ADMISSION OF PARTNER – COMPREHENSIVE
Question 1 .
X, Y and Z are equal partners with capitals of ₹ 1,500; ₹ 1,750 and ₹ 2,000 respectively.
They agree to admit W into equal partnership upon payment in cash ₹ 1,500 for 1/4th
share of the goodwill and ₹ 1,800 as his capital, both sums to remain in the business. The
liabilities of the old firm amounted to ₹ 3,000 and the assets, apart from cash 220, consist
of Motors ₹ 1,200, Furniture ₹ 400, Stock ₹ 2,650 and Debtors ₹ 3,780. The Motors and
Furniture were revalued at ₹ 950 and ₹ 380 respectively.
Pass journal entries to give effect to the above arrangement and also show Balance Sheet
of the new firm.
Solution:
Working Notes:
1. Sacrificing Ratio = 1:1:1
2. Distribution of goodwill:
X’ Share = 1,500 x 1/ 3 = 500
Y’ Share = 1,500 x 1/ 3 = 500
Z’ Share = 1,500 x 1/ 3 = 500
3. Distribution of loss on revaluation :
X’ Share = 270 x 1/ 3 = 90
Y’ Share = 270 x 1/ 3 = 90
Z’ Share = 270 x 1/ 3 = 90
, Revaluation a/ c
Date Particulars Amount Amount Date Particulars Amount Amount
To Motor a/c 250 By Loss transferred to
To Furniture a/c 20 X’ Capital a/c 90
Y’s Capital a/c 90
Z’s Capital a/c 90 270
270 270
Partners’ Capital a/ c
Particulars X Y Z W Particulars X Y Z W
To Revaluation a/ c 2,00
90 90 90 By Balance b/ d 1,500 1,750
( Loss ) 0
To balance c/ d 1910 2,160 2,410 1,800 By Cash a/c 1,800
By Premium for good
( bal.figure) 500 500 500
will a/ c
2,50
2,000 2,250 2,500 1800 2,000 2,250 1800
0
, CASH A/ C
Date Particulars Amount Date Particulars Amount
To balance b/ d 220 By balance b/ d 3,520
To W’s Capital a/ c 1,800 ( bal.figure )
To premium for goodwill a/ c 1,500
3,520 3,520
Question 2.
Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1
as at 31st March, 2018:
They agree to admit C into the partnership on the following terms:
(a) C was to bring in ₹ 7,500 as his capital and ₹ 3,000 as goodwill for 1/4th share .
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor ₹ 375.
(d) Building Account was to be appreciated by 10%.
Pass necessary journal entries to give effect to the arrangements. Prepare Profit and Loss
Adjustment Account (or Revaluation Account), Capital Accounts and Balance Sheet of the
new firm.
Question 1 .
X, Y and Z are equal partners with capitals of ₹ 1,500; ₹ 1,750 and ₹ 2,000 respectively.
They agree to admit W into equal partnership upon payment in cash ₹ 1,500 for 1/4th
share of the goodwill and ₹ 1,800 as his capital, both sums to remain in the business. The
liabilities of the old firm amounted to ₹ 3,000 and the assets, apart from cash 220, consist
of Motors ₹ 1,200, Furniture ₹ 400, Stock ₹ 2,650 and Debtors ₹ 3,780. The Motors and
Furniture were revalued at ₹ 950 and ₹ 380 respectively.
Pass journal entries to give effect to the above arrangement and also show Balance Sheet
of the new firm.
Solution:
Working Notes:
1. Sacrificing Ratio = 1:1:1
2. Distribution of goodwill:
X’ Share = 1,500 x 1/ 3 = 500
Y’ Share = 1,500 x 1/ 3 = 500
Z’ Share = 1,500 x 1/ 3 = 500
3. Distribution of loss on revaluation :
X’ Share = 270 x 1/ 3 = 90
Y’ Share = 270 x 1/ 3 = 90
Z’ Share = 270 x 1/ 3 = 90
, Revaluation a/ c
Date Particulars Amount Amount Date Particulars Amount Amount
To Motor a/c 250 By Loss transferred to
To Furniture a/c 20 X’ Capital a/c 90
Y’s Capital a/c 90
Z’s Capital a/c 90 270
270 270
Partners’ Capital a/ c
Particulars X Y Z W Particulars X Y Z W
To Revaluation a/ c 2,00
90 90 90 By Balance b/ d 1,500 1,750
( Loss ) 0
To balance c/ d 1910 2,160 2,410 1,800 By Cash a/c 1,800
By Premium for good
( bal.figure) 500 500 500
will a/ c
2,50
2,000 2,250 2,500 1800 2,000 2,250 1800
0
, CASH A/ C
Date Particulars Amount Date Particulars Amount
To balance b/ d 220 By balance b/ d 3,520
To W’s Capital a/ c 1,800 ( bal.figure )
To premium for goodwill a/ c 1,500
3,520 3,520
Question 2.
Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1
as at 31st March, 2018:
They agree to admit C into the partnership on the following terms:
(a) C was to bring in ₹ 7,500 as his capital and ₹ 3,000 as goodwill for 1/4th share .
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor ₹ 375.
(d) Building Account was to be appreciated by 10%.
Pass necessary journal entries to give effect to the arrangements. Prepare Profit and Loss
Adjustment Account (or Revaluation Account), Capital Accounts and Balance Sheet of the
new firm.
