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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
The Balance Sheet of X and Y, who share profits and losses as 5 : 3, as at 1st April, 2025 showed: X’s Capital ₹52,000; Y’s Capital ₹54,000; General Reserve ₹4,800; Sundry Creditors ₹5,000; Employees’ Provident Fund ₹1,000; Workmen Compensation Reserve ₹10,000; and assets – Goodwill ₹8,000, Machinery ₹38,000, Furniture ₹15,000, Sundry Debtors ₹33,000, Stock ₹7,000, Bank ₹25,000, Advertisement Suspense A/c ₹800. They decided to change their profit-sharing ratio to 3 : 5, and agreed: (a) Goodwill be valued at two years’ purchase of the average profit of the last three years – 2023 ₹7,500; 2024 ₹4,000; 2025 ₹6,500; (b) Machinery and Stock be revalued at ₹45,000 and ₹8,000 respectively; (c) Claim on account of workmen compensation is ₹6,000. Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.
Revaluation Account
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Profit transferred to Capital A/cs: | By Machinery A/c (45,000 – 38,000) | 7,000 | |
| X 5,000; Y 3,000 | 8,000 | By Stock A/c (8,000 – 7,000) | 1,000 |
| Total | 8,000 | Total | 8,000 |
Partners’ Capital Accounts
| Particulars (Dr.) | X | Y | Particulars (Cr.) | X | Y |
|---|---|---|---|---|---|
| To Goodwill A/c (written off) | 5,000 | 3,000 | By Balance b/d | 52,000 | 54,000 |
| To Advertisement Suspense A/c | 500 | 300 | By General Reserve A/c | 3,000 | 1,800 |
| To X’s Capital A/c (Goodwill) | – | 3,000 | By Workmen Compensation Reserve A/c | 2,500 | 1,500 |
| To Balance c/d | 60,000 | 54,000 | By Revaluation A/c (Profit) | 5,000 | 3,000 |
| By Y’s Capital A/c (Goodwill) | 3,000 | – | |||
| Total | 65,500 | 60,300 | Total | 65,500 | 60,300 |
Balance Sheet as at 1st April, 2025 (after change)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| X’s Capital | 60,000 | Machinery (38,000 + 7,000) | 45,000 |
| Y’s Capital | 54,000 | Furniture | 15,000 |
| Sundry Creditors | 5,000 | Sundry Debtors | 33,000 |
| Employees’ Provident Fund | 1,000 | Stock (7,000 + 1,000) | 8,000 |
| Workmen Compensation Claim | 6,000 | Bank | 25,000 |
| Total | 1,26,000 | Total | 1,26,000 |
Working Notes: Sacrifice / (Gain): X = 5/8 – 3/8 = 2/8 (Sacrifice); Y = 3/8 – 5/8 = –2/8 (Gain). New goodwill = average profit ₹6,000 × 2 = ₹12,000; adjustment = ₹12,000 × 2/8 = ₹3,000, paid by Y (gainer) to X (sacrificer). Existing goodwill ₹8,000 and Advertisement Suspense ₹800 are written off, and the General Reserve, WCR (net of ₹6,000 claim) and revaluation profit are distributed, all in the old ratio 5 : 3.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 3 Q.30 - Change in Profit-Sharing Ratio Among the Existing Partners", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 3 - Change in Profit-Sharing Ratio Among the Existing Partners.
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