T.S. Grewal Class 12 Chapter 4 Q.56 - Admission of a Partner

Question 56

Vimal and Nirmal are partners sharing profits in the ratio of 5 : 3. They admit Kailash on 1st April, 2024 when the Balance Sheet showed: Vimal’s Capital ₹32,000, Nirmal’s Capital ₹34,000, General Reserve ₹8,000, Bank Loan ₹6,000, Creditors ₹6,000; and assets – Goodwill ₹8,000, Machinery ₹38,000, Furniture ₹5,000, Debtors ₹23,000, Stock ₹7,000, Cash ₹5,000. Terms: (i) Kailash brings ₹30,000 as capital for a 1/3rd share; (ii) Kailash does not bring goodwill in cash; Vimal and Nirmal raise goodwill in the books; (iii) goodwill valued at 2 years’ purchase of average profit of ₹6,000; (iv) Machinery and Stock revalued at ₹45,000 and ₹8,000. Prepare the Revaluation Account and Partners’ Capital Accounts.

Solution

Revaluation Account

Particulars (Dr.)	₹	Particulars (Cr.)	₹
To Profit (Vimal 5,000; Nirmal 3,000)	8,000	By Machinery A/c	7,000
		By Stock A/c	1,000
Total	8,000	Total	8,000

Partners’ Capital Accounts

Particulars (Dr.)	Vimal	Nirmal	Kailash	Particulars (Cr.)	Vimal	Nirmal	Kailash
To Goodwill A/c (existing, old ratio)	5,000	3,000	–	By Balance b/d	32,000	34,000	–
To Goodwill A/c (new, written off in new ratio)	5,000	3,000	–	By Cash A/c (Capital)	–	–	30,000
To Balance c/d	39,500	38,500	30,000	By Goodwill A/c (raised, old ratio)	7,500	4,500	–
				By Revaluation A/c	5,000	3,000	–
				By General Reserve A/c	5,000	3,000	–
Total	49,500	44,500	30,000	Total	49,500	44,500	30,000

Working Notes: New goodwill = ₹6,000 × 2 = ₹12,000. Existing goodwill ₹8,000 is written off in the old ratio 5 : 3. New goodwill ₹12,000 is raised in the old ratio 5 : 3 (Vimal ₹7,500, Nirmal ₹4,500) and then written off in the new ratio 5 : 3 : 4 (Vimal ₹5,000, Nirmal ₹3,000, Kailash ₹4,000 through his Current Account, as he brings no goodwill in cash). Revaluation profit and General Reserve are shared in the old ratio 5 : 3.