Question

Seeta and Geeta share profits and losses in the ratio of 3:2 in Partnership Firm. Their Balance Sheet as on 31^st March, 2020 was as under:

Balance Sheet as on 31^st March, 2020

Liabilities		Amount (₹)	Assets		Amount (₹)
Capitals:		40,500	Bank		11,250
Seeta	22,500		Bills Receivable		5,700
Geeta	18,000		Debtors	31,200	30,000
Creditors		18,750	(-) R.D.D.	1,200
Biil Payable		15,000	Stock		18,000
Bank Loan		24,000	Furniture		7,050
General Reserve		3,750	Machinery		7,500
			Building		22,500
		1,02,000			1,02,000

On 1^st April, 2020 they admitted Reeta on the following terms:

1. For half (1/2) share in future profit Reeta should bring ₹ 15,000 as capital and ₹ 7,500 for goodwill in cash.
2. Furniture should be appreciated up to ₹ 8,025 and building be appreciated by 20%.
3. R.D.D. is to be maintained at ₹ 1,500.
4. The stock is to be reduced by 10% and machinery depreciated by 5%.
5. Half of amount of goodwill is withdrawn by old partners.

Pass the necessary Journal Entries in the books of the firm.

Answer 1

In the books of Seeta and Geeta
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2020
April 1.	Cash/Bank A/c   ...Dr.		15,000	-
	To Reeta Capital A/c		-	15,000
	(Being cash brought in by Reeta as capital)
2	Cash A/c   ....Dr.		7,500	-
	To Goodwill  A/c		-	7,500
	(Being cash brought in by Reeta as goodwill)
3	Goodwill A/c  ....Dr.		7500	-
	To Seeta A/c		-	4,500
	To Geeta A/c		-	3,000
	(Being goodwill distributed in sacrifice ratio)
4	Seeta A/c  ....Dr.		2,250	-
	Geeta A/c  ....Dr.		1,500	-
	To Cash A/c		-	3,750
	(Being half the amount of goodwill withdrawn by old partners)
5	General Reserve A/c   ....Dr.		3,750	-
	To Seeta A/c		-	2,250
	To Geeta A/c		-	1,500
	(Being general reserve distributed among old partners)
6	Revaluation A/c   ...Dr.		2,475	-
	To R.D.D. A/c		-	300
	To Stock A/c		-	1,800
	To Machinery A/c		-	375
	(Being decrease in the value of assets and RDD increased)
7	Furniture A/c   ...Dr.		975	-
	Building A/c   ...Dr.		4,500	-
	To Revaluation A/c		-	5,475
	(Being appreciation in the value of assets)
8	Revaluation A/c   ...Dr.		3,000	-
	To Seeta A/c		-	1,800
	To Geeta A/c		-	1,200
	(Being Profit on Revaluation distributed in Profit sharing ratio)

Working Note:

Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To R.D.D A/c		300	By Furniture A/c	975
To Stock A/c		1,800	By Building A/c	4,500
To Machinery A/c		375
To Profit on Revaluation transferred to Partners a Capital A/c		3,000
Seeta	1,800
Geeta	1,200
		5,475		5,475