Madan, Dass and Param were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2023, their Balance Sheet was as under
Madan, Dass and Param were partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2023, their Balance Sheet was as under:
| Liabilities | ₹ | Assets | ₹ |
|
Sundry Creditors Employees Provident Fund General Reserve Capital A/cs: Madan Dass Param |
26,500 3,500 20,000 1,00,000 50,000 40,000 |
Cash at Bank Sundry Debtors Stock Fixed Assets Goodwill Advertisement Expenditure |
20,000 30,000 55,000 1,15,000 15,000 5,000 |
| Â | 2,40,000 | Â | 2,40,000 |
Dass retires on 1st April, 2023. For the purpose, the following adjustments were agreed upon:
(i) Goodwill of the firm is to be valued at 2 years’ purchase of the average profit of 3 completed years preceding the date of retirement. The profits for previous years ended 31st March were:
| Year | Profit (₹) |
| 2019-20 | 45,000 |
| 2020-21 | 50,000 |
| 2021-22 | 55,000 |
| 2022-23 | 60,000 |
(ii) Fixed Assets were undervalued by ₹ 25,000.
(iii) Stock was overvalued by ₹ 5,000.
(iv) New profit-sharing ratio of Madan and Param will be 3 : 2.
(v) Dass be paid through amount brought in by Madan and Param in such a way as to make their capitals proportionate. Minimum Bank Balance is to be maintained at ₹ 10,000.
Prepare Revaluation Account, Capital Accounts of Partners and the Balance Sheet of Madan and Param.
Anurag Pathak Changed status to publish March 3, 2024
