goodwill
Change in Profit Sharing Ratio
In certain cases the partners in a firm may
change their existing profit sharing ratio.
1:1
2:1
Change in Profit Sharing Ratio
By this, some partners will gain in
future profits while others will lose.
Change in Profit Sharing Ratio
In such a case the gaining partner should
compensate the sacrificing partner.
Change in Profit Sharing Ratio
Example:
A and B are partners sharing profits in the ratio of 3:2,
they decide to change the ratio into 1:1.In this case,
A loses 1/10th ie; 3/5 – 1/2 and B gains this
1/10th ie; 1/2 - 2/5.
Change in Profit Sharing Ratio
Example:
Here B has to compensate with A and it will be the
proportionate amount of goodwill.
Suppose the total value of goodwill is Rs.50,000, then B
should pay Rs.5000 ie; 50000 x 1/10 to A as compensation.
Change in Profit Sharing Ratio
Example:
The journal entry :
B's Capital Account Dr. 5000
To A's Capital Account 5000
B
A
ACCOUNTING
TREATMENT OF
RESERVES
AND ACCUMULATED
PROFIT OR LOSS
RESERVES AND ACCUMULATED
PROFIT OR LOSSAt the time of change in profit sharing ratio, some
undistributed profits and reserves may stand in
the books
RESERVES AND ACCUMULATED
PROFIT OR LOSSIt should be shared among the partners in their
old profit sharing ratio before reconstitution
takes place.
This is to be done even if the question is silent in
this regard
RESERVES AND ACCUMULATED
PROFIT OR LOSS
Journal Entry:
Undistributed profits or Reserves:
Profit and Loss Account Dr.
Reserves Account Dr.
To Old Partners’ Capital Account
RESERVES AND ACCUMULATED
PROFIT OR LOSSJournal Entry:
Undistributed Losses:
Old Partners’ Capital Account Dr.
To Profit and Loss Account
RESERVES AND ACCUMULATED
PROFIT OR LOSS
Same treatment may be followed for
Workmen's Compensation fund and
Investment Fluctuation Fund
RESERVES AND ACCUMULATED
PROFIT OR LOSSExample:
A, B and C are partners sharing profit and losses in the ratio of 2:3:4. Theydecided to share future profits and losses in the ratio of 4:3:2. They alsodecided to record the effect of the following without affecting their bookValues: General Reserve Rs. 20,000 and Profit and Loss A/c Rs. 25,000.
You are required to give the necessary single journal entry.
Old Ratio of A, B and C 2/9:3/9:4/9
New Ratio of A, B and C 4/9:3/9:2/9
Sacrifice or Gain:
A = 2/9-4/9 =2/9 (Gain), B = 3/9-3/9=0 , C = 4/9-2/9= 2/9 (Sacrifice)
Journal Entry;
A’s Capital A/c (2/9 of 45,000) Dr. 10,000
To C’s Capital A/c (2/9 of 45,000) 10,000
Revaluation of
Assets and
Liabilities
Revaluation of Assets and Liabilities
Alternatives:
1. If revised values are to be recorded in
the books
2. If revised values are not to be
recorded in the books.
Revaluation of Assets and Liabilities
It is better to ascertain that whether the assets and
liabilities of the firm are shown at their correct
value at the time of change in the profit sharing
ratio of existing partners
Revaluation of Assets and Liabilities
If they are overstated or understated, they must be
revalued and any profit or loss should be adjusted
to the old partners in their old ratio
Revaluation of Assets and Liabilities
All the adjustments regarding revaluation of assets and
liabilities are affected through revaluation account or
the Profit and Loss Adjustment Account
Revaluation of Assets and Liabilities
Revaluation A/c is credited with
1. The increase in the value of asset
2. Decrease in the value of liability
3. Any unrecorded asset
Revaluation of Assets and Liabilities
Revaluation A/c is debited with
1. The decrease in the value of assets
2. Increase in the value of liability
3. Unrecorded liabilities
Revaluation of Assets and Liabilities
Balance in the revaluation account (gains or loss)
should be transferred to the old partners’ capital
account in their old ratio
Revaluation of Assets and LiabilitiesWhen revised values are to be recorded in books:
Example:
X, Y and Z are partners sharing profits equally. They decided that in future Z will get
1/5th share in profits. On the day of change, following is their Balance Sheet:
On this date, Building have been valued at Rs. 15,000, Stock to be reduced by Rs.1,500and provision for doubtful debts to be reduced by Rs. 1,000.
