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**CBSE accountancy class 12 chapter Reconstitution of a Partnership Firm – Admission of a Partner Numerical Questions Solutions**. You can find the questions/answers/solutions for the**chapter 3**of**CBSE class 12 accountancy**in this page. So is the case if you are looking for**CBSE class 12 Commerce**related topic**Reconstitution of a Partnership Firm – Admission of a Partner Numerical Questions Solutions**. If you’re looking for theoretical questions related to Test Your Understanding, Do It Yourself, Short Answers or Long Answers you can find them at Reconstitution of a Partnership Firm – Admission of a PartnerReconstitution of a Partnership Firm – Admission of a Partner – Numerical Questions Solutions

1. A and B were partners in a firm sharing profits and losses in the ratio of 3:2. They admit C into the partnership with 1/6 share in the profits. Calculate the new profit sharing ratio?

C’s share

{= \dfrac{1}{6}}

Remaining Share

{= 1 - \dfrac{1}{6}}

{= \dfrac{5}{6}}

This remaining share should be distributed to A and B in their old profit sharing ratio 3:2. So,

A’s share

{= \dfrac{5}{6} × \dfrac{3}{5}}

{= \dfrac{3}{6}}

B’s share

{= \dfrac{5}{6} × \dfrac{2}{5}}

{= \dfrac{2}{6}}

New Ratio

{= \dfrac{3}{6} : \dfrac{2}{6} : \dfrac{1}{6}}

= 3:2:1

2. A,B,C were partners in a firm sharing profits in 3:2:1 ratio. They admitted D for 10% profits. Calculate the new profit sharing ratio?

D’s share

{= \dfrac{10}{100}}

{= \dfrac{1}{10}}

Remaining Share

{= 1 - \dfrac{1}{10}}

{= \dfrac{9}{10}}

This remaining share should be distributed to A, B and C in their old profit sharing ratio 3:2:1. So,

A’s new share

{= \dfrac{9}{10} × \dfrac{3}{6}}

{= \dfrac{27}{60}}

B’s new share

{= \dfrac{9}{10} × \dfrac{2}{6}}

{= \dfrac{18}{60}}

C’s new share

{= \dfrac{9}{10} × \dfrac{1}{6}}

{= \dfrac{9}{60}}

D’s new share

{= \dfrac{1}{10}}

{= \dfrac{6}{60}}

New Ratio

{= \dfrac{27}{60} : \dfrac{18}{6} : \dfrac{9}{60} : \dfrac{6}{60}}

= 27:18:9:6

= 9:6:3:1

3. X and Y are partners sharing profits in 5:3 ratio admitted Z for 1/10 share which he acquired equally for X and Y. Calculate new profit sharing ratio?

Share of Z

{= \dfrac{1}{10}}

This share is sacrificed equally by X and Y

X’s sacrifice

{= \dfrac{1}{10} × \dfrac{1}{2}}

{= \dfrac{1}{20}}

X’s new share

{= \dfrac{5}{8} - \dfrac{1}{20}}

{= \dfrac{25 - 2}{40}}

{= \dfrac{23}{40}}

Y’s sacrifice

{= \dfrac{1}{10} × \dfrac{1}{2}}

{= \dfrac{1}{20}}

Y’s new share

{= \dfrac{3}{8} - \dfrac{1}{20}}

{= \dfrac{15 - 2}{40}}

{= \dfrac{13}{40}}

Z’s share

{= \dfrac{1}{10}}

{= \dfrac{4}{40}}

New Ratio

{= \dfrac{23}{40} : \dfrac{13}{40} : \dfrac{4}{40}}

= 23 : 13 : 4

4. A, B and C are partners sharing profits in 2:2:1 ratio admitted D for 1/8 share which he acquired entirely from A. Calculate new profit sharing ratio?

D’s share

{= \dfrac{1}{8}}

A’s sacrifice

{= \dfrac{2}{5} - \dfrac{1}{8}}

{= \dfrac{16 - 5}{40}}

{= \dfrac{11}{40}}

B’s share

{= \dfrac{2}{5}}

{= \dfrac{16}{40}}

C’s share

{= \dfrac{1}{5}}

{= \dfrac{8}{40}}

D’s share

{= \dfrac{1}{8}}

{= \dfrac{5}{40}}

New Ratio

{= \dfrac{11}{40} : \dfrac{16}{40} : \dfrac{8}{40} : \dfrac{5}{40}}

= 11: 16 : 8 : 5

5. P and Q are partners sharing profits in 2:1 ratio. They admitted R into partnership giving him 1/5 share which he acquired from P and Q in 1:2 ratio. Calculate new profit sharing ratio?

R’s share

{= \dfrac{1}{5}}

P’s sacrifice

{= \dfrac{1}{5} × \dfrac{1}{3}}

{= \dfrac{1}{15}}

P’s new share

{= \dfrac{2}{3} - \dfrac{1}{15}}

{= \dfrac{10 - 1}{15}}

{= \dfrac{9}{15}}

{= \dfrac{3}{5}}

Q’s sacrifice

{= \dfrac{1}{5} × \dfrac{2}{3}}

{= \dfrac{2}{15}}

P’s new share

{= \dfrac{1}{3} - \dfrac{2}{15}}

{= \dfrac{5 - 2}{15}}

{= \dfrac{3}{15}}

{= \dfrac{1}{5}}

R’s share

{= \dfrac{1}{5}}

New Ratio

{= \dfrac{3}{5} : \dfrac{1}{5} : \dfrac{1}{5}}

= 3 : 1 : 1

6. A, B and C are partners sharing profits in 3:2:2 ratio. They admitted D as a new partner for 1/5 share which he acquired from A, B and C in 2:2:1 ratio respectively. Calculate new profit sharing ratio?

D’s share

{= \dfrac{1}{5}}

A’s sacrifice

{= \dfrac{1}{5} × \dfrac{2}{5}}

{= \dfrac{2}{25}}

A’s new share

{= \dfrac{3}{7} - \dfrac{2}{25}}

{= \dfrac{75 - 14}{175}}

{= \dfrac{61}{175}}

B’s sacrifice

{= \dfrac{1}{5} × \dfrac{2}{5}}

{= \dfrac{2}{25}}

B’s new share

{= \dfrac{2}{7} - \dfrac{2}{25}}

{= \dfrac{50 - 14}{175}}

{= \dfrac{36}{175}}

C’s sacrifice

{= \dfrac{1}{5} × \dfrac{1}{5}}

{= \dfrac{1}{25}}

C’s new share

{= \dfrac{2}{7} - \dfrac{1}{25}}

{= \dfrac{50 - 7}{175}}

{= \dfrac{43}{175}}

D’s share

{= \dfrac{1}{5}}

{= \dfrac{35}{175}}

New Ratio

{= \dfrac{61}{175} : \dfrac{36}{175} : \dfrac{43}{175} : \dfrac{35}{175}}

= 61 : 36 : 43 : 35

7. A and B were partners in a firm sharing profits in 3:2 ratio. They admitted C for 3/7 share which he took 2/7 from A and 1/7 from B. Calculate new profit sharing ratio?

C’s share

{= \dfrac{3}{7}}

A’s sacrifice

{= \dfrac{2}{7}}

A’s new share

{= \dfrac{3}{5} - \dfrac{2}{7}}

{= \dfrac{21 - 10}{35}}

{= \dfrac{11}{35}}

B’s sacrifice

{= \dfrac{1}{7}}

B’s new share

{= \dfrac{2}{5} - \dfrac{1}{7}}

{= \dfrac{14 - 5}{35}}

{= \dfrac{9}{35}}

C’s share

{= \dfrac{3}{7}}

{= \dfrac{15}{35}}

New Ratio

{= \dfrac{11}{35} : \dfrac{9}{35} : \dfrac{15}{35}}

= 11:9:15

8. A, B and C were partners in a firm sharing profits in 3:3:2 ratio. They admitted D as a new partner for 4/7 profit. D acquired his share 2/7 from A. 1/7 from B and 1/7 from C. Calculate new profit sharing ratio?

D’s share

{= \dfrac{4}{7}}

A’s sacrifice

{= \dfrac{2}{7}}

A’s new share

{= \dfrac{3}{8} - \dfrac{2}{7}}

{= \dfrac{21 - 16}{56}}

{= \dfrac{5}{56}}

B’s sacrifice

{= \dfrac{1}{7}}

B’s new share

{= \dfrac{3}{8} - \dfrac{1}{7}}

{= \dfrac{21 - 8}{56}}

{= \dfrac{13}{56}}

C’s sacrifice

{= \dfrac{1}{7}}

C’s new share

{= \dfrac{2}{8} - \dfrac{1}{7}}

{= \dfrac{14 - 8}{56}}

{= \dfrac{6}{56}}

D’s share

{= \dfrac{4}{7}}

{= \dfrac{32}{56}}

New Ratio

{= \dfrac{5}{56} : \dfrac{13}{56} : \dfrac{6}{56} : \dfrac{32}{56}}

= 5 : 13 : 6 : 32

9. Radha and Rukmani are partners in a firm sharing profits in 3:2 ratio. They admitted Gopi as a new partner. Radha surrendered 1/3 of her share in favour of Gopi and Rukmani surrendered 1/4 of her share in favour of Gopi. Calculate new profit sharing ratio?

