# 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.

#### 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