Question

Pravin and Kishor are partners sharing profits and losses in the ratio 3 : 2. Their Balance Sheet as on 31st March, 2019 was as under:

Balance Sheet as on 31st March, 2019
Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		37,500	Bank		22,500
Bills Payable		30,000	Bills Receivable		11,400
Bank Loans		48,000	Debtors	62,400	60,000
General Reserve		7,500	Less: RDD	2,400
Capitals:			Stock		36,000
Pravin	45,000	81,000	Furniture		14,100
Kishor	36,000		Machinery		15,000
			Buildings		45,000
		2,04,000			2,04,000

On 1.04.2019 they admitted Asha on the following terms:

1. For 1/2 share in profits in future, Asha will bring ₹ 30,000 for capital and ₹ 15,000 for goodwill.
2. Half of the amount of goodwill is withdrawn by old partners.
3. Stock is to be depreciated by 10% and Machinery by 5%.
4. RDD is to be maintained at ₹ 3,000.
5. Furniture be valued at ₹ 16,050 and Building be appreciated by 20%

Pass the necessary Journal entries in the books of the firm and prepare working notes.

Answer 1

In the books of the firm
Date	Particular	L.F.	Amount Dr. (₹)	Amount Cr. (₹)
1.4.2019
1.	General Reserve A/c   ...Dr.		7,500	-
	To Pravin's capital A/c		-	4,500
	To Kishor's capital A/c		-	3,000
	(Being general reserve distributed among old partners)
2.	Revaluation A/c ...Dr.		4,950	-
	To Stock A/c		-	3,600
	To Machinery A/c		-	750
	To RDD A/c		-	600
	(Being decrease in the value of assets and RDD increased)
3.	Furniture A/c      ...Dr.		1,950	-
	Building A/c      ...Dr.		9,000	-
	To Revaluation A/c		-	10,950
	(Being appreciation in the value of assets)
4.	Revaluation A/c   ...Dr.		6,000	-
	To Pravin's capital A/c		-	3,600
	To Kishor's capital A/c		-	2,400
	(Being profit on revaluation transferred to partner's capital account)
5.	Bank A/c   ...Dr.		30,000	-
	To Asha's capital A/c		-	30,000
	(Being cash brought in by Asha as capital)
6.	Bank A/c   ...Dr.		45,000	-
	To Asha's capital A/c		-	30,000
	To Premium for Goodwill capital A/c		-	15,000
	(Being the amount of capital and goodwill brought in by Asha)
7.	Bank A/c   ...Dr.		15,000	-
	To Goodwill A/c		-	15,000
	(Being cash brought in by Asha as goodwill)
8.	Goodwill A/c    ...Dr.		15,000	-
	To Pravin's capital A/c		-	9,000
	To Kishor's capitalA/c		-	6,000
	(Being goodwill credited in old partners capital account in their sacrificing ratio)
9.	Pravin's capital A/c   ...Dr.		4,500	-
	Kishor's capital A/c   ...Dr.		3,000	-
	To Bank A/c		-	7,500
	(Being half the amount of goodwill withdrawn by old partners)

Working Notes:

Dr.	Revaluation Account			Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
To Stock		3,600	By Furniture A/c	1,950
To Machinery		750	By Building A/c	9,000
To RDD		600
To Profit transferred to Partners Capital A/c:
Pravin	3,600	6,000
Kishor	2,400
		10,950		10,950

 

Dr.	Goodwill Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Pravin's capital A/c	9,000	By Bank A/c	15,000
To Kishor's capital A/c	6,000
	15,000		15,000