Partners D, E and F run a firm. Profit‑sharing ratio is D:E:F = 3:2:1. Capital balances are D – Rs. 1,20,000; E – Rs. 80,000; F – Rs. 1,00,000. At the time of dissolution, the firm’s assets and liabilities are: Cash Rs. 60,000; Debtors Rs. 50,000; Land (book value) Rs. 2,00,000; Plant & Machinery Rs. 1,20,000; Creditors Rs. 70,000; Bank loan Rs. 50,000. The land has a revaluation surplus of Rs. 40,000 (fair value exceeds book value). Partner F, who has died, is entitled to a bonus of 12% on his capital. No goodwill is due. Prepare a Statement of Affairs showing net assets available for distribution and compute the cash each partner will receive on dissolution after adjusting for the revaluation surplus and F’s bonus.

Step-by-step solution

1. List total assets at book values: 60,000 + 50,000 + 2,00,000 + 1,20,000 = Rs. 4,30,000.
2. Add the revaluation surplus on land: 4,30,000 + 40,000 = Rs. 4,70,000 (adjusted assets).
3. List total liabilities: 70,000 + 50,000 = Rs. 1,20,000.
4. Compute net assets before bonus: 4,70,000 – 1,20,000 = Rs. 3,50,000.
5. Calculate bonus to the deceased partner F: 12% of his capital = 0.12 × 1,00,000 = Rs. 12,000.
6. Deduct the bonus from net assets: 3,50,000 – 12,000 = Rs. 3,38,000 (assets available for distribution).
7. Distribute the remaining net assets according to profit‑sharing ratio (3:2:1).
8. Total ratio parts = 3 + 2 + 1 = 6 parts; value of one part = 3,38,000 ÷ 6 = Rs. 56,333.33.
9. Partner D’s share = 3 parts = 3 × 56,333.33 = Rs. 1,69,000 (rounded).
10. Partner E’s share = 2 parts = 2 × 56,333.33 = Rs. 1,12,666.66 ≈ Rs. 1,12,667.
11. Partner F’s share = 1 part = Rs. 56,333.33 ≈ Rs. 56,333.
12. Thus, cash to be paid: D – Rs. 1,69,000; E – Rs. 1,12,667; F – Rs. 56,333.

Concept tested: Revaluation surplus and bonus on capital

Published 25 September 2026 · How this solution was prepared and checked