Radha’s share

{= \dfrac{3}{5}}

Radha’s sacrifice

{= \dfrac{3}{5} × \dfrac{1}{3}}

{= \dfrac{1}{5}}

Radha’s new share

{= \dfrac{3}{5} - \dfrac{1}{5}}

{= \dfrac{2}{5}}

Rukmani’s sacrifice

{= \dfrac{2}{5} × \dfrac{1}{4}}

{= \dfrac{1}{10}}

Rukmani’s new share

{= \dfrac{2}{5} - \dfrac{1}{10}}

{= \dfrac{4 - 1}{10}}

{= \dfrac{3}{10}}

Gopi’s share

= Radha’s sacrifice + Rukmani’s sacrifice

{= \dfrac{1}{5} + \dfrac{1}{10}}

{= \dfrac{2 + 1}{10}}

{= \dfrac{3}{10}}

New Ratio

{= \dfrac{2}{5} : \dfrac{3}{10} : \dfrac{3}{10}}

{= \dfrac{4}{10} : \dfrac{3}{10} : \dfrac{3}{10}}

= 4 : 3 : 3

10. Singh, Gupta and Khan are partners in a firm sharing profits in 3:2:3 ratio. They admitted Jain as a new partner. Singh surrendered 1/3 of his share in favour of Jain: Gupta surrendered 1/4 of his share in favour of Jain and Khan surrendered 1/5 in favour of Jain. Calculate new profit sharing ratio?

Singh’s share

{= \dfrac{3}{8}}

Singh’s sacrifice

{= \dfrac{3}{8} × \dfrac{1}{3}}

{= \dfrac{1}{8}}

Shingh’s new share

{= \dfrac{3}{8} - \dfrac{1}{8}}

{= \dfrac{2}{8}}

{= \dfrac{1}{4}}

Gupta’s share

{= \dfrac{2}{8}}

{= \dfrac{1}{4}}

Gupta’s sacrifice

{= \dfrac{1}{8} × \dfrac{1}{4}}

{= \dfrac{1}{16}}

Gupta’s new share

{= \dfrac{1}{4} - \dfrac{1}{16}}

{= \dfrac{4 - 1}{16}}

{= \dfrac{3}{16}}

Khan’s share

{= \dfrac{3}{8}}

Khan’s sacrifice

{= \dfrac{3}{8} × \dfrac{1}{5}}

{= \dfrac{3}{40}}

Khan’s new share

{= \dfrac{3}{8} - {3}{40}}

{= \dfrac{15 - 3}{40}}

{= \dfrac{12}{40}}

{= \dfrac{3}{10}}

Jain’s share

= Singh’s sacrifice + Gupta’s sacrifice + Khan’s sacrifice

{= \dfrac{1}{8} + \dfrac{1}{16} + \dfrac{3}{40}}

{= \dfrac{10 + 5 + 6}{80}}

{= \dfrac{21}{80}}

New Ratio

{= \dfrac{1}{4} : \dfrac{3}{16} : \dfrac{3}{10} : \dfrac{21}{80}}

{= \dfrac{20}{80} : \dfrac{15}{80} : \dfrac{24}{80} : \dfrac{21}{80}}

= 20 : 15 : 24 : 21

11. Sandeep and Navdeep are partners in a firm sharing profits in 5:3 ratio. They admit C into the firm and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio?

Sandeep’s share

{= \dfrac{5}{8}}

Sandeep’s new share

{= \dfrac{4}{7}}

Sandeep’s sacrifice

{= \dfrac{5}{8} - \dfrac{4}{7}}

{= \dfrac{35 - 32}{56}}

{= \dfrac{3}{56}}

Sandeep’s share

{= \dfrac{3}{8}}

Sandeep’s new share

{= \dfrac{2}{7}}

Sandeep’s sacrifice

{= \dfrac{3}{8} - \dfrac{2}{7}}

{= \dfrac{21 - 16}{56}}

{= \dfrac{5}{56}}

Sacrificing Ratio

{= \dfrac{3}{56} : \dfrac{5}{56}}

= 3 : 5

12. Rao and Swami are partners in a firm sharing profits and losses in 3:2 ratio. They admit Ravi as a new partner for 1/8 share in the profits. The new profit sharing ratio between Rao and Swami is 4:3. Calculate new profit sharing ratio and sacrificing ratio?

Ravi’s share

{= \dfrac{1}{8}}

Remaining’s share

{= 1- \dfrac{1}{8}}

{= \dfrac{8 - 1}{8}}

{= \dfrac{7}{8}}

This remaining share need to be shared between Rao and Swami in the ratio 4:3

Rao’s new share

{= \dfrac{7}{8} × \dfrac{4}{7}}

{= \dfrac{4}{8}}

{= \dfrac{1}{2}}

Swami’s new share

{= \dfrac{7}{8} × \dfrac{3}{7}}

{= \dfrac{3}{8}}

Ravi’s new share

{= \dfrac{1}{8}}

New Profit sharing ratio

{= \dfrac{1}{2} : \dfrac{3}{8} : \dfrac{1}{8}}

{= \dfrac{4}{8} : \dfrac{3}{8} : \dfrac{1}{8}}

= 4 : 3 : 1

Sacrifice

= Old share – new share

Rao’s sacrifice

{= \dfrac{3}{5} - \dfrac{1}{2}}

{= \dfrac{6 - 5}{10}}

{= \dfrac{1}{10}}

Swami’s sacrifice

{= \dfrac{2}{5} - \dfrac{3}{8}}

{= \dfrac{16 - 15}{40}}

{= \dfrac{1}{40}}

Sacrificing Ratio

{= \dfrac{1}{10} : \dfrac{1}{40}}

{= \dfrac{4}{40} : \dfrac{1}{40}}

= 4 : 1

13. Compute the value of goodwill on the basis of four years’ purchase of the average profits based on the last five years? The profits for the last five years were as follows:

₹

2013

40,000

2014

50,000

2015

60,000

2016

50,000

2017

60,000

Year

Profit

₹

₹

2013

40,000

2014

50,000

2015

60,000

2016

50,000

2017

60,000

Total

2,60,000

Average Profit

{= \dfrac{Total~Profit~of~last~5~years}{No.~of~years}}

= \dfrac{₹~2,60,000}{5}

= ₹ 52,000

Goodwill

{= Average~Profits × No.~of~years~purchased}

= ₹ 52,000 × 4

= ₹ 2,08,000

14. Firm’s Capital in a business is ₹ 2,00,000. The normal rate of return on firm’s capital is 15%. During the year 2015 the firm earned a profit of ₹ 48,000. Calculate goodwill on the basis of 3 years purchase of super profit?

Firm’s capital

= 2,00,000

Normal Rate of Return

= 15%

Normal Profits

{= Firm's~Capital × \dfrac{Normal~Rate~of~Return}{100}}

{= ₹~2,00,000 × \dfrac{15}{100}}

= ₹ 30,000

Actual Proits

= ₹ 48,000

Super Profits

= Actual Profits – Normal Profits

= ₹ 48,000 – ₹ 30,000

= ₹ 18,000

Goodwill

= Super Profits × No. of Years Purchased

= ₹ 6,000

15. The books of Ram and Bharat showed that the firm’s capital on 31.12.2016 was ₹ 5,00,000 and the profits for the last 5 years : 2015 ₹ 40,000; 2014 ₹ 50,000; 2013 ₹ 55,000; 2012 ₹ 70,000 and 2011 ₹ 85,000. Calculate the value of goodwill on the basis of 3 years purchase of the average super profits of the last 5 years assuming that the normal rate of return is 10%?

Normal Profits

{= Firm's~Capital × \dfrac{Normal~Rate~of~Return}{100}}

{= ₹ 5,00,000 × \dfrac{10}{100}}

= ₹ 50,000

Average Profits:

Year

Profit

₹

₹

2015

40,000

2014

50,000

2013

55,000

2012

70,000

2011

85,000

Total

3,00,000

Average Profits

{= \dfrac{Total~Profits~of~Last~5~Years}{No.~of~Years}}

{= \dfrac{₹~3,00,000}{5}}

= ₹ 60,000

Super Profits

= Actual Profits – Normal Profits

= ₹ 60,000 – ₹ 50,000

= ₹ 10,000

Goodwill

= Super Profits × No. of Years Purchased

= ₹ 10,000 × 3

= ₹ 30,000

16. Rajan and Rajani are partners in a firm. Their capitals were Rajan ₹ 3,00,000; Rajani ₹ 2,00,000. During the year 2015 the firm earned a profit of ₹ 1,50,000. Calculate the value of goodwill of the firm by capitalisation method assuming that the normal rate of return is 20%?

