16 X and Y are partners, sharing profit and losses in the ratio of 3/5 : 2/5 They - Accountancy - Reconstitution- Admission of a Partner

Question

16 X and Y are partners, sharing profit and losses in the ratio of
3/5 : 2/5 They admit Z a differently abled person into the firm on
1st April, 2017, when their Balance sheet as follows:

Liabilities
Amount
Assets
Amount

Creditors
45000
Cah at Bank
15000

General Reserve
36000
Debtors 60000

X Capital A/cs
180000
Less: Provision for doubtful Debts 2400
57600

Y Capital A/cs
90000
Patents
44400

X Current A/cs
30000
Investments
24000

Y Current A/cs
6000
Fixed Assets
216000

Goodwill
30000

387000

Z is admitted on the following terms;
(a) Provision for Doubtful Debts is to be maintained at 5% on
Debtors
(b) Outstanding rent amounted to 15,000
(c) An accrued income of the 4,500 does not appear in the books of
the firm It is now to be recorded
(d) X takes over the Investments at an agreed value of Rs
18,000
(e) New profit-sharing Ratio of partners will be 4 : 3 : 2
(f) Z will bring in Rs 60,000 as his capital by cheque
(g) Z is to pay an amount equal to his share in firm's goodwill
valued at twice the average profit Of the last three years which
were Rs 90,000; Rs 78,000 and Rs 75,000 respectively
(h) Half of the amount of goodwill is to be withdrawn by X and
Y
Give the necessary Journal entries, Partners' Capital and Current
Accounts, and the Balance Sheet of the new firm Identify the value
being highlighted by admitting Z as a partner in the firm

Neha Arora · Accepted Answer

Dear Student,

The solution is worked out below

Journal

Date

Particulars
L F
Debit
Amount
(Rs)
Credit
Amount
(Rs)

(i)
Bank A/c
Dr

78,000

To Z’s Capital A/c

60,000

To Premium for Goodwill A/c

18,000

(Capital and goodwill brought in by
Z)

(ii)
Premium for Goodwill A/c
Dr

18,000

To X’s Current A/c

12,600

To Y’s Current A/c

5,400

(Goodwill distributed in sacrificing
ratio)

(iii)
X’s Current A/c
Dr

6,300

Y’s Current A/c
Dr

2,700

To Bank A/c

9,000

(Half goodwill withdrawn)

Dr
Partners’
Capital Accounts
Cr

Particulars
X
Y
Z
Particulars
X
Y
Z

Balance c/d
1,80,000
90,000
60,000
Balance b/d
1,80,000
90,000

60,000

1,80,000
90,000
60,000

Dr
Partners’
Current Accounts
Cr

Particulars
X
Y
Particulars
X
Y

Revaluation A/c
10,260
6,840
Balance b/d
30,000
6,000

Goodwill A/c
18,000
12,000
General Reserve
12,600
5,400

Revaluation A/c
18,000

Premium for Goodwill A/c
21,600
14,400

Bank A/c
6,300
2,700

Balance c/d
11,640
4,260

13,560
5,750

Bank
Account

Dr

Cr

Particulars
Amount
Rs
Particulars
Amount
Rs

Balance b/d
15,000
X’s Current A/c
6,300

Premium for Goodwill
18,000
Y’s Current A/c
2,700

Z’s Capital A/c
60,000
Balance c/d
84,000

93,000

Balance
Sheet

Liabilities
Amount
Rs
Assets
Amount
Rs

Outstanding Rent
15,000
Cash at Bank
84,000

X’s Current A/c
11,640
Patents
44,400

Y’s Current
A/c
4,260
Fixed Assets
2,16,000

Capital A/c

Accrued Income
4,500

X
1,80,000

Debtors
60,000

Y
90,000

Less: Provision
3,000
57,000

Z
60,000
3,30,000

Creditors
45,000

4,05,900

Working Notes:

Revaluation
Account

Dr

Cr

Particulars
Amount
Rs

To Provision for Doubtful
Debts
600
Accrued Income
4,500

To Outstanding Rent
15,000
Loss on Revaluation

To Investments
6,000
X’s Current A/c
10,260

Y’s Current A/c
6,840
17,100

21,600

Calculation of Z's Share of Goodwill

Firm's Goodwill=90,000+78,000+75,0003=81,000Z's share=81,000×29=18,000 (to be distributed in sacrificing ratio)
Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

X's sacrifice=35-49=745Y's  sacrifice=25-39=345

Liabilities	Amount	Assets	Amount
Creditors	45000	Cah at Bank	15000
General Reserve	36000	Debtors 60000
X Capital A/cs	180000	Less: Provision for doubtful Debts 2400	57600
Y Capital A/cs	90000	Patents	44400
X Current A/cs	30000	Investments	24000
Y Current A/cs	6000	Fixed Assets	216000
		Goodwill	30000

	387000		387000

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

(i)	Bank A/c	Dr.		78,000
	To Z’s Capital A/c				60,000
	To Premium for Goodwill A/c				18,000
	(Capital and goodwill brought in by Z)

(ii)	Premium for Goodwill A/c	Dr.		18,000
	To X’s Current A/c				12,600
	To Y’s Current A/c				5,400
	(Goodwill distributed in sacrificing ratio)

(iii)	X’s Current A/c	Dr.		6,300
	Y’s Current A/c	Dr.		2,700
	To Bank A/c				9,000
	(Half goodwill withdrawn)

Dr.	Partners’ Capital Accounts								Cr.
Particulars		X	Y	Z	Particulars	X	Y	Z
Balance c/d		1,80,000	90,000	60,000	Balance b/d	1,80,000	90,000
								60,000
		1,80,000	90,000	60,000		1,80,000	90,000	60,000

Dr.	Partners’ Current Accounts						Cr.
Particulars		X	Y	Particulars	X	Y
Revaluation A/c		10,260	6,840	Balance b/d	30,000	6,000
Goodwill A/c		18,000	12,000	General Reserve	12,600	5,400
Revaluation A/c		18,000		Premium for Goodwill A/c	21,600	14,400
Bank A/c		6,300	2,700
Balance c/d		11,640	4,260
		13,560	5,750		13,560	5,750

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	15,000	X’s Current A/c	6,300
Premium for Goodwill	18,000	Y’s Current A/c	2,700
Z’s Capital A/c	60,000	Balance c/d	84,000


	93,000		93,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Outstanding Rent		15,000	Cash at Bank		84,000
X’s Current A/c		11,640	Patents		44,400
Y’s Current A/c		4,260	Fixed Assets		2,16,000
Capital A/c			Accrued Income		4,500
X	1,80,000		Debtors	60,000
Y	90,000		Less: Provision	3,000	57,000
Z	60,000	3,30,000
Creditors		45,000
		4,05,900			4,05,900

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
To Provision for Doubtful Debts	600	Accrued Income		4,500
To Outstanding Rent	15,000	Loss on Revaluation
To Investments	6,000	X’s Current A/c	10,260
		Y’s Current A/c	6,840	17,100
	21,600			21,600