Chapter 3 from Textbook Double Entry Book Keeping Ts Grewal (2017) for Class 12 ACCOUNTANCY

Question 57:

Answer:

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

	C’s Capital A/c	Dr.		6,900
	To A’s Capital A/c				4,140
	To B’s Capital A/c				2,760
	(Revaluation adjusted)

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		30,000	Freehold Premises	2,00,000
Bills Payable		20,000	Plant	40,000
Capital			Furniture	20,000
X	2,10,140		Office Equipment	25,000
Y	1,06,760		Bank (10,000+50,000+10,000)	70,000
Z	43,100	3,60,000	Stock	30,000
			Debtors	25,000
		4,10,000		4,10,000

Working Notes:

WN 1: Calculation of Profit on Revaluation:

Particulars	Amount Rs
Freehold Premises	40,000
Furniture	5,000
Office Equipment	2,500
Less:
Provision for Doubtful Debts	5,000
Stock	3,000
Plant	5,000
Profit on Revaluation	34,500

WN 2:

$\begin{array}{l} C's Share in Revaluation = 34,500 \times \frac{1}{5} = Rs 6,900 and it should be credited to A& B in the ratio of 3:2 \\ A's Share = 6,900 \times \frac{3}{5} = 4, 140 \\ B's Share = 6,900 \times \frac{2}{5} = 2, 760 \end{array}$

WN 3: Calculation of Distribution of Goodwill

$\begin{array}{l} A' s Share = 10, 000 \times \frac{3}{5} = 6, 000 \\ B' s Share = 10, 000 \times \frac{2}{5} = 4, 000 \end{array}$

WN 4: Calculation of Capital of Partners’

$\begin{array}{l} A' s Capital = 2, 00, 000 + 4, 140 + 6, 000 = 2, 10, 140 \\ B' s Capital = 1, 00, 000 + 2, 760 + 4, 000 = 1, 06, 760 \\ C' s Capital = 50, 000 - 6, 900 = 43, 100 \end{array}$

Question 58:

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

	C’s Capital A/c	Dr.		6,900
	To A’s Capital A/c				4,140
	To B’s Capital A/c				2,760
	(Revaluation adjusted)

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		30,000	Freehold Premises	2,00,000
Bills Payable		20,000	Plant	40,000
Capital			Furniture	20,000
X	2,10,140		Office Equipment	25,000
Y	1,06,760		Bank (10,000+50,000+10,000)	70,000
Z	43,100	3,60,000	Stock	30,000
			Debtors	25,000
		4,10,000		4,10,000

Working Notes:

WN 1: Calculation of Profit on Revaluation:

Particulars	Amount Rs
Freehold Premises	40,000
Furniture	5,000
Office Equipment	2,500
Less:
Provision for Doubtful Debts	5,000
Stock	3,000
Plant	5,000
Profit on Revaluation	34,500

WN 2:

$\begin{array}{l} C's Share in Revaluation = 34,500 \times \frac{1}{5} = Rs 6,900 and it should be credited to A& B in the ratio of 3:2 \\ A's Share = 6,900 \times \frac{3}{5} = 4, 140 \\ B's Share = 6,900 \times \frac{2}{5} = 2, 760 \end{array}$

WN 3: Calculation of Distribution of Goodwill

$\begin{array}{l} A' s Share = 10, 000 \times \frac{3}{5} = 6, 000 \\ B' s Share = 10, 000 \times \frac{2}{5} = 4, 000 \end{array}$

WN 4: Calculation of Capital of Partners’

$\begin{array}{l} A' s Capital = 2, 00, 000 + 4, 140 + 6, 000 = 2, 10, 140 \\ B' s Capital = 1, 00, 000 + 2, 760 + 4, 000 = 1, 06, 760 \\ C' s Capital = 50, 000 - 6, 900 = 43, 100 \end{array}$

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		General Reserve A/c	Dr.		1,60,000
		To A’s Capital A/c				96,000
		To B’s Capital A/c				64,000
		(General reserve distributed between old partners in their old ratio)

		A’s Capital A/c	Dr.		72,000
		B’s Capital A/c	Dr.		48,000
		To Profit and Loss A/c				1,20,000
		(Debit balance of profit and loss distributed between old partners in their old ratio)

Question 59:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		General Reserve A/c	Dr.		1,60,000
		To A’s Capital A/c				96,000
		To B’s Capital A/c				64,000
		(General reserve distributed between old partners in their old ratio)

		A’s Capital A/c	Dr.		72,000
		B’s Capital A/c	Dr.		48,000
		To Profit and Loss A/c				1,20,000
		(Debit balance of profit and loss distributed between old partners in their old ratio)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
(a)	General Reserve A/c	Dr.		36,000
	Contingency Reserve A/c	Dr.		6,000
	Profit and Loss A/c	Dr.		18,000
	To X’s Capital A/c				30,000
	To Y’s Capital A/c				18,000
	To Z’s Capital A/c				12,000
	(Reserves and profits are distributed among the partners in their old ratio)

	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		7,200
	Z’s Capital A/c	Dr.		4,800
	To Advertisement Suspense A/c				24,000
	(Balance of advertisement suspense is debited to partners’ capital accounts in old ratio)

(b)	General Reserve A/c	Dr.		84,000
	To A’s Capital A/c				48,000
	To B’s Capital A/c				36,000
	(Reserve distributed between the partners in their old ratio)

	A’s Capital A/c	Dr.		4,800
	B’s Capital A/c	Dr.		3,600
	To Profit & Loss A/c				8,400
	(Balance of profit and loss debited to partners’ capital accounts in old ratio)

(c)	Workmen Compensation Reserve A/c	Dr.		72,000
	To X’s Capital A/c				36,000
	To Y’s Capital A/c				36,000
	(Balance of WCR distributed between the partners in their old ratio, i.e. 1:1)

(d)	Workmen Compensation Reserve A/c	Dr.		72,000
	To Workmen Compensation Claim A/c				48,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				12,000
	(Claim against WCF is created and excess balance is distributed between the partners in their old ratio, i.e. 1:1)

(e)	Investment Fluctuation Reserve A/c	Dr.		24,000
	To Investments A/c				10,000
	To X’s Capital A/c				7,000
	To Y’s Capital A/c				7,000
	(Balance of IFR transferred to Investments for the decrease and excess balance is distributed between the partners in their old ratio, i.e. 1:1)

(f)	General Reserve A/c	Dr.		4,800
	To Investment Fluctuation Reserve A/c				960
	To X’s Capital A/c				1,920
	To Y’s Capital A/c				1,920
	(20% of general reserve transferred to IFR and balance is distributed between the partners in their old ratio, i.e. 1:1)

(g)

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	C’s Current A/c	Dr.		36,000
	D’s Current A/c	Dr.		18,000
	To A’s Current A/c				54,000
	(Gaining partners’ compensated to Sacrificing Partner)

Working Notes:

WN1: Calculation of Adjusted Balance

Particulars	Amount
General Reserve	1,50,000
Contingency Reserve	60,000
P&L A/c (Cr.)	90,000
Advertisement Suspense A/c (Dr.)	(1,20,000)
Adjusted Balance	1,80,000

WN2: Calculation of Sacrifice/(Gain)

Sacrifice = Old Ratio Ë— New Ratio

$\begin{array}{l} A = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} \\ B = \frac{3}{10} - \frac{3}{10} = 0 \\ C = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (G a i n) \end{array}$

$Amount of gain to C = 1, 80, 000 \times \frac{2}{10} = 36, 000 Amount of gain to D = 1, 80, 000 \times \frac{1}{10} = 18, 000$

Question 60:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
(a)	General Reserve A/c	Dr.		36,000
	Contingency Reserve A/c	Dr.		6,000
	Profit and Loss A/c	Dr.		18,000
	To X’s Capital A/c				30,000
	To Y’s Capital A/c				18,000
	To Z’s Capital A/c				12,000
	(Reserves and profits are distributed among the partners in their old ratio)

	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		7,200
	Z’s Capital A/c	Dr.		4,800
	To Advertisement Suspense A/c				24,000
	(Balance of advertisement suspense is debited to partners’ capital accounts in old ratio)

(b)	General Reserve A/c	Dr.		84,000
	To A’s Capital A/c				48,000
	To B’s Capital A/c				36,000
	(Reserve distributed between the partners in their old ratio)

	A’s Capital A/c	Dr.		4,800
	B’s Capital A/c	Dr.		3,600
	To Profit & Loss A/c				8,400
	(Balance of profit and loss debited to partners’ capital accounts in old ratio)

(c)	Workmen Compensation Reserve A/c	Dr.		72,000
	To X’s Capital A/c				36,000
	To Y’s Capital A/c				36,000
	(Balance of WCR distributed between the partners in their old ratio, i.e. 1:1)

(d)	Workmen Compensation Reserve A/c	Dr.		72,000
	To Workmen Compensation Claim A/c				48,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				12,000
	(Claim against WCF is created and excess balance is distributed between the partners in their old ratio, i.e. 1:1)

(e)	Investment Fluctuation Reserve A/c	Dr.		24,000
	To Investments A/c				10,000
	To X’s Capital A/c				7,000
	To Y’s Capital A/c				7,000
	(Balance of IFR transferred to Investments for the decrease and excess balance is distributed between the partners in their old ratio, i.e. 1:1)

(f)	General Reserve A/c	Dr.		4,800
	To Investment Fluctuation Reserve A/c				960
	To X’s Capital A/c				1,920
	To Y’s Capital A/c				1,920
	(20% of general reserve transferred to IFR and balance is distributed between the partners in their old ratio, i.e. 1:1)

(g)

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	C’s Current A/c	Dr.		36,000
	D’s Current A/c	Dr.		18,000
	To A’s Current A/c				54,000
	(Gaining partners’ compensated to Sacrificing Partner)

Working Notes:

WN1: Calculation of Adjusted Balance

Particulars	Amount
General Reserve	1,50,000
Contingency Reserve	60,000
P&L A/c (Cr.)	90,000
Advertisement Suspense A/c (Dr.)	(1,20,000)
Adjusted Balance	1,80,000

WN2: Calculation of Sacrifice/(Gain)

Sacrifice = Old Ratio Ë— New Ratio

$\begin{array}{l} A = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} \\ B = \frac{3}{10} - \frac{3}{10} = 0 \\ C = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (G a i n) \end{array}$

$Amount of gain to C = 1, 80, 000 \times \frac{2}{10} = 36, 000 Amount of gain to D = 1, 80, 000 \times \frac{1}{10} = 18, 000$

Answer:

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

Case 1	Workmen Compensation Reserve A/c	Dr.		12,000
	To X’s Capital A/c				6,000
	To Y’s Capital A/c				3,600
	To Z’s Capital A/c				2,400
	(Workmen Compensation Reserve distributed)

Case 2	Workmen Compensation Reserve A/c	Dr.		12,000
	To Workmen Compensation Claim A/c				1,500
	To X’s Capital A/c				5,250
	To Y’s Capital A/c				3,150
	To Z’s Capital A/c				2,100
	(Workmen Compensation Reserve distributed)

Case 3	Workmen Compensation Reserve A/c	Dr.		12,000
	Revaluation A/c	Dr.		10,000
	To Workmen Compensation Claim A/c				22,000
	(Workmen Compensation Reserve adjusted towards the claim)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		3,000
	Z’s Capital A/c	Dr.		2,000
	To Revaluation A/c				10,000
	(Partner contributed for workmen compensation claim deficiency)

Question 61:

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

Case 1	Workmen Compensation Reserve A/c	Dr.		12,000
	To X’s Capital A/c				6,000
	To Y’s Capital A/c				3,600
	To Z’s Capital A/c				2,400
	(Workmen Compensation Reserve distributed)

Case 2	Workmen Compensation Reserve A/c	Dr.		12,000
	To Workmen Compensation Claim A/c				1,500
	To X’s Capital A/c				5,250
	To Y’s Capital A/c				3,150
	To Z’s Capital A/c				2,100
	(Workmen Compensation Reserve distributed)

Case 3	Workmen Compensation Reserve A/c	Dr.		12,000
	Revaluation A/c	Dr.		10,000
	To Workmen Compensation Claim A/c				22,000
	(Workmen Compensation Reserve adjusted towards the claim)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		3,000
	Z’s Capital A/c	Dr.		2,000
	To Revaluation A/c				10,000
	(Partner contributed for workmen compensation claim deficiency)

Answer:

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

Case 1	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

Case 2	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

Case 3	Investment Fluctuation Reserve A/c	Dr.		10,000
	To Investment A/c				5,000
	To X’s Capital A/c				2,500
	To Y’s Capital A/c				1,500
	To Z’s Capital A/c				1,000
	(Excess Investment Fluctuation Reserve distributed)

Case 4	Investment Fluctuation Reserve A/c	Dr.		10,000
	Revaluation A/c	Dr.		5,000
	To Investment A/c				15,000
	(Investment Fluctuation Reserve adjusted towards decrease in value of investment)

	X’s Capital A/c	Dr.		2,500
	Y’s Capital A/c	Dr.		1,500
	Z’s Capital A/c	Dr.		1,000
	To Revaluation A/c				5,000
	( Partner contributed for Investment fluctuation reserve deficiency)

Case 5	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

	Investment A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Surplus in value of Investment transferred to Revaluation a/c)

	Revaluation A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve Surplus transferred to Partners Capital A/c)

Question 62:

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

Case 1	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

Case 2	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

Case 3	Investment Fluctuation Reserve A/c	Dr.		10,000
	To Investment A/c				5,000
	To X’s Capital A/c				2,500
	To Y’s Capital A/c				1,500
	To Z’s Capital A/c				1,000
	(Excess Investment Fluctuation Reserve distributed)

Case 4	Investment Fluctuation Reserve A/c	Dr.		10,000
	Revaluation A/c	Dr.		5,000
	To Investment A/c				15,000
	(Investment Fluctuation Reserve adjusted towards decrease in value of investment)

	X’s Capital A/c	Dr.		2,500
	Y’s Capital A/c	Dr.		1,500
	Z’s Capital A/c	Dr.		1,000
	To Revaluation A/c				5,000
	( Partner contributed for Investment fluctuation reserve deficiency)