Goodwill can be calculated by either

(a)

Capitalization of average profits

(b)

By Captalizing Super Profits

(a) Capitalization of Average Profits:

Rajan’s Capital

= ₹ 3,00,000

Rajani’s Capital

= ₹ 2,00,000

Total’s Capital

= ₹ 5,00,000

Normal Rate of Return

= 20%

Average Profits

= ₹ 1,50,000

Capitalized Value of Average Profits

{= Average~Profits × \dfrac{100}{Normal~Rate~of~Return}}

{= ₹~1,50,000 × \dfrac{100}{20}}

= ₹ 7,50,000

Goodwill

= Capitalized Value – Net Assets

= ₹ 7,50,000 – ₹ 5,00,000

= ₹ 2,50,000

(b) By Captalizing Super Profits:

Normal Profits

{= Invested~Capital × \dfrac{Normal~Rate~of~Return}{100}}

{= ₹~5,00,000 × \dfrac{20}{100}}

₹ 1,00,000

Super Profit

= Average Profits – Normal Profits

= ₹ 1,50,000 – ₹ 1,00,000

= ₹ 50,000

Goodwill

{= Super~Profits × \dfrac{100}{Normal~Rate~of~Return}}

{= ₹~50,000 × \dfrac{100}{20}}

= ₹ 2,50,000

17. A business has earned average profits of ₹ 1,00,000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are ₹ 10,00,000 and its external liabilities are ₹ 1,80,000. The normal rate of return is 10%?

Goodwill can be calculated by either

(a)

Capitalization of average profits

(b)

By Captalizing Super Profits

(a) Capitalization of Average Profits:

Firms’ Capital

= Total Assets – Outside Liabilities

= ₹ 10,00,000 – ₹ 1,80,000

= ₹ 8,20,000

Normal Rate of Return

= 10%

Average Profits

= ₹ 1,00,000

Capitalized Value of Average Profits

{= Average~Profits × \dfrac{100}{Normal~Rate~of~Return}}

{= ₹~1,00,000 × \dfrac{100}{10}}

= ₹ 10,00,000

Goodwill

= Capitalized Value – Net Assets

= ₹ 10,00,000 – ₹ 8,20,000

= ₹ 1,80,000

(b) By Captalizing Super Profits:

Firms’ Capital

= Total Assets – Outside Liabilities

= ₹ 10,00,000 – ₹ 1,80,000

= ₹ 8,20,000

Normal Rate of Return

= 10%

Average Profits

= ₹ 1,00,000

Normal Profits

{= Firm's~Capital × \dfrac{Normal~Rate~of~Return}{100}}

{= ₹~8,20,000 × \dfrac{10}{100}}

= ₹ 82,000

Super Profit

= Average Profits – Normal Profits

= ₹ 1,00,000 – ₹ 82,000

= ₹ 18,000

Goodwill

{= Super~Profits × \dfrac{100}{Normal~Rate~of~Return}}

{= ₹~18,000 × \dfrac{100}{10}}

= ₹ 1,80,000

18. Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 4,000 as his share of goodwill premium. Give the necessary journal entries:

a)

When the amount of goodwill is retained in the business.

b)

When the amount of goodwill is fully withdrawn.

c)

When 50% of the amount of goodwill is withdrawn.

d)

When goodwill is paid privately.

a) When the amount of goodwill is retained in the business.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

24,000

To Ghosh’s Capital A/c

20,000

To Premium for Goodwill A/c

4,000

(Being the amount brought in by Ghosh as Capital and Goodwill)

Premium for Goodwill A/c

Dr.

4,000

To Verma’s Capital A/c

2,500

To Sharma’s Capital A/c

1,500

(Being Goodwill transferred to Verma and Sharma in the ratio 5:3)

b) When the amount of goodwill is fully withdrawn.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

24,000

To Ghosh’s Capital A/c

20,000

To Premium for Goodwill A/c

4,000

(Being the amount brought in by Ghosh as Capital and Goodwill)

Premium for Goodwill A/c

Dr.

4,000

To Verma’s Capital A/c

2,500

To Sharma’s Capital A/c

1,500

(Being Goodwill transferred to Verma and Sharma in the ratio 5:3)

Verma’s Capital A/c

Dr.

2,500

Sharma’s Capital A/c

Dr.

1,500

To Cash A/c

4,000

(Being cash withdrawn by Verma and Sharma equal to their share of Goodwill)

c) When 50% of the amount of goodwill is withdrawn.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

24,000

To Ghosh’s Capital A/c

20,000

To Premium for Goodwill A/c

4,000

(Being the amount brought in by Ghosh as Capital and Goodwill)

Premium for Goodwill A/c

Dr.

4,000

To Verma’s Capital A/c

2,500

To Sharma’s Capital A/c

1,500

(Being Goodwill transferred to Verma and Sharma in the ratio 5:3)

Verma’s Capital A/c

Dr.

1,250

Sharma’s Capital A/c

Dr.

750

To Cash A/c

2,000

(Being cash withdrawn by Verma and Sharma equal to 50% of their share of Goodwill)

d) When goodwill is paid privately.

In this case, only the entry related to the Capital is recorded in the journal. No entry related to the Goodwill is passed in the books of the firm.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

20,000

To Ghosh’s Capital A/c

20,000

(Being the amount brought in by Ghosh as Capital)

Working Notes:

Share of Goodwill

Verma

{= ₹~4,000 × \dfrac{5}{8}}

= ₹ 2,500

Sharma

{= ₹~4,000 × \dfrac{3}{8}}

= ₹ 1,500

19. A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership with 1/4 share in profits. C will bring in ₹ 30,000 for capital and the requisite amount of goodwill premium in cash. The goodwill of the firm is valued at ₹ 20,000. The new profit sharing ratio is 2:1:1. A and B withdraw their share of goodwill. Give necessary journal entries?

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

35,000

To C’s Capital A/c

30,000

To Premium for Goodwill A/c

5,000

(Being amount brought by C for his share of Capital and Goodwill)

Premium for Goodwill A/c

Dr.

5,000

To A’s Capital A/c

2,000

To B’s Capital A/c

3,000

(Being Goodwill brought in by C is distributed among A and B in their sacrificing ratio)

A’s Capital A/c

Dr.

2,000

B’s Capital A/c

Dr.

3,000

To Cash A/c

5,000

Being the amount of goodwill withdrawn by both A and B

Working Notes:

Sacrificing Ratio

= Old Ratio – New Ratio

A

{= \dfrac{3}{5} - \dfrac{2}{4}}

{= \dfrac{12 - 10}{20}}

{= \dfrac{2}{20}}

B

{= \dfrac{2}{5} - \dfrac{1}{4}}

{= \dfrac{8 - 5}{20}}

{= \dfrac{3}{20}}

Sacrificing Ratio

{= \dfrac{2}{20} : \dfrac{3}{20}}

= 2:3

C’s Share of Goodwill

{= ₹~20,000 × \dfrac{1}{4}}

= ₹ 5,000

Goodwill Distributed to:

A

{= ₹~5,000 × \dfrac{2}{5}}

= ₹ 2,000

B

{= ₹ 5,000 × \dfrac{3}{5}}

= ₹ 3,000

20. Arti and Bharti are partners in a firm sharing profits in 3:2 ratio, They admitted Sarthi for 1/4 share in the profits of the firm. Sarthi brings ₹ 50,000 for his capital and ₹ 10,000 for his 1/4 share of goodwill. Goodwill already appears in the books of Arti and Bharti at ₹ 5,000. the new profit sharing ratio between Arti, Bharti and Sarthi will be 2:1:1. Record the necessary journal entries in the books of the new firm?

There’re two cases in which the goodwill be shared between Arti and Bharti.

(i)

The existing goodwill will be distribute to Arti and Bharti in their profit sharing ratio i.e. 3:2

(ii)

The goodwill brought in by the new partner Sarthi will be shared among Arti and Bharti in their sacrificing ratio.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Arti’s Capital A/c

Dr.

3,000

Bharti’s Capital A/c

Dr.

2,000

To Goodwill A/c

5,000

(Being goodwill already exisitng in the books written off)

Cash A/c

Dr.

60,000

To Sarthi’s Capital A/c

50,000

To Premium for Goodwill A/c

10,000

(Being both Capital and Goodwill brought in by the new partner Sarthi)

Premium for Goodwill A/c

Dr.

10,000

To Arti’s Capital A/c

4,000

To Bharti’s Capital A/c

6,000

(Being Goodwill brought in by the new partner Sarthi distributed among the existing partners Arti and Bharti)

Working Notes:

Exiting Goodwill Write Off:

Arti

{= ₹~5,000 × \dfrac{3}{5}}

= ₹ 3,000

Bharti

{= ₹~5,000 × \dfrac{2}{5}}

= ₹ 2,000

Sacrificing Ratio

= Old Ratio – New Ratio

Arti

{= \dfrac{3}{5} - \dfrac{2}{4}}

{= \dfrac{12 - 10}{20}}

{= \dfrac{2}{20}}

Bharti

{= \dfrac{2}{5} - \dfrac{1}{4}}

{= \dfrac{8 - 5}{20}}

{= \dfrac{3}{20}}

Sacrificing Ratio

{= \dfrac{2}{20} : \dfrac{3}{20}}

= 2:3

Sarthi’s goodwill

= ₹ 5,000

Goodwill Distributed to:

Arti

{= ₹~10,000 × \dfrac{2}{5}}

= ₹ 4,000

Bharti

{= ₹~10,000 × \dfrac{3}{5}}

= ₹ 6,000

21. X and Y are partners in a firm sharing profits and losses in 4:3 ratio. They admitted Z for 1/8 share. Z brought ₹ 20,000 for his capital and ₹ 7,000 for his 1/8 share of goodwill. Goodwill already appears in the books at ₹ 40,000. Show necessary journal entries in the books of X, Y and Z?

