Question

Rajinder and Vijay were partners in a firm sharing profits in the ratio 3:2. On 31^st March 2023 their balance sheet was as follows:

Liabilities		Amount (₹)	Assets		Amount (₹)
Capital A/cs:			Fixed Assets (Tangible)		3,60,000
Rajinder	3,00,000	4,50,000	Goodwill		50,000
Vijay	1,50,000		Investments		40,000
Current A/cs:			Stock		74,000
Rajinder	50,000	60,000	Debtors	1,00,000	96,000
Vijay	10,000		Less: Provision for Doubtful Debts	4,000
Creditors		75,000	Bank		25,000
General Reserve
		6,45,000			6,45,000

With an aim to expand business it is decided to admit Ranvijay as a partner on 1^st April 2023 on the following terms:

1. Provision for doubtful debts is to be increased to 6% of debtors.
2. An outstanding bill for repairs ₹ 50,000 to be accounted in the books.
3. An unaccounted interest accrued of ₹ 7500 be provided for.
4. Investment were sold at book value.
5. Half of stock was taken by Rajinder at ₹ 42,000 and remaining stock was also to be revalued at the same rate.
6. New profit-sharing ratio of partners will be 5:3:2.
7. Ranvijay will bring ₹ 1,00,000 as capital and his share of goodwill which was valued at twice the average profit of the last three years ended 31^st March 2023, 2022 and 2021 were ₹ 1,50,000, ₹ 1,30,000 and ₹ 1,70,000 respectively.

Pass necessary journal entries.

Answer 1

Journal Entries in the Books of Rajinder, Vijay and Ranvijay
Date	Particulars	L.F	Debit (₹)	Credit (₹)
i)	Revaluation A/c    ...Dr.		52,000
	To Prov. For Doubtful Debts A/c			2,000
	To Outstanding Bill for Repairs A/c			50,000
	(Being increase in PDD and O/S bill accounted)
ii)	Accrued Interest A/c     ...Dr.		7,500
	Stock A/c      ...Dr.		10,000
	To Revaluation A/c			17,500
	(Being increase in Stock and Accrued Interest accounted)
iii)	Rajinder’s Current A/c   ...Dr		20,700
	Vijay’s Current A/c       ...Dr		13,000
	To Revaluation A/c			34,500
	(Being loss on revaluation transferred to partner’s current A/c)
iv)	Bank A/c      ...Dr		40,000
	To Investment A/c			40,000
	(Being Investment sold at book value)
v)	Rajinder’s Current A/c      ...Dr.		42,000
	To Stock A/c			42,000
	(Being stock taken over by Rajinder)
vi)	General Reserve A/c      ...Dr.		60,000
	To Rajinder’s Current A/c			36,000
	To Vijay’s Current A/c			24,000
	(Being General Reserve distributed)
vii)	Rajinder’s Current A/c      ...Dr.		30,000
	Vijay’s Current A/c         ...Dr.		20,000
	To Goodwill A/c			50,000
	(Being Goodwill written off)
viii)	Bank A/c      ...Dr.		1,60,000
	To Ranvijay’s Capital A/c			1,00,000
	To Premium for Goodwill A/c			60,000
	(Being new partner brings capital and share of goodwill)
ix)	Premium for Goodwill A/c      ...Dr.		60,000
	To Rajinder’s Current A/c			30,000
	To Vijay’s Current A/c			30,000
	(Being premium distributed in Sacrificing Ratio)