Pass journal entries in the books of firm regarding the revaluation of assets. Preparenecessary ledger accounts and Balance Sheet.
Liabilities Amount Assets Amount
Creditors 18,400 Cash 6,000
Capital A/cs: Debtors 22,500
X 12,500 Less: Provision for Doubtful Debts 4,000 18,500
Y 12,500 Stock 12,500
Z 9,000 34,000 Machinery 5,400
Buildings 10,000
52,400 52,400
Revaluation of Assets and LiabilitiesWhen revised values are to be recorded in books:
Solution:
Journal
Building a/c Dr. 5,000
Provision for doubtful debts a/c Dr. 1,000
To Revaluation a/c 6,000
Revaluation a/c Dr. 1,500
To Stock a/c 1,500
Revaluation Dr. 4,500
To X’s Capital a/c 1,500
To Y’s Capital a/c 1,500
To Z’s Capital a/c 1,500
Revaluation of Assets and LiabilitiesWhen revised values are to be recorded in books:
Revaluation A/C
Particulars Amou
nt
(Dr.)
Particulars Amount
(Cr.)
To stock 1,500 By Building 5,000
To Profit transferred to: By Provision for Doubtful Debts 1,000
X’s Capital A/c 1,500
Y’s Capital A/c 1,500
Z ’s Capital A/c 1,500 4,500
6,000 6,000
Revaluation of Assets and Liabilities
When revised values are to be recorded in books:
Partners’ Capital Accounts
Dr. Cr.
Particulars X Y Z Particulars X Y Z
To Balance c/d 14,000 14,000 10,500 By Balance b/d 12,500 12,500 9,000
By Revaluation a/c 1,500 1,500 1,500
14,000 14,000 10,500 14,000 14,000 10,500
Revaluation of Assets and LiabilitiesWhen revised values are to be recorded in books:
Balance Sheetas on ……………………………….
Liabilities Amount Assets Amount
Creditors 18,400 Cash 6,000
Capital A/cs: Debtors 22,500
X 14,000 Less: Provision for Doubtful Debts 3,000 19,500
Y 14,000 Stock (12,500-1,500) 11,000
Z 10,500 38,500 Machinery 5,400
Buildings (10,000+5,000) 15,000
56,900 56,900
Revaluation of Assets and LiabilitiesWhen revised values are not to be recorded in books:
If the partners decide that the revised values of assets and
liabilities are not recorded in the books and they also do
not want to distribute the general reserves and
accumulated profits, then in such a case revaluation /
change in the value of assets and liabilities are recorded by
passing a journal entry as illustrated below:
Gaining Partners’ capital A/c Dr.
To Sacrificing Partners’ Capital A/c
Revaluation of Assets and LiabilitiesWhen revised values are not to be recorded in books:
Example:
P, Q and R are partners sharing profits and losses in the ratio of 3:3:2. Their Balance
Sheet as on 31st March, 2019 was as follows:
Partners decided that with effect from 1st April, 2019 they would share profits and
losses in the ratio of 4:3;2. It was agreed that:
Liabilities Amount Assets Amount
Creditors 24,000 Cash at Bank 37,000
General Reserve 36,000 Debtors 44,000
Capital A/cs: Stock 1,20,000
P 2,00,000 Machinery 1,59,000
Q 1,50,000 Buildings 2,00,000
R 1,50,000 5,00,000
5,60,000 5,60,000
Revaluation of Assets and LiabilitiesWhen revised values are not to be recorded in books:
Example:
Stock be valued at Rs. 1,10,000.
Machinery is to be depreciated by 10%.
A Provision for doubtful debts is to be made on debtors @5%.
Building to be appreciated by 20%.
A liability for Rs. 2,500 included in Sundry Creditors is not likely to
arise.
Partners agreed that the revised values are not to be recorded in
the books. They also do not want to distribute the general reserve. You
are required to pass Journal Entries and Prepare accounts and Balance
Sheet of the reconstituted firm.