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

27,000

To Z’s Capital A/c

20,000

To Premium for Goodwill A/c

7,000

(Being capital and goodwill brought in by the new partner Z)

Premium for Goodwill A/c

Dr.

7,000

To X’s Capital A/c

4,000

To Y’s Capital A/c

3,000

(Being goodwill brought in by new partner C is distributed to the old partners X and Y in their sacrificing ratio)

According to AS-10 Goodwill can be shown in the books if the money and money value is paid for it. In this case, no money or money value is paid for Goodwill. Hence, the goodwill for ₹ 40,000 can not be raised.

Also note that, as the new profit sharing ratio is not given, the sacrificing ratio of X and Y will be their old profit sharing ratio.

Working Notes:

Sacrificing Ratio

= 4:3

Goodwill brought by Z

= ₹ 7,000

Goodwill Distributed to:

X

{= ₹~7,000 × \dfrac{4}{7}}

= ₹ 4,000

Y

{= ₹~7,000 × \dfrac{3}{7}}

= ₹ 3,000

22. Aditya and Balan are partners sharing profits and losses in 3:2 ratio. They admitted Christopher for 1/4 share in the profits. The new profit sharing ratio agreed was 2:1:1. Christopher brought ₹ 50,000 for his capital. His share of goodwill was agreed to at ₹ 15,000. Christopher could bring only ₹ 10,000 out of his share of goodwill. Record necessary journal entries in the books of the firm?

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Cash A/c

Dr.

60,000

To Christopher’s Capital A/c

50,000

To Premium for Goodwill A/c

10,000

(Being the amount for Capital and Premium for Goodwill brought in by the new partner Christopher)

Premium for Goodwill A/c

Dr.

10,000

Christopher’s Capital A/c

Dr.

5,000

To Aditya’s Capital A/c

6,000

To Balan’s Capital A/c

9,000

(Being the Goodwill brought in by Christopher distributed to the old partners Aditya and Balan)

Working Notes:

Sacrificing Ratio

= Old Ratio – New Ratio

Aditya

{= \dfrac{3}{5} - \dfrac{2}{4}}

{= \dfrac{12 - 10}{20}}

{= \dfrac{2}{20}}

Balan

{= \dfrac{2}{5} - \dfrac{1}{4}}

{= \dfrac{8 - 5}{20}}

{= \dfrac{3}{20}}

Sacrificing Ratio

{= \dfrac{2}{20} : \dfrac{3}{20}}

= 2:3

Christopher’s Share of Goodwill

= ₹ 15,000

Goodwill brought by Christopher

= ₹ 10,000

Goodwill taken from Christopher’s Capital

= ₹ 15,000 – ₹ 10,000

= ₹ 5,000

Goodwill Distributed to:

Aditya

{= ₹~15,000 × \dfrac{2}{5}}

= ₹ 6,000

Balan

{= ₹~15,000 × \dfrac{3}{5}}

= ₹ 9,000

23. Amar and Samar were partners in a firm sharing profits and losses in 3:1 ratio. They admitted Kanwar for 1/4 share of profits. Kanwar could not bring his share of goodwill premium in cash. The Goodwill of the firm was valued at ₹ 80,000 on Kanwar’s admission. Record necessary journal entry for goodwill on Kanwar’s admission.

As the new ratio in which the profits should be shared or the sacrificing ration are not given, we can assume that the sacrificing ratio of Amar and Samar will be equal to their profit sharing ratio.

Also, as the new partner Kanwar could not bring in the Goodwill, the amount equivalent to the goodwill will be deducted from Kanwar’s capital account and distributed to the old partners Amar and Samar.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Kanwar’s Capital A/c

Dr.

20,000

To Amar’s Capital A/c

15,000

To Samar’s Capital A/c

5,000

(Being Kanwar’s share of goodwill charged to his capital and distributed to the old partners Amar and Samar in their sacrificing ratio i.e. 3:1)

Working Notes:

Sacrificing Ratio

= 3:1

Goodwill deducted from

Kanwar’s Capital A/c

Kanwar’s Capital A/c

{= ₹~80,000 × \dfrac{1}{4}}

= ₹ 20,000

Goodwill distributed to:

Amar

{= ₹~20,000 × \dfrac{3}{4}}

= ₹ 15,000

Samar

{= ₹~20,000 × \dfrac{1}{4}}

= ₹ 5,000

24. Mohan Lal and Sohan Lal were partners in a firm sharing profits and losses in 3:2 ratio. They admitted Ram Lal for 1/4 share on 1.1.2013 1.1.2017. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of last 4 years which were ₹ 50,000 for 2013, ₹ 60,000 for 2014, ₹ 90,000 for 2015 and ₹ 70,000 for 2016. Ram Lal did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram Lal’s admission when:

a)

Goodwill already appears in the books at ₹ 2,02,500.

b)

Goodwill appears in the books at ₹ 2,500.

c)

Goodwill appears in the books at ₹ 2,05,000.

Year

Profit

2013

50,000

2014

60,000

2015

90,000

2016

70,000

Total

2,70,000

Average Profits

{= \dfrac{Total~Profits~of~last~4~years}{No.~of~Years}}

{= \dfrac{₹ 2,70,000}{4}}

= ₹ 67,500

Goodwill

{= Average~Profits × No.~of~Years~of~Purchase}

= ₹ 67,500 × 3

= ₹ 2,02,500

As given in the problem, Ram Lal’s share of profits is ¼.

So, his share of goodwill will also be ¼

Ram Lal’s Goodwill share

{= ₹ 2,02,500 × \dfrac{1}{4}}

= ₹ 50,625

The problem neither specified the new profit sharing ratio nor the sacrificing ratio. So, we can assume that the goodwill is shared among the old partners Mohan Lal and Sohan Lal in their profit or loss sharing ratio.

Distribution of Goodwill to the old partners in their profit sharing ratio:

Mohan Lal

{= ₹ 50,625 × \dfrac{3}{5}}

= ₹ 30,375

Mohan Lal

{= ₹ 50,625 × \dfrac{2}{5}}

= ₹ 20,250

a) Goodwill already appears in the books at ₹ 2,02,500.

The goodwill existing in the books should be written off at the time of admission of a new partner.

Writing off Existing Goodwill:

Mohan Lal

{= ₹ 2,02,500 × \dfrac{3}{5}}

= ₹ 1,21,500

Sohan Lal

{= ₹ 2,02,500 × \dfrac{2}{5}}

= ₹ 81,000

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Mohan Lal’s Capital A/c

Dr.

1,21,500

Sohan Lal’s Capital A/c

Dr.

81,000

To Goodwill A/c

2,02,500

(Being Goodwill already exisitng in the firm is written off)

Ram Lal’s Capital A/c

Dr.

50,625

To Mohan Lal’s Capital A/c

30,375

To Sohan Lal’s Capital A/c

20,250

(Being Ram Lal’s share of goodwill charged on his capital distributed to the old partners in the ratio of their sacrifice)

b) Goodwill appears in the books at ₹ 2,500.

The goodwill existing in the books should be written off at the time of admission of a new partner.

Writing off Existing Goodwill:

Mohan Lal

{= 2,500 × \dfrac{3}{5}}

= ₹ 1,500

Sohan Lal

{= 2,500 × \dfrac{2}{5}}

= ₹ 1,000

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Mohan Lal’s Capital A/c

Dr.

1,500

Sohan Lal’s Capital A/c

Dr.

1,000

To Goodwill A/c

2,500

(Being Goodwill already exisitng in the firm is written off)

Ram Lal’s Capital A/c

Dr.

50,625

To Mohan Lal’s Capital A/c

30,375

To Sohan Lal’s Capital A/c

20,250

(Being Ram Lal’s share of goodwill charged on his capital distributed to the old partners in the ratio of their sacrifice)

c) Goodwill appears in the books at ₹ 2,05,000.

The goodwill existing in the books should be written off at the time of admission of a new partner.

Writing off Existing Goodwill:

Mohan Lal

{= 2,05,000 × \dfrac{3}{5}}

= ₹ 1,23,000

Sohan Lal

{= 2,05,000 × \dfrac{2}{5}}

= ₹ 82,000

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Mohan Lal’s Capital A/c

Dr.

1,23,000

Sohan Lal’s Capital A/c

Dr.

82,000

To Goodwill A/c

2,05,000

(Being Goodwill already exisitng in the firm is written off)

Ram Lal’s Capital A/c

Dr.

50,625

To Mohan Lal’s Capital A/c

30,375

To Sohan Lal’s Capital A/c

20,250

(Being Ram Lal’s share of goodwill charged on his capital distributed to the old partners in the ratio of their sacrifice)

25. Rajesh and Mukesh are equal partners in a firm. They admit Hari into partnership and the new profit sharing ratio between Rajesh, Mukesh and Hari is 4:3:2. On Hari’s admission goodwill of the firm is valued at ₹ 36,000. Hari is unable to bring his share of goodwill premium in cash. Rajesh, Mukesh and Hari decided not to show goodwill in their balance sheet. Record necessary journal entries for the treatment of goodwill on Hari’s admission.

