Question

Moksh and Aarav share profits and losses in the ratio 3 : 2 in partnership firm. Their Balance Sheet as on 31st March, 2023 was as under:

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		75,000	Bank		45,000
Bills payable		60,000	Bills receivable		22,800
Bank loans		96,000	Debtors	1,24,800	1,20,000
General reserve		15,000	Less : R.D.D	4,800
Capitals:			Stock		72,000
Moksh	90,000	1,62,000	Furniture		28,200
Aarav	72,000		Machinery		30,000
			Building		90,000
		4,08,000			4,08,000

On 1-04-2023, they admitted Tithi on the following terms:

(1) For 112 shares in profits in future, Tithi should bring ₹ 60,000 for capital and ₹  30,000 for goodwill in cash.

(2) Half of amount of goodwill is withdrawn by old partners.

(3) The Stock is to be depreciated by 10% and Machinery by 5%.

(4) R.D.D. is to be maintained at ₹ 6,000.

(5)  Furniture should be appreciated to ₹ 32,100 and Building be appreciated by 20%.

Pass the necessary journal entries in the books of the firm.

Answer 1

Journal Entries in the books of the Partnership Firm
Date	Particulars	L.F.	Debit Amount (₹)	Credit Amount (₹)
1-4-2023	General reserve A/c   ...Dr.		15,000	-
	To Moksh’s Capital A/c		-	9,000
	To Aarav’s Capital A/c		-	6,000
	(Being general reserve distributed among old partners)
	Profit and Loss Adjustment A/c    ...Dr.		9,900	-
	To Stock A/c		-	7,200
	To Machinery A/c		-	1,500
	To R.D.D. A/c		-	1,200
	(Being decrease in the value of assets and increased R.D.D. amount)
	Furniture A/c   ...Dr.		3,900	-
	Building A/c   ...Dr.		18,000	-
	To Profit and Loss Adjustment A/c		-	21,900
	(Being appreciation in the value of assets)
	Profit and Loss Adjustment A/c   ...Dr.		12,000	-
	To Moksh’s Capital A/c		-	7,200
	To Aarav’s Capital A/c		-	4,800
	(Being profit and revaluation distributed among old partners in their old profit and loss ratio)
	Bank A/c   ...Dr.		60,000	-
	To Tithi’s Capital A/c		-	60,000
	(Being cash brought in by Tithi as capital)
	Bank A/c   ...Dr.		30,000	--
	To Goodwill’s A/c		-	30,000
	(Being cash brought in by Tithi as goodwill)
	Goodwill A/c   ...Dr.		30,000	-
	To Moksh’s Capital A/c		-	18,000
	To Aarav’s Capital A/c		-	12,000
	Being goodwill distributed in sacrifice ratio among old partners
	Moksh’s Capital A/c   ...Dr.		9,000	-
	Aarav’s Capital A/c   ...Dr.		6,000	-
	To Bank A/c		-	15,000
	(Being half amount of goodwill withdrawn by old partners in their sacrifice ratio)

 

Dr.	In the books of the Partnership firm Profit and Loss Adjustment A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Stock A/c		7,200	By Furniture A/c	3,900
To Machinery A/c		1,500	By Building A/c	18,000
To R.D.D. A/c		1,200
To Profit on Revaluation transferred to Partners’ Capital A/c’s
Moksh	7,200	12,000
Aarav	4,800
		21,900		21,900

 

Dr.	Goodwill A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Moksh’s Capital A	18,000	By Bank A/c	30,000
To Aarav’s Capital A/c	12,000
	30,000		30,000