Vimal and Nirmal are partners in a firm sharing profits

56 :- Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admit Kailash into the firm on 1st April 2025, when their Balance Sheet was as follows:

Terms of Kailash’s admission were as follows
(i) Kailash will bring Rs 30,000 as his share of capital and will be entitled to 1/3rd share in the profits
(ii) Kailash is not to bring goodwill in cash.
(iii) Goodwill of the firm is valued on the basis of 2 year’s purchase of the average profit of the last three years. Average profit of the last three years is Rs 6,000.
(iv) Machinery and stock are revalued at Rs 45,000 and Rs 8,000 respectively.
Prepare a Revaluation Account and Partner’s Capital Accounts incorporating the above adjustments.

Solution :-

WORKING NOTES :-
(i) Valuation of goodwill
Goodwill = 6,000 x 2 = Rs 12,000
It will be distributed in sacrificing ratio
Kailash share of goodwill = 12,000 x 1/3 = Rs 4,000
Vimal’s share of goodwill = 4,000 x 5/8 = Rs 2,500
Nirmal’s share of goodwill = 4,000 x 3/8 = Rs 1,500

(ii) Writing off the goodwill appearing in balance sheet in 5:3
Vimal’s share = 8,000 x 5/8 = Rs 5,000
Nirmal’s share = 8,000 x 3/8 = Rs 3,000