As Rajesh and Mukesh are equal partners in the firm their share of profits will be 1:1

Also, as Hari is not able to bring the goodwill, his share of goodwill will be deducted from his capital and distributed into the old partners’ Capital accounts.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Hari’s Capital A/c

Dr.

8,000

To Rajesh’s Capital A/c

2,000

To Mukesh’s Capital A/c

6,000

(Being share of goodwill of the new partner Hari adjusted to the old partners’ capital accounts)

Working Notes:

Hari’s Share of goodwill

{= ₹ 36,000 × \dfrac{2}{9}}

= ₹ 8,000

Old Ratio

= 1:1

New Ratio

= 4:3:2

Sacrificing Ratio:

Rajesh

{= \dfrac{1}{2} - \dfrac{4}{9}}

{= \dfrac{9 - 8}{18}}

= \dfrac{1}{18}

Mukesh

{= \dfrac{1}{2} - \dfrac{3}{9}}

{= \dfrac{9 - 6}{18}}

= \dfrac{3}{18}

Goodwill sharing ratio

{= \dfrac{1}{18} : \dfrac{3}{18}}

= 1:3

Goodwill Distributed to:

Rajesh

{= ₹ 8,000 × \dfrac{1}{4}}

= ₹ 2,000

Mukesh

{= ₹ 8,000 × \dfrac{3}{4}}

= ₹ 6,000

26. Amar and Akbar are equal partners in a firm. They admitted Anthony as a new partner and the new profit sharing ratio is 4:3:2. Anthony could not bring this share of goodwill ₹ 45,000 in cash. It is decided to do adjustment for goodwill without opening goodwill account. Pass the necessary journal entry for the treatment of goodwill?

As Amar and Akbar are equal partners in the firm their share of profits will be 1:1

Also, as Anthony is not able to bring the goodwill, his share of goodwill will be deducted from his capital and distributed into the old partners’ Capital accounts.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Anthony’s Capital A/c

Dr.

45,000

To Amar’s Capital A/c

11,250

To Akbar’s Capital A/c

33,750

(Being share of goodwill of the new partner Anthony adjusted to the old partners’ capital accounts)

Working Notes:

Anthony’s Share of goodwill

= ₹ 45,000

Old Ratio

= 1:1

New Ratio

= 4:3:2

Sacrificing Ratio:

Amar

{= \dfrac{1}{2} - \dfrac{4}{9}}

{= \dfrac{9 - 8}{18}}

= \dfrac{1}{18}

Akbar

{= \dfrac{1}{2} - \dfrac{3}{9}}

{= \dfrac{9 - 6}{18}}

= \dfrac{3}{18}

Goodwill sharing ratio

{= \dfrac{1}{18} : \dfrac{3}{18}}

= 1:3

Goodwill Distributed to:

Amar

{= ₹ 45,000 × \dfrac{1}{4}}

= ₹ 11,250

Akbar

{= ₹ 45,000 × \dfrac{3}{4}}

= ₹ 33,750

27. Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.

Balance Sheet of A and B as at March 31, 2016

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Bills Payable

10,000

Cash in Hand

10,000

Creditors

58,000

Cash at Bank

40,000

Outstanding Expenses

2,000

Sundry Debtors

60,000

Capitals

Stock

40,000

A

1,80,000

Plant

1,00,000

B

1,50,000

3,30,000

Buildings

1,50,000

4,00,000

4,00,000

C is admitted as a partner on the date of the balance sheet on the following terms:

(i)

C will bring in ₹ 1,00,000 as his capital and Rs. 60,000 as his share of goodwill for 1/4 share in the profits.

(ii)

Plant is to be appreciated to ₹ 1,20,000 and the value of buildings is to be appreciated by 10%.

(iii)

Stock is found over valued by ₹ 4,000.

(iv)

A provision for bad and doubtful debts is to be created at 5% of debtors.

(v)

Creditors were unrecorded to the extent of ₹ 1,000.

Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Bank A/c

Dr.

1,60,000

To C’s Capital A/c

1,00,000

To Premium for Goodwill A/c

60,000

(Being Capital and Goodwill brought in by the new partner C)

Premium for Goodwill A/c

Dr.

60,000

To A’s Capital A/c

40,000

To B’s Capital A/c

20,000

(Being C’s share of Goodwill is distributed among the old partners A and B)

Plant A/c

Dr.

20,000

Building A/c

Dr.

15,000

To Revaluation A/c

35,000

(Being increase in the value of the assets on revaluation)

Revaluation A/c

Dr.

7,000

To Stock A/c

4,000

To Provision for Doubtful Debts A/c

3,000

(Being reduction in the value of the assets on revaluation)

Revaluation A/c

Dr.

1,000

To Creditors A/c (Unrecorded)

1,000

(Being increase in the value of the liabilies on re-assessment)

Revaluation A/c

Dr.

27,000

To A’s Capital A/c

18,000

To B’s Capital A/c

9,000

(Being Profit on revaluation of assets and re-assessment of liabilities transferred to A and B in old profit sharing ratio))

Revaluation Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

To Stock A/c

4,000

By Plant A/c

20,000

To Creditors A/c (Unrecorded)

3,000

By Building A/c

15,000

Revaluation of Profit:

To A’s Capital A/c

18,000

To B’s Capital A/c

9,000

27,000

35,000

35,000

Partners’ Capital Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

A

₹

A

Amount

₹

B

₹

B

Amount

₹

C

₹

C

Date

Particulars

J.F.

Amount

₹

A

₹

A

Amount

₹

B

₹

B

Amount

₹

C

₹

C

To Balance b/d

2,38,000

1,79,000

1,00,000

By Balance b/d

1,80,000

1,50,000

–

By Bank A/c

–

–

1,00,000

By Premium for Goodwill A/c

40,000

20,000

–

By Revaluation A/c

18,000

9,000

–

2,38,000

1,79,000

1,00,000

2,38,000

1,79,000

1,00,000

Balance Sheet

as on March 31, 2016

as on March 31, 2016

Dr.

Cr.

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Bills Payable

10,000

Cash in Hand

10,000

Creditors

59,000

Cash at Bank

2,00,000

Outstanding Expenses

2,000

Sundry Debtors

60,000

Capital:

Provision for

3,000

57,000

A

2,38,000

Doubtful Debts

B

1,79,000

Stock

36,000

C

1,00,000

5,17,000

Plant

1,20,000

Building

1,65,000

5,88,000

5,88,000

Working Notes:

Neither the new ratio or sacrificing ratio is provided in the problem. So, we’ll consider the old sharing ratio as the sacrificing ratio.

So, the new partner C’s share of goodwill should be distributed among the old partners A and B in ratio 2:1

Sacrificing Ratio

= 2:1

Distribution of Goodwill:

A’ share

{= ₹~60,000 × \dfrac{2}{3}}

= ₹ 40,000

B’ share

{= ₹~60,000 × \dfrac{1}{3}}

= ₹ 20,000

Appreciation in plant

= ₹ 1,20,000 – ₹ 1,00,000

= ₹ 20,000

Appreciation in Building

{= ₹~1,50,000 × \dfrac{10}{100}}

= ₹ 15,000

Doubtful Debts

{= ₹~60,000 × \dfrac{5}{100}}

= ₹ 3,000

28. Leela and Meeta were partners in a firm sharing profits and losses in the ratio of 5:3. In April 2017 they admitted Om as a new partner. On the date of Om’s admission the balance sheet of Leela and Meeta showed a balance of ₹ 16,000 in general reserve and ₹ 24,000 (Cr) in Profit and Loss Account. Record necessary journal entries for the treatment of these items on Om’s admission. The new profit sharing ratio between Leela, Meeta and Om was 5:3:2.

Journal

Dr.

Cr.

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

General Reserve A/c

Dr.

16,000

Profit and Loss A/c

Dr.

24,000

To Leela’s Capital A/c

25,000

To Meena’s Capital A/c

16,000

(Being General Reseve and Profit distributed to the existing partners in thier profit sharing ratio before admitting the new partner)

Working Notes:

The general reserves and profit should be distributed among the existing partners in their profit and loss sharing ratio i.e. 5:3

Genral Reserve

= ₹ 16,000

Profit

= ₹ 24,000

Amount to be distributed

= ₹ 40,000

Share of:

Leela

{= ₹~40,000 × \dfrac{5}{8}}

= ₹ 25,000

Meena

{= ₹~40,000 × \dfrac{3}{8}}

= ₹ 15,000

29. Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio. On 1.1.2017 they admitted Ranjan as a partner. On Ranjan’s admission the profit and loss account of Amit and Viney showed a debit balance of ₹ 40,000. Record necessary journal entry for the treatment of the same.

A debit balance in profit and loss indicates a loss. The loss should be written-off among the existing partners in their old profit and loss sharing ratio 3:1

Journal

Dr.

Cr.

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Amit’s Capital A/c

Dr.

30,000

Viney’s Capital A/c

Dr.

