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Balance Sheet of Ajay, Salil and Ravi who are sharing profits in the ratio of 2 : 3 : 1, as at 31st March, 2023 is given below:

Liabilities Assets  

Ajay’s Capital

Salil’s Capital

Ravi’s Capital

Workmen Compensation Reserve

Investment Fluctuation Reserve

Sundry Creditors

Employee’s Provident Fund

1,00,000

2,00,000

3,00,000

20,000

10,000

3,00,000

60,000

Goodwill

Land and Building

Investment (Market Value ₹ 46,000)

Stock

Debtors

Less: PDD

Bank

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3,00,000

10,000

12,000

2,50,000

50,000

80,000

 

2,90,000

2,96,000

12,000

  9,90,000     9,90,000

Ravi retired on 1st April, 2023 and Ajay and Salil decide to share future profits and losses in the ratio of 3 : 2. 50% is to be paid to Ravi immediately and the balance in two equal annual instalments together with interest @ 10% p.a. Other terms of retirement are:

(i) Goodwill is to be valued at 2 year’s purchase of average profits of last three completed years. The profits were 2020 – 21 – ₹ 48,000, 2021 – 22 – ₹ 93,000, 2022 – 23 – ₹ 1,38,000.

(ii) Land and Building was found undervalued by ₹ 20,000 and Stock was found overvalued by ₹ 38,000.

(iii) Provision for doubtful debts is to be made equal to 5% of the debtors.

(iv) Claim on account of workmen compensation is ₹ 8,000.

(v) 10% of the sundry creditors be written back as no longer payable.

(vi) Out of the amount of insurance which was debited to Profit and Loss Account, ₹ 5,000 be carried forward as an unexpired insurance.

Pass necessary Journal entries and prepare necessary Ledger Accounts and Balance Sheet.

Anurag Pathak Changed status to publish March 3, 2024
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