Case 5	Investment Fluctuation Reserve A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve distributed)

	Investment A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Surplus in value of Investment transferred to Revaluation a/c)

	Revaluation A/c	Dr.		10,000
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				3,000
	To Z’s Capital A/c				2,000
	(Investment Fluctuation Reserve Surplus transferred to Partners Capital A/c)

Answer:

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

	C’s Current A/c	Dr.		6,000
	D’s Current A/c	Dr.		3,000
	To A’s Current A/c				9,000
	(Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain:

$\begin{array}{l} A:B:C = 6 :3:1 (Old Ratio) \\ A:B:C:D = 3 :3:3:1 (New Ratio) \\ A = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} (S a c r i f i c e) \\ B = \frac{3}{10} - \frac{3}{10} = 0 \\ C = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (G a i n) \\ D = 0 - \frac{1}{10} = - \frac{1}{10} (G a i n) \\ Amount to be adjusted = General Reserve + Contingency Reserve + Profit and Loss - Advertisement Suspense \\ =30,000+5,000+15,000 - 20,000 = Rs 30,000 \\ A's share = 30,000 \times \frac{3}{10} = Rs 9,000 \\ C's share = 30,000 \times \frac{2}{10} = Rs 6,000 \\ D's share = 30,000 \times \frac{1}{10} = Rs 3,000 \end{array}$

Question 63:

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

	C’s Current A/c	Dr.		6,000
	D’s Current A/c	Dr.		3,000
	To A’s Current A/c				9,000
	(Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain:

$\begin{array}{l} A:B:C = 6 :3:1 (Old Ratio) \\ A:B:C:D = 3 :3:3:1 (New Ratio) \\ A = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} (S a c r i f i c e) \\ B = \frac{3}{10} - \frac{3}{10} = 0 \\ C = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (G a i n) \\ D = 0 - \frac{1}{10} = - \frac{1}{10} (G a i n) \\ Amount to be adjusted = General Reserve + Contingency Reserve + Profit and Loss - Advertisement Suspense \\ =30,000+5,000+15,000 - 20,000 = Rs 30,000 \\ A's share = 30,000 \times \frac{3}{10} = Rs 9,000 \\ C's share = 30,000 \times \frac{2}{10} = Rs 6,000 \\ D's share = 30,000 \times \frac{1}{10} = Rs 3,000 \end{array}$

Answer:

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

	R’s Capital A/c	Dr.		66,000
	S’s Capital A/c	Dr.		33,000
	To P’s Capital A/c				99,000
	(Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain:

$\begin{array}{l} P:Q:R=6:3:1 (Old Ratio) \\ P:Q:R:S=3:3:3:1 (New Ratio) \\ P = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} (Sacrifice) \\ Q = \frac{3}{10} - \frac{3}{10} =0 \\ R = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (Gain) \\ S = 0 - \frac{1}{10} = - \frac{1}{10} (Gain) \\ Amount to be adjusted = General Reserve + Contingency Reserve + P& L - Advertisement Suspense \\ + Workmen Compensation Reserve + Investment Fluctuation Reserve \\ =2,40,000+40,000+1,20,000 - 1,00,000+20,000+10,000 = Rs 3,30,000 \\ P's share=3,30,000× \frac{3}{10} = Rs 99,000 \\ R's share=3,30,000× \frac{2}{10} = Rs 66,000 \\ S's share=3,30,000× \frac{1}{10} = Rs 33,000 \end{array}$

Particulars	Amount (Rs)
Workmen Compensation Reserve	40,000
less: Claim on Workmen Compensation Reserve	20,000
Amount to be adjusted	20,000

Investment Fluctuation Reserve	20,000
less: Decrease in the Value of Investment	10,000
Amount to be adjusted	10,000

Question 64:

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

	R’s Capital A/c	Dr.		66,000
	S’s Capital A/c	Dr.		33,000
	To P’s Capital A/c				99,000
	(Adjustment entry made for change in ratio)

Working Notes:

WN1: Calculation of Sacrifice or Gain:

$\begin{array}{l} P:Q:R=6:3:1 (Old Ratio) \\ P:Q:R:S=3:3:3:1 (New Ratio) \\ P = \frac{6}{10} - \frac{3}{10} = \frac{3}{10} (Sacrifice) \\ Q = \frac{3}{10} - \frac{3}{10} =0 \\ R = \frac{1}{10} - \frac{3}{10} = - \frac{2}{10} (Gain) \\ S = 0 - \frac{1}{10} = - \frac{1}{10} (Gain) \\ Amount to be adjusted = General Reserve + Contingency Reserve + P& L - Advertisement Suspense \\ + Workmen Compensation Reserve + Investment Fluctuation Reserve \\ =2,40,000+40,000+1,20,000 - 1,00,000+20,000+10,000 = Rs 3,30,000 \\ P's share=3,30,000× \frac{3}{10} = Rs 99,000 \\ R's share=3,30,000× \frac{2}{10} = Rs 66,000 \\ S's share=3,30,000× \frac{1}{10} = Rs 33,000 \end{array}$

Particulars	Amount (Rs)
Workmen Compensation Reserve	40,000
less: Claim on Workmen Compensation Reserve	20,000
Amount to be adjusted	20,000

Investment Fluctuation Reserve	20,000
less: Decrease in the Value of Investment	10,000
Amount to be adjusted	10,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock A/c	30,000	Provision for Doubtful Debts A/c		24,000
Patents A/c	74,000	Loss transferred to:
Claim for Damages A/c	20,000	A’s Capital A/c	60,000
		B’s Capital A/c	40,000	1,00,000
	1,24,000			1,24,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Revaluation A/c	60,000	40,000		Balance b/d	4,00,000	3,50,000
Balance c/d	5,08,000	4,22,000	3,00,000	Bank A/c			3,00,000
				Premium for Goodwill A/c	60,000	40,000
				General Reserve A/c	1,08,000	72,000

	5,68,000	4,62,000	3,00,000		5,68,000	4,62,000	3,00,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		3,20,000	Debtors	4,80,000
Claim for Damages		20,000	Less: Provision for Doubtful Debts	24,000	4,56,000
			Stock (3,00,000 – 30,000)		2,70,000
Capital A/c:			Building		2,04,000
A	5,08,000		Cash (2,40,000 + 4,00,000)		6,40,000
B	4,22,000
C	3,00,000	12,30,000
		15,70,000			15,70,000

Working Notes

$\begin{array}{l} Goodwill of the Firm = 4, 00, 000 \\ C' s Share = 4, 00, 000 \times \frac{1}{4} = Rs 1, 00, 000 \end{array}$

Question 65:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock A/c	30,000	Provision for Doubtful Debts A/c		24,000
Patents A/c	74,000	Loss transferred to:
Claim for Damages A/c	20,000	A’s Capital A/c	60,000
		B’s Capital A/c	40,000	1,00,000
	1,24,000			1,24,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Revaluation A/c	60,000	40,000		Balance b/d	4,00,000	3,50,000
Balance c/d	5,08,000	4,22,000	3,00,000	Bank A/c			3,00,000
				Premium for Goodwill A/c	60,000	40,000
				General Reserve A/c	1,08,000	72,000

	5,68,000	4,62,000	3,00,000		5,68,000	4,62,000	3,00,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		3,20,000	Debtors	4,80,000
Claim for Damages		20,000	Less: Provision for Doubtful Debts	24,000	4,56,000
			Stock (3,00,000 – 30,000)		2,70,000
Capital A/c:			Building		2,04,000
A	5,08,000		Cash (2,40,000 + 4,00,000)		6,40,000
B	4,22,000
C	3,00,000	12,30,000
		15,70,000			15,70,000

Working Notes

$\begin{array}{l} Goodwill of the Firm = 4, 00, 000 \\ C' s Share = 4, 00, 000 \times \frac{1}{4} = Rs 1, 00, 000 \end{array}$

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts (20,000 × 4%)	800		Land (1, 00,000 × 10%)	10,000
Less: Old Provision	500	300
Stock (30,000 × 5%)		1,500
Profit transferred to
V Capital		5,740
N Capital		2,460
		10,000		10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	V	N	P	Particulars	V	N	P
				Balance b/d	1,50,000	50,000
				Revaluation	5,740	2,460
				General Reserve	7,000	3,000
				P’s Loan			80,000
Balance c/d	1,90,740	67,460	80,000	Premium for Goodwill	28,000	12,000
	1,90,740	67,460	80,000		1,90,740	67,460	80,000

Balance Sheet as on April 01, 2017 after P’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		10,000	Cash (15,500 + 40,000)	55,500
Bills Payable		15,000	Debtors	20,000
Capital A/cs:			Bills Receivables	50,000
V	1,90,740		Stock (30,000 – 1,500)	28,500
N	67,460		Building	1,00,000
P	80,000	3,38,200	Land (1,00,000 + 10,000)	1,10,000
Provision for Doubtful Debts		800
		3,64,000		3,64,000

Working Notes

WN1

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	15,500
Premium for Goodwill	40,000
		Balance c/d	55,500
	55,500		55,500

WN2

Distribution of Premium for Goodwill

Question 66:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts (20,000 × 4%)	800		Land (1, 00,000 × 10%)	10,000
Less: Old Provision	500	300
Stock (30,000 × 5%)		1,500
Profit transferred to
V Capital		5,740
N Capital		2,460
		10,000		10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	V	N	P	Particulars	V	N	P
				Balance b/d	1,50,000	50,000
				Revaluation	5,740	2,460
				General Reserve	7,000	3,000
				P’s Loan			80,000
Balance c/d	1,90,740	67,460	80,000	Premium for Goodwill	28,000	12,000
	1,90,740	67,460	80,000		1,90,740	67,460	80,000

Balance Sheet as on April 01, 2017 after P’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		10,000	Cash (15,500 + 40,000)	55,500
Bills Payable		15,000	Debtors	20,000
Capital A/cs:			Bills Receivables	50,000
V	1,90,740		Stock (30,000 – 1,500)	28,500
N	67,460		Building	1,00,000
P	80,000	3,38,200	Land (1,00,000 + 10,000)	1,10,000
Provision for Doubtful Debts		800
		3,64,000		3,64,000

Working Notes

WN1

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	15,500
Premium for Goodwill	40,000
		Balance c/d	55,500
	55,500		55,500

WN2

Distribution of Premium for Goodwill

Answer:

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Building

62,500

Stock

2,50,000

Machinery

25,000

Unrecorded Asset

3,00,000

Outstanding Salary

75,000

Profit:

X

2,32,500

Y

1,55,000

3,87,500

5,50,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Goodwill	75,000	50,000		Balance b/d	20,00,000	10,00,000
X Capital A/c			75,000	Revaluation	2,32,500	1,55,000
Y Capital A/c			50,000	Z’s Capital A/c	75,000	50,000
Balance c/d	25,32,500	13,55,000	11,25,000	Premium for Goodwill	1,80,000	1,20,000
				Z’s Current A/c	1,20,000	80,000
				Bank				12,50,000
	26,07,500	14,05,000	12,50,000		26,07,500	14,05,000		12,50,000

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	14,37,500	Debtors	62,500
Z’s capital A/c	12,50,000	Balance c/d	29,25,000
Premium for goodwill A/c	3,00,000
	29,87,500		29,87,500

**Balance Sheet**
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		3,75,000	Cash		62,500
Bills Payable		2,50,000	Bank		29,25,000
Creditors		6,25,000	Debtors (1,25,000 + 62,500)		1,87,500
Capital			Stock		10,00,000
X	25,32,500		Building	12,50,000
Y	13,55,000		Less: Depreciation	62,500	11,87,500
Z	11,25,000	50,12,500	Machines	5,00,000
Outstanding Salary		75,000	Less: Depreciation	25,000	4,75,000
			Unrecorded Assets		3,00,000
			Z’s Current A/c		2,00,000
		63,37,500			63,37,500

For Adjusting General Reserve

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

	Z’s Capital A/c	Dr.		1,25,000
	To X’s Capital A/c				75,000
	To Y’s Capital A/c				50,000
	(Adjustment made for General Reserve)

For Calculating amount to be adjusted for General Reserve

Z's share of General Reserve = $\frac{1}{3} \times 3, 75, 000 = Rs 1, 25, 000$
Amount to be credited to
X Capital A/c = $\frac{3}{5} \times 1, 25, 000 = Rs 75, 000$

Y Capital A/c = $\frac{2}{5} \times 1, 25, 000 = Rs 50, 000$

Question 67:

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Building

62,500

Stock

2,50,000

Machinery

25,000

Unrecorded Asset

3,00,000

Outstanding Salary

75,000

Profit:

X

2,32,500

Y

1,55,000

3,87,500

5,50,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Goodwill	75,000	50,000		Balance b/d	20,00,000	10,00,000
X Capital A/c			75,000	Revaluation	2,32,500	1,55,000
Y Capital A/c			50,000	Z’s Capital A/c	75,000	50,000
Balance c/d	25,32,500	13,55,000	11,25,000	Premium for Goodwill	1,80,000	1,20,000
				Z’s Current A/c	1,20,000	80,000
				Bank				12,50,000
	26,07,500	14,05,000	12,50,000		26,07,500	14,05,000		12,50,000

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	14,37,500	Debtors	62,500
Z’s capital A/c	12,50,000	Balance c/d	29,25,000
Premium for goodwill A/c	3,00,000
	29,87,500		29,87,500

**Balance Sheet**
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		3,75,000	Cash		62,500
Bills Payable		2,50,000	Bank		29,25,000
Creditors		6,25,000	Debtors (1,25,000 + 62,500)		1,87,500
Capital			Stock		10,00,000
X	25,32,500		Building	12,50,000
Y	13,55,000		Less: Depreciation	62,500	11,87,500
Z	11,25,000	50,12,500	Machines	5,00,000
Outstanding Salary		75,000	Less: Depreciation	25,000	4,75,000
			Unrecorded Assets		3,00,000
			Z’s Current A/c		2,00,000
		63,37,500			63,37,500

For Adjusting General Reserve

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

	Z’s Capital A/c	Dr.		1,25,000
	To X’s Capital A/c				75,000
	To Y’s Capital A/c				50,000
	(Adjustment made for General Reserve)

