Q.No.88 | Chapter 5 – Admission of Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 88 Chapter 5 of +2-A

88. A and B were partners in a firm sharing profits in 3 : 1 ratio. They admitted C as a partner for 1/4th share in the future profits. C was to bring 60,000 for his capital. The Balance Sheet of A and B as at 1st April, 2019, the date on which C was admitted, was:

Liabilities			Assets
Capital A/cs			Land and Building		40,000
A	50,000		Plant ad Machinery		70,000
B	80,000	1,30,000	Stock		30,000
General Reserve		10,000	Debtors	35,000
Creditors		70,000	Less: Provision for Doubtful Debts	1,000	34,000
			Investments		26,000
			Cash		10,000
		2,10,000			2,10,000

The other terms agreed upon were:
(a) Goodwill of the firm was valued at 24,000.
(b) Land and Building were valued at 65,000 and Plant and Machinery at 60,000.
(c) Provision for Doubtful Debts was found in excess by 400.
(d) A liability of 1,200 included in Sundry Creditors was not likely to arise.
(e) The capitals of the partners be adjusted on the basis of C's contribution of capital to the firm. (f) Excess of shortfall, if any, be transferred to Current Accounts. Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

 

 

The solution of Question 88 Chapter 5 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
Plant and Machinery	(70,000 – 60,000)	10,000	Land and Building	(65,000 – 40,000)	2,000
			Provision for Doubtful		400
			Creditors		1,200
Profit transferred to
A Capital	12,450
B Capital	4,150	11,700
		26,600			26,600

 

Partners’ Capital Account

Parti culars	A	B	C	Partic ulars	A	B	C
To Revaluation A/c	7,800	3,900	-	By Balance B/d	50,000	80,000	-
				By General Reserve	7,500	2,500	-
				By Cash	-	-	60,000
				By C's Current A/c	4,500	1,500	-
To Balance c/d	74,450	88,150	40,000	By Premium for Goodwill	12,450	4,150	-
	74,450	88,150	40,000		74,450	88,150	40,000
To B’s Current A/c	-	43,150	-	By Balance B/d	74,450	88,150	60,000
				By A’s Current A/c	60,550	-	-
To Balance c/d	1,35,000	45,000	60,000
	1,35,000	88,150	60,000		1,35,000	88,150	60,000

Balance Sheet

Liabilities		Amount	Assets		Amount
Creditors	(70,000 – 1,200)	68,800	Land and Building		65,000
B’s Current A/c		43,150	Plant and Machinery		60,000
Capital A/cs:			Stock		30,000
A	1,35,000		Debtors	35,000
B	45,000		Less: Prov. for Bad Debts	600	34,400
C	60,000	2,40,000	Investments		26,000
			Cash		70,000
			A’s Current A/c		60,550
			C's Current A/c		6,000
		3,51,950			3,51,950

 

Working Note:-

Sacrificing Ratio
Old Ratio of A and B = 3 : 1
Sacrificing Ratio of A and B= 3 : 1

Distribution of Revaluation Loss

C’s Share of Goodwill	=	24,000	X	1
				4
	=	6,000

A will get	=	6,000	X	3
				4
	=	4,500

B will get	=	6,000	X	1
				4
	=	1,500

As C has not brought his share of goodwill in cash, hence, his share shall be debited to his current account

 

Distribution of Revaluation Profit

A will get	=	16,600	X	3
				4
	=	12,450

B will get	=	16,600	X	1
				4
	=	4,150

Adjustment of Capitals (in new ratio)

Total Capital of the firm on the basis of c’s share	=	40,000	X	4
				1
	=	1,60,000

Total Capital of the firm after C’s admission 60,000 × 4	=	2,40,000
Less: C’s Capital	=	60,000
Combined Capital of A and B	=	1,80,000

 

 

A’s Capital Share	=	1,80,000	X	3
				4
	=	1,35,000

 

B and C Capital Share	=	1,80,000	X	1
				4
	=	45,000

Cash Account

Particulars		Amount	Particulars		Amount
Balance b/d		10,000	Balance c/d		70,000
C’s Capital		60,000
		70,000			70,000

 

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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