Question

The following is the balance sheet of James and Justina as on 1.1.2017. They share the profits and losses equally

Liabilities	₹	₹	Assets	₹
Capital accounts:			Building	70,000
James	40,000		Stock	30,000
Justina	50,000	90,000	Debtors	20,000
Creditors		35,000	Bank	15,000
Reserve fund		15,000	Prepaid insurance	5,000
		1,40,000		1,40,000

On the above date, Balan is admitted as a partner with a 1/5 share in future profits. Following are the terms for his admission:

1. Balan brings ₹ 25,000 as capital.
2. His share of goodwill is ₹ 10,000 and he brings cash for it.
3. The assets are to be valued as under:
   Building ₹ 80,000; Debtors ₹ 18,000; Stock ₹ 33,000

Prepare necessary ledger accounts and the balance sheet after admission.

Answer 1

Revaluation Account

Dr.	Cr.
Particulars	₹	₹	Particulars	₹	₹
To Debtors A/c		2,000	By Building A/c		10,000
To profit on revaluation transferred to			By Stock A/c		3,000
James Capital A/c	5,500
Justina Capital A/c	5,500	11,000
		13,000			13,000

 

Dr.	Capital Account						Cr.
Particulars	James	Justina	Balan	Particulars	James	Justina	Balan
To Balance c/d	58,000	68,000	25,000	By Balance b/d	40,000	50,000	-
				By Reserve Fund	7,500	7,500	-
				By Bank A/c	-	-	25,000
				By Revaluation	5,500	5,500	-
				By Bank A/c (Share Goodwill)	5,000	5,000	-
	58,000	68,000	25,000		58,000	68,000	25,000
				By Balance b/d	58,000	68,000	25,000

 

Dr.	Cash Account		Cr.
Particulars	₹	Particulars	₹
To Balance b/d	15,000	By Balance c/d	50,000
To Balan Capital A/c	25,000
To James Capital A/c	5,000
To Justina Capital A/c	5,000
	50,000		50,000

Balance Sheet as on 01.01.2017

Liabilities	₹	₹	Assets	₹	₹
Capital Accounts			Building	7,000
James A/c	58,000		Add: Appreciation	10,000	80,000
Justina A/c	68,000		Stock	30,000
Balan A/c	25,000	1,51,000	Add: Appreciation	3,000	33,000
Creditors A/c		35,000	Debtors	20,000
			(−) Unvalued	2,000	18,000
			Bank		50,000
			Prepaid insurance		5,000
		1,86,000			1,86,000