For Calculating amount to be adjusted for General Reserve

Z's share of General Reserve = $\frac{1}{3} \times 3, 75, 000 = Rs 1, 25, 000$
Amount to be credited to
X Capital A/c = $\frac{3}{5} \times 1, 25, 000 = Rs 75, 000$

Y Capital A/c = $\frac{2}{5} \times 1, 25, 000 = Rs 50, 000$

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts A/c		1,500	Land and Building A/c	3,000
Profit transferred to:			Stock A/c	2,500
X’s Capital A/c	2,400
Y’s Capital A/c	1,600	4,000
		5,500		5,500

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Advertisement Expenditure A/c	3,000	2,000		Balance b/d	15,000	10,000
Balance c/d	40,200	26,800	15,000	Bank A/c			15,000
				Premium for Goodwill A/c	6,000	4,000
				Revaluation A/c	2,400	1,600
				General Reserve A/c	12,000	8,000
				Workmen Compensation Reserve A/c	7,800	5,200
	43,200	28,800	15,000		43,200	28,800	15,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		1,10,000	Debtors	22,000
Employees’ Provident Fund		8,000	Less: Provision for Doubtful Debts	2,500	19,500
Workmen Compensation Reserve		12,000	Land and Building (68,000 + 3,000)		71,000
Capital A/cs:			Plant and Machinery		12,000
X	40,200		Stock (11,000 + 2,500)		13,500
Y	26,800		Bank (71,000 + 10,000 + 15,000)		96,000
Z	15,000	82,000
		2,12,000			2,12,000

Question 68:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts A/c		1,500	Land and Building A/c	3,000
Profit transferred to:			Stock A/c	2,500
X’s Capital A/c	2,400
Y’s Capital A/c	1,600	4,000
		5,500		5,500

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Advertisement Expenditure A/c	3,000	2,000		Balance b/d	15,000	10,000
Balance c/d	40,200	26,800	15,000	Bank A/c			15,000
				Premium for Goodwill A/c	6,000	4,000
				Revaluation A/c	2,400	1,600
				General Reserve A/c	12,000	8,000
				Workmen Compensation Reserve A/c	7,800	5,200
	43,200	28,800	15,000		43,200	28,800	15,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		1,10,000	Debtors	22,000
Employees’ Provident Fund		8,000	Less: Provision for Doubtful Debts	2,500	19,500
Workmen Compensation Reserve		12,000	Land and Building (68,000 + 3,000)		71,000
Capital A/cs:			Plant and Machinery		12,000
X	40,200		Stock (11,000 + 2,500)		13,500
Y	26,800		Bank (71,000 + 10,000 + 15,000)		96,000
Z	15,000	82,000
		2,12,000			2,12,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Provision for Doubtful Debts A/c	200	Accrued Commission A/c		1,500
Outstanding Rent A/c	5,000	Loss transferred to:
Investments A/c	2,000	X’s Capital A/c	3,420
		Y’s Capital A/c	2,280	5,700
	7,200			7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Balance c/d	1,54,000	1,36,000	1,20,000	Balance b/d	1,54,000	1,36,000
				Cash A/c				1,20,000
	1,54,000	1,36,000	1,20,000		1,54,000	1,36,000		1,20,000

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Cash A/c	4,200	1,800		Balance b/d	10,000	2,000
Revaluation A/c	3,420	2,280		Premium for Goodwill A/c	8,400	3,600
Goodwill A/c	6,000	4,000		General Reserve A/c	7,200	4,800
Investments A/c	6,000
Balance c/d	5,980	2,320
	25,600	10,400			25,600	10,400

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		15,000	Accrued Commission		1,500
Outstanding Rent		5,000	Debtors	20,000
Capital A/c:			Less: Provision for Doubtful Debts	1,000	19,000
X	1,54,000		Patents		14,800
Y	1,36,000		Cash in hand		1,51,000
Z	1,20,000	4,10,000	Cash at Bank		1,80,000
Current A/c:			Machinery		72,000
X	5,980
Y	2,320	8,300
		4,38,300			4,38,300

Working Notes

WN 1: Calculation of Sacrificing Ratio

Old ratio = 3 : 2

New profit sharing ratio = 4 : 3 : 2

Sacrificing ratio= Old ratio – New ratio

$\begin{array}{l} Sacrifice made by X = \frac{3}{5} - \frac{4}{9} = \frac{7}{45} \\ Sacrifice made by Y = \frac{2}{5} - \frac{3}{9} = \frac{3}{45} \end{array}$

Sacrificing ratio = 7 : 3

WN 2: Calculation of Goodwill

Goodwill = Average Profits for Last 3 Years’ × Number of Years’ Purchase

Total Profit = 25,000 + 26000 + 30,000 = Rs 81,000

$Average Profits for 3 years = \frac{Total Profit}{3}$

$Average Profit = \frac{81, 000}{3} = 27, 000$

Goodwill = 27,000 × 2 = Rs 54,000

$Z' s share of goodwill = 54, 000 \times \frac{2}{9} = 12, 000$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	X’s Capital A/c	4,200
Z’s Capital A/c	1,20,000	Y’s Capital A/c	1,800
Premium for Goodwill A/c	12,000	Balance c/d	1,51,000

	1,57,000		1,57,000

Question 69:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Provision for Doubtful Debts A/c	200	Accrued Commission A/c		1,500
Outstanding Rent A/c	5,000	Loss transferred to:
Investments A/c	2,000	X’s Capital A/c	3,420
		Y’s Capital A/c	2,280	5,700
	7,200			7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Balance c/d	1,54,000	1,36,000	1,20,000	Balance b/d	1,54,000	1,36,000
				Cash A/c				1,20,000
	1,54,000	1,36,000	1,20,000		1,54,000	1,36,000		1,20,000

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Cash A/c	4,200	1,800		Balance b/d	10,000	2,000
Revaluation A/c	3,420	2,280		Premium for Goodwill A/c	8,400	3,600
Goodwill A/c	6,000	4,000		General Reserve A/c	7,200	4,800
Investments A/c	6,000
Balance c/d	5,980	2,320
	25,600	10,400			25,600	10,400

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		15,000	Accrued Commission		1,500
Outstanding Rent		5,000	Debtors	20,000
Capital A/c:			Less: Provision for Doubtful Debts	1,000	19,000
X	1,54,000		Patents		14,800
Y	1,36,000		Cash in hand		1,51,000
Z	1,20,000	4,10,000	Cash at Bank		1,80,000
Current A/c:			Machinery		72,000
X	5,980
Y	2,320	8,300
		4,38,300			4,38,300

Working Notes

WN 1: Calculation of Sacrificing Ratio

Old ratio = 3 : 2

New profit sharing ratio = 4 : 3 : 2

Sacrificing ratio= Old ratio – New ratio

$\begin{array}{l} Sacrifice made by X = \frac{3}{5} - \frac{4}{9} = \frac{7}{45} \\ Sacrifice made by Y = \frac{2}{5} - \frac{3}{9} = \frac{3}{45} \end{array}$

Sacrificing ratio = 7 : 3

WN 2: Calculation of Goodwill

Goodwill = Average Profits for Last 3 Years’ × Number of Years’ Purchase

Total Profit = 25,000 + 26000 + 30,000 = Rs 81,000

$Average Profits for 3 years = \frac{Total Profit}{3}$

$Average Profit = \frac{81, 000}{3} = 27, 000$

Goodwill = 27,000 × 2 = Rs 54,000

$Z' s share of goodwill = 54, 000 \times \frac{2}{9} = 12, 000$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	X’s Capital A/c	4,200
Z’s Capital A/c	1,20,000	Y’s Capital A/c	1,800
Premium for Goodwill A/c	12,000	Balance c/d	1,51,000

	1,57,000		1,57,000

Answer:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		40,000
	To Z’s Capital A/c				40,000
	(Capital amount brought in by new partners)

	Z’s Current A/c	Dr.		3,000
	To X’s Capital A/c				1,800
	To Y’s Capital A/c				1,200
	(Z’s Current Account debited for amount of goodwill not brought by him and credited to old partners in their sacrificing ratio)

	Revaluation A/c	Dr.		2,000
	Provision for Doubtful Debts A/c			4,000
	To Debtors				6,000
	(Bad Debts written-off)

	Revaluation A/c	Dr.		2,000
	To Creditors A/c				2,000
	(Creditors are to be paid 2,000 more)

	Revaluation A/c	Dr.		2,000
	To Claim for Damages A/c				2,000
	(Created claim for damages)

	Outstanding Rent A/c	Dr.		1,800
	To Revaluation A/c				1,800
	(Outstanding rent reduced by 1,800)

	X’s Capital A/c	Dr.		2,520
	Y’s Capital A/c	Dr.		1,680
	To Revaluation A/c				4,200
	(Revaluation loss distributed among old partners in their old ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	50,000	60,000
Revaluation A/c	2,520	1,680		Bank A/c			40,000
Profit and Loss A/c	2,400	1,600		Z’s Current A/c	1,800	1,200
Balance c/d	48,440	58,960	40,000	Workmen Compensation Reserve A/c	1,560	1,040
	53,360	62,240	40,000		53,360	62,240	40,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Outstanding Rent		11,200	Debtors	80,000
Sundry Creditors		22,000	Less: Provision for Doubtful Debts	6,000	74,000
Workmen Compensation Reserve		3,000	Stock		20,000
Claim for Damages		2,000

Capital A/cs:			Machinery		38,600
X	48,440		Cash (10,000 + 40,000)		50,000
Y	58,960		Z’s Current A/c		3,000
Z	40,000	1,47,400
		1,85,600			1,85,600

Working Notes: Calculation of Goodwill

Average profit for 3 years = \frac{Total Profit}{3}

Total Profit = 10,000 + 20,000 + 30,000 = Rs 60,000

$Average profit for 3 years = \frac{60, 000}{3} = 20, 000$

Goodwill = 20,000 × 1.5 – 12,000 = 18,000

$Z' s share of goodwill = 18, 000 \times \frac{1}{6} = 3, 000$

Note: Opening Balance Sheet implies Balance Sheet as on April 01, 2016.

Question 70:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		40,000
	To Z’s Capital A/c				40,000
	(Capital amount brought in by new partners)

	Z’s Current A/c	Dr.		3,000
	To X’s Capital A/c				1,800
	To Y’s Capital A/c				1,200
	(Z’s Current Account debited for amount of goodwill not brought by him and credited to old partners in their sacrificing ratio)

	Revaluation A/c	Dr.		2,000
	Provision for Doubtful Debts A/c			4,000
	To Debtors				6,000
	(Bad Debts written-off)

	Revaluation A/c	Dr.		2,000
	To Creditors A/c				2,000
	(Creditors are to be paid 2,000 more)

	Revaluation A/c	Dr.		2,000
	To Claim for Damages A/c				2,000
	(Created claim for damages)

	Outstanding Rent A/c	Dr.		1,800
	To Revaluation A/c				1,800
	(Outstanding rent reduced by 1,800)

	X’s Capital A/c	Dr.		2,520
	Y’s Capital A/c	Dr.		1,680
	To Revaluation A/c				4,200
	(Revaluation loss distributed among old partners in their old ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	50,000	60,000
Revaluation A/c	2,520	1,680		Bank A/c			40,000
Profit and Loss A/c	2,400	1,600		Z’s Current A/c	1,800	1,200
Balance c/d	48,440	58,960	40,000	Workmen Compensation Reserve A/c	1,560	1,040
	53,360	62,240	40,000		53,360	62,240	40,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Outstanding Rent		11,200	Debtors	80,000
Sundry Creditors		22,000	Less: Provision for Doubtful Debts	6,000	74,000
Workmen Compensation Reserve		3,000	Stock		20,000
Claim for Damages		2,000

Capital A/cs:			Machinery		38,600
X	48,440		Cash (10,000 + 40,000)		50,000
Y	58,960		Z’s Current A/c		3,000
Z	40,000	1,47,400
		1,85,600			1,85,600

Working Notes: Calculation of Goodwill

Average profit for 3 years = \frac{Total Profit}{3}

Total Profit = 10,000 + 20,000 + 30,000 = Rs 60,000

$Average profit for 3 years = \frac{60, 000}{3} = 20, 000$

Goodwill = 20,000 × 1.5 – 12,000 = 18,000

$Z' s share of goodwill = 18, 000 \times \frac{1}{6} = 3, 000$

Note: Opening Balance Sheet implies Balance Sheet as on April 01, 2016.

