The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015-Solution

Q.11. The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015:

Books of Rajesh, Pramod and Nishant
Balance Sheet as on March 31, 2015

Liabilities
Amount
 (Rs.)
Assets
Amount
 (Rs.)
Bills Payable6,250Factory Building12,000
Sundry Creditors10,000Debtors 10,500
Reserve Fund2,750  Less: Reserve 50010,000
Capital Accounts: Bills Receivable7,000
Rajesh    20,000 Stock15,500
Pramod   15,000 Plant and Machinery11,500
Nishant  15,00050,000Bank Balance13,000
69,000 69,000

Pramod retired on the date of Balance Sheet and the following adjustments were made:
a) Stock was valued at 10% less than the book value.
b) Factory buildings were appreciated by 12%.
c) Reserve for doubtful debts Increated up to 5%.
d) Reserve for legal charges to be made at Rs 265.
e) The goodwill of the firm be fixed at Rs 10,000.
f) The capital of the new firm be fixed at Rs 30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2.
Pass journal entries and prepare the balance sheet of the reconstituted firm after transferring the balance in Pramod’s Capital account to his loan account.

SOLUTION

Journal entries

DateParticularsL.F.
Amount
(Rs.)
Amount
(Rs.)
2015
Mar.31Revaluation A/c Dr. 1,840
   To Stock A/c1,550
   To Reserve for Doubtful  Debts A/c25
To Reserve for Legal Charges A/c265
(Assets and Liabilities are revalued)
Mar.31Factory Building A/cDr. 1,440
  To Revaluation A/c1,440
( Factory Building appreciated)
Mar.31Rajesh’s Capital A/c     Dr. 160
Pramod’s Capital A/cDr.120
Nishant’s Capital A/cDr.120
      To Revaluation A/c400
(Loss on Revaluation adjusted to Partners’ Capital Account)
Mar.31Rajesh’s Capital A/cDr. 2,000
Nishant’s Capital A/c1,000
    To Pramod Capital’s A/c3,000
(Pramod’s share of goodwill adjusted to Rajesh’s and Nishant’s Capital Account in their gaining ratio)
Mar.31Reserve Fund A/cDr. 2,750
   To Rajesh’s Capital A/c1,100
   To Pramod’s CapitalA/c825
   To Nishant’s Capital A/c  825
(Reserve Fund distributed all the partners)
Mar.31Pramod’s Capital A/c Dr. 18,705
      To Pramod’s Loan A/c18,705
(Pramod’s Capital transferred to his Loan Account)
Mar.31Rajesh’s Capital A/c Dr. 940
Nishant’s Capital A/cDr.2,705
  To Rajesh’s Current A/c940
  To Nishant’s Current A/c2,705
(Excess in Capital Account is transferred to Current Account)

Partner's Capital Account

ParticularsRajeshPramodNishantParticularsRajeshPramodNishant
Revaluation (Loss)160120120Balance b/d20,00015,00015,000
Pramod’s Capital A/c2,000 1,000Reserve Fund1,100825825
Pramod’s Loan A/c 18,705 Rajesh’s Capital A/c 2,000 
Rajesh’s Current A/c940  Nishant’s Capital A/c 1,000 
Nishant’s Current A/c  2,705      
Balance c/d18,000 12,000   
 21,10018,82515,825 21,10018,82515,825

Balance Sheet as on March 31, 2015
Liabilities
Amount 
(Rs.)
Assets
Amount 
(Rs.)
Bills Payable6,250Plant and Machinery11,500
Sundry Creditors10,000Debtors10,500
Reserve for Legal Charges265  Less: Reserve   (525)9,975
Pramod’s Loan18,705Bills Receivable7,000
Capital: Stock15,500
    Rajesh18,000   Less: 10% Depreciation(1,550)13,950
    Nishant12,00030,000  Factory Building12,000
     Add: 12% Appreciation1,44013,440
  Bank Balance9,355
 65,220 65,220

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