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Question
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2019, they admit Z as a partner for 1/4th share in the profits. Z contributed following assets towards his capital and for his share of goodwill:
Stock ₹ 60,000; Debtors ₹ 80,000; Land ₹ 1,00,000, Plant and Machinery ₹ 40,000.
On the date of admission of Z, the goodwill of the firm was valued at ₹ 6,00,000.
Pass necessary Journal entries in the books of the firm on Z's admission.
Solution
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
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2019 |
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April 1 |
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Debtors A/c |
Dr. |
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80,000 |
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Land A/c |
Dr. |
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1,00,000 |
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Plant and Machinery A/c |
Dr. |
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40,000 |
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To Z’s Capital A/c |
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1,30,000 |
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To Premium for Goodwill A/c |
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1,50,000 |
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(Z brought assets for his share of goodwill and Capital) |
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April 1 |
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To X’s Capital A/c |
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90,000 |
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To Y’s Capital A/c |
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60,000 |
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(Z’s share of Goodwill distributed between X and Y in sacrificing ratio) |
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Working Notes:
WN1
Z's share of Goodwill = 6,00,000 x `1/4` = Rs. 1,50,000
WN 2
X will get = 1,50,000 x `3/5` = Rs. 90,000
Y will get = 1,50,000 x `2/5` = Rs. 60,000.
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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) |
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Sundry creditors |
41,500 |
Cash at Bank |
26,500 |
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Reserve fund |
4,000 |
Bills Receivable |
3,000 |
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Capital Accounts |
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Debtors |
16,000 |
|
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A |
30,000 |
Stock |
20,000 |
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B |
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Fixtures |
1,000 |
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Land & Building |
25,000 |
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91,500 |
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91,500 |
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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.
Pinky, Qumar and Roopa partners in a firm sharing profits and losses in the ratio of 3:2:1. S is admitted as a new partner for 1/4 share in the profits of the firm, whichs he gets 1/8 from Pinky, and 1/16 each from Qmar and Roopa. The total capital of the new firm after Seema’s admission will be Rs 2,40,000. Seema is required to bring in cash equal to 1/4 of the total capital of the new firm. The capitals of the old partners also have to be adjusted in proportion of their profit sharing ratio. The capitals of Pinky, Qumar and Roopa after all adjustments in respect of goodwill and revaluation of assets and liabilities have been made are Pinky Rs 80,000, Qumar Rs 30,000 and Roopa Rs 20,000. Calculate the capitals of all the partners and record the necessary journal entries for doing adjustments in respect of capitals according to the agreement between the partners?
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| Profits for the last four years ended 31st March, were | ₹ |
| 2015-16 | 4,00,000 |
| 2016-17 | 5,00,000 |
| 2017-18 | 6,00,000 |
| 2018-19 | 7,00,000 |
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