What is meant by 'Reconstitution of a Partnership Firm'?
In a partnership firm, any change in the existing agreement between the partners amounts to its reconstitution. It leads to the end of the existing agreement and a new agreement comes into being with a changed relationship among the members of the partnership firm.
Saloni and Shrishti were partners in a firm sharing profits in the ratio of 7:3. Their capitals were Rs 2,00,000 and Rs 1,50,000 respectively. They admitted Aditi on 1st April, 2013 as a new partner for 1/6 share in future profits. Aditi brought Rs 1,00,000 as her capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transaction on Aditi's admission.
Mohan and Mahesh were partners in a firm sharing profits in the ratio of 3:2. On 1st April, 2012 they admitted Nusrat as a partner in the firm. The Balance Sheet of Mohan and Mahesh on that date was as under:
It was agreed that:
(i) The value of Building and Stock be appreciated to Rs 3,80,000 and Rs 1,60,000 respectively.
(ii) The liabilities of workmen's compensation fund was determined at Rs 2,30,000.
(iii) Nusrat brought in her share of goodwill Rs 1,00,000 in cash.
(iv) Nusrat was to bring further cash as would make her capital equal to 20% of the combined capital of Mohan and Mahesh after above revaluation and adjustments are carried out.
(v) The future profit sharing ratio will be Mohan 2 / 5, Mahesh 2/5, Nusrat 1/5.
Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of the new firm. Also show clearly the calculation of Capital brought by Nusrat.
Kushal Kumar and Kavita were partners in a firm sharing profits in the ratio of 3:1:1. On 1st April, 2012 their Balance Sheet was as follows:
On the above date Kavita retired and the following was agreed:
(i) Goodwill of the firm was valued at Rs 40,000.
(ii) Land was to be appreciated by 30% and building was to be depreciated by Rs 1,00,000.
(iii) Value of furniture was to be reduced by Rs 20,000.
(iv) Bad debts reserve is to be increased to Rs 15,000.
(v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her Loan Account.
(vi) Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.
Prepare Revaluation Account, Partner's Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita's retirement.
State the ratio in which the partners share profits or losses on revaluation of assets and liabilities, when there is a change in profit sharing ratio amongst existing partners?
Mona, Nisha and Priyanka are partners in a firm. They contributed Rs. 50,000 each as capital three years ago. At that time Priyanka agreed to look after the business as Mona and Nisha were busy. The profits for the past three years were Rs. 15,000, Rs. 25,000 and Rs. 50,000 respectively. While going through the books of accounts Mona noticed that the profit had been distributed in the ratio of 1 : 1 : 2. When the enquired from Priyanka about this, Priyanka answered that since she looked after the business she should get more profit. Mona disagreed and it was decided to distribute profit equally retrospectively for the last three years.
(a) You are required to make necessary corrections in the books of accounts of Mona, Nisha and Priyanka by passing an adjustment entry.
(b) Identify the value which was not practiced by Priyanka while distributing profits.
Abhay and Beena are partners in a firm. They admit Chetan as a partner with 1/4th shares in the profits of the firm. Chetan brings Rs. 2,00,000 as his share of capital. The value of the total assets of the firm is Rs. 5,40,000 and outside liabilities are valued at Rs. 1,00,000 on that date. Give the necessary entry to record goodwill at the time of Chetan's admission. Also show your working notes.
Naresh, David and Aslam are partners sharing profits in the ratio of 5:3:7. On April 1st, 2012, Naresh gave a notice to retire from the firm. David and Aslam decided to share future profits in the ratio of 2:3. The adjusted capital accounts of David and Aslam show a balance of Rs. 33,000 and Rs. 70,500 respectively. The total amount to be paid to Naresh is Rs. 90,500. This amount is to be paid by David and Aslam in such a way that their capitals become proportionate to their new profit sharing ratio. Pass necessary journal entries for the above transactions in the books of the firm. Show your working clearly.
Sahaj and Nimish are partners in a firm. They share profits and losses in the ratio of 2:1. Since both of them are especially abled, sometimes they find it difficult to run the business on their own. Gauri, a common friend decides to help them. Therefore, they admitted her into partnership for a 1/3rd share. She brought her share of goodwill in cash and proportionate capital. At the time of Gauri’s admission, the Balance sheet of Sahaj and Nimish was as under:
It was decided to:
(a) Reduce the value of stock by Rs 5,000.
(b) Depreciate furniture by 10% and appreciate machinery by 5%.
(c) Rs 3,000 of the debtors proved bad. A provision of 5% was to be created on Sundry Debtors for doubtful debts.
(d) Goodwill of the firm was valued at Rs 45,000.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the reconstituted firm. Identify the value being conveyed in the question.
State any two occasions on which a firm can be reconstituted.
State the two main rights that a newly admitted partner acquires in the firm.
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