Question

W and R are partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet as on 31^st March, 2016 was as follows 

Balance Sheet of W and R                                   as on 31.3.2016
Liabilities		Amount (Rs)	Assets	Amount (Rs)
Sundry Creditors		20,000	Cash	12,000
Provision for Bad Debts		2,000	Debtors	18,000
Outstanding Salary		3,000	Stock	20,000
General Reserve		5,000	Furniture	40,000
			Plant & Machinery	40,000
Capitals:
W	60,000
R	40,000	1,00,000
		1,30,000		1,30,000

On the above date C was admitted for 16th16th share in the profits on the following terms:

(i) C will bring Rs 30,000 as his capital and Rs 10,000 for his share of goodwill premium, half of which will be withdrawn by W and R.

(ii) Debtors Rs 1,500 will be written off as bad debts and a provision of 5% will be created for bad and doubtful debts.

(iii) Outstanding salary will be paid off.

(iv) Stock will be depreciated by 10%, furniture by Rs 500 and Plant and Machinery by 8%.

(v) Investments Rs 2,500 not mentioned in the balance sheet were to be taken into account.

(vi) A creditor of Rs 2,100 not recorded in the books was to be taken into account. Pass necessary Journal Entries for the above transactions in the books of the firm on C’s admission.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash A/c	Dr.		40,000
	To C’s Capital A/c				30,000
	To Premium for Goodwill A/c				10,000
	(Capital & goodwill brought in cash)
	Premium for Goodwill A/c	Dr.		10,000
	To W’s Capital A/c				6,000
	To R’s Capital A/c				4,000
	(Goodwill shared in sacrificing ratio of 3 : 2)
	W’s Capital A/c	Dr.		3,000
	R’s Capital A/c	Dr.		2,000
	To Cash A/c				5,000
	(Goodwill withdrawn)
	General Reserve A/c	Dr.		5,000
	To W’s Capital A/c				3,000
	To R’s Capital A/c				2,000
	(General reserve shared among old partners in old ratio)
	Outstanding Salary A/c	Dr.		3,000
	To Cash A/c				3,000
	(Outstanding salary paid)
	Revaluation A/c	Dr.		8,125
	To Provision for Doubtful Debts A/c				325
	To Stock A/c				2,000
	To Furniture A/c				500
	To Plant & Machinery A/c				3,200
	To Creditors A/c				2,100
	(Decrease in assets and increase in liabilities debited to Revaluation A/c)
	Investments A/c	Dr.		2,500
	To Revaluation A/c				2,500
	(Assets revalued)
	W’s Capital A/c	Dr.		3,375
	R’s Capital A/c	Dr.		2,250
	To Revaluation A/c				5,625
	(Loss on revaluation debited to old partners in old ratio)