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Question
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner and fixed the new profit-sharing ratio as 3 : 2 : 1. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at ₹ 50,000 and ₹ 5,000 respectively all debtors are good. Pass the necessary Journal entries.
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) |
Provision for Doubtful Debts A/c |
Dr. |
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5,000 |
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To Revaluation A/c |
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5,000 |
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(Provision on Debtors reduced) |
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(ii) |
Revaluation A/c |
Dr. |
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5,000 |
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To X’s Capital A/c |
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3,000 |
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To Y’s Capital A/c |
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2,000 |
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(Profit on Revaluation transferred to Partners’ Capital A/c) |
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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?
Mohan Lal and Sohan Lal were partners in a firm sharing profits and losses in 3:2 ratio. They admitted Ram Lal for 1/4 share on 1.1.2013. It was agreed that goodwill of the firm will be valued at 3 years purchase of the average profits of last 4 years which were Rs. 50,000 for 2013, Rs. 60,000 for 2014, Rs. 90,000 for 2015 and Rs. 70,000 for 2016. Ram Lal did not bring his share of goodwill premium in cash. Record the necessary journal entries in the books of the firm on Ram Lal’s admission when:
a) Goodwill already appears in the books at Rs. 2,02,500.
b) Goodwill appears in the books at Rs. 2,500.
c) Goodwill appears in the books at Rs. 2,05,000.
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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Balance Sheet of A and B as on 31.03.2016 |
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Liabilites |
Amount (Rs) |
Assets |
Amount (Rs) |
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Creditors |
|
8,000 |
Cash in hand |
2,000 |
|
|
Bills payable |
|
4,000 |
Cash at bank |
10,000 |
|
|
General reserve |
|
6,000 |
Sundry debtors |
8,000 |
|
|
Capital accounts: |
|
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Stock |
10,000 |
|
|
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Azad |
50,000 |
|
Funiture |
5,000 |
|
|
Babli |
32,000 |
82,000 |
Machinery |
25,000 |
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Buildings |
40,000 |
|
|
|
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1,00,000 |
|
1,00,000 |
|
It was agreed that
i) Chintan will bring in Rs 12,000 as his share of goodwill premium.
ii) Buildings were valued at Rs 45,000 and Machinery at Rs 23,000.
iii) A provision for doubtful debts is to be created @ 6% on debtors.
iv) The capital accounts of Azad and Babli are to be adjusted by opening current accounts.
Record necessary journal entries, show necessary ledger accounts and prepare the Balance Sheet after admission.
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