Q.No.80 | Chapter 5 – Admission of Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 80 Chapter 5 of +2-A

80.Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 their Balance Sheet was:

Liabilities			Assets
Sundry Creditors		16,000	Cash in Hand		1,200
Public Deposits		61,000	Cash at Bank		2,800
Bank Overdraft		6,000	Stock		32,000
Outstanding Liabilities		2,000	Prepaid Insurance		1,000
Capital A/cs:			Sundry Debtors	28,000
Deepika	48,000		Less: Provision for Doubtful Debt	800	27,200
Rajshre	40,000	88,00	Plant and Machinery		48,000
			Land and Building		50,000
			Furniture		10,00
		1,73,000			1,73,000

On 1st April, 2019 the partners admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at 60,000, Stock at 40,000 and the Provision for Doubtful Debts is to be maintained at 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of Deepika, Rajshree and Anshu.

 

 

The solution of Question 80 Chapter 5 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
Reserve for D. Debts	4,000		Plant and Machinery	60,000 – 48,000)	12,000
Less: Old Reserve	800	3,200	Stock	(40,000 – 32,000)	8,000
Furniture	10,000X 10%	1,000	Land and Building	(50,000 × 20%)	10,000
Outstanding salary		8,000
Profit transferred to
Deepika Capital	10,680
Rajshree Capita	7,120	17,800
		25,000			25,000

 

Partners’ Capital Account the year ended 31st March, 2019

Parti culars	Deepi ka	Rajsh ree	Anshu	Partic ulars	Deepi ka	Rajsh ree	Anshu
				By Balance B/d	48,000	40,000	-
				By Revaluation	10,680	7,120	-
To Balance c/d (before adjustment of Goodwill)	58,680	47,120	32,000	By Cash A/c	-	-	32,000
	58,680	47,120	32,000		58,680	47,120	32,000
To Deepika’s Capita	-	-	2,220	By Balance B/d	58,680	47,120	32,000
To Rajshree’s Capita	-	-	2,220	By Anshu’s Capital (Goodwill)	2,220	2,220	-
To Balance c/d	60,900	49,340	30,000
	60,900	49,340	32,000		60,900	49,340	32,000

Balance Sheet

Liabilities		Amount	Assets		Amount
Outstanding Salaries		8,000	Cash in Hand		1,200
Sundry Creditors		16,000	Cash at Bank		28,800
Public Deposits		61,000	Stock		40,000
Capital:			Debtors	28,800
A	1,87,875		Less: 5% Provision for D. Debts	4,000	24,800
B	92,625		Plant and Machinery		60,000
C	30,000	3,10,500	Prepaid Insurance		1,000
Outstanding Liabilities		1,37,80	Land and Building		60,000
			Furniture		9,000
		2,24,800			2,24,800

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Deepika and Rajshree = 3 : 2
New Ratio of Deepika , Rajshree and Anshu = 5 : 3 : 2

Sacrificing Ratio = Old Ratio − New Ratio

Deepika’s New Ratio	=	3	-	5
		5		10

=	6- 5
	10

=	1
		10

 

Rajshree’s New Ratio	=	2	-	3
		5		10

=	4 - 3
	10

=	1
		10

Sacrifice Ratio of Deepika and Rajshree= 1 : 1

Valuation of Goodwill

Capitalized value on the basis of Anshu’s share	=	32,000	X	10
				2
	=	1,60,000

Actual Capital of all partners before adjustment of Goodwill	=	58,680 + 47,120 + 32,000
	=	Rs 1,37,800

Goodwill	=	Capitalized value − Actual Capital of all partners before adjustment of Goodwill
	=	1,60,000 − 1,37,800
	=	22,000

 

Valuation of Goodwill

Anshu’s share of Goodwill	=	22,200	X	2
				10
	=	Rs 4,440

Deepika and Rajshree each will entitle for Goodwill	=	4,440	X	1
				2
	=	Rs 2,220

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

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