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Record the Necessary Journal Entries and Prepare the Balance Sheet of the Firm After Vimal’S Admission. - Accountancy

Journal Entry
Ledger

Ashish and Dutta were partners in a firm sharing profits in 3:2 ratio. On Jan. 01, 2015 they admitted Vimal for 1/5 share in the profits. The Balance Sheet of Ashish and Dutta as on Jan. 01, 2016 was as follows

Balance Sheet of A and B as on 1.1.2016 

Liabilites

Amount

Rs

Assets

Amount

Rs

Creditors

15,000

Land & Building

35,000

Bills Payable

10,000

Plant

45,000

Ashish Capital

80,000

Debtors

22,000

 

Dutta’s Capital

35,000

Less : Provision

2,000

20,000

 

 

Stock

35,000

 

 

Cash

5,000

 

1,40,000

 

1,40,000

It was agreed that:
i) The value of Land and Buildingbeincreased by Rs 15,000.
ii) The value of plantbeincreased by 10,000.
iii) Goodwill of the firm be valued at Rs 20,000.
iv) Vimal to bring in capital to the extent of 1/5th of the total capital of the new firm.

Record the necessary journal entries and prepare the Balance Sheet of the firm after Vimal’s admission.

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Solution

Books of Ashish, Dutta and Vimal

Journal

Date

Particularss

L.F.

Amount

Rs

Amount

Rs

2016

 

 

 

 

 

Jan 1

Land and Building A/c

Dr.

 

15,000

 

 

Plant A/c

Dr.

 

10,000

 

 

 

To Revaluation A/c

 

 

 

25,000

 

(Increased in the value of assets)

 

 

 

 

 

 

 

 

 

 

 

Revaluation A/c

Dr.

 

25,000

 

 

 

To Ashish’s Capital A/c

 

 

 

15,000

 

 

To Dutta’s Capital A/c

 

 

 

10,000

 

(Profit on revaluation transferred to partners capital account) 

 

 

 

 

 

 

 

 

 

 

 

Cash A/c

Dr.

 

36,000

 

 

 

To Vimal Capital A/c

 

 

 

36,000

 

(Capital brought by Vimal)

 

 

 

 

 

 

 

 

 

 

 

 

Vimal’s Current A/c

Dr.

 

4,000

 

 

 

To Ashish’s Capital A/c

 

 

 

2,400

 

 

To Dutta’s Capital A/c

 

 

 

1,600

 

(Vimal’s share goodwill adjusted through his current account)

 

 

 

  

Balance Sheet as on January 01, 2016

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

15,000

Land and Building

50,000

Bills Payable

10,000

Plant

55,000

 

 

Debtors

22,000

 

Ashish’s Capital Account

97,400

Less: Provision

2,000

20,000

Dutta’s Capital Account

46,600

Stock

35,000

Vimal’s Capital Account

36,000

Cash

41,000

 

 

Vimal’s Current Account

4,000

 

2,05,000

 

2,05,000

Working Note:  1)

Partners’ Capital Account

Dr.

Cr.

Particulars

Ashish

Dutta

Vimal

Particulars

Ashish

Dutta

Vimal

 

 

 

 

Balance b/d

80,000

35,000

 

 

 

 

 

Revaluation

15,000

10,000

 

Balance c/d

97,400

46,600

36,000

Cash

 

 

36,000

 

 

 

 

Vimal Current

2,400

1,600

 

 

97,400

46,600

36,000

 

97,400

46,600

36,000

2)

Vimal Current Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Ashish’s Capital A/c

2,400

 

 

Dutta’s Capital A/c

1,600

Balance c/d

4,000

 

4,000

 

4,000

3) Calculation of New Profit Sharing Ratio
Vimal's Share = `1/5`

Remaining Share of Firm = 1 - `1/5 = 4/5`

Ashish's share in the new firm = `3/5 xx 4/5 = 12/25`

Dutta's share in the new firm = `2/5 xx 4/5 = 8/25`

New Profit sharing ratio of Ashish, Dutta and Vimal

= `12/25 : 8/25 : 1/5 or 12/25 : 8/25 : 5/25 or 12 : 8 : 5`

4) Sacrificing Ratio = Old Ratio – New Ratio

Ashish’s Sacrificing Share = `3/5 - 12/25 = [ 15 -12]/25 = 3/25`

Dutta’s Sacrificing Share = `2/5 - 8/25 = [ 10 - 8 ]/25 = 2/25`

Sacrificing Ratio between Ashish and Dutta is 3:2

Note: Here, Goodwill has been adjusted through current account because Vimal has not brought his share of goodwill and he is to bring capital in proportion to total capital of the new firm after adjustment.

5) Capital of new firm on the basis of old partners adjusted capital:
Total adjusted capital of old partners

Ashish’s Capital

=

97,400

Dutta’s Capital

=

46,600

 

 

1,44,000

Remaining Share of Ashish and Dutta (old partners) in the new firm = `4/5`

Capital of the new firm = 1,44,000 ×`5/4` =1,80,000

Vimal’s share in the capital of the new firm = 1,80,000 x `1/5` = 36,000.

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 35 | Page 171
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