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Question
Pass entries in firm's Journal for the following on admission of a partner:
(i) Unrecorded Investments worth ₹ 20,000.
(ii) Unrecorded liability towards suppliers for ₹ 5,000.
(iii) An item of ₹ 1,600 included in Sundry Creditors is not likely to be claimed and hence should be written back.
Solution
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
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(i) |
Investment A/c |
Dr. |
|
20,000 |
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|
|
To Revaluation A/c |
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20,000 |
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(Investments recorded) |
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|
(ii) |
Revaluation A/c |
Dr. |
|
5,000 |
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To Creditors A/c |
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|
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5,000 |
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|
(Liability recorded) |
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(iii) |
Creditors A/c |
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To Revaluation A/c |
Dr |
|
1,600 |
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|
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(Liability decreased) |
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|
1,600 |
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RELATED QUESTIONS
Do you advise that assets and liabilities must be revalued at the time of admission of a partner? If so, why? Also describe how is this treated in the book of account?
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A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:
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Balance Sheet of A and B as on March 31, 2016 |
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|
Liabilites |
Amount (Rs) |
Assets |
Amount (Rs) |
|
|
Sundry creditors |
41,500 |
Cash at Bank |
26,500 |
|
|
Reserve fund |
4,000 |
Bills Receivable |
3,000 |
|
|
Capital Accounts |
|
Debtors |
16,000 |
|
|
|
A |
30,000 |
Stock |
20,000 |
|
|
B |
16,000 |
Fixtures |
1,000 |
|
|
|
Land & Building |
25,000 |
|
|
|
91,500 |
|
91,500 |
|
On April 1,2017, C was admitted into partnership on the following terms:
- That C pays Rs 10,000 as his capital.
- That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.
- That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable.
- That the value of land and buildings be appreciated by 20%.
- There being a claim against the firm for damages, a liability to the extent of Rs 1,000 should be created.
- An item of Rs 650 included in sundry creditors is not likely to be claimed and hence should be written back.
Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C.
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