Abha and Ritu were partners sharing profits and losses in the ratio of 5:3. Their Balance Sheet as at 31st March 2022 was as under: Liabilities Bills Payable Creditors Workmen Compensation Fund General Reserve Profit and Loss A/c Capital Accounts: Abha Ritu Amount (Rs.) Assets 22,000 45,000 40,000 24000 Cash in Hand Cash at Bank Debtors 70,000 Stock 20,000 Investments Furniture 3,20,000 Machinery 1,90,000 Goodwill 7,07,000 Amount (Rs.) 12,000 83,000 82,000 66,000 60,000 3 75,000 2,25,000 1,04,000 7,07,000 On 1 April, 2022 they admitted Sonal into the partnership firm for 1/4th share which she acquired from Abha and Ritu in the ratio of 2:1 respectively. Other adjustments were as follows: i. The Goodwill of the firm is valued at Rs. 96,000 and Sonal was unable to contribute her share of goodwill in cash. ii. Create a provision of Rs 6,000 for Doubtful Debts.
Answer / Solution
New Profit-Sharing Ratio:
Abha = 11/24
Ritu = 7/24
Sonal = 6/24
Therefore, New Ratio = 11 : 7 : 6
Sonal’s Share of Goodwill:
Rs. 96,000 × 1/4 = Rs. 24,000
Since Sonal cannot bring goodwill in cash:
- Abha receives Rs. 16,000
- Ritu receives Rs. 8,000
Provision for Doubtful Debts: Rs. 6,000
After all the required adjustments:
- Abha’s adjusted capital = Rs. 2,66,000
- Ritu’s adjusted capital = Rs. 1,56,000
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