Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1-Solution

Q.5. Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2017 was as follows:

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Creditors	49,000	Cash	8,000
Reserves	18,500	Debtors	19,000
Digvijay’s Capital	82,000	Stock	42,000
Brijesh’s Capital	60,000	Buildings	207,000
Parakaram’s Capital	75,500	Patents	9,000
	2,85,000		2,85,000

Brijesh retired on March 31, 2017 on the following terms:
(i) Goodwill of the firm was valued at Rs 70,000 and was not to appear in the books.
(ii)  Bad debts amounting to Rs 2,000 were to be written off.
(iii)  Patents were considered as valueless.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Digvijay and Parakaram after Brijesh’s retirement.

SOLUTION

Revaluation Account

Particulars	Amount  (Rs.)	Particulars	Amount (Rs.)
To Bad debts	2,000	By Loss transferred to partners capital A/c
To Patents	9,000	Digvijay	4,400
		Parakaram	4,400
		Brijesh	2,200
	11,000		11,000

Partners capital A/c

Particulars	Digvijay	Brijesh	Parakaram	Particulars	Digvijay	Brijesh	Parakaram
To Brijesh’s capital A/c	18,667	_	9,333	By balance b/d	82,000	60,000	75,500
To Revaluation A/c (loss)	4,400	4,400	2,200	By reserve	7,400	7,400	3,700
To Brijesh’s Capital A/c	_	91,000	_	By Digvijay’s capital A/c	_	18,667	_
By balance c/d	66,333	_	67,667	By Parakaram’s capital A/c	_	9,333	_
	89,400	95,400	79,200		89,400	95,400	79,200

Balance sheet

as on March 31,2017

Liabilities	Amount (Rs.)	Assets		Amount (Rs.)
To Creditors	49,000	By cash		8,000
To Brijesh’s Loan A/c	91,000	By Debtors	19,000
To Digvijay’s Capital A/c	66,333	Less: Bad debts	2,000	17,000
To Parakaram’s Capital A/c	67,667	By Stock		42,000
		By Buildings		2,07,000
	2,74,000			2,74,000

WN1. 

Calculation for Brijesh’s goodwill distribution 

= Firm’s Goodwill X 2/5

= 70,000 X 2/5

=Rs 28,000

WN2. 

Calculation of Gaing ratio = New ratio – Old ratio

Digvijay =

Parakaram =

Gaing Ratio is 2:4

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