Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016-Solution

Q.12. Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.

Books of Jain, Gupta and Malik

Balance Sheet as on March 31, 2016

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Sundry Creditors	19,800	Land and Building	26,000
Telephone Bills Outstanding	300	Bonds	14,370
Accounts Payable	8,950	Cash	5,500
Accumulated Profits	16,750	Bills Receivable	23,450
		Sundry Debtors	26,700
Capitals :		Stock	18,100
Jain     40,000		Office Furniture	18,250
Gupta  60,000		Plants and Machinery	20,230
Malik   20,000	1,20,000	Computers	13,200
	1,65,800		1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.
A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.
The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.
Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

SOLUTION

In the books of Jain and Gupta
Revaluation Account
Dr.                                                                                                                          Cr.

Particulars	Amount (Rs.)	Particulars		Amount (Rs.)
To Office Furniture	4,000	By Stock		1,900
To Land and Building	6,000	By Plant and Machinery		3,300
To Provision for Doubtful Debts	1,700	By Loss transferred to:
		Jain’s Capital A/c	3,250
		Gupta’s Capital A/c	1,950
		Malik’s Capital A/c	1,300	6,500
	11,700			11,700

Partners’ Capital Account

Dr.                                                                                                                          Cr.

Particulars	Jain	Gupta	Malik	Particulars	Jain	Gupta	Malik
To Revaluation (Loss)	3,250	1,950	1,300	By Balance b/d	40,000	60,000	20,000
To Malik’s Capital	1,125	675	–	By Accumulated Profits	8,375	5,025	3,350
To Cash	–	–	16,500	By Jain’s Capital A/c	–	–	1,125
To Malik’s Loan	–	–	7,350	By Gupta’s Capital A/c	–	–	675
To Balance c/d	53,900	69,000	–	By Cash	9,900	6,600	–
	58,275	71,625	25,150		58,275	71,625	25,150

Balance Sheet

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
To Sundry Creditors	19,800	By Stock	20,000
To Telephone Bills Outstanding	300	By Bonds	14,370
To Accounts Payable	8,950	By Cash	5,500
To Malik’s Loan	7,350	By Bills Receivable	23,450
		By Sundry Debtors	26,700
To Partners’ Capital:		Less: Provision for Bad Debts 1,700	25,000
Jain 53,900		By Land and Building	20,000
Gupta 69,000	1,22,900	By Office Furniture	14,250
		By Plant and Machinery	23,530
		By Computers	13,200
	1,59,300		1,59,300

Working Note:
1) Malik’s share of goodwill = Total Goodwill × Retiring Partner Share

= 9,000 x 2/10

= Rs. 1,800

2) Gaining Ratio = New Ratio – Old Ratio
Jain’s Gaining Share = 5/8-5/10

Gaining Ratio between Jain and Gupta = 10:6 or 5:3

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