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock	30,000	Provision for d/d		24,000
Patents	74,000	Loss transferred to:
Outstanding Claim	20,000	X	60,000
		Y	40,000	1,00,000
	1,24,000			1,24,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

X Capital A/c			21,600	Balance b/d	4,00,000	3,50,000
Y Capital A/c			14,400	Z’s Capital A/c	21,600	14,400
Revaluation A/c	60,000	40,000		Premium for Goodwill	60,000	40,000
Balance c/d	4,21,600	3,64,400	2,64,000	Cash			3,00,000
	4,81,600	4,04,400	3,00,000		4,81,600	4,04,400	3,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		1,80,000	Cash (2,40,000 + 1,00,000 + 3,00,000)		6,40,000
Bills Payable		50,000	Stock		2,70,000
Creditors		2,70,000	Debtors	4,80,000
Capital			Less: Prov. for DD	24,000	4,56,000
X	4,21,600		Building		2,04,000
Y	3,64,400
Z	2,64,000	10,50,000
Outstanding Claim		20,000
		15,70,000			15,70,000

Working Note:
1. Closing Stock Balance = Opening balance - Value of Stock reduced (10%)
                3,00,000 â”€ $3, 00, 000 - (\frac{10}{100} \times 3, 00, 000) = 2, 70, 000$

2. For Calculating amount to be adjusted for General Reserve
     Z's share of General Reserve = $\frac{1}{5} \times 1, 80, 000 = Rs 36, 000$
    Amount to be credited to

X Capital A/c = $\frac{3}{5} \times 36, 000 = Rs 21, 600$

    Y Capital A/c = $\frac{2}{5} \times 36, 000 = Rs 14, 400$

For Adjusting General Reserve

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

	Z’s Capital A/c	Dr.		36,000
	To X’s Capital A/c				21,600
	To Y’s Capital A/c				14,400
	(Adjustment made for General Reserve)

Question 71:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock	30,000	Provision for d/d		24,000
Patents	74,000	Loss transferred to:
Outstanding Claim	20,000	X	60,000
		Y	40,000	1,00,000
	1,24,000			1,24,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

X Capital A/c			21,600	Balance b/d	4,00,000	3,50,000
Y Capital A/c			14,400	Z’s Capital A/c	21,600	14,400
Revaluation A/c	60,000	40,000		Premium for Goodwill	60,000	40,000
Balance c/d	4,21,600	3,64,400	2,64,000	Cash			3,00,000
	4,81,600	4,04,400	3,00,000		4,81,600	4,04,400	3,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		1,80,000	Cash (2,40,000 + 1,00,000 + 3,00,000)		6,40,000
Bills Payable		50,000	Stock		2,70,000
Creditors		2,70,000	Debtors	4,80,000
Capital			Less: Prov. for DD	24,000	4,56,000
X	4,21,600		Building		2,04,000
Y	3,64,400
Z	2,64,000	10,50,000
Outstanding Claim		20,000
		15,70,000			15,70,000

Working Note:
1. Closing Stock Balance = Opening balance - Value of Stock reduced (10%)
                3,00,000 â”€ $3, 00, 000 - (\frac{10}{100} \times 3, 00, 000) = 2, 70, 000$

2. For Calculating amount to be adjusted for General Reserve
     Z's share of General Reserve = $\frac{1}{5} \times 1, 80, 000 = Rs 36, 000$
    Amount to be credited to

X Capital A/c = $\frac{3}{5} \times 36, 000 = Rs 21, 600$

    Y Capital A/c = $\frac{2}{5} \times 36, 000 = Rs 14, 400$

For Adjusting General Reserve

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

	Z’s Capital A/c	Dr.		36,000
	To X’s Capital A/c				21,600
	To Y’s Capital A/c				14,400
	(Adjustment made for General Reserve)

Answer:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		22,500
	To T’s Capital A/c				20,000
	To Premium for Goodwill A/c				2,500
	(Capital and goodwill brought in by T)

	T’s Current A/c	Dr.		7,500
	Premium for Goodwill A/c	Dr.		2,500
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				5,000
	(Goodwill amount distributed between sacrificing partners in their sacrificing ratio)

	Stock A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Increase in value of stock)

	Revaluation A/c	Dr.		2,600
	To Furniture A/c				2,600
	(Depreciated furniture @ 10%)

	Land and Building A/c	Dr.		20,000
	To Revaluation A/c				20,000
	(Value of land and building appreciated by 20%)

	Revaluation A/c	Dr.		2,200
	To Provision for Doubtful Debts A/c				2,200
	(Provision created against debtors)

	Outstanding Liabilities A/c	Dr.		2,000
	To X’s Capital A/c				2,000
	(Reimbursed X for the payment made by hi, for the outstanding liabilities)

	Creditors A/c	Dr.		5,000
	To Revaluation A/c				5,000
	(Creditors reduced by 5,000)

	Revaluation A/c	Dr.		30,200
	To X’s Capital A/c				12,080
	To Y’s Capital A/c				12,080
	To Z’s Capital A/c				6,040
	(Revaluation profit distributed among old partners in their old ratio)

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

T

Particulars

X

Y

Z

T

Balance c/d

77,480

75,480

31,240

20,000

Balance b/d

48,000

20,000

Bank A/c

20,000

T’s Current A/c

3,750

Premium for Goodwill A/c

1,250

General Reserve A/c

10,400

5,200

Revaluation A/c

12,080

6,040

Outstanding Liabilities A/c

2,000

77,480

75,480

31,240

20,000

77,480

75,480

31,240

20,000

Balance Sheet as on April 01, 2016 after T’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (51,400 – 5,000)		46,400	Land and Building (1,00,000 + 20,000)		1,20,000
Outstanding Liabilities		4,000	Furniture (26,000 – 2,600)		23,400
			Stock (47,000 + 10,000)		57,000
Capital A/c:			Sundry Debtors	22,000
X	77,480		Less: Provision for Doubtful Debts	2,200	19,800
Y	75,480		Cash		26,900
Z	31,240		T’s Current A/c		7,500
T	20,000	2,04,200
		2,54,600			2,54,600

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	4,400	Balance c/d	26,900
T’s Capital A/c	20,000
Premium for goodwill A/c	2,500
	26,900		26,900

Working Notes:

Calculation of Sacrificing Ratio

$\begin{array}{l} Old ratio = 2 : 2 : 1 \\ New profit sharing ratio = 5 : 5 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by X = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Y = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Z = \frac{1}{5} - \frac{3}{15} = 0 \\ Sacrificing Ratio = 1 : 1 \end{array}$

Question 72:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		22,500
	To T’s Capital A/c				20,000
	To Premium for Goodwill A/c				2,500
	(Capital and goodwill brought in by T)

	T’s Current A/c	Dr.		7,500
	Premium for Goodwill A/c	Dr.		2,500
	To X’s Capital A/c				5,000
	To Y’s Capital A/c				5,000
	(Goodwill amount distributed between sacrificing partners in their sacrificing ratio)

	Stock A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Increase in value of stock)

	Revaluation A/c	Dr.		2,600
	To Furniture A/c				2,600
	(Depreciated furniture @ 10%)

	Land and Building A/c	Dr.		20,000
	To Revaluation A/c				20,000
	(Value of land and building appreciated by 20%)

	Revaluation A/c	Dr.		2,200
	To Provision for Doubtful Debts A/c				2,200
	(Provision created against debtors)

	Outstanding Liabilities A/c	Dr.		2,000
	To X’s Capital A/c				2,000
	(Reimbursed X for the payment made by hi, for the outstanding liabilities)

	Creditors A/c	Dr.		5,000
	To Revaluation A/c				5,000
	(Creditors reduced by 5,000)

	Revaluation A/c	Dr.		30,200
	To X’s Capital A/c				12,080
	To Y’s Capital A/c				12,080
	To Z’s Capital A/c				6,040
	(Revaluation profit distributed among old partners in their old ratio)

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

T

Particulars

X

Y

Z

T

Balance c/d

77,480

75,480

31,240

20,000

Balance b/d

48,000

20,000

Bank A/c

20,000

T’s Current A/c

3,750

Premium for Goodwill A/c

1,250

General Reserve A/c

10,400

5,200

Revaluation A/c

12,080

6,040

Outstanding Liabilities A/c

2,000

77,480

75,480

31,240

20,000

77,480

75,480

31,240

20,000

Balance Sheet as on April 01, 2016 after T’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (51,400 – 5,000)		46,400	Land and Building (1,00,000 + 20,000)		1,20,000
Outstanding Liabilities		4,000	Furniture (26,000 – 2,600)		23,400
			Stock (47,000 + 10,000)		57,000
Capital A/c:			Sundry Debtors	22,000
X	77,480		Less: Provision for Doubtful Debts	2,200	19,800
Y	75,480		Cash		26,900
Z	31,240		T’s Current A/c		7,500
T	20,000	2,04,200
		2,54,600			2,54,600

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	4,400	Balance c/d	26,900
T’s Capital A/c	20,000
Premium for goodwill A/c	2,500
	26,900		26,900

Working Notes:

Calculation of Sacrificing Ratio

$\begin{array}{l} Old ratio = 2 : 2 : 1 \\ New profit sharing ratio = 5 : 5 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by X = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Y = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Z = \frac{1}{5} - \frac{3}{15} = 0 \\ Sacrificing Ratio = 1 : 1 \end{array}$

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Provision for Doubtful Debts A/c (5% of 85,000)	4,250	Advertisement Expense A/c		3,000
A’s Capital A/c (Revaluation Expenses)	5,250	B’s Capital A/c (Personal expenses)		5,000
		Loss transferred to:
		A’s Capital A/c	750
		B’s Capital A/c	500
		C’s Capital A/c	250	1,500
	9,500			9,500

Partners’ Capital Accounts

Dr.

Cr.

Particulars

A

B

C

D

Particulars

A

B

C

D

Revaluation A/c

5,000

Balance b/d

1,50,000

1,00,000

Revaluation A/c (Loss)

750

500

250

Bank A/c

1,00,000

A’s Capital A/c

18,854

Revaluation A/c

5,250

B’s Capital A/c

12,569

Creditors A/c

25,000

Balance c/d

6,285

C’s Capital A/c

18,854

12,569

6,285

Balance c/d

1,73,354

1,57,069

1,06,035

87,292

1,74,104

1,62,569

1,06,285

1,25,000

1,74,104

1,62,569

1,06,285

1,25,000

Balance Sheet as on April 01, 2016 after D’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		50,000	Building		1,25,000
Bills Payable		25,000	Plant and Machinery		1,00,000
			Furniture		75,000
			Stock		50,000
Capital A/cs:			Debtors	75,000
			Add: Bill dishonoured	10,000
A	1,73,354		Less: Provision for Doubtful Debts	4,250	80,750
B	1,57,069		Bills Receivable		50,000
C	1,06,035		Advertisement Expenses		3,000
D	87,292	5,23,750	Bank		1,15,000
		5,98,750			5,98,750

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	Debtors A/c (Bill Dishonoured)	10,000
D’s Capital A/c	1,00,000	Balance c/d	1,15,000
	1,25,000		1,25,000

Working Notes:

WN1 Calculation of Hidden Goodwill

Capitalised Value of Firm = Incoming Partner' s Capital \times Reciprocal of Incoming Partner' s Share = 1, 25, 000 \times \frac{6}{1} = Rs 7, 50, 000

Net Worth of Firm = Adjusted Capital of Partners + Accumulated Reserves – Accumulated Losses
= 1,55,400 + 1,44,500 + 99,750 + 1,25,000 = 5,23,750

Hidden Goodwill = Capital Value of Firm – Net Worth of Firm
= 7,50,000 – 5,23,750 = Rs 2,26,250

' D' s share of Goodwill = Hidden Goodwill \times D' s Share = 2, 26, 250 \times \frac{1}{6} = Rs 37, 708

This share will be shared by the old partners in their sacrificing ratio i.e. 3 : 2 : 1

The following Journal entry will be passed:

D’s Capital A/c	Dr.	37,708
To A’s Capital A/c			18,854
To B’s Capital A/c			12,569
To C’s Capital A/c			6,285
(Adjustment for goodwill made)

Note: The balances of Partners' Capital Accounts as worked out in the above solution are different from the answers as per the book. As per the textbook answer, the working of hidden goodwill has not been considered.

Question 73:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Provision for Doubtful Debts A/c (5% of 85,000)	4,250	Advertisement Expense A/c		3,000
A’s Capital A/c (Revaluation Expenses)	5,250	B’s Capital A/c (Personal expenses)		5,000
		Loss transferred to:
		A’s Capital A/c	750
		B’s Capital A/c	500
		C’s Capital A/c	250	1,500
	9,500			9,500

Partners’ Capital Accounts

Dr.

Cr.

Particulars

A

B

C

D

Particulars

A

B

C

D

Revaluation A/c

5,000

Balance b/d

1,50,000

1,00,000

Revaluation A/c (Loss)

750

500

250

Bank A/c

1,00,000

A’s Capital A/c

18,854

Revaluation A/c

5,250

B’s Capital A/c

12,569

Creditors A/c

25,000

Balance c/d

6,285

C’s Capital A/c

18,854

12,569

6,285

Balance c/d

1,73,354

1,57,069

1,06,035

87,292

1,74,104

1,62,569

1,06,285

1,25,000

1,74,104

1,62,569

1,06,285

1,25,000

Balance Sheet as on April 01, 2016 after D’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Sundry Creditors		50,000	Building		1,25,000
Bills Payable		25,000	Plant and Machinery		1,00,000
			Furniture		75,000
			Stock		50,000
Capital A/cs:			Debtors	75,000
			Add: Bill dishonoured	10,000
A	1,73,354		Less: Provision for Doubtful Debts	4,250	80,750
B	1,57,069		Bills Receivable		50,000
C	1,06,035		Advertisement Expenses		3,000
D	87,292	5,23,750	Bank		1,15,000
		5,98,750			5,98,750

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	Debtors A/c (Bill Dishonoured)	10,000
D’s Capital A/c	1,00,000	Balance c/d	1,15,000
	1,25,000		1,25,000

Working Notes:

WN1 Calculation of Hidden Goodwill

Capitalised Value of Firm = Incoming Partner' s Capital \times Reciprocal of Incoming Partner' s Share = 1, 25, 000 \times \frac{6}{1} = Rs 7, 50, 000

Net Worth of Firm = Adjusted Capital of Partners + Accumulated Reserves – Accumulated Losses
= 1,55,400 + 1,44,500 + 99,750 + 1,25,000 = 5,23,750

Hidden Goodwill = Capital Value of Firm – Net Worth of Firm
= 7,50,000 – 5,23,750 = Rs 2,26,250

' D' s share of Goodwill = Hidden Goodwill \times D' s Share = 2, 26, 250 \times \frac{1}{6} = Rs 37, 708

This share will be shared by the old partners in their sacrificing ratio i.e. 3 : 2 : 1

The following Journal entry will be passed:

D’s Capital A/c	Dr.	37,708
To A’s Capital A/c			18,854
To B’s Capital A/c			12,569
To C’s Capital A/c			6,285
(Adjustment for goodwill made)

Note: The balances of Partners' Capital Accounts as worked out in the above solution are different from the answers as per the book. As per the textbook answer, the working of hidden goodwill has not been considered.

