Q.No.83 | Chapter 5 – Admission of Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 83 Chapter 5 of +2-A

83. Balance Sheet of Ram and Shyam who shares profits in the ratio of their capitals as at 31st March, 2019 is:

Liabilities			Assets
Capital A/cs:			Freehold Premises	20,000
Ram	30,000		Plant and Machinery	13,500
Shyam	25,000	55,000	Fixtures and Fittings	1,750
Current A/cs:			Vehicles	1,350
Ram	2,000		Stock	14,100
Shyam	1,800	3,800	Bills Receivable	13,060
Creditors		19,000	Debtors	27,500
Bills Payable		16,000	Bank	1,590
			Cash	950
		93,800		93,800

On 1st April, 2019, they admitted Arjun into partnership on the following terms:
(a) Arjun to bring 20,000 as capital and 6,600 for goodwill, which is to be left in the business and he is to receive 1/4th share of the profits.
(b) Provision for Doubtful Debts is to be 2% on Debtors.
(c) Value of Stock to be written down by 5% .
(d) Freehold Premises are to be taken at a value of 22,400; Plant and Machinery 11,800; Fixtures and Fittings 1,540 and Vehicles 800. You are required to make necessary adjustments entries in the firm, give
Balance Sheet of the new firm as at 1st April, 2019 and also determine the ratio in which the partners will share profits, there being no change in the ratio of Ram and Shyam.

 

 

The solution of Question 83 Chapter 5 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
Reserve for D. Debts	(27,500 × 2%)	550	Free hold Premises	(22,400 – 20,000)	2,400
Stock		705
Plant and Machinery	(13,500 – 11,800)	1,700
Fixture and Fittings		210
Vehicles		550	Loss transferred to
			Ram’s Current	717
			Shyam’s Current	598	1,315
		25,000			25,000

 

Partners’ Capital Account

Parti culars	Ram	Shyam	Arjun	Partic ulars	Ram	Shyam	Arjun
				By Balance B/d	30,000	25,000	-
				By Bank A/c A/c	-	-	20,000
To Balance c/d	30,000	25,000	20,000
	30,000	25,000	20,000		30,000	25,000	20,000

 

Partners’ Capital Account

Parti culars	Ram	Shyam	Arjun	Partic ulars	Ram	Shyam	Arjun
To Revaluation A/c	717	598	-	By Balance B/d	2,000	1,800	-
To Balance c/d	4,883	4,202	-	By Premium for Goodwill	3,600	3,000	-
	5,600	4,800	-		5,600	4,800	-

Balance Sheet

Liabilities		Amount	Assets		Amount
Creditors		19,000	Freehold Premises		1,200
Bills Payable		16,000	Plant and Machinery		11,800
Capital A/cs:			Fixture and Fittings		1,540
Ram			Debtors	27,500
Shyam	30,000		Less: 2% Reserve for D. Debts	550	26,950
Arjun	25,000		Stock	(14,100 – 705)	13,395
C	20,000	1,00,700	Bills Receivables		13,060
Current A/cs:			Bank		1,590
Ram	4,883		Cash	(950 + 20,000 + 6,600)	27,550
Shyam	4,202	9,085	Vehicles		800
		1,19,085			1,19,085

 

Date	Particulars		L.F.	Debit	Credit
	Cash A/c	Dr		26,600
	To Arjun’s Capital				20,000
	To Premium for Goodwill A/c				6,600
	(Arjun brought Capital and share of goodwill)
	Premium for Goodwill A/c	Dr		6,600
	To Ram’s Current A/c				3,600
	To Shyam’s Current A/c				3 ,000
	(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 6:5)

 

Working Note:-

Calculation of Sacrificing Ratio
Old Ratio of Ram and Shyam = 3 : 2
Arjun admitted for 1/4 share of profit
Remaining share of A and B after C’s Admission = Total Share -  Arjun’s Share

Remaining share	=	1	-	1
				4

=	4 - 1
	4

=	3
		4

New Ratio = Old Ratio − Combined share of Ram and Shyam

New Ratio = Combined share of A and B x Old Ratio

Ram’s Sacrificing Ratio	=	6	X	3
		11		4

=	18
		44

Shyam’s Sacrificing Ratio	=	5	X	3
		11		4

=	15
		44

New Profit sharing Ratio between ram, Shyam and Arjun	=	18	:	15	:	1
		44		44		4

=	18 : 15 : 11
	44

Distribution of Premium for Goodwill

 

Ram will get	=	6,600	X	6
				11
	=	3,600

Shyam will get	=	6,600	X	5
				11
	=	3,000

Valuation of Goodwill

Ram will get	=	1,315	X	2
				10
	=	717

Shyam will get	=	1,315	X	1
				2
	=	589

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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