44 :- On 31st March 2025, the balance sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as :
B retired on 1st April 2025 and following adjustments were agreed to determine the amount payable to B :
(a) Out of the amount of insurance premium debited to profit and loss account, Rs 1,000 be carried forward as prepaid insurance.
(b) Freehold premises be appreciated by 10%.
(c) Provision for doubtful debts is brought up to 5% on debtors.
(d) Machinery be reduced by 5%.
(e) Liability for workmen compensation to the extent of Rs 1,500 would be created.
(f) Goodwill of the firm be fixed at Rs 18,000 and B’s share of the same be adjusted into the capital Accounts of A and C who will share future profits in the ratio of 3/4th and 1/4th
(g) Total capital of the firm as newly constituted be fixed at Rs 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 maybe.
(h) B be paid Rs 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.
Solution :-
WORKING NOTES :-
(a) Calculation of gaining share of A and C
New share — old share
A = 3/4 – 3/6 = 6/24
C = 1/4 – 1/6 = 2/24
Gaining share of A and C is 3:1
(b) Calculation of share of goodwill
B’s share of goodwill = 18,000 x 2/6 = Rs 6,000
It is to be brought by A and C in 3:1
A’s share of goodwill = 6,000 x 3/4 = Rs 4,500
C’s share of goodwill = 6,000 x 1/4 = Rs 1,500
(c) Calculation of their new capital
A = 60,000 x 3/4 = Rs 45,000
B = 60,000 x 1/4 = Rs 15,000