Answer:

Revaluation Account
					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Bad Debts A/c	2,000	Stock A/c		2,000
Provision for Doubtful Debts A/c	2,000	Creditors A/c		800
		Loss transferred to:
		X’s Capital A/c	720
		Y’s Capital A/c	480	1,200
	4,000			4,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation A/c	720	480		Balance b/d	50,000	40,000
Balance c/d	58,280	45,520	30,000	Bank A/c			30,000
				Premium for Goodwill A/c	3,000	2,000
				Reserve A/c	6,000	4,000
	59,000	46,000	30,000		59,000	46,000	30,000

Balance Sheet as on April 01, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Employees’ Provident Fund		5,000	Debtors	22,000
Sundry Creditors		19,200	Less: Provision for Doubtful Debts	2,000
			Less: Bad Debts	2,000	18,000
Capital A/cs:			Stock (18,000 + 2,000)		20,000
X	58,280		Machinery		30,000
Y	45,520		Building		50,000
Z	30,000	1,33,800	Cash at Bank		40,000
		1,58,000			1,58,000

Working Notes: Calculation of Increase in Stock

$\begin{array}{l} Value of Stock (90 %) = Rs 18, 000 \\ Value of Stock (100 %) = Rs 20, 000 (18, 000 \times \frac{100}{90}) \\ ∴ Increase in stock = Rs 2, 000 \end{array}$

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	Balance c/d	40,000
Z’s Capital A/c	30,000
Premium for Goodwill a/c	5,000
	40,000		40,000

Question 74:

Revaluation Account
					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Bad Debts A/c	2,000	Stock A/c		2,000
Provision for Doubtful Debts A/c	2,000	Creditors A/c		800
		Loss transferred to:
		X’s Capital A/c	720
		Y’s Capital A/c	480	1,200
	4,000			4,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation A/c	720	480		Balance b/d	50,000	40,000
Balance c/d	58,280	45,520	30,000	Bank A/c			30,000
				Premium for Goodwill A/c	3,000	2,000
				Reserve A/c	6,000	4,000
	59,000	46,000	30,000		59,000	46,000	30,000

Balance Sheet as on April 01, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Employees’ Provident Fund		5,000	Debtors	22,000
Sundry Creditors		19,200	Less: Provision for Doubtful Debts	2,000
			Less: Bad Debts	2,000	18,000
Capital A/cs:			Stock (18,000 + 2,000)		20,000
X	58,280		Machinery		30,000
Y	45,520		Building		50,000
Z	30,000	1,33,800	Cash at Bank		40,000
		1,58,000			1,58,000

Working Notes: Calculation of Increase in Stock

$\begin{array}{l} Value of Stock (90 %) = Rs 18, 000 \\ Value of Stock (100 %) = Rs 20, 000 (18, 000 \times \frac{100}{90}) \\ ∴ Increase in stock = Rs 2, 000 \end{array}$

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	Balance c/d	40,000
Z’s Capital A/c	30,000
Premium for Goodwill a/c	5,000
	40,000		40,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Provision for Doubtful Debt (1,70,000 $\times$ 5%)	8,500	Advertisement Expenses		6,000
A’s Capital A/c	10,100	B’s Capital A/c		10,000
Furniture	40,000	Loss :
		A	21,300
		B	14,200
		C	7,100	42,600
	58,600			58,600

Partners’ Capital Accounts
Dr.										Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D

					Balance b/d	3,00,000	3,00,000	2,00,000
Revaluation	21,300	14,200	7,100		Creditors				50,000
Revaluation		10,000			Bank				2,00,000
Balance c/d	3,83,300	3,38,800	2,24,400	2,50,000	Premium for Goodwill	94,500	63,000	31,500
					Revaluation	10,100
	4,04,600	3,63,000	2,31,500	2,50,000		4,04,600	3,63,000	2,31,500	2,50,000

Balance Sheet
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Bills Payable		50,000	Bank		4,19,000
Creditors		1,00,000	Stock		1,00,000
Capital			Debtors	1,70,000
A	3,83,300		Less: Prov. for DD	8,500	1,61,500
B	3,38,800		Building		2,50,000
C	2,24,400		Machinery		2,00,000
D	2,50,000	11,96,500	Furniture		1,10,000
			Bills Receivable		1,00,000
			Advertisement Expenses		6,000
		13,46,500			13,46,500

Working Notes:

WN 1: Closing Bank Balance

Bank = 50,000 + 2,00,000 + 1,89,000

-

20,000 = Rs 4,19,000

Question 75:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Provision for Doubtful Debt (1,70,000 $\times$ 5%)	8,500	Advertisement Expenses		6,000
A’s Capital A/c	10,100	B’s Capital A/c		10,000
Furniture	40,000	Loss :
		A	21,300
		B	14,200
		C	7,100	42,600
	58,600			58,600

Partners’ Capital Accounts
Dr.										Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D

					Balance b/d	3,00,000	3,00,000	2,00,000
Revaluation	21,300	14,200	7,100		Creditors				50,000
Revaluation		10,000			Bank				2,00,000
Balance c/d	3,83,300	3,38,800	2,24,400	2,50,000	Premium for Goodwill	94,500	63,000	31,500
					Revaluation	10,100
	4,04,600	3,63,000	2,31,500	2,50,000		4,04,600	3,63,000	2,31,500	2,50,000

Balance Sheet
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Bills Payable		50,000	Bank		4,19,000
Creditors		1,00,000	Stock		1,00,000
Capital			Debtors	1,70,000
A	3,83,300		Less: Prov. for DD	8,500	1,61,500
B	3,38,800		Building		2,50,000
C	2,24,400		Machinery		2,00,000
D	2,50,000	11,96,500	Furniture		1,10,000
			Bills Receivable		1,00,000
			Advertisement Expenses		6,000
		13,46,500			13,46,500

Working Notes:

WN 1: Closing Bank Balance

Bank = 50,000 + 2,00,000 + 1,89,000

-

20,000 = Rs 4,19,000

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Prov. for D. Debts	600	Accrued Income	4,500
Outstanding Rent	15,000	Loss transferred to
Investments	6,000	X’s Current A/c	10,260
		Y’s Current A/c	6,840

	21,600		21,600

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

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	10,260	6,840		Balance b/d	30,000	6,000
Goodwill	18,000	12,000		General Reserve	21,600	14,400
Bank	12,600	5,400		Premium for Goodwill	25,200	10,800
Investments	18,000
Balance c/d	17,940	6,960
	76,800	31,200			76,800	31,200

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Patents		44,400
X	1,80,000		Fixed Assets		2,16,000
Y	90,000		Accrued Income		4,500
Z	60,000	3,30,000	Cash at Bank (15,000 + 96,000 – 18,000)		93,000
Outstanding Rent		15,000	Debtors	60,000
Current A/cs:			Less: 5% Reserve for D. Debts	3,000	57,000
X	17,940
Y	6,960	24,900
Creditors		45,000
		4,14,900			4,14,900

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Bank A/c	Dr.		96,000
To Z’s Capital				60,000
To Premium for Goodwill				36,000
(Z brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		36,000
To X’s Current A/c				25,200
To Y’s Current A/c				10,800
(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 7:3)

X's Current A/c Dr.			12,600
Y's Current A/c Dr.			5,400
To BankA/c				18,000
(Half of goodwill withdrawn by partners)

Working Notes:

WN1 Calculation of Z's Share of Premium for Goodwill

Average Profits = \frac{90, 000 + 78, 000 + 75, 000}{3} = Rs 81, 000 Firm' s Goodwil = 81, 000 \times 2 = Rs 1, 62, 000 Z' s share = 1, 62, 000 \times \frac{2}{9} = Rs 36, 000 Rs 36, 000 will be distributed between X and Y in sacrificing ratio .

WN2 Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio X' s sacrifice = \frac{3}{5} - \frac{4}{9} = \frac{7}{45} Y' s sacrifice = \frac{2}{5} - \frac{3}{9} = \frac{3}{45} Sacrificing Ratio = 7 : 3

WN3 Calculation of Share of Premium of Goodwill

$X' s share = 36, 000 \times \frac{7}{10} = Rs 25, 200 Y' s share = 36, 000 \times \frac{3}{10} = Rs 10, 800$

WN4 Distribution of Loss on Revaluation

$X' s share = 17, 100 \times \frac{3}{5} = Rs 10, 260 Y' s share = 17, 100 \times \frac{2}{5} = Rs 6, 840$

Question 76:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Prov. for D. Debts	600	Accrued Income	4,500
Outstanding Rent	15,000	Loss transferred to
Investments	6,000	X’s Current A/c	10,260
		Y’s Current A/c	6,840

	21,600		21,600

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

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	10,260	6,840		Balance b/d	30,000	6,000
Goodwill	18,000	12,000		General Reserve	21,600	14,400
Bank	12,600	5,400		Premium for Goodwill	25,200	10,800
Investments	18,000
Balance c/d	17,940	6,960
	76,800	31,200			76,800	31,200

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Patents		44,400
X	1,80,000		Fixed Assets		2,16,000
Y	90,000		Accrued Income		4,500
Z	60,000	3,30,000	Cash at Bank (15,000 + 96,000 – 18,000)		93,000
Outstanding Rent		15,000	Debtors	60,000
Current A/cs:			Less: 5% Reserve for D. Debts	3,000	57,000
X	17,940
Y	6,960	24,900
Creditors		45,000
		4,14,900			4,14,900

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Bank A/c	Dr.		96,000
To Z’s Capital				60,000
To Premium for Goodwill				36,000
(Z brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		36,000
To X’s Current A/c				25,200
To Y’s Current A/c				10,800
(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 7:3)

X's Current A/c Dr.			12,600
Y's Current A/c Dr.			5,400
To BankA/c				18,000
(Half of goodwill withdrawn by partners)

Working Notes:

WN1 Calculation of Z's Share of Premium for Goodwill

Average Profits = \frac{90, 000 + 78, 000 + 75, 000}{3} = Rs 81, 000 Firm' s Goodwil = 81, 000 \times 2 = Rs 1, 62, 000 Z' s share = 1, 62, 000 \times \frac{2}{9} = Rs 36, 000 Rs 36, 000 will be distributed between X and Y in sacrificing ratio .

WN2 Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio X' s sacrifice = \frac{3}{5} - \frac{4}{9} = \frac{7}{45} Y' s sacrifice = \frac{2}{5} - \frac{3}{9} = \frac{3}{45} Sacrificing Ratio = 7 : 3

WN3 Calculation of Share of Premium of Goodwill

$X' s share = 36, 000 \times \frac{7}{10} = Rs 25, 200 Y' s share = 36, 000 \times \frac{3}{10} = Rs 10, 800$

WN4 Distribution of Loss on Revaluation

$X' s share = 17, 100 \times \frac{3}{5} = Rs 10, 260 Y' s share = 17, 100 \times \frac{2}{5} = Rs 6, 840$

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts		1,000	Machinery	3,000
Outstanding salary		2,000	Stock	2,000
Profit transferred to:
M	1,250
N	750	2,000
		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	N	R	Particulars	M	N	R
Goodwill A/c	3,125	1,875		Balance b/d	12,000	10,000
Bank A/c	1,500	500		Revaluation A/c	1,250	750
Balance c/d	11,625	9,375	8,000	Premium for Goodwill	3,000	1,000
				Bank			8,000
	16,250	9,375	8,000		16,250	9,375	8,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		6,000	Cash		1,300
Bills Payable		2,000	Stock		10,000
Creditors		4,000	Bank		10,500
M’s Current A/c		1,125	Machinery		15,000
N’s Current A/c		375	Debtors	7,200
Capital			Less: Provision for DD	1,000	6,200
M	11,625		R’s Current A/c		1,500
N	9,375
R	8,000	29,000
Outstanding Salary		2,000
		44,500			44,500

Working Notes:

WN 1: Calculation of Sacrificing Ratio
$\begin{array}{l} M = \frac{5}{8} - \frac{7}{16} = \frac{3}{16} \\ N = \frac{3}{8} - \frac{5}{16} = \frac{1}{16} \\ M:N = 3:1 \end{array}$

WN 2: Treatment of General Reserve

$\begin{array}{l} R's share in General Reserve = 6,000 \times \frac{4}{16} = Rs 1,500 \\ Rs 1,500 is to be shared by M and N in the ratio of 3:1 \end{array}$

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

	R’s Current A/c	Dr.		1,500
	To M’s Current A/c				1,125
	To N’s Current A/c				375
	(Adjustment entry made for General Reserve)

Question 77:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts		1,000	Machinery	3,000
Outstanding salary		2,000	Stock	2,000
Profit transferred to:
M	1,250
N	750	2,000
		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	N	R	Particulars	M	N	R
Goodwill A/c	3,125	1,875		Balance b/d	12,000	10,000
Bank A/c	1,500	500		Revaluation A/c	1,250	750
Balance c/d	11,625	9,375	8,000	Premium for Goodwill	3,000	1,000
				Bank			8,000
	16,250	9,375	8,000		16,250	9,375	8,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
General Reserve		6,000	Cash		1,300
Bills Payable		2,000	Stock		10,000
Creditors		4,000	Bank		10,500
M’s Current A/c		1,125	Machinery		15,000
N’s Current A/c		375	Debtors	7,200
Capital			Less: Provision for DD	1,000	6,200
M	11,625		R’s Current A/c		1,500
N	9,375
R	8,000	29,000
Outstanding Salary		2,000
		44,500			44,500

Working Notes:

WN 1: Calculation of Sacrificing Ratio
$\begin{array}{l} M = \frac{5}{8} - \frac{7}{16} = \frac{3}{16} \\ N = \frac{3}{8} - \frac{5}{16} = \frac{1}{16} \\ M:N = 3:1 \end{array}$

WN 2: Treatment of General Reserve

$\begin{array}{l} R's share in General Reserve = 6,000 \times \frac{4}{16} = Rs 1,500 \\ Rs 1,500 is to be shared by M and N in the ratio of 3:1 \end{array}$

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

	R’s Current A/c	Dr.		1,500
	To M’s Current A/c				1,125
	To N’s Current A/c				375
	(Adjustment entry made for General Reserve)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Land and Building	20,000	Sundry Creditors	1,200
Stock	3,200	Loss transferred to
Provision for Doubtful Debts	1,000	A Capital	13,800
		B Capital	9,200
	24,200		24,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
A’s Capital			4,000	Balance b/d	86,000	64,000
B’s Capital			4,000	General Reserve	12,000	8,000
Revaluation	13,800	9,200		Cash			50,000
Goodwill	6,000	4,000		C’s Capital	4,000	4,000
Balance c/d	82,200	62,800	42,000
	1,02,000	76,000	50,000		1,02,000	76,000	50,000

Balance Sheet as on April 01, 2017 (after C’s admission)
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (60,000 – 20,000)		40,000
A	82,200		Plant and Machinery		70,000
B	62,800		Sundry Debtors	20,000
C	42,000	1,87,000	Less: Provision for D. Debts	1,000	19,000
			Stock (36,000 – 3,200)		32,800
Sundry Creditors (31,200 – 1,200)		30,000	Cash at Bank		4,000
			Cash in Hand (1,200 + 50,000)		51,200
		2,17,000			2,17,000

WN1: Calculation of C’s share of Goodwill

Particulars		Debit Amount Rs	Credit Amount Rs

C’s Capital A/c	Dr.	8,000
To A’s Capital A/c			4,000
To B’s Capital A/c			4,000
(C’s share of goodwill charge from his capital)

WN2: Distribution of General Reserve (in old ratio)

WN3: Writing-off of Goodwill

Note: The answer given in book is different as the amount of goodwill has been adjusted through Partner's Capital Account in our solution.