Revaluation of Assets and Liabilities
When revised values are not to be recorded in books:
Solution:
Journal Entry:
P’s Capital A/c Dr. 3,500
To Q’s Capital A/c 2,100
To R’s Capital A/c 1,400
Revaluation of Assets and Liabilities
When revised values are not to be recorded in books:
Working Notes:(1)
Particulars Amount Amount
Loss due to decrease in the value of Stock 10,000
Loss due to decrease in the value of Machinery 15,900
Loss due to Provision for doubtful debts 2,200 28,100
Profit due to increase in the value of Building 40,000
Profit due to decrease in Sundry Creditors 2,500 42,500
Profit on Revaluation 14,400
Add: General Reserve 36,000
Total 50,400
Revaluation of Assets and Liabilities
When revised values are not to be recorded in books:
Working Notes:(2)
Old Ratio of P, Q and R = 3:3:2 and
New Ratio of P, Q and R = 4:3:2.
Sacrifice or Gain:
Sacrificing Ratio = Old Share – New Share
P = 3/8 – 4/9 = 5/72 (Gain), 50,400 x 5/72 = Rs. 3,500 (Dr.)
Q = 3/8 – 3/9 = 3/72 (Sacrifice), 50,400 x 3/72 = Rs. 2,100 (Cr.)
R = 2/8 – 2/9 = 2/72 (Sacrifice), 50,400 x 2/72 = Rs. 1,400 (Cr.)
Revaluation of Assets and Liabilities
When revised values are not to be recorded in books:
Partners’ capital AccountsDr. Cr.
Particulars P Q R Particulars P Q R
To Q’s Capital A/c 2,100 ----- ----- By Balance b/d 2,00,000 1,50,000 1,50,000
To R’s Capital A/c 1,400 ----- ----- By P’s Capital A/c 2,100 1,400
To Balance c/d 1,96,00 1,52,100 1,51,400
2,00,000 1,52,100 1,51,400 2,00,000 1,52,100 1,51,400
Revaluation of Assets and LiabilitiesWhen revised values are not to be recorded in books:
Balance SheetAs on 1st April, 2019
Liabilities Amount Assets Amount
Creditors 24,000 Cash at Bank 37,000
General Reserve 36,000 Debtors 44,000
Capital A/cs: Stock 1,20,000
P 1,96,500 Machinery 1,59,000
Q 1,52,100 Buildings 2,00,000
R 1,51,400 5,00,000
5,60,000 5,60,000
Need for
Preparing
Revaluation
Account
Need for preparing Revaluation Account
1. To bring the assets and liabilities of the firm to their
true values
2. To find out the profit or loss arising out of revaluation
Revaluation Account
Journal Entries:-
Increase in the value of asset:
Asset Account Dr.
To Revaluation Account
Revaluation Account
Journal Entries:-
Decrease in the value of asset:
Revaluation Account Dr.
To Asset Account
Revaluation Account
Journal Entries:-
Increase in the value of liability
Revaluation account Dr.
To Liability Account
Revaluation Account
Journal Entries:-
Decrease in the value of liability
Liability account Dr.
To Revaluation Account
Revaluation Account
Journal Entries:-
Unrecorded Asset –
Asset Account Dr.
To Revaluation Account
Revaluation AccountJournal Entries:-
Unrecorded Liability:
Revaluation Account Dr.
To Unrecorded Liability Account
Revaluation AccountJournal Entries:-
Transfer of balance in Revaluation account (profit
and loss adjustment account):
a. If the revaluation account shows a credit balance
ie; profit
Revaluation account Dr.
To Old Partners’ Capital (individually) account
Revaluation AccountJournal Entries:-
Transfer of balance in Revaluation account (profit
and loss adjustment account):
b. If the revaluation account shows a debit balance,
ie; Loss.
Old Partners’ capital account Dr.
To Revaluation account
ADJUSTMENT OF
CAPIITAL
ACCOUNTS
OF PARTNERS
Adjustment of Partners’ CapitalsSometimes it is decided among partners to adjust
their capitals in new profit-sharing ratio. For thispurpose, first of all the adjusted capitals of partnersare calculated after making adjustments for generalreserve, undistributed profits and losses, goodwill,revaluation of assets and liabilities, etc. then totalrequired capital of the new firm is apportionedamong partners in new profit sharing ratio. In case,adjusted capital is more than the required capital,the surplus capital is withdraw by the partner(s) andvice versa.
Adjustment of Partners’ Capitals
Example:X, Y and Z are partners in the firm sharing profit and losses as 3:2:1. Their
Balance Sheet as at 31st March, 2019 was as follows:
From 1st April, 2019, they agreed to alter their profit-sharing ratio as 5:3:2. It is
also decided that:
Liabilities Amount Assets Amount
Sundry Creditors 4,50,000 Cash in hand 60,000
General Reserve 2,40,000 Cash at Bank 60,000
Bank Loan 2,10,000 Sundry Debtors 1,80,000
Partners’ Capital a/cs: Stock 3,60,000
X 3,00,000 Bills Receivable 1,50,000
Y 2,40,000 Plant and Machinery 8,40,000
Z 2,10,000 7,50,000
16,50,000 16.50,000
Adjustment of Partners’ Capitals Plant and Machinery should be valued at Rs.9,00,000.
