Solve this: Priya and Riya were partners in a firm sharing profits in the ratio of 3:1 On 1st April - Accountancy - Reconstitution- Change in Existing Profit Sharing Ratio

Question

Solve this:
Priya and Riya were partners in a firm sharing
profits in the ratio of 3:1 On 1st April 2015 they
admitted Siya As new partner for 1/4th
share in the profits of the firm On the date of Siya's
admission the balance sheet of Priya and
Riya showed a General Reserve of Rs 80000, a
debit balance of Rs 40000 in Profit and Loss A/c and
Workmen Compensation Fund of Rs20000

The following was agreed on Siya's
admission
i) Siya will bring Rs200,00 as her
capital and the necessary amount of cash as premium for his share
of goodwill
ii) Goodwill of the firm is valued at Rs
80000
iii) There was acclaim of Workmen compensation for
Rs28000
iv) The partners decided to share future profits in the ratio
of 2:1:1
Pass the necessary journal entries for the above on
Siya's admission

Neha Chopra · Accepted Answer

Dear Student

Journal

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

General Reserve A/c
Dr

80,000

To Priya’s Capital A/c

60,000

To Riya’s Capital A/c

20,000

(Received General Reserve Transferred to Capital
accounts)

Priya’s Capital A/c
Dr

30,000

Ria’s Capital A/c
Dr

10,000

To Profit & loss A/c

40,000

(Being Profit and loss Transferred to capital
account of old partners)

Workmen Compensation Fund A/c
Dr

20,000

To Revalution A/c

20,000

(Being Fund Transferred to revalution account for
payment of liability)

Ravalution A/c
Dr

28,000

To Claim of Workmen Compensation
A/c

28,000

(Being Claim of workmen compensation
booked)

Bank A/c
Dr

40,000

To Siya’s Capital A/c

20,000

To Premium For Goodwill A/c

20,000

(Being Siya brought his share of goodwill and
Capital)

Premium for Goodwill A/c
Dr

20,000

To Priya’s Capital A/c

20,000

(Being Premium for goodwill credited to Priya for
her Sacrificing Ratio)

Priya’s Capital A/c
Dr

6,000

Riya’s Capital A/c
Dr

2,000

To Revalution A/c

8,000

(Being Revalution Loss transferred to old
partners )

Sacrificing Ratio of Priya and
Riya

Priya = Old Ratio - New Ratio
34-24
14

Riya = Old Ratio - New Ratio
14-14
0

Therefore only Priya is
Sacrificing

Goodwill distribution

Chitra's share of Goodwill

20,000

Distribution in Sacrificing
Ratio

Priya

20,000

Regards

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	General Reserve A/c	Dr.		80,000
	To Priya’s Capital A/c				60,000
	To Riya’s Capital A/c				20,000
	(Received General Reserve Transferred to Capital accounts)

	Priya’s Capital A/c	Dr.		30,000
	Ria’s Capital A/c	Dr.		10,000
	To Profit & loss A/c				40,000
	(Being Profit and loss Transferred to capital account of old partners)

	Workmen Compensation Fund A/c	Dr.		20,000
	To Revalution A/c				20,000
	(Being Fund Transferred to revalution account for payment of liability)

	Ravalution A/c	Dr.		28,000
	To Claim of Workmen Compensation A/c				28,000
	(Being Claim of workmen compensation booked)

	Bank A/c	Dr.		40,000
	To Siya’s Capital A/c				20,000
	To Premium For Goodwill A/c				20,000
	(Being Siya brought his share of goodwill and Capital)

	Premium for Goodwill A/c	Dr.		20,000
	To Priya’s Capital A/c				20,000
	(Being Premium for goodwill credited to Priya for her Sacrificing Ratio)


	Priya’s Capital A/c	Dr.		6,000
	Riya’s Capital A/c	Dr.		2,000
	To Revalution A/c				8,000
	(Being Revalution Loss transferred to old partners )

Sacrificing Ratio of Priya and Riya
Priya = Old Ratio - New Ratio	$\frac{3}{4} - \frac{2}{4}$	$\frac{1}{4}$
Riya = Old Ratio - New Ratio	$\frac{1}{4} - \frac{1}{4}$	0
Therefore only Priya is Sacrificing

Goodwill distribution
Chitra's share of Goodwill		20,000
Distribution in Sacrificing Ratio
Priya		20,000