027 loan account is transferred to his capital account. For the further development of the business, usually some fresh capital/loan is required. The amount of loan is placed to the credit of the party contributing the same on such terms and conditions as may have been agreed upon When the partnership firm is converted into a company, then the financial statements of the new company will be prepared according to Schedule III to the Companies Act, 2013. The general instructions for preparation of Balance sheet and the Statement of Profit and Loss of the company are given in Schedule Ill to the Companies Act, 2013, Illustration 4 The following is the Balance Sheet of Messers A and B as on 31st March 2011 : Liabilities Assets A's Capital 40,000 Land and Buildings 50,000 B's Capital 50,000 90,000 Stock 30,000 A's Loan 10,000 Debtors 20,000 General Reserve 10,000 Investment Liabilities 20,000 6% Debentures in X Lid. 20,000 Cash 10,000 1,30,000 1,30,000 It was agreed that Mr. C is to be admitted for a fifth share in the future profits from 1st April 2011. He is required to contribute cash towards goodwill and 7 10,000 towards capital The following further information is furnished: () The partners A and B shared the profits in the ratio 3:2. m Mr. A was receiving a salary of 7 500p.m. from the very inception of the firm in 1998 in addition to share of profit. (1) The future profit ratio between A, B and C will be 3:1:1. Mr. A will not get any salary after the admission of Mr. C. (iv) (a) The goodwill of the firm shall be determined on the basis of 2 years purchase of the average profits from business of the last 5 years. The particulars of the profits are as under: Year ended 31-3-07 Profit 20,000 Year ended 31-3-08 Loss 10,000 Year ended 31-3-09 Profil 20,000 Year ended 31-3-10 Profit 25.000 Year ended 31.3.11 Profit 30,000 The above profits and losses are after charging the salary of Mr. A. The profit of the year ended 31st March 2007 included an extraneous profit of 30,000 and the loss of the year ended 31st March 2008 was on account of by strike to the extent of 20,000 (b) It was agreed that the value of the goodwill of the firm shall appear in the books of the firm. (V) The trading profit for the year ended 31st March, 2012 was 240,000 before depreciation. (vi) The partners had drawn each >1,000 p.m. as drawings (vii) The value of the other assets and liabilities as on 31st March, 2012 were as under: Building (before depreciation) 60,000 Stock 40,000 Debtors Nil Investment 20,000 Liabilities NI! (viii) Provide depreciation at 5% on land and buildings on the closing balance and interest at 6% on A's loan. (ix) They applied for conversion of the firm into a Private Limited Company i.e. ABC Pvt. Ltd