Question

L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31-3-2017 was as follows :

On the above date, O was admitted as a new partner and it was decided that :

1. The new profit sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
2. Goodwill of the firm was valued at Rs 1,80,000 and O brought his share of goodwill (premium) in cash.
3. The market value of investments was Rs 36,000.
4. Machinery will be reduced to Rs 58,000.
5. A creditor of Rs 6,000 was not likely to claim the amount and hence was to be written off.
6. O will bring proportionate capital so as to give him 1/6th share in the profits of the firm,
7. Provision for doubtful debts to be maintained @ 5% and provision for discount on debtors be made @ 2%.

Prepare Revaluation Account, Partners’ Capital Account and Balance Sheet of the new firm

Answer 1

Note: 1 Q's share of Goodwill = 1,80,000 x 1/6 = Rs. 30,000

2. No change in M and N profit sharing Ratio.