Question 78:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Land and Building	20,000	Sundry Creditors	1,200
Stock	3,200	Loss transferred to
Provision for Doubtful Debts	1,000	A Capital	13,800
		B Capital	9,200
	24,200		24,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
A’s Capital			4,000	Balance b/d	86,000	64,000
B’s Capital			4,000	General Reserve	12,000	8,000
Revaluation	13,800	9,200		Cash			50,000
Goodwill	6,000	4,000		C’s Capital	4,000	4,000
Balance c/d	82,200	62,800	42,000
	1,02,000	76,000	50,000		1,02,000	76,000	50,000

Balance Sheet as on April 01, 2017 (after C’s admission)
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (60,000 – 20,000)		40,000
A	82,200		Plant and Machinery		70,000
B	62,800		Sundry Debtors	20,000
C	42,000	1,87,000	Less: Provision for D. Debts	1,000	19,000
			Stock (36,000 – 3,200)		32,800
Sundry Creditors (31,200 – 1,200)		30,000	Cash at Bank		4,000
			Cash in Hand (1,200 + 50,000)		51,200
		2,17,000			2,17,000

WN1: Calculation of C’s share of Goodwill

Particulars		Debit Amount Rs	Credit Amount Rs

C’s Capital A/c	Dr.	8,000
To A’s Capital A/c			4,000
To B’s Capital A/c			4,000
(C’s share of goodwill charge from his capital)

WN2: Distribution of General Reserve (in old ratio)

WN3: Writing-off of Goodwill

Note: The answer given in book is different as the amount of goodwill has been adjusted through Partner's Capital Account in our solution.

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Reserve Fund A/c	Dr.		4,000
To A’s Capital A/c				3,000
To B’s Capital A/c				1,000
(Reserve Fund distributed)

Revaluation A/c	Dr.		4,050
To Stock A/c				2,000
To Fixtures A/c				100
To Provision for Doubtful Debts A/c				950
To Outstanding Claim for Damages A/c				1,000
(Decrease in assets, increase in liability and provision for doubtful debts created)

Land and Building A/c	Dr.		5,000
Sundry Creditors A/c	Dr.		650
To Revaluation A/c				5,650
(Decrease in creditors and increase in land and building transferred to Revaluation Account)

Revaluation A/c	Dr.		1,600
To A’s Capital A/c				1,200
To B’s Capital A/c				400
(Profit on revaluation transferred to A and B’s Capital Accounts in their old profit sharing ratio)

Bank A/c	Dr.		15,000
To C’s Capital A/c				10,000
To Premium for Goodwill A/c				5,000
(C brought capital and share of goodwill)

Premium for Goodwill A/c	Dr.		5,000
To A’s Capital A/c				3,750
To B’s Capital A/c				1,250
(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

A’s Capital A/c	Dr.		1,875
B’s Capital A/c	Dr.		625
To Bank A/c				2,500
(Half of the Premium for Goodwill withdrawn)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	2,000	Land and Building	5,000
Fixtures	100	Sundry Creditors	650
Provision for D. Debts (19,000 × 5%)	950
Outstanding Claim for Damages	1,000
Profit transferred to
A Capital	1,200
B Capital	400
	5,650		5,650

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A	B	C		Particulars	A	B	C
Bank (withdrawn of Goodwill)	1,875	625			Balance b/d	30,000	16,000
					Bank			10,000
					Revaluation (Profit)	1,200	400
					Reserve Fund	3,000	1,000
Balance c/d	36,075	18,025	10,000		Premium for Goodwill	3,750	1,250
	37,950	18,650	10,000			37,950	18,650	10,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building		30,000
A	36,075		Fixtures		900
B	18,025		Stock		18,000
C	10,000	64,100

Creditors (41,500 – 650)		40,850	Debtors	16,000
			Bills Receivable	3,000
Outstanding Claim for Damages		1,000		19,000
			Less: 5% Prov. for D. Debts	950	18,050
			Bank		39,000

		1,05,950			1,05,950

Question 79:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Reserve Fund A/c	Dr.		4,000
To A’s Capital A/c				3,000
To B’s Capital A/c				1,000
(Reserve Fund distributed)

Revaluation A/c	Dr.		4,050
To Stock A/c				2,000
To Fixtures A/c				100
To Provision for Doubtful Debts A/c				950
To Outstanding Claim for Damages A/c				1,000
(Decrease in assets, increase in liability and provision for doubtful debts created)

Land and Building A/c	Dr.		5,000
Sundry Creditors A/c	Dr.		650
To Revaluation A/c				5,650
(Decrease in creditors and increase in land and building transferred to Revaluation Account)

Revaluation A/c	Dr.		1,600
To A’s Capital A/c				1,200
To B’s Capital A/c				400
(Profit on revaluation transferred to A and B’s Capital Accounts in their old profit sharing ratio)

Bank A/c	Dr.		15,000
To C’s Capital A/c				10,000
To Premium for Goodwill A/c				5,000
(C brought capital and share of goodwill)

Premium for Goodwill A/c	Dr.		5,000
To A’s Capital A/c				3,750
To B’s Capital A/c				1,250
(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

A’s Capital A/c	Dr.		1,875
B’s Capital A/c	Dr.		625
To Bank A/c				2,500
(Half of the Premium for Goodwill withdrawn)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	2,000	Land and Building	5,000
Fixtures	100	Sundry Creditors	650
Provision for D. Debts (19,000 × 5%)	950
Outstanding Claim for Damages	1,000
Profit transferred to
A Capital	1,200
B Capital	400
	5,650		5,650

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A	B	C		Particulars	A	B	C
Bank (withdrawn of Goodwill)	1,875	625			Balance b/d	30,000	16,000
					Bank			10,000
					Revaluation (Profit)	1,200	400
					Reserve Fund	3,000	1,000
Balance c/d	36,075	18,025	10,000		Premium for Goodwill	3,750	1,250
	37,950	18,650	10,000			37,950	18,650	10,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building		30,000
A	36,075		Fixtures		900
B	18,025		Stock		18,000
C	10,000	64,100

Creditors (41,500 – 650)		40,850	Debtors	16,000
			Bills Receivable	3,000
Outstanding Claim for Damages		1,000		19,000
			Less: 5% Prov. for D. Debts	950	18,050
			Bank		39,000

		1,05,950			1,05,950

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		750	Building	5,000
Provision for D. Debts	500
Less: Old Provision	400	100
Furniture		500

Profit on Revaluation transferred to
Rajesh Capital		2,190
Ravi Capital		1,460

		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Rajesh	Ravi	Raman	Particulars	Rajesh	Ravi	Raman
				Balance b/d	29,000	15,000
				Revaluation	2,190	1,460
Balance c/d	31,190	16,460	16,000	Cash			16,000
(before and just went of
Goodwill)
	31,190	16,460	16,000		31,190	16,460	16,000
Rajesh’s Capital			1,635	Balance c/d	31,190	16,460	16,000
Raman’s Capital			1,635	Raman’s Capital	1,635	1,635
Balance c/d	32,825	18,095	12,730
	32,825	18,095	16,000		32,825	18,095	16,000

Balance Sheet as on March 31, 2017 after Raman’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		38,500	Cash (2,000 + 16,000)		18,000
Outstanding Rent		4,000	Stock (15,000 – 750)		14,250
Capital A/cs:			Prepaid Insurance		1,500
Rajesh	32,825		Debtors	9,400
Ravi	18,095		Less: Provision for D. Debts	500	8,900
Raman	12,730	63,730	Machinery		19,000
			Building (35,000 + 5,000)		40,000
			Furniture (5,000 – 500)		4,500
		1,06,150			1,06,150

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of Goodwill

Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital + Ravi’s Capital + Raman’s Capital

= 31,190 + 16,460 + 16,000

= Rs 63,650

Capitalised value on the basis of Raman’s share

Raman’s share of Goodwill

WN3

Adjustment of Raman’s share of goodwill

Rajesh and Ravi each Capital Accounts will be credited by

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Raman’s Capital A/c	Dr.		3,270
To Rajesh’s Capital A/c				1,635
To Ravi’s Capital A/c				1,635
(Raman’s share of goodwill adjusted)

WN4

Distribution of Profit on Revaluation (in old ratio)

Note: The answer given in book is different as the adjustment of goodwill has been made through Capital Account of the Partner and not through Current Accounts.

Question 80:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		750	Building	5,000
Provision for D. Debts	500
Less: Old Provision	400	100
Furniture		500

Profit on Revaluation transferred to
Rajesh Capital		2,190
Ravi Capital		1,460

		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Rajesh	Ravi	Raman	Particulars	Rajesh	Ravi	Raman
				Balance b/d	29,000	15,000
				Revaluation	2,190	1,460
Balance c/d	31,190	16,460	16,000	Cash			16,000
(before and just went of
Goodwill)
	31,190	16,460	16,000		31,190	16,460	16,000
Rajesh’s Capital			1,635	Balance c/d	31,190	16,460	16,000
Raman’s Capital			1,635	Raman’s Capital	1,635	1,635
Balance c/d	32,825	18,095	12,730
	32,825	18,095	16,000		32,825	18,095	16,000

Balance Sheet as on March 31, 2017 after Raman’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		38,500	Cash (2,000 + 16,000)		18,000
Outstanding Rent		4,000	Stock (15,000 – 750)		14,250
Capital A/cs:			Prepaid Insurance		1,500
Rajesh	32,825		Debtors	9,400
Ravi	18,095		Less: Provision for D. Debts	500	8,900
Raman	12,730	63,730	Machinery		19,000
			Building (35,000 + 5,000)		40,000
			Furniture (5,000 – 500)		4,500
		1,06,150			1,06,150

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of Goodwill

Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital + Ravi’s Capital + Raman’s Capital

= 31,190 + 16,460 + 16,000

= Rs 63,650

Capitalised value on the basis of Raman’s share

Raman’s share of Goodwill

WN3

Adjustment of Raman’s share of goodwill

Rajesh and Ravi each Capital Accounts will be credited by

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Raman’s Capital A/c	Dr.		3,270
To Rajesh’s Capital A/c				1,635
To Ravi’s Capital A/c				1,635
(Raman’s share of goodwill adjusted)

WN4

Distribution of Profit on Revaluation (in old ratio)

Note: The answer given in book is different as the adjustment of goodwill has been made through Capital Account of the Partner and not through Current Accounts.

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs

		Fixed Assets:
		Furniture	95,000 × 10%	9,500
Profit transferred to		Business Premises	2,05,000 × 10%	20,500
A Capital	15,000
B Capital	10,000
C Capital	5,000

	30,000			30,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
A’s Capital (Goodwill)			7,500		Balance b/d	1,20,000	1,20,000	1,20,000
B’s Capital (Goodwill)			2,500		Revaluation (Profit)	15,000	10,000	5,000
					Cash				1,20,000
Balance c/d	1,65,000	1,40,000	1,15,000	1,20,000	Premium for Goodwill	22,500	7,500
					C’s Capital (Goodwill)	7,500	2,500
	1,65,000	1,40,000	1,25,000	1,20,000		1,65,000	1,40,000	1,25,000	1,20,000

Balance Sheet as on April 01, 2017, after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Furniture (95,000 + 9,500)	1,04,500
A	1,65,000		Business Premises (2,05,000+20,500)	2,25,500
B	1,40,000		Stock-in-Trade	40,000
C	1,15,000		Debtors	28,000
D	1,20,000	5,40,000	Cash at Bank	15,000
Sundry Creditors		20,000	Cash in hand (4,200 + 1,50,000)	1,54,200
Outstanding salaries and wages		7,200
		5,67,200		5,67,200

Working Note:

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of C’s gain in goodwill

WN3

Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

WN4

Journal Entries for D’s Capital and distribution of goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		1,50,000
To D’s Capital A/c				1,20,000
To Premium for Goodwill A/c				30,000
(D brought Capital and share of Capital)

Premium for Goodwill	Dr.		30,000
C’s Capital A/c	Dr.		10,000
To A’s Capital A/c				30,000
To B’s Capital				10,000
(Gain goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Question 81:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs

		Fixed Assets:
		Furniture	95,000 × 10%	9,500
Profit transferred to		Business Premises	2,05,000 × 10%	20,500
A Capital	15,000
B Capital	10,000
C Capital	5,000

	30,000			30,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
A’s Capital (Goodwill)			7,500		Balance b/d	1,20,000	1,20,000	1,20,000
B’s Capital (Goodwill)			2,500		Revaluation (Profit)	15,000	10,000	5,000
					Cash				1,20,000
Balance c/d	1,65,000	1,40,000	1,15,000	1,20,000	Premium for Goodwill	22,500	7,500
					C’s Capital (Goodwill)	7,500	2,500
	1,65,000	1,40,000	1,25,000	1,20,000		1,65,000	1,40,000	1,25,000	1,20,000

Balance Sheet as on April 01, 2017, after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Furniture (95,000 + 9,500)	1,04,500
A	1,65,000		Business Premises (2,05,000+20,500)	2,25,500
B	1,40,000		Stock-in-Trade	40,000
C	1,15,000		Debtors	28,000
D	1,20,000	5,40,000	Cash at Bank	15,000
Sundry Creditors		20,000	Cash in hand (4,200 + 1,50,000)	1,54,200
Outstanding salaries and wages		7,200
		5,67,200		5,67,200

