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Pass the Necessary Journal Entries, Prepare the Revaluation Account and Partners’ Capital Accounts, and Show the Balance Sheet After the Admission of C. - Accountancy

Journal Entry
Ledger

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.         

Balance Sheet of A and B as on December 31, 2016

Liabilites

Amount

(Rs)

Assets

Amount

(Rs)

Bills Payable

 

10,000

Cash in Hand

10,000

Creditors

 

58,000

Cash at Bank

40,000

Outstanding

 

2,000

Sundry Debtors

60,000

Expenses

 

-

Stock

40,000

Capitals:

 

 

Plant

1,00,000

 

A

1,80,000

 

Buildings

1,50,000

 

B

1,50,000

3,30,000

 

 

 

 

 

4,00,000

 

4,00,000

C is admitted as a partner on the date of the balance sheet on the following terms:
(i) C will bring in Rs 1,00,000 as his capital and Rs 60,000 as his share of goodwill for 1/4 share in the profits.
(ii) Plant is to be appreciated to Rs 1,20,000 and the value of buildings is to be appreciated by 10%.
(iii) Stock is found over valued by Rs 4,000.
(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.
(v) Creditors were unrecorded to the extent of Rs 1,000.
Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.

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Solution

Books of A, B and C Journal

Date

Particulars

L.F.

Amount

Rs

Amount

Rs

2016

 

 

 

 

 

Dec 31

Bank A/c

Dr.

 

1,60,000

 

 

 

To C’s Capital A/c

 

 

 

1,00,000

 

 

To Premium for Goodwill A/c

 

 

 

60,000

 

(Capital and premium for goodwill brought by C for 1/4 th share)

 

 

 

             

 

Premium for Goodwill A/c

Dr.

 

60,000

 

 

 

To A’s Capital A/c

 

 

 

40,000

 

 

To B’s Capital A/c

 

 

 

20,000

 

(Premium for Goodwill brought by C transferred to old partners’ capital account in their sacrificing ratio, 3:1)

 

 

 

 

             

 

Plant A/c

Dr.

 

20,000

 

 

Building A/c

Dr.

 

15,000

 

 

 

To Revaluation A/c

 

 

 

35,000

 

(Value of assets increased)

 

 

 

 

             

 

Revaluation A/c

Dr.

 

8,000

 

 

 

To Stock

 

 

 

4,000

 

 

To Provision for Doubtful Debts A/c

 

 

3,000

 

 

To Creditors A/c (Unrecorded)

 

 

 

1,000

 

(Assets and liabilities revalued)

 

 

 

 

             

 

Revaluation A/c

Dr.

 

27,000

 

 

 

To A’s Capital A/c

 

 

 

18,000

 

 

To B’s Capital A/c

 

 

 

9,000

 

(Profit on revaluation transferred to old partners capital account)

 

 

 

 

  

Revaluation Account

Dr.

                                                                                   Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

4,000

Plant

20,000

Provision for Doubtful Debts

3,000

Building

15,000

Creditors (Unrecorded)

1,000

 

 

Profit transferred to

 

 

 

 

A’s Capital

18,000

 

 

 

 

B’s Capital

9,000

27,000

 

 

 

35,000

 

35,000

 

Partners’ Capital Account 

Dr.

                                                           Cr.

Particulars

A

B

C

Particulars

A

B

C

Balance c/d

2,38,000

1,79,000

1,00,000

Balance b/d

1,80,000

1,50,000

 

 

 

 

 

Bank

 

 

1,00,000

 

 

 

 

Premium for Goodwill

40,000

20,000

 

 

 

 

 

Revaluation

18,000

9,000

 

 

2,38,000

1,79,000

1,00,000

 

2,38,000

1,79,000

1,00,000

 

Balance Sheet as on December 31, 2016 

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Bills Payable

10,000

Cash in Hand

 

10,000

Creditors

59,000

Cash at Bank

 

2,00,000

Outstanding Expenses

2,000

Sundry Debtors

60,000

 

Capital:

 

Less: Provision for Doubtful Debt

3,000

57,000

 

A

2,38,000

 

Stock

 

36,000

 

B

1,79,000

 

Plant

 

1,20,000

 

C

1,00,000

5,17,000

Building

 

1,65,000

 

5,88,000

 

 

5,88,000

Working Note:

1) Sacrificing ratio = Old Ratio − New Ratio

A's Sacrificing ratio = `2/3 - 2/4 = [ 8 - 6]/12 = 2/12`

B's Sacrificing ratio = `1/3 - 1/4 = [ 4 -3]/12 = 1/12`

Sacrificing ratio between A and B = 2:1.

Concept: Admission of a New Partner
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 27 | Page 168
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