10,000

To Profit and Loss A/c

40,000

(Being Loss written off among the old partners in their profit and loss sharing ratio i.e. 3:1)

Working Notes:

Share of Amit

{= ₹~40,000 × \dfrac{3}{4}}

= ₹ 30,000

Share of Viney

{= ₹~40,000 × \dfrac{1}{4}}

= ₹ 10,000

30. A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:

Balance Sheet of A and B as at March 31, 2016 March 31, 2017

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Sundry creditors

41,500

Cash at Bank

26,500

Reserve Fund

4,000

Bills Receivable

3,000

Capital Accounts

Debtors

16,000

A

30,000

Stock

20,000

B

16,000

Fixtures

1,000

Land & Building

25,000

91,500

91,500

On April 1, 2017, C was admitted into partnership on the following terms:

(a)

That C pays ₹ 10,000 as his capital.

(b)

That C pays ₹ 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

(c)

That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable.

(d)

That the value of land and buildings be appreciated by 20%.

(e)

There being a claim against the firm for damages, a liability to the extent of ₹ 1,000 should be created.

(f)

An item of ₹ 650 included in sundry creditors is not likely to be claimed and hence should be written back.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.

Books of A, B and C

Journal

Journal

Dr.

Cr.

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

2017

Apr 01

Bank A/c

Dr.

15,000

To C’s Capital A/c

10,000

To Premium for Goodwill A/c

5,000

(Being the Capital and Good will brought in by the new partner C)

Apr 01

Premium for Goodwill A/c

Dr.

5,000

To A’s Capital A/c

3,750

To B’s Capital A/c

1,250

(Being the goodwill brought in by the new partner C is distributed to old partners in their sacrificing ratio of 3:1)

Apr 01

A’s Capital A/c

Dr.

1,875

B’s Capital A/c

Dr.

625

To Bank A/c

2,500

(Being half of the goodwill amount withdrawn by the old partners)

Apr 01

Revaluation A/c

Dr.

3,050

To Stock A/c

2,000

To Fixture A/c

100

To Provision for Doubtful Debts

on Debtors A/c

on Debtors A/c

800

To Provision for Doubtful Debts

on Bills Receivable A/c

on Bills Receivable A/c

150

(Being decrease in the value of the assets on revaluation)

Apr 01

Land and Buillding A/c

Dr.

5,000

Apr 01

Sundry Creditors A/c

Dr.

650

To Revaluation A/c

5,650

(Being appreciation in the value of assets on revaluation)

Apr 01

Revaluation A/c

Dr.

1,000

To Claim for Damages A/c

1,000

(Being increase in the liability due to claim for damages identified on re-assessment)

Apr 01

Revaluation A/c

Dr.

1,600

To A’s Capital A/c

1,200

To B’s Capital A/c

400

(Being profit on revaluation transferred to old partners’ capital accounts)

Apr 01

Reserve Fund A/c

Dr.

4,000

To A’s Capital A/c

3,000

To B’s Capital A/c

1,000

(Being reserve fund distributed among old partners)

Bank Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

2017

2017

Apr 01

To Bank A/c

26,500

Apr 01

By A’s Capital A/c

1,875

Apr 01

To C’s Capital A/c

10,000

Apr 01

By B’s Capital A/c

625

Apr 01

To Premium for Goodwill A/c

5,000

Apr 01

By Balance c/d

39,000

41,500

41,500

Partners’ Capital Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

A

₹

A

Amount

₹

B

₹

B

Amount

₹

C

₹

C

Date

Particulars

J.F.

Amount

₹

A

₹

A

Amount

₹

B

₹

B

Amount

₹

C

₹

C

2017

2017

Apr 01

To Bank A/c

1,875

625

–

Apr 01

By Balance b/d

30,000

16,000

–

Apr 01

To Balance c/d

36,075

18,025

10,000

Apr 01

By Bank A/c

10,000

Apr 01

By Premium for Goodwill A/c

3,750

1,250

Apr 01

By Revaluation A/c

1,200

400

–

Apr 01

By Reserve Fund A/c

3,000

1,000

–

37,950

18,650

10,000

37,950

18,650

10,000

Balance Sheet

as on March 31, 2017

as on March 31, 2017

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Sundry Creditors

40,850

Cash at Bank

39,000

Claim for Damages

1,000

Bills Receivable

3,000

Capital

Provision

(150)

2,850

A

36,075

Debtors

16,000

B

18,025

Provision

(800)

15,200

C

10,000

64,100

Stock

18,000

Fixtures

900

Land and Building

30,000

1,05,950

1,05,950

Working Notes:

As neither the new profit sharing ratio nor the sacrificing ratio are given, we consider that both A and B sacrifice their share in the profits in the ratio of their profit and loss sharing ratio i.e. 3:1

The reserve fund and revaluation should also be share among the old partners in their profit sharing ratio i.e. 3:1

Sacrificing Ratio

{= \dfrac{3}{4} : \dfrac{1}{4}}

= 3:1

Goodwill paid by C

= ₹ 5,000

Goodwill Distributed to:

A

{= ₹ 5,000 × \dfrac{3}{4}}

= ₹ 3,750

B

{= ₹~5,000 × \dfrac{1}{4}}

= ₹ 1,250

Goodwill Amount Withdrawn by:

A

{= ₹~3,750 × \dfrac{1}{2}}

= ₹ 3,750

B

{= ₹~1,250 × \dfrac{1}{2}}

= ₹ 625

Stock Reduction

{= ₹~20,000 × \dfrac{10}{100}}

= ₹ 2,000

Fixtures Reduction

{= ₹~1,000 × \dfrac{10}{100}}

= ₹ 100

Provision for Doubtful Debts:

Sundry Debtors

{= ₹~16,000 \dfrac{5}{100}}

= ₹ 800

Bills Receivable

{= ₹~3,000 \dfrac{5}{100}}

= ₹ 150

Appreciation on Land and Building

{= ₹~25,000 × \dfrac{20}{100}}

= ₹ 5,000

Reserve Fund Transferred to:

A

{= ₹~4,000 × \dfrac{3}{4}}

= ₹ 3,000

B

{= ₹~4,000 × \dfrac{1}{4}}

= ₹ 1,000

31. A and B are partners sharing profits and losses in the ratio of 3:1. On Ist April. 2017 they admitted C as a new partner for 1/4 share in the profits of the firm. C brings ₹ 20,000 as for his 1/4 share in the profits of the firm. The capitals of A and B after all adjustments in respect of goodwill, revaluation of assets and liabilities, etc. has been worked out at ₹ 50,000 for A and ₹ 12,000 for B. It is agreed that partner’s capitals will be according to new profit sharing ratio. Calculate the new capitals of A and B and pass the necessary journal entries assuming that A and B brought in or withdrew the necessary cash as the case may be for making their capitals in proportion to their profit sharing ratio?

C’s share

{= \dfrac{1}{4}}

Remaining share

{= 1- \dfrac{1}{4}}

{= \dfrac{3}{4}}

A’s new share

{= \dfrac{3}{4} × \dfrac{3}{4}}

{= \dfrac{9}{16}}

B’s new share

{= \dfrac{3}{4} × \dfrac{1}{4}}

{= \dfrac{3}{16}}

C’s share

{= \dfrac{1}{4}}

{= \dfrac{4}{16}}

New Ratio

{= \dfrac{9}{16} : \dfrac{3}{16} : \dfrac{4}{16}}

= 9 : 3 : 4

Based on C’s capital, which is 1/4 of the total capital, the total capital works out to be

Total Capital

{= \dfrac{4}{1} × C's~Capital}

{= \dfrac{4}{1} × 20,000}

= 80,000

A’s Capital

{= 80,000 × \dfrac{9}{16}}

= 45,000

A’s Withdrawal

= 50,000 – 45,000

= 5,000

B’s Capital

{= 80,000 × \dfrac{3}{16}}

= 15,000

B’s additional investment

= 15,000 – 12,000

= 3,000

Books of A, B and C

Journal

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

2017

Jan 01

A’s Capital A/c

Dr.

5,000

To Cash A/c

5,000

(Being excess capital withdrawn by A)

Jan 01

Cash A/c

Dr.

3,000

To B’s Capital A/c

3,000

(Being deficiency made good by additional capital brought in by B)

32. Pinky, Qumar and Roopa partners in a firm sharing profits and losses in the ratio of 3:2:1. S Seema is admitted as a new partner for 1/4 share in the profits of the firm, whichs he gets 1/8 from Pinky, and 1/16 each from Qmar and Roopa. The total capital of the new firm after Seema’s admission will be ₹ 2,40,000. Seema is required to bring in cash equal to 1/4 of the total capital of the new firm. The capitals of the old partners also have to be adjusted in proportion of their profit sharing ratio. The capitals of Pinky, Qumar and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky ₹ 80,000, Qumar ₹ 30,000 and Roopa ₹ 20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners?