Working Note:

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of C’s gain in goodwill

WN3

Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

WN4

Journal Entries for D’s Capital and distribution of goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		1,50,000
To D’s Capital A/c				1,20,000
To Premium for Goodwill A/c				30,000
(D brought Capital and share of Capital)

Premium for Goodwill	Dr.		30,000
C’s Capital A/c	Dr.		10,000
To A’s Capital A/c				30,000
To B’s Capital				10,000
(Gain goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		950	Land and Building A/c	10,000
Furniture A/c		600
Stock A/c		3,850
Profit transferred to:
A’s Capital A/c	2,760
B’s Capital A/c	1,840	4,600
		10,000		10,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Balance c/d	38,960	41,240	30,000	Balance b/d	30,200	35,400
				Bank A/c			30,000
				C’s Current A/c	6,000	4,000
				Revaluation A/c	2,760	1,840
	38,960	41,240	30,000		38,960	41,240	30,000

Balance Sheet as on March 31, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		20,800	Debtors	19,000
Bills Payable		10,000	Less: Provision for Doubtful Debts	950	18,050
			Furniture (10,600 – 600)		10,000
			Land and Building (40,000 + 10,000)		50,000
Capital A/c:			Stock (38,500 – 3,850)		34,650
A	38,960		C’s Current A/c		10,000
B	41,240		Cash		18,300
C	30,000	1,10,200

		1,41,000			1,41,000

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance B/d	8,300	Bank Loan A/c	20,000
C’s Capital A/c	30,000	Balance c/d	18,300
	38,300		38,300

Question 82:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		950	Land and Building A/c	10,000
Furniture A/c		600
Stock A/c		3,850
Profit transferred to:
A’s Capital A/c	2,760
B’s Capital A/c	1,840	4,600
		10,000		10,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Balance c/d	38,960	41,240	30,000	Balance b/d	30,200	35,400
				Bank A/c			30,000
				C’s Current A/c	6,000	4,000
				Revaluation A/c	2,760	1,840
	38,960	41,240	30,000		38,960	41,240	30,000

Balance Sheet as on March 31, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		20,800	Debtors	19,000
Bills Payable		10,000	Less: Provision for Doubtful Debts	950	18,050
			Furniture (10,600 – 600)		10,000
			Land and Building (40,000 + 10,000)		50,000
Capital A/c:			Stock (38,500 – 3,850)		34,650
A	38,960		C’s Current A/c		10,000
B	41,240		Cash		18,300
C	30,000	1,10,200

		1,41,000			1,41,000

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance B/d	8,300	Bank Loan A/c	20,000
C’s Capital A/c	30,000	Balance c/d	18,300
	38,300		38,300

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		1,100	Land and Building A/c	10,000
Furniture A/c		1,300	Stock A/c	5,000
Profit transferred to:
John’s Capital A/c	5,040
Bull’s Capital A/c	5,040
Wool’s Capital A/c	2,520	12,600
		15,000		15,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	John	Bull	Wool	Tuna	Particulars	John	Bull	Wool	Tuna

Balance c/d	36,240	35,240	15,120	10,000	Balance b/d	24,000	24,000	10,000
					Bank A/c				10,000
					Tuna’s Current A/c	1,000	1,000
					General Reserve A/c	5,200	5,200	2,600
					Revaluation A/c	5,040	5,040	2,520
					Outstanding Liabilities A/c	1,000
	36,240	35,240	15,120	10,000		36,240	35,240	15,120	10,000

Balance Sheet as on April 01, 2015 after Tuna’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		25,700	Debtors	11,000
Outstanding Liabilities		2,000	Less: Provision for Doubtful Debts	1,100	9,900
Capital A/cs:			Land and Building (50,000 + 10,000)		60,000
John	36,240		Furniture (13,000 – 1,300)		11,700
Bull	35,240		Stock (23,500 + 5,000)		28,500
Wool	15,120		Cash		12,200
Tuna	10,000	96,600	Tuna’s Current A/c		2,000
		1,24,300			1,24,300

Working Notes

New Profit Sharing ratio = 5 : 5 : 3 : 2

$Tuna's share of goodwill = 15,000 \times \frac{2}{15} = 2, 000$

Old ratio = 2 : 2 : 1

$\begin{array}{l} Sacrifice made by John = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Bull = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Wool = \frac{1}{5} - \frac{3}{15} = 0 \end{array}$

Therefore only John and Bull Sacrifices in ratio of 1 : 1.

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,200	Balance c/d	12,200
Tuna’s Capital A/c	10,000
	12,200		12,200

Question 83:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		1,100	Land and Building A/c	10,000
Furniture A/c		1,300	Stock A/c	5,000
Profit transferred to:
John’s Capital A/c	5,040
Bull’s Capital A/c	5,040
Wool’s Capital A/c	2,520	12,600
		15,000		15,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	John	Bull	Wool	Tuna	Particulars	John	Bull	Wool	Tuna

Balance c/d	36,240	35,240	15,120	10,000	Balance b/d	24,000	24,000	10,000
					Bank A/c				10,000
					Tuna’s Current A/c	1,000	1,000
					General Reserve A/c	5,200	5,200	2,600
					Revaluation A/c	5,040	5,040	2,520
					Outstanding Liabilities A/c	1,000
	36,240	35,240	15,120	10,000		36,240	35,240	15,120	10,000

Balance Sheet as on April 01, 2015 after Tuna’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		25,700	Debtors	11,000
Outstanding Liabilities		2,000	Less: Provision for Doubtful Debts	1,100	9,900
Capital A/cs:			Land and Building (50,000 + 10,000)		60,000
John	36,240		Furniture (13,000 – 1,300)		11,700
Bull	35,240		Stock (23,500 + 5,000)		28,500
Wool	15,120		Cash		12,200
Tuna	10,000	96,600	Tuna’s Current A/c		2,000
		1,24,300			1,24,300

Working Notes

New Profit Sharing ratio = 5 : 5 : 3 : 2

$Tuna's share of goodwill = 15,000 \times \frac{2}{15} = 2, 000$

Old ratio = 2 : 2 : 1

$\begin{array}{l} Sacrifice made by John = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Bull = \frac{2}{5} - \frac{5}{15} = \frac{1}{15} \\ Sacrifice made by Wool = \frac{1}{5} - \frac{3}{15} = 0 \end{array}$

Therefore only John and Bull Sacrifices in ratio of 1 : 1.

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,200	Balance c/d	12,200
Tuna’s Capital A/c	10,000
	12,200		12,200

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	3,000	A's Capital A/c	300
Provision for Doubtful Debts	1,200	Loss transferred to
Investment (5,000 – 4,900)	100	A Capital	2,400
		B Capital	1,600
	4,300		4,300

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	2,400	1,600		Balance b/d	50,000	30,000
Revaluation	300			Bank			20,000
				Premium for Goodwill	3,000	2,000
Balance c/d	50,300	30,400	20,000
	53,000	32,000	20,000		53,000	32,000	20,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Buildings		35,000
A	50,300		Machinery		25,000
B	30,400		Stock		15,000
C	20,000	1,00,700	Debtors	15,000
Creditors		20,000	Less: Bad Debts	3,000
				12,000
			Less: 10% Provision for Doubtful Debts	1,200	10,800
			Bank		34,900
		1,20,700			1,20,700

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000
C’s Capital	20,000
Premium for Goodwill	5,000
Investments	4,900	Balance c/d	34,900

	34,900		34,900

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Sale of Investments

Bank A/c	Dr.	4,900
Revaluation A/c	Dr.	100
To Investment			5,000

WN4

Bad debt Recovered

A's Capital A/c	Dr.	300
To Revaluation A/c			300

Question 84:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	3,000	A's Capital A/c	300
Provision for Doubtful Debts	1,200	Loss transferred to
Investment (5,000 – 4,900)	100	A Capital	2,400
		B Capital	1,600
	4,300		4,300

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	2,400	1,600		Balance b/d	50,000	30,000
Revaluation	300			Bank			20,000
				Premium for Goodwill	3,000	2,000
Balance c/d	50,300	30,400	20,000
	53,000	32,000	20,000		53,000	32,000	20,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Buildings		35,000
A	50,300		Machinery		25,000
B	30,400		Stock		15,000
C	20,000	1,00,700	Debtors	15,000
Creditors		20,000	Less: Bad Debts	3,000
				12,000
			Less: 10% Provision for Doubtful Debts	1,200	10,800
			Bank		34,900
		1,20,700			1,20,700

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000
C’s Capital	20,000
Premium for Goodwill	5,000
Investments	4,900	Balance c/d	34,900

	34,900		34,900

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Sale of Investments

Bank A/c	Dr.	4,900
Revaluation A/c	Dr.	100
To Investment			5,000

WN4

Bad debt Recovered

A's Capital A/c	Dr.	300
To Revaluation A/c			300

Answer:

Calculation of total capital of the new firm

$\begin{array}{l} Total capital of the firm = Capital brought in by New Partner \times Reciprocal of his Profit Share \\ Total capital of the firm = 1, 05, 000 \times \frac{5}{1} = Rs 5, 25, 000 \end{array}$

Calculation of new capital

$\begin{array}{l} X = 5, 25, 000 \times \frac{5}{10} = 2, 62, 500 \\ Y = 5, 25, 000 \times \frac{3}{10} = 1, 57, 500 \end{array}$

Calculation of cash to be brought in or to be paid by existing partners

Particulars	X	Y
New Capitalvipin	2,62,500	1,57,500
Less: Existing Capital	2,40,000	1,80,000
Net Effect	22,500 to be brought in	(22,500) to be withdrawn

Working Notes: Calculation of New Profit Sharing Ratio

$\begin{array}{l} Old ratio = 3 : 2 \\ Z' s Share = \frac{1}{5} \\ X' s New Share = \frac{3}{5} - \frac{1}{2} \times \frac{1}{5} = \frac{5}{10} \\ Y = \frac{2}{5} - \frac{1}{2} \times \frac{1}{5} = \frac{3}{10} \\ Z = \frac{1}{5} or \frac{2}{10} \\ New Profit Sharing Ratio = 5 : 3 : 2 \end{array}$

Question 85:

Calculation of total capital of the new firm

$\begin{array}{l} Total capital of the firm = Capital brought in by New Partner \times Reciprocal of his Profit Share \\ Total capital of the firm = 1, 05, 000 \times \frac{5}{1} = Rs 5, 25, 000 \end{array}$

Calculation of new capital

$\begin{array}{l} X = 5, 25, 000 \times \frac{5}{10} = 2, 62, 500 \\ Y = 5, 25, 000 \times \frac{3}{10} = 1, 57, 500 \end{array}$

Calculation of cash to be brought in or to be paid by existing partners

Particulars	X	Y
New Capitalvipin	2,62,500	1,57,500
Less: Existing Capital	2,40,000	1,80,000
Net Effect	22,500 to be brought in	(22,500) to be withdrawn

Working Notes: Calculation of New Profit Sharing Ratio

$\begin{array}{l} Old ratio = 3 : 2 \\ Z' s Share = \frac{1}{5} \\ X' s New Share = \frac{3}{5} - \frac{1}{2} \times \frac{1}{5} = \frac{5}{10} \\ Y = \frac{2}{5} - \frac{1}{2} \times \frac{1}{5} = \frac{3}{10} \\ Z = \frac{1}{5} or \frac{2}{10} \\ New Profit Sharing Ratio = 5 : 3 : 2 \end{array}$

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Furniture A/c	2,520	Stock A/c		2,400
Investment A/c	2,880	Prepaid Salaries A/c		480
Machinery A/c	3,060	Loss transferred to:
Outstanding Rent A/c	1,080	A’s Capital A/c	1,332
		B’s Capital A/c	1,998
		C’s Capital A/c	3,330	6,660
	9,540			9,540

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill A/c	2,400	3,600	6,000		Balance b/d	21,600	26,400	31,200
Revaluation A/c	1,332	1,998	3,330		Bank A/c				19,200
Balance c/d	20,028	24,042	27,270	19,200	Premium for Goodwill A/c	480	720	1,200
					Profit and Loss A/c	1,680	2,520	4,200

	23,760	29,640	36,600	19,200		23,760	29,640	36,600	19,200

Cash A/c	828				Balance b/d	20,028	24,042	27,270	19,200
Balance c/d	19,200	28,800	48,000	19,200	Cash A/c		4,758	20,730
	20,002	28,800	48,000	19,200		20,002	28,800	48,000	19,200

Balance Sheet as on April 01, 2017 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		38,400	Cash	57,060
Employees’ Provident Fund		19,200	Bills Receivable	14,400
Outstanding Rent		1,080	Furniture (16,800 – 2,520)	14,280
			Stock	28,800
Capital A/cs:			Debtors	25,200
A	19,200		Investment (19,200 – 2,880)	16,320
B	28,800		Machinery (20,400 – 3,060)	17,340
C	48,000		Prepaid Salaries	480
D	19,200	1,15,200
		1,73,880		1,73,880

Working Notes

$\begin{array}{l} Let the total share be 1 \\ D is admitted for \frac{1}{6} th share \\ Remaining = 1 - \frac{1}{6} = \frac{5}{6} \\ Old ratio = 2 : 3 : 5 \\ New profit sharing ratio \\ A = \frac{5}{6} \times \frac{2}{10} = \frac{10}{60} \\ B = \frac{5}{6} \times \frac{3}{10} = \frac{15}{60} \\ C = \frac{5}{6} \times \frac{5}{10} = \frac{25}{60} \\ D = \frac{1}{6} or \frac{10}{60} \\ NPR = 2 : 3 : 5 : 2 \end{array}$

$\begin{array}{l} Total capital of the firm = Capital of the incoming partner \times Reciprocal of his profit share \\ Total capital of the firm = 19, 200 \times \frac{6}{1} = 1, 15, 200 \end{array}$

