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 Payable	6,250	Factory Building	12,000
Sundry Creditors	10,000	Debtors 10,500
Reserve Fund	2,750	Less: Reserve 500	10,000
Capital Accounts:		Bills Receivable	7,000
Rajesh    20,000		Stock	15,500
Pramod   15,000		Plant and Machinery	11,500
Nishant  15,000	50,000	Bank Balance	13,000
	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

Date	Particulars		L.F.	Amount (Rs.)	Amount (Rs.)
2015
Mar.31	Revaluation A/c	Dr.		1,840
	To Stock A/c				1,550
	To Reserve for Doubtful  Debts A/c				25
	To Reserve for Legal Charges A/c				265
	(Assets and Liabilities are revalued)
Mar.31	Factory Building A/c	Dr.		1,440
	To Revaluation A/c				1,440
	( Factory Building appreciated)
Mar.31	Rajesh’s Capital A/c	Dr.		160
	Pramod’s Capital A/c	Dr.		120
	Nishant’s Capital A/c	Dr.		120
	To Revaluation A/c				400
	(Loss on Revaluation adjusted to Partners’ Capital Account)
Mar.31	Rajesh’s Capital A/c	Dr.		2,000
	Nishant’s Capital A/c			1,000
	To Pramod Capital’s A/c				3,000
	(Pramod’s share of goodwill adjusted to Rajesh’s and Nishant’s Capital Account in their gaining ratio)
Mar.31	Reserve Fund A/c	Dr.		2,750
	To Rajesh’s Capital A/c				1,100
	To Pramod’s CapitalA/c				825
	To Nishant’s Capital A/c				825
	(Reserve Fund distributed all the partners)
Mar.31	Pramod’s Capital A/c	Dr.		18,705
	To Pramod’s Loan A/c				18,705
	(Pramod’s Capital transferred to his Loan Account)
Mar.31	Rajesh’s Capital A/c	Dr.		940
	Nishant’s Capital A/c	Dr.		2,705
	To Rajesh’s Current A/c				940
	To Nishant’s Current A/c				2,705
	(Excess in Capital Account is transferred to Current Account)

Partner's Capital Account

Particulars	Rajesh	Pramod	Nishant	Particulars	Rajesh	Pramod	Nishant
Revaluation (Loss)	160	120	120	Balance b/d	20,000	15,000	15,000
Pramod’s Capital A/c	2,000		1,000	Reserve Fund	1,100	825	825
Pramod’s Loan A/c		18,705		Rajesh’s Capital A/c		2,000
Rajesh’s Current A/c	940			Nishant’s Capital A/c		1,000
Nishant’s Current A/c			2,705
Balance c/d	18,000		12,000
	21,100	18,825	15,825		21,100	18,825	15,825

Balance Sheet as on March 31, 2015

Liabilities		Amount  (Rs.)	Assets		Amount  (Rs.)
Bills Payable		6,250	Plant and Machinery		11,500
Sundry Creditors		10,000	Debtors	10,500
Reserve for Legal Charges		265	Less: Reserve	(525)	9,975
Pramod’s Loan		18,705	Bills Receivable		7,000
Capital:			Stock		15,500
Rajesh	18,000		Less: 10% Depreciation	(1,550)	13,950
Nishant	12,000	30,000	Factory Building	12,000
			Add: 12% Appreciation	1,440	13,440
			Bank Balance		9,355
		65,220			65,220

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