We know that

New Ratio

= Old Ratio – Sacrificing Ratio

Pinky’s sacrifice

{= \dfrac{1}{8}}

Pinky’s new share

{= \dfrac{3}{6} - \dfrac{1}{8}}

{= \dfrac{12 - 3}{24}}

Qamar’s sacrifice

{= \dfrac{1}{16}}

Qamar’s new share

{= \dfrac{2}{6} - \dfrac{1}{16}}

{= \dfrac{16 - 3}{48}}

{= \dfrac{13}{48}}

Roopa’s sacrifice

{= \dfrac{1}{16}}

Roopa’s new share

{= \dfrac{1}{6} - \dfrac{1}{16}}

{= \dfrac{8 - 3}{48}}

{= \dfrac{5}{48}}

Seema’s share

{= \dfrac{1}{4}}

New Ratio

{= \dfrac{9}{24} : \dfrac{13}{48} : \dfrac{5}{48} : \dfrac{1}{4}}

{= \dfrac{18}{48} : \dfrac{13}{48} : \dfrac{5}{48} : \dfrac{12}{48}}

= 18 : 13 : 5 : 12

The total capital of the firm is given to be ₹ 2,40,000

Pinky’s Capital

{= 2,40,000 × \dfrac{18}{48}}

= ₹ 90,000

Qamar’s Capital

{= 2,40,000 × \dfrac{13}{48}}

= ₹ 65,000

Roopa’s Capital

{= 2,40,000 × \dfrac{5}{48}}

= ₹ 25,000

Seema’s Capital

{= 2,40,000 × \dfrac{12}{48}}

= ₹ 60,000

Additional investment by old partners

Pinky

= 90,000 – 80,000

= ₹ 10,000

Qamar

= 65,000 – 30,000

= ₹ 35,000

Roopa

= 25,000 – 20,000

= ₹ 5,000

Books of Pinky, Qamar, Roopa and Seema

Journal

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

Bank A/c

Dr.

60,000

To Seema’s Capital A/c

60,000

Being the new partner Seema brought in the capital for ¼ share in the profits

Bank A/c

Dr.

50,000

To Pinky’s Capital A/c

10,000

To Qamar’s Capital A/c

35,000

To Roopa’s Capital A/c

5,000

(Being deficiency made good by additional amount brought in by the old partmers Pinky, Qamar and Roopa)

33. The following was the Balance Sheet of Arun, Bablu and Chetan sharing profits and losses in the ratio of {\dfrac{6}{14} : \dfrac{5}{14} : \dfrac{3}{14}} respectively.

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Capital Accounts

9,000

Land and Buildings

24,000

Bills Payable

3,000

Furniture

3,500

Arun

1,900

Stock

14,500

Bablu

16,000

Debtors

12,600

Chetan

8,000

43,000

Cash

900

55,000

55,000

They agreed to take Deepak into partnership and give him a share of 1/8 on the following terms: a) that Deepak should bring in ₹ 4,200 as goodwill and ₹ 7,000 as his Capital; (b) that furniture be depreciated by 12%; (c) that stock be depreciated by 10% (d) that a Reserve of 5% be created for doubtful debts: (e) that the value of land and buildings having appreciated be brought upto ₹ 31,000 ;(f) that after making the adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of Deepak’s Capital to his share in the business, i.e., actual cash to be paid off to, or brought in by the old partners as the case may be.

Prepare Cash Account, Profit and Loss Adjustment Account (Revaluation Account) and the Opening Balance Sheet of the new firm.

Deepak’s share

{= \dfrac{1}{8}}

Remaining share

{= 1- \dfrac{1}{8}}

{= \dfrac{8 - 1}{8}}

{= \dfrac{7}{8}}

Arun’s new share

{= \dfrac{7}{8} × \dfrac{6}{14}}

{= \dfrac{42}{112}}

Bablu’s new share

{= \dfrac{7}{8} × \dfrac{5}{14}}

{= \dfrac{35}{112}}

Chetan’s new share

{= \dfrac{7}{8} × \dfrac{3}{14}}

{= \dfrac{21}{112}}

New Ratio

{= \dfrac{42}{112} : \dfrac{35}{112} : \dfrac{21}{112} : \dfrac{1}{8}}

{= \dfrac{42}{112} : \dfrac{35}{112} : \dfrac{21}{112} : \dfrac{14}{112}}

= 6:5:3:2

It is given in the problem that the old partners continue to share in the same proportion as before. This implies that their old profit and loss sharing ratio will also be same as the new one (only for three old partners) i.e. 6:5:2. The goodwill brought in by the new partner Deepak will be shared among the existing partners in their old profit sharing ratio as given below. Also note that the Profit and Loss Adjustment Account is used synonymously with the Revaluation Account (the problem is indirectly asking to prepare Revaluation Account). Ideally we should be preparing the Journal. However, to keep the scope of the problem simple, we’re directly preparing the ledger accounts and balance sheet.

Arun’s share

{= 4,200 × \dfrac{6}{14}}

= 1,800

Bablu’s share

{= 4,200 × \dfrac{5}{14}}

= 1,500

Chetan’s share

{= 4,200 × \dfrac{3}{14}}

= 900

Depreciation on Furniture

{= 3,500 × \dfrac{12}{100}}

= 420

Depreciation on Stock

{= 14,000 × \dfrac{10}{100}}

= 1,400

Reserve for Doubtful Debts

{= 12,600 × \dfrac{5}{100}}

= 630

Appreciation of Land and Building

= 31,000 – 24,000

= 6,000

Based on Deepak’s capital, which is ⅛ of the total capital, the total capital works out to be as follows:

Total Capital

{= \dfrac{8}{1} × 7,000}

= ₹ 56,000

Arun’s Capital

{= 56,000 × \dfrac{6}{16}}

= ₹ 21,000

Bablu’s Capital

{= 56,000 × \dfrac{5}{16}}

= ₹ 17,500

Chetan’s Capital

{= 56,000 × \dfrac{3}{16}}

= ₹ 10,500

Books of Arun, Bablu, Chetan and Deepak

Profit and Loss Adjustment Account

(Revaluation Account)

Profit and Loss Adjustment Account

(Revaluation Account)

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

To Furniture A/c

420

By Land and Buildings A/c

7,000

To Stock A/c

1,400

To Reserve for Doubtful Debts A/c

630

Profit on Revaluation Transferred:

To Arun’s Capital A/c

1,950

To Bablu’s Capital A/c

1,625

To Chetan’s Capital A/c

975

4,550

7,000

7,000

We need to prepare the cash account also, as the Cash need to be transferred to the balance sheet.

Cash Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

To Balance b/d

900

By Arun’s Capital A/c

1,750

To Chetan’s Capital A/c

625

By Bablu’s Capital A/c

1,625

To Deepak’s Capital A/c

7,000

By Balance b/d

9,350

To Premium for Goodwill A/c

4,200

12,725

12,725

Partners’ Capital Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

Arun

₹

Arun

Amount

₹

Bablu

₹

Bablu

Amount

₹

Chetan

₹

Chetan

Amount

₹

Deepak

₹

Deepak

Date

Particulars

J.F.

Amount

₹

Arun

₹

Arun

Amount

₹

Bablu

₹

Bablu

Amount

₹

Chetan

₹

Chetan

Amount

₹

Deepak

₹

Deepak

To Bank A/c

1,750

1,625

–

–

By Balance b/d

19,000

16,000

8,000

–

To Balance c/d

21,000

17,500

10,500

7,000

By Cash A/c

7,000

By Premium for Goodwill A/c

1,800

1,500

900

–

By Revaluation A/c

1,950

1,625

975

–

By Bank A/c

–

–

625

–

22,750

19,125

10,500

7,000

22,750

19,125

10,500

7,000

Balance sheet

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Creditors

9,000

Land and Buildings

31,000

Bills Payable

3,000

Furniture

3,080

Capital

Stock

12,600

Arun

21,000

Debtors

12,600

Bablu

17,500

Reserve for Doubtful Debts

(630)

11,970

Chetan

10,500

Cash

9,350

Deepak

7,000

56,000

68,000

68,000

34. Azad and Babli are partners in a firm sharing profits and losses in the ratio of 2:1. Chintan is admitted into the firm with 1/4 share in profits. Chintan will bring in Rs. 30,000 as his capital and the capitals of Azad and Babli are to be adjusted in the profit sharing ratio. The Balance Sheet of Azad and Babli as on March 31, 2016 (before Chintan’s admission) was as follows:

Balance Sheet of A and B

as on 31.03.2016

as on 31.03.2016

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Creditors

8,000

Cash in hand

2,000

Bills Payable

4,000

Cash at bank

10,000

General Reserve

6,000

Sundry debtors

8,000

Capital accounts:

Stock

10,000

Azad

50,000

Furniture

5,000

Babli

32,000

Machinery

25,000

Buildings

40,000

1,00,000

1,00,000

It was agreed that:

i)

Chintan will bring in ₹ 12,000 as his share of goodwill premium.

ii)

Buildings were valued at Rs. 45,000 and Machinery at ₹ 23,000.

iii)

A provision for doubtful debts is to be created @ 6% on debtors.

iv)

The capital accounts of Azad and Babli are to be adjusted by opening current accounts.

Record necessary journal entries, show necessary ledger accounts and prepare the Balance Sheet after admission.

Books of Azad, Babli and Chitan

Journal

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

2016

Mar 31

To Bank A/c

Dr.

