Question

Amalendu and Sameer share profits and losses in the ratio 3:2 respectively Their balance sheet as on 31^st March 2017 was as under.

Balance Sheet as on 31st March 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	10,000	Cash at bank	12,000
Amlendu capital	60,000	Sundry debtors	24,000
Sameer capital	40,000	Land & Building	50,000
General reserve	20,000	Stock	16,000
		Plant and machinery	20,000
		Furniture & fixture	8,000
	1,30,000		1,30,000

On 1^st April 2017, they admit Paresh into partnership. The term being that:

1. He shall pay ₹16,000 as his share of Goodwill 50% amount of Goodwill shall be withdrawn by the old partners.
2. He shall have to bring in ₹ 20,000 as his Capital for 1/4 share in future profits.
3. For the purpose of Paresh’s admission, it was agreed that the assets would be revalued as follows.

A) Land and Building is to be valued at ₹ 60,000
B) Plant and Machinery to be valued at ₹ 16,000
C) Stock valued at ₹ 20,000 and Furniture and Fixtures at ₹ 4,000.
D) A Provision of 5% on Debtors would be made for Doubtful Debts.

Pass the necessary Journal Entries in the Books of a New Firm.

Answer 1

In the books of Partnership Firm Journal Entries
Date	Particulars		L.F	Debit (₹)	Credit (₹)
2017 April 1	General Reserve A/c	Dr.		20,000
	To Amalendu’s Capital A/c				12,000
	To Sameer’s Capital A/c				8,000
	(Being general reserve distributed among old partners)
	Profit and Loss Adjustment A/c	Dr.		9,200
	To Plant and Machinery A/c				4,000
	To Furniture & Fixture A/c				4,000
	To R.D.D. A/c				1,200
	(Being decrease in the value of assets and reserve for doubtful debts.)
	Land and Building A/c	Dr.		10,000
	Stock A/c	Dr.		4,000
	To Profit and Loss Adjustment A/c				14,000
	(Being appreciation in the value of assets)
	Profit and Loss Adjustment A/c	Dr.		4,800
	To Amalendu’s Capital A/c				2,880
	To Sameer’s Capital A/c				1,920
	(Being profit on revaluation distributed in profit sharing ratio)
	Cash / Bank A/c	Dr.		20,000
	To Paresh’s Capital A/c				20,000
	(Being amount brought in for capital by Paresh)
	Cash / Bank A/c	Dr.		16,000
	To Goodwill A/c				16,000
	(Being amount brought in for goodwill by Paresh)
	Goodwill A/c	Dr.		16,000
	To Amalendu’s Capital A/c				9,600
	To Sameer’s Capital A/c				6,400
	(Being goodwill distributed among old partners)
	Amalendu’s Capital A/c	Dr.		4,800
	Sameer’s Capital A/c	Dr.		3,200
	To Bank A/c				8,000
	(Being half of the goodwill amount withdrawn by old partners)
				108,000	108,000

Working Notes :

Dr.	Goodwill A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Amalendu’s Capital A/c	9,600	By Cash/ Bank A/c	16,000
To Sameer’s Capital A/c	6,400
	16,000		16,000

 

Dr	Profit and Loss Adjustment A/c						Cr
Particulars		Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Plant and Machinery A/c			4,000	By Land & Building A/c		10,000
To Furniture and Fixture A/c			4,000	By Stock A/c		4,000
To R.D.D. Debts A/c			1,200
To Profit on Revaluation Transferred to Partners’
Capital A/cs :
Amalendu		2,880
Sameer		1,920	4,800
			14,000			14,000