A provision of 5% on Sundry Debtors be made forDoubtful Debts.
The goodwill of the firm be valued at Rs. 3,00,000.
The stock be reduced to Rs. 3,30,000.
Total capital of the firm will be Rs. 12,00,000.
Goodwill was not to appear in the books.
Draft necessary journal entries, adjust the capitals ofpartners according to new profit-sharing ratio, preparepartners’ capital accounts and revised Balance sheet ofthe reconstituted firm.
Adjustment of Partners’ CapitalsSolution:
Journal Entries:Plant and machinery A/c Dr. 60,000
To Revaluation A/c 60,000
Revaluation A/c Dr. 39,000
To Stock a/c 30,000
To Provision for Doubtful Debts a/c 9,000
Revaluation A/c Dr. 21,000
To X’s Capital A/c 10,500
To Y’s Capital A/c 7,000
To Z’s Capital A/c 3,500
Adjustment of Partners’ CapitalsSolution:
Journal Entries:X’s Capital A/c Dr. 10,000
To Y’s Capital A/c 10,000
General Reserve A/c Dr. 2,40,000
To X’s Capital A/c 1,20,000
To Y’s Capital A/c 80,000
To Z’s Capital A/c 40,000
Cash A/c Dr. 1,92,500
To X’s Capital A/c 1,69,500
To Y’s Capital A/c 23,000
Z’s Capital A/c Dr. 3,500
To Cash A/c 3,500
Adjustment of Partners’ Capitals
Working Notes: (1)
Calculation of sacrifice or gain:
X = 3/6 – 5/10 = Nil,
Y = 2/6 – 3/10 = 2/60 (Sacrifice)
Z = 1/6 – 2/10 = 2/60 ( Gain)
Share of Goodwill credited to Y = 3,00,000 x 2/60
= Rs. 10,000.
Adjustment of Partners’ Capitals
Working Notes: (2)Calculation of new capitals of partners on the basis of new profit- sharing ratio
Total capital of the firm = Rs. 12,00,000
Capital of X = 12,00,000 x 5/10 = Rs 6,00,000,
Capital of Y = 12,00,000 x 3/10 = Rs 3,60,000,
Capital of X = 12,00,000 x 2/10 = Rs 2,40,000,
Working Notes: (3)
Balance of cash in hand = 60,000 + 1,69,000 + 23,000 –
3,500 = 2,49,000.
Adjustment of Partners’ Capitals
Working Notes: (4)
Revaluation AccountParticulars Amount (Dr.) Particulars Amount (Cr.)
To Provision for Doubtful Debts 9,000 By Plant and Machinery 60,000
To Stock 30,000
To Profit transferred to Capital a/cs:
X 10,500
Y 7,000
Z 3,500 21,000
60,000 60,000
Adjustment of Partners’ Capitals
Partners’ Capital AccountsDr. Cr.
Particulars X Y Z Particulars X Y Z
To Y’s Capital
A/c
------ ------ 10,000 By Balance b/d 3,00,000 2,40,000 2,10,000
To Cash ------ ------ 3,500 By Revaluation A/c 10,500 7,000 3,500
To Balance c/d 6,00,000 3,60,000 2,40,000 By General
Reserve
1,20,000 80,000 40,000
By Z’s Capital A/c ------ 10,000 ------
By Cash A/c 1,69,000 23,000 ------
6,00,000 3,60,000 2,53,500 6,00,000 3,60,000 2,53,500
Adjustment of Partners’ Capitals
Balance SheetAs on 1st April, 2019
Liabilities Amount Assets Amount
Sundry Creditors 4,50,000 Cash in hand 2,69,000
Bank Loan 2,10,000 Cash at Bank 60,000
Partners’ Capital a/cs: Sundry Debtors 1,71,000
X 6,00,000 Stock 3,30,000
Y 3,60,000 Bills Receivable 1,50,000
Z 2,40,000 12,00,000 Plant and Machinery 9,00,000
18,60,000 18,60,000
ThanksPrepared by
Manoj Kumar
KV, OFN,
Rajgir