42,000

To Chintan’s Capital A/c

30,000

To Premium for Goodwill A/c

12,000

(Being the new Partner Chintan brought in the capital and Premium for Goodwill)

Mar 31

Premium for Goodwill

Dr.

12,000

To Azad’s Capital A/c

8,000

To Babli’s Capital A/c

4,000

(Being premium for Goodwill brought in by the new partner Chintan is distributed to the old partners’s capital accounts)

Mar 31

Building A/c

Dr.

5,000

To Revaluation A/c

5,000

Being appreciation in the building asset on revaluation

Mar 31

Revalutaion A/c

Dr.

2,480

To Machinery A/c

2,000

To Provision for Doubtful Debts A/c

480

(Being decrease in the value of the assets on revaluation)

Mar 31

Revaluation A/c

Dr.

2,480

To Azad’s Capital A/c

1,680

To Babli’s Capital A/c

1,680

(Being excess profit on revaluation transferred to the old partners capital accounts)

Mar 31

General Reserve A/c

Dr.

6,000

To Azad’s Capital A/c

4,000

To Babli’s Capital A/c

2,000

Being the general reserve funds distributed among the old partners

Mar 31

Azad’s Capital A/c

Dr.

3,680

To Azad’s Current A/c

Being the excess capital transferred to the partner’s current account

Revaluation A/c

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

2016

Mar 31

To Machinery A/c

2,000

By Building A/c

5,000

Mar 31

To Provision for Doubtful Debts A/c

480

Mar 31

Profit Transferred:

To Azad’s Capital A/c

1,680

To Babli’s Capital A/c

840

2,520

5,000

5,000

Partners’ Capital A/c

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

Azad

₹

Azad

Amount

₹

Babli

₹

Babli

Amount

₹

Chintan

₹

Chintan

Date

Particulars

J.F.

Amount

₹

Azad

₹

Azad

Amount

₹

Babli

₹

Babli

Amount

₹

Chintan

₹

Chintan

2016

2016

Mar 31

To Current A/c

3,680

8,840

–

By Balance b/d

50,000

32,000

–

Mar 31

To Balance c/d

60,000

30,000

30,000

By Bank A/c

–

–

30,000

By Goodwill A/c

8,000

4,000

–

By General Reserve A/c

4,000

2,000

–

By Revaluation A/c

1,680

840

–

63,680

38,840

30,000

63,680

38,840

30,000

Balance Sheet

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Creditors

8,000

Cash in Hand

2,000

Bills Payable

4,000

Cash at Bank

52,000

Capital Account

Sundry Debtors

8,000

Azad

60,000

Provision for Doubtful Debts

(480)

7,520

Babli

30,000

Stock

10,000

Chintan

30,000

1,20,000

Furniture

5,000

Current Account

Machinery

23,000

Azad

3,680

Building

45,000

Babli

8,840

12,520

1,44,520

1,44,520

Working Notes:

Distribution of Goodwill to:

Azad

{= ₹~12,000 × \dfrac{2}{3}}

= ₹ 8,000

Babli

{= ₹~12,000 × \dfrac{1}{3}}

= ₹ 4,000

Appreciation on Building

= ₹ 45,000 – ₹ 40,000

= ₹ 5,000

Depreciation on Building

= ₹ 25,000 – ₹ 23,000

= ₹ 2,000

Provision on Doubtful Debts

{= ₹~8,000 × \dfrac{6}{100}}

= ₹ 480

35. Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2015 Mar. 31, 2016 they admitted Vimal for 1/5 share in the profits. The Balance Sheet of Ashish and Dutta as on March 31, 2016 was as follows:

Balance Sheet of A and B

as on 1.03.2016 31.03.2016

as on 1.03.2016 31.03.2016

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Ashish’s Capital

80,000

Land and Buildings

35,000

Dutta’s Capital

35,000

Plant

45,000

Creditors

15,000

Debtors

22,000

Bills Payable

10,000

Provision

2,000

20,000

Stock

35,000

Cash

5,000

1,40,000

1,40,000

It was agreed that:

i)

The value of Land and Building be increased by ₹ 15,000.

ii)

The value of plant be increased by 10,000.

iii)

Goodwill of the firm be valued at ₹ 20,000.

iv)

Vimal to bring in capital to the extent of 1/5th of the total capital of the new firm.

Record the necessary journal entries and prepare the Balance Sheet of the firm after Vimal’s admission.

Books of Ashish, Dutta and Vimal

Journal

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Amount

₹

Credit

Amount

₹

Amount

₹

2016

Mar 31

Land and Building A/c

Dr.

15,000

Plant A/c

Dr.

10,000

To Revaluation A/c

25,000

(Being increase in the value of the assets on revaluation)

Mar 31

Revaluation A/c

Dr.

25,000

To Ashish’s Capital A/c

15,000

To Dutta’s Capital A/c

10,000

(Being Profit on revaluation transferred to old partners’ capital accounts)

Mar 31

To Cash A/c

Dr.

36,000

To Vimal’s Capital A/c A/c

36,000

(Being capital brought in by the new partner Vimal)

Mar 31

Vimal’s Current A/c

Dr.

4,000

To Ashish’s Capital A/c

2,400

To Dutta’s Capital A/c

1,600

(Being share of new partner Vimal’s goodwill adjusted through his current account)

Vimal’s Current Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

Ashish

₹

Ashish

Amount

₹

Dutta

₹

Dutta

Amount

₹

Vimal

₹

Vimal

Date

Particulars

J.F.

Amount

₹

Ashish

₹

Ashish

Amount

₹

Dutta

₹

Dutta

Amount

₹

Vimal

₹

Vimal

2016

2016

Mar 31

To Balance c/d

97,000

46,600

36,600

By Balance b/d

80,000

35,000

–

By Revaluation A/c

15,000

10,000

–

By Cash A/c

–

–

36,000

By Vimal’s Current A/c

2,400

1,600

–

97,400

46,600

36,000

97,400

46,600

36,000

Vimal’s Current Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

₹

Date

Particulars

J.F.

Amount

₹

₹

2016

Mar 31

To Ashish’s Capital A/c

2,400

By Balance b/d

4,000

To Dutta’s Capital A/c

1,600

4,000

4,000

Balance Sheet

as on March 31, 2016

as on March 31, 2016

Liabilities

Amount

₹

₹

Assets

Amount

₹

₹

Creditors

15,000

Land and Building

50,000

Bills Payable

10,000

Plant

55,000

Capital

Debtors

22,000

Ashish

97,400

Provision

(2,000)

20,000

Dutta

46,600

Stock

35,000

Vimal

36,000

1,80,000

Cash

41,000

Vimal’s Current Account

4,000

2,05,000

2,05,000

Working Notes:

In the problem, the goodwill of the firm is given. However, Vimal didn’t bring his share of goodwill. So, the premium for goodwill should be adjusted through his current account.

Vimal’s share

{= \dfrac{1}{5}}

Remaining share

{= 1 - \dfrac{1}{5}}

{= \dfrac{4}{5}}

Ashish’s new share

{= \dfrac{4}{5} × \dfrac{3}{5}}

{= \dfrac{12}{25}}

Dutta’s new share

{= \dfrac{4}{5} × \dfrac{2}{5}}

{= \dfrac{8}{25}}

New ratio

{= \dfrac{12}{25} : \dfrac{8}{25} : \dfrac{1}{5}}

{= \dfrac{12}{25} : \dfrac{8}{25} : \dfrac{5}{25}}

= 12:8:5

As neithter the sacrificing ratio nor the new ratio are given, we can consider that the sacrificing ratio is same as the profit sharing ratio i.e. 3:2

Also, as Vimal didn’t bring his share of goodwill and he has to bring the capital equal to 1/5th of the total capital of the new firm, his share of goodwill should be adjusted through the current account.

Revaluation

Land and Building

= ₹ 15,000

Plant

= ₹ 10,000

Revaluation Amount

= ₹ 25,000

Distribution of Revaluation Amount

Ashish

{= ₹~25,000 × \dfrac{3}{5}}

= ₹ 15,000

Dutta

{= ₹~25,000 × \dfrac{2}{5}}

= ₹ 10,000

Vimal’s share of goodwill

{= ₹~20,000 × \dfrac{1}{5}}

= ₹ 4,000

Goodwill Distribution:

Ashish

{= ₹~4,000 × \dfrac{3}{5}}

= ₹ 2,400

Dutta

{= ₹~4,000 × \dfrac{3}{5}}

= ₹ 1,600

New Capital

= Old Capital + Revaluation Amount + Goodwill Distribution

Ashish

= ₹ 80,000 + ₹ 15,000 + ₹ 2,400

= ₹ 97,400

Dutta

= ₹ 35,000 + ₹ 10,000 + ₹ 1,600

= ₹ 46,600

Total adjusted capital of old partners

= ₹ 97,400 + ₹ 46,600

= ₹ 1,44,000

The total adjusted capital of the old partners will be equal to their total (added) share of capital i.e. \dfrac{4}{5}

∴ New Capital

{= ₹~1,80,000 × \dfrac{5}{4}}

= ₹ 1,80,000

Vimal’s capital

{= ₹~1,80,000 × \dfrac{1}{5}}

= ₹ 36,000