Maharashtra State BoardHSC Commerce 12th Board Exam
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Snehal and Meenal Are Equal Partners in a Business. Their Balance Sheet is as Follows: - Book Keeping and Accountancy

Journal Entry
Ledger

Snehal and Meenal are equal partners in a business. Their Balance sheet is as follows :

                 Balance Sheet as on 31st March, 2012

Liabilities Amount
(Rs)
Amount (Rs) Assets Amount
(Rs)
Amount
(Rs)
Capital A/c’s     Premises   20500
Snehal 80000 125000

Investments

  10500
Meenal 45000 Equipments   5000
Creditors   26000 Bills Receivable   18000
Bank Loan (Taken on 1.1.2012)   40000 Debtors 110000 99000
      (-) R.D.D 11000
    Profit and Loss A/c   6600
    Bank   31400
  191000   191000

They agreed to admit Kamal on 1st April, 2012 on the following terms.

1) He should bring 50,000 towards his capital for 1/4th share in future profit.

2) Goodwill A/c be raised in the books of the firm Rs 40,000/-

3) R.D.D to be maintained at 5% on debtors.

4) Premises to be valued at Rs 30,000 and Equipments to be written off fully.

5) Interest at the rate of 15% p.a. is due on bank loan.

6) Creditors allowed a discount of Rs 1100/- and they were paid off immediately.

Pass necessary journal entries to record the above scheme of admission.

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Solution

Journal Entry

Date Particulars L.F. Debit Amount Rs. Credit Amount Rs.
  Reserve for Doubtful Debts A/c                Dr
   To Profit and Loss Adjustment  A/c
(Being Reserve for Doubtful Debts maintained @ 5%)
  5500 5500
  Premises A/c           Dr
   To Profit and Loss Adjustment  A/c
(Being Premises Appreciated by Rs 9,500)
  9500 9500
  Creditors A/c          Dr.
   To Profit and Loss Adjustment  A/c
(Being Creditors paid off)
  1100 1100
  Profit and Loss Adjustment  A/c     Dr.
   To Equipment A/c
(Being Equipments written off)
  5000 5000
  Profit and Loss Adjustment  A/c     Dr.
   To Outstanding Interest on Loan
(Being Interest on Bank Loan outstanding for 3 months @ 15% per annum)
  1500 1500
  Profit and Loss Adjustment  A/c     Dr.
   To Snehal’s Capital A/c
   To Meenal’s Capital A/c
(Being Profit on Profit and Loss Adjustment  A/c, distributed among existing partners in the equal ratio)
  9600

4800

4800

  Snehal’s Capital A/c  Dr.
Meenal’s Capital A/c Dr.
    To Profit and Loss A/c
(Being Profit and Loss (Dr.) A/c transferred to existing Partner’s Capital A/c in the equal ratio)
 

3300

3300

6600
  Cash A/c                    Dr.
   To Kamal's Capital A/c
(Being Kamal brought his share of Capital in Cash)
  50000 50000
  Goodwill A/c             Dr.
   To Snehal’s Capital A/c
  To Meenal’s Capital A/c
(Being Goodwill A/c is to be raised in the book of the firm)
  40000

20000

20000

Working Notes:

Calculation of New Profit Sharing Ratio

Old Ratio = Snehal : Meenal = 1 : 1

Kamal's Share = `1/4`

Let the total share of firm = 1

Remaining share of firm = `1-1/4 = 3/4`

Snehal's New Share = `3/4 xx 1/2 = 3/8`

Meenal's New Share = `3/4 xx 1/2 = 3/8`

New Profit Sharing Ratio = `3/8 : 3/8 : 1/4 = (3:3:2)/8`

Sacrificing Ratio = Old Ratio - New Ratio

Snehal's Sacrifice = `1/2 - 3/8 = 1/8`

Meenal's Sacrifice = `1/2 - 3/8 = 1/8`

Sacrificing Ratio = 1 : 1

WN 1: Distribution of Profit and Loss A/c

Snehal will give = `6600 xx 1/2 = "Rs" 3300`

Meenal will give = `6600 xx 1/2 = "Rs" 3300`

WN 2: Distribution of Kamal’s Share of Goodwill 

Snehal will get = `40000 xx 1/2 = "Rs." 20000`

Meenal will get = `40000 xx 1/2 = "Rs" 20000`

WN 3 : Profit and Loss Adjustment Account

                      Profit and Loss Adjustment Account

Dr.                                                                                          Cr.

 

Particulars Amount (Rs) Particulars Amount (Rs)
Equipments 5000 Reserve for Doubtful Debts 5500
Outstanding  Interest on Loan 1500 Premises 9500
Profit transferred to:  

Creditors

1100
Snehal’s Capital
`(9600 xx 1/2)`
4800 9600    
Meenal’s Capital
`(9600 xx 1/2)`
4800  
  16100   16100
  Is there an error in this question or solution?
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APPEARS IN

Micheal Vaz Accounts - Book Keeping and Accountancy HSC 12th Standard Maharashtra State Board
Chapter 3 Reconstitution of Partnership (Admission of Partner)
Practical Problems | Q 3 | Page 109
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