T.S. Grewal Class 12 Chapter 4 Q.57 - Admission of a Partner

Question 57

X, Y and Z are equal partners with capitals of ₹15,000, ₹17,500 and ₹20,000 respectively. They admit W into equal partnership on payment in cash of ₹15,000 for a 1/4th share of goodwill and ₹18,000 as his capital, both sums to remain in the business. The liabilities were ₹30,000; assets (apart from cash) consist of Motors ₹12,000, Furniture ₹4,000, Stock ₹26,500 and Debtors ₹37,800. Motors and Furniture were revalued at ₹9,500 and ₹3,800 respectively. Pass the Journal entries and show the Balance Sheet of the new firm.

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Cash A/c    Dr.		33,000
	To W’s Capital A/c			18,000
	To Premium for Goodwill A/c			15,000
	Premium for Goodwill A/c    Dr.		15,000
	To X’s / Y’s / Z’s Capital A/c (₹5,000 each)			15,000
	Revaluation A/c    Dr.		2,700
	To Motors A/c			2,500
	To Furniture A/c			200
	X’s / Y’s / Z’s Capital A/c    Dr. (₹900 each)		2,700
	To Revaluation A/c			2,700
	(Revaluation loss shared in the old ratio 1 : 1 : 1)

Balance Sheet of the New Firm

Liabilities	₹	Assets	₹
Sundry Liabilities	30,000	Cash (2,200 + 33,000)	35,200
Capitals: X 19,100; Y 21,600; Z 24,100; W 18,000	82,800	Motors	9,500
		Furniture	3,800
		Stock	26,500
		Debtors	37,800
Total	1,12,800	Total	1,12,800

Working Note: Opening cash (balancing figure) = ₹82,500 (liabilities + capitals) – ₹80,300 (non-cash assets) = ₹2,200. New ratio = 1 : 1 : 1 : 1; sacrificing ratio of X, Y, Z = 1 : 1 : 1.