M AND S are partners sharing profits and losses in the ratio 2:1 Their balance sheet was as follows - Accountancy - Reconstitution- Admission of a Partner

Question

M AND S are partners sharing profits and losses in the ratio 2:1
Their balance sheet was as follows :
Liabilities = Creditors - 44000, Capital
accounts : M- 30000 and S- 20000 TOTAL = 94000

Assets = Cashat bank- 17000, debtors -
15000, Bills recievables- 4000 Stock - 25000, kland and building -
30000, furniture and fixtures- 3000, TOTAL= 94000
R admitted on 1st april 2012 on the
following terms :
(a) That he brings in Rs 15000 as his
capital for 1/4th share and pays Rs 6000 for goodwill , half of
which is withdrawn by M and S
(b) There is likely to be a claim against
the firm for damages for which a provision to the extent of Rs 1500
is to be made
© A bill for Rs 300 for electric
charges has been omitted to be accounted It should , therefore Now
be provided for
(d) Stock is reduced to Rs 23000 and
furniture and fixtures by Rs 1000
( e) 5% reserve for bad and doubtful debts
to be created
(f) value of land and building to be
appreciated by 20%/
(g) Included in the creditors is an item of
Rs 1200 which is not paid and therefore has to be written
back
(h) That the profit sharing ratio of the
old firm will not change
Show jouranls, revaluation account,
partners capital account And balance sheet of new firm stating the
proportion in which the partners will share profits and losses in
future

Mohammed Vaseem · Accepted Answer

Revaluation Account Dr Cr Particulars Amount Rs Particulars Amount Rs Provision Against Claim for Damages 1,500 Land and Building (30,000 Ã— 20%) 6,000 Outstanding Electricity Bill 300 Creditors (Unclaimed) 1,200 Stock 2,000 Furniture 1,000 Reserve for Doubtful Debts (15,000 Ã— 5%) 750 Profit transferred to Capital Account: M 1,100 S 550 1,650 7,200 7,200 Partnersâ€™ Capital Accounts Dr Cr Particulars M S R Particular M S R Bank (Goodwill Withdrawn) 2,000 1,000 Balance b/d 30,000 20,000 Bank 15,000 Premium for Goodwill 4,000 2,000 Balance c/d 33,100 21,550 15,000 Revaluation (Profit) 1,100 550 35,100 22,550 15,000 35,100 22,550 15,000 Balance Sheet as on April, 01 after Mâ€™s admission Liabilities Amount Rs Assets Amount Rs Provision Against Claim for Damages 1,500 Cash at Bank (17,000 + 21,000 â€“ 3,000) 35,000 Outstanding Electricity Bill 300 Stock (25,000 â€“ 2,000) 23,000 Sundry Creditors (44,000 â€“ 1,200) 42,800 Furniture and Fixtures (3,000 â€“ 1,000) 2,000 Capitals Account: Sundry Debtors 15,000 M 33,100 Less: 5% Reserve for Doub Debts 750 14,250 S 21,550 Bills Receivable 4,000 R 15,000 69,650 Land and Building (30,000 + 6,000) 36,000 1,14,250 1,14,250 Working Notes: 1

2 Distribution of Premium for Goodwill

3 Withdrawn of Premium for Goodwill

4 Distribution of Revaluation Profit

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision Against Claim for Damages		1,500	Land and Building (30,000 × 20%)	6,000
Outstanding Electricity Bill		300	Creditors (Unclaimed)	1,200
Stock		2,000
Furniture		1,000
Reserve for Doubtful Debts (15,000 × 5%)		750
Profit transferred to Capital Account:
M	1,100
S	550	1,650
		7,200		7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	S	R	Particular	M	S	R
Bank (Goodwill Withdrawn)	2,000	1,000		Balance b/d	30,000	20,000
				Bank			15,000
				Premium for Goodwill	4,000	2,000
Balance c/d	33,100	21,550	15,000	Revaluation (Profit)	1,100	550
	35,100	22,550	15,000		35,100	22,550	15,000

Balance Sheet as on April, 01 after M’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Provision Against Claim for Damages		1,500	Cash at Bank (17,000 + 21,000 – 3,000)		35,000
Outstanding Electricity Bill		300	Stock (25,000 – 2,000)		23,000
Sundry Creditors (44,000 – 1,200)		42,800	Furniture and Fixtures (3,000 – 1,000)		2,000
Capitals Account:			Sundry Debtors	15,000
M	33,100		Less: 5% Reserve for Doub. Debts	750	14,250
S	21,550		Bills Receivable		4,000
R	15,000	69,650	Land and Building (30,000 + 6,000)		36,000
		1,14,250			1,14,250