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.
Solution
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Books of A, B and C Journal |
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|
Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
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|
2016 |
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|
|
|
|
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|
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 |
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|
3,000 |
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|
|
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To Creditors A/c (Unrecorded) |
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|
|
1,000 |
|
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(Assets and liabilities revalued) |
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|
|
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|
Revaluation A/c |
Dr. |
|
27,000 |
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||
|
|
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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) |
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|
|
|
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|
Revaluation Account |
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|
Dr. |
Cr. |
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|
Particulars |
Amount Rs |
Particulars |
Amount Rs |
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|
Stock |
4,000 |
Plant |
20,000 |
|||
|
Provision for Doubtful Debts |
3,000 |
Building |
15,000 |
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|
Creditors (Unrecorded) |
1,000 |
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|
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Profit transferred to |
|
|
|
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A’s Capital |
18,000 |
|
|
|
|
|
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B’s Capital |
9,000 |
27,000 |
|
|
|
|
|
35,000 |
|
35,000 |
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|
Partners’ Capital Account |
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|
Dr. |
Cr. |
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|
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 |
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|
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 |
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|
|
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 |
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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.
