On 31st March, 2018 , The Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as: B retires and following readjustments of assets and liabilities have been agreed upon before ascertainment of the amount payable to B: (a) Out of the amount of insurance premium which was debited to Profit and Loss Account, ₹ 1,000 be carried forward for Unexpired insurance. (b) Freehold Premises be appreciated by 10%. (c) Provision for Doubtful Debts is brought up to 5% on Debtors. (d) Machinery be depreciated by 5%. (e) Liability for Workmen Compensation to the extent of ₹ 1,500 would be created. (f) That the goodwill of the entire firm be fixed at ₹ 18,000 and B’s share of the same be adjusted into the accounts of A and C who are going to share future profits in the proportion of 3/4th and 1/4th respectively. (g) Total capital of the firm as newly constituted be fixed at ₹ 60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be. (h) B be paid ₹ 5,000 in cash and the balance be transferred to his Loan Account. Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

On 31st March, 2018 , The Balance Sheet of A, B and C who were sharing

1.	On 31st March, 2018 , The Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as: B retires and following readjustments of assets and liabilities have been agreed upon before ascertainment of the amount payable to B: (a) Out of the amount of insurance premium which was debited to Profit and Loss Account, ₹ 1,000 be carried forward for Unexpired insurance. (b) Freehold Premises be appreciated by 10%. (c) Provision for Doubtful Debts is brought up to 5% on Debtors. (d) Machinery be depreciated by 5%. (e) Liability for Workmen Compensation to the extent of ₹ 1,500 would be created. (f) That the goodwill of the entire firm be fixed at ₹ 18,000 and B’s share of the same be adjusted into the accounts of A and C who are going to share future profits in the proportion of 3/4th and 1/4th respectively. (g) Total capital of the firm as newly constituted be fixed at ₹ 60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be. (h) B be paid ₹ 5,000 in cash and the balance be transferred to his Loan Account. Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.
Answer» re of goodwill is to be distributed between X and Z in their =3 : 1(GAINING Ratio)Explanation:1) Calculation of Profit Sharing RatioCapital ratio(A ,B and C) =45,000 :30,000: 15,000Old ratio(A,B and C ) =3:2:1 B retires from the firm.New Gaining ratio (A:C) =3:1 2)Adjustment of goodwillGoodwill of the firm =Rs.18,000B's share of goodwill =18,000× = 6,000B's share of goodwill is to be distributed between X and Z in their =3 : 1(Gaining Ratio)A's 6,000 × = 4,500 rs.C's = 6,000 × = 1,500 rs.3) Adjustment of PARTNER's Capital after B's retirement (Old ratio)Total capital of the new Firm (After B's Retirement ) =Rs.60,000New Ratio =3:1A's capital =60,000× =Rs.45,000C's Capital 60,000× = Rs.15,000

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