$\begin{array}{l} New capital : \\ A = 1, 15, 200 \times \frac{2}{12} = 19, 200 \\ B = 1, 15, 200 \times \frac{3}{12} = 28, 800 \\ C = 1, 15, 200 \times \frac{5}{12} = 48, 000 \end{array}$

Calculation of cash to be brought in or to be paid by existing partners

Particulars	A	B	C
New Capital	19,200	28,800	48,000
Less: Existing Capital	20,028	24,042	27,270
Net Effect	(828) to be withdrawn	4,758 to be brought in	20,730 to be brought in

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	10,800	A’s Capital A/c	828
D’s Capital A/c	19,200	Balance c/d	57,060
Premium for Goodwill A/c	2,400
B’s Capital A/c	4,758
C’s Capital A/c	20,730

	57,888		57,888

Question 86:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Furniture A/c	2,520	Stock A/c		2,400
Investment A/c	2,880	Prepaid Salaries A/c		480
Machinery A/c	3,060	Loss transferred to:
Outstanding Rent A/c	1,080	A’s Capital A/c	1,332
		B’s Capital A/c	1,998
		C’s Capital A/c	3,330	6,660
	9,540			9,540

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill A/c	2,400	3,600	6,000		Balance b/d	21,600	26,400	31,200
Revaluation A/c	1,332	1,998	3,330		Bank A/c				19,200
Balance c/d	20,028	24,042	27,270	19,200	Premium for Goodwill A/c	480	720	1,200
					Profit and Loss A/c	1,680	2,520	4,200

	23,760	29,640	36,600	19,200		23,760	29,640	36,600	19,200

Cash A/c	828				Balance b/d	20,028	24,042	27,270	19,200
Balance c/d	19,200	28,800	48,000	19,200	Cash A/c		4,758	20,730
	20,002	28,800	48,000	19,200		20,002	28,800	48,000	19,200

Balance Sheet as on April 01, 2017 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		38,400	Cash	57,060
Employees’ Provident Fund		19,200	Bills Receivable	14,400
Outstanding Rent		1,080	Furniture (16,800 – 2,520)	14,280
			Stock	28,800
Capital A/cs:			Debtors	25,200
A	19,200		Investment (19,200 – 2,880)	16,320
B	28,800		Machinery (20,400 – 3,060)	17,340
C	48,000		Prepaid Salaries	480
D	19,200	1,15,200
		1,73,880		1,73,880

Working Notes

$\begin{array}{l} Let the total share be 1 \\ D is admitted for \frac{1}{6} th share \\ Remaining = 1 - \frac{1}{6} = \frac{5}{6} \\ Old ratio = 2 : 3 : 5 \\ New profit sharing ratio \\ A = \frac{5}{6} \times \frac{2}{10} = \frac{10}{60} \\ B = \frac{5}{6} \times \frac{3}{10} = \frac{15}{60} \\ C = \frac{5}{6} \times \frac{5}{10} = \frac{25}{60} \\ D = \frac{1}{6} or \frac{10}{60} \\ NPR = 2 : 3 : 5 : 2 \end{array}$

$\begin{array}{l} Total capital of the firm = Capital of the incoming partner \times Reciprocal of his profit share \\ Total capital of the firm = 19, 200 \times \frac{6}{1} = 1, 15, 200 \end{array}$

$\begin{array}{l} New capital : \\ A = 1, 15, 200 \times \frac{2}{12} = 19, 200 \\ B = 1, 15, 200 \times \frac{3}{12} = 28, 800 \\ C = 1, 15, 200 \times \frac{5}{12} = 48, 000 \end{array}$

Calculation of cash to be brought in or to be paid by existing partners

Particulars	A	B	C
New Capital	19,200	28,800	48,000
Less: Existing Capital	20,028	24,042	27,270
Net Effect	(828) to be withdrawn	4,758 to be brought in	20,730 to be brought in

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	10,800	A’s Capital A/c	828
D’s Capital A/c	19,200	Balance c/d	57,060
Premium for Goodwill A/c	2,400
B’s Capital A/c	4,758
C’s Capital A/c	20,730

	57,888		57,888

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock A/c		2,000	Land and Building A/c	5,000
Office Furniture A/c		100
Provision for Doubtful Debts A/c		800
Profit transferred to:
A’s Capital A/c	1,575
B’s Capital A/c	525	2,100
		5,000		5,000

Partners’ Capital Accounts
Dr.										Cr.
Particulars	A	B	C	Particulars		A	B		C
Advertisement Expenditure A/c	1,500	500		Balance b/d		30,000	16,000
Balance c/d	37,575	18,525	14,000	Bank A/c					14,000
				C’s Current A/c		3,000	1,000
				Revaluation A/c		1,575	525
				General Reserve A/c		4,500	1,500
	39,075	19,025	14,000			39,075	19,025		14,000

Current A/c		4,525		Balance b/d	37,575			18,525	14,000
Balance c/d	42,000	14,000	14,000	Current A/c	4,425
	42,000	18,525	14,000		42,000			18,525	14,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		37,500	Debtors	16,000
			Less: Provision for Doubtful Debts	800	15,200
			Land and Building (25,000 + 5,000)		30,000
Capital A/c:			Bills Receivable		3,000
A	42,000		Stock (20,000 – 2,000)		18,000
B	14,000		Furniture (1,000 – 100)		900
C	14,000	70,000	Cash at Bank		36,500
			Current A/c:
Current A/c:			A	4,425
B		4,525	C	4,000	8,425
		1,12,025			1,12,025

Working Notes

\begin{array}{l} C is admitted for \frac{1}{5} share \\ Let the total share = 1 \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}

\begin{array}{l} Old ratio = 3 : 1 \\ New profit sharing ratio \\ A = \frac{4}{5} \times \frac{3}{4} = \frac{12}{20} \\ B = \frac{4}{5} \times \frac{1}{4} = \frac{4}{20} \\ C = \frac{1}{5} or \frac{4}{20} \\ New profit sharing ratio = 3 : 1 : 1 \end{array}

\begin{array}{l} Total capital of the firm = Capital of new partner \times Reciprocal of his profit share \\ Total capital of the firm = 14, 000 \times \frac{5}{1} = 70, 000 \\ New Capital : \\ A = 70, 000 \times \frac{3}{5} = 42, 000 \\ B = 70, 000 \times \frac{1}{5} = 14, 000 \end{array}

Particulars	A	B
New Capital	42,000	14,000
Less: Existing Capital	37,575	18,525
Net Effect	4,425 to be brought in	(4,525) to be withdrawn

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	22,500	Balance c/d	36,500
C’s Capital A/c	14,000
	36,500		36,500

Question 87:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock A/c		2,000	Land and Building A/c	5,000
Office Furniture A/c		100
Provision for Doubtful Debts A/c		800
Profit transferred to:
A’s Capital A/c	1,575
B’s Capital A/c	525	2,100
		5,000		5,000

Partners’ Capital Accounts
Dr.										Cr.
Particulars	A	B	C	Particulars		A	B		C
Advertisement Expenditure A/c	1,500	500		Balance b/d		30,000	16,000
Balance c/d	37,575	18,525	14,000	Bank A/c					14,000
				C’s Current A/c		3,000	1,000
				Revaluation A/c		1,575	525
				General Reserve A/c		4,500	1,500
	39,075	19,025	14,000			39,075	19,025		14,000

Current A/c		4,525		Balance b/d	37,575			18,525	14,000
Balance c/d	42,000	14,000	14,000	Current A/c	4,425
	42,000	18,525	14,000		42,000			18,525	14,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		37,500	Debtors	16,000
			Less: Provision for Doubtful Debts	800	15,200
			Land and Building (25,000 + 5,000)		30,000
Capital A/c:			Bills Receivable		3,000
A	42,000		Stock (20,000 – 2,000)		18,000
B	14,000		Furniture (1,000 – 100)		900
C	14,000	70,000	Cash at Bank		36,500
			Current A/c:
Current A/c:			A	4,425
B		4,525	C	4,000	8,425
		1,12,025			1,12,025

Working Notes

\begin{array}{l} C is admitted for \frac{1}{5} share \\ Let the total share = 1 \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}

\begin{array}{l} Old ratio = 3 : 1 \\ New profit sharing ratio \\ A = \frac{4}{5} \times \frac{3}{4} = \frac{12}{20} \\ B = \frac{4}{5} \times \frac{1}{4} = \frac{4}{20} \\ C = \frac{1}{5} or \frac{4}{20} \\ New profit sharing ratio = 3 : 1 : 1 \end{array}

\begin{array}{l} Total capital of the firm = Capital of new partner \times Reciprocal of his profit share \\ Total capital of the firm = 14, 000 \times \frac{5}{1} = 70, 000 \\ New Capital : \\ A = 70, 000 \times \frac{3}{5} = 42, 000 \\ B = 70, 000 \times \frac{1}{5} = 14, 000 \end{array}

Particulars	A	B
New Capital	42,000	14,000
Less: Existing Capital	37,575	18,525
Net Effect	4,425 to be brought in	(4,525) to be withdrawn

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	22,500	Balance c/d	36,500
C’s Capital A/c	14,000
	36,500		36,500

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts	2,000	Building	5,000
Machinery	3,000	Bad Debts Recovered	3,500
Cash A/c	3,500

	8,500		8,500

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C
Current A/c	2,000	8,000		Balance b/d	50,000	32,000
Balance c/d	60,000	30,000	30,000	General Reserve	4,000	2,000
				Premium for Goodwill	8,000	4,000
				Cash			30,000
	62,000	38,000	30,000		62,000	38,000	30,000

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Bills Payable		19,000	Stock	10,000
Creditors		20,000	Machinery	23,000
A’s Current A/c		2,000	Debtors	47,000
B’s Current A/c		8,000	Building	45,000
Capital			Cash	44,000
A	60,000
B	30,000
C	30,000	1,20,000

		1,69,000		1,69,000

Working Notes:

WN 1:

$\begin{array}{l} Calculation of Adjustment of Capital: \\ C's Capital for \frac{1}{4} th share = Rs 30,000 \\ So, Total capital of the Firm would be = 30, 000 \times \frac{4}{1} = Rs 1,20,000 \\ After deducting C's Capital, \\ Total Capital of A and B would be =1,20,000 - 30,000=Rs 90,000 \\ A's New Capital = 90,000 \times \frac{2}{3} = Rs 60,000 \\ B's New Capital = 90,000 \times \frac{1}{3} = Rs 30,000 \end{array}$
WN 2: Calculation of Cash Balance

Cash Balance = 2,000 + 30,000 + 12,000 + 3,500 - 3,500 = Rs 44,000

Question 88:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts	2,000	Building	5,000
Machinery	3,000	Bad Debts Recovered	3,500
Cash A/c	3,500

	8,500		8,500

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C
Current A/c	2,000	8,000		Balance b/d	50,000	32,000
Balance c/d	60,000	30,000	30,000	General Reserve	4,000	2,000
				Premium for Goodwill	8,000	4,000
				Cash			30,000
	62,000	38,000	30,000		62,000	38,000	30,000

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Bills Payable		19,000	Stock	10,000
Creditors		20,000	Machinery	23,000
A’s Current A/c		2,000	Debtors	47,000
B’s Current A/c		8,000	Building	45,000
Capital			Cash	44,000
A	60,000
B	30,000
C	30,000	1,20,000

		1,69,000		1,69,000

Working Notes:

WN 1:

$\begin{array}{l} Calculation of Adjustment of Capital: \\ C's Capital for \frac{1}{4} th share = Rs 30,000 \\ So, Total capital of the Firm would be = 30, 000 \times \frac{4}{1} = Rs 1,20,000 \\ After deducting C's Capital, \\ Total Capital of A and B would be =1,20,000 - 30,000=Rs 90,000 \\ A's New Capital = 90,000 \times \frac{2}{3} = Rs 60,000 \\ B's New Capital = 90,000 \times \frac{1}{3} = Rs 30,000 \end{array}$
WN 2: Calculation of Cash Balance

Cash Balance = 2,000 + 30,000 + 12,000 + 3,500 - 3,500 = Rs 44,000

Answer:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		1,50,000
	To C’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				50,000
	(Capital and Goodwill amount brought in by C)

	Premium for Goodwill A/c	Dr.		50,000
	To A’s Capital A/c				30,000
	To B’s Capital A/c				20,000
	(Goodwill brought in by C credited to old partners’ capital accounts in their sacrificing ratio)

	Plant A/c	Dr.		10,000
	Creditors A/c	Dr.		7,000
	To Revaluation A/c				17,000
	(Plant value appreciated and creditors liability reduced)

	Revaluation A/c	Dr.		24,500
	To Provision for Doubtful Debts A/c				4,500
	To Liability for Compensation A/c				10,000
	To Stock A/c				10,000
	(Stock value decreased, provision against debtors created, workers liability increased)

	A’s Capital A/c	Dr.		4,500
	B’s Capital A/c	Dr.		3,000
	To Revaluation A/c				7,500
	(Revaluation loss distributed among old partners in their old ratio)

	General Reserve A/c	Dr.		50,000
	To A’s Capital A/c				30,000
	To B’s Capital A/c				20,000
	(General Reserve distributed between old partners in their old ratio)

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (75,000 – 7,000)		68,000	Debtors	90,000
Liability for Compensation		10,000	Less: Provision for Doubtful Debts	4,500	85,500
			Plant		1,60,000
Capital A/cs:			Patents		50,000
A	1,80,000		Stock		90,000
B	1,20,000		Cash at Bank (10,000 + 50,000 +1,00,000)		1,60,000
C	1,00,000	4,00,000

Current A/c:
A	25,500
B	42,000	67,500
		5,45,500			5,45,500

Working Notes

$\begin{array}{l} C is admitted for \frac{1}{4} share \\ Let the total share = 1 \\ Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \\ Old ratio = 60 : 40 or 3 : 2 \end{array}$

$\begin{array}{l} A = \frac{3}{4} \times \frac{3}{5} = \frac{9}{20} \\ B = \frac{3}{4} \times \frac{2}{5} = \frac{6}{20} \\ C = \frac{1}{4} or \frac{5}{20} \\ New profit sharing ratio = 9 : 6 : 5 \end{array}$

$\begin{array}{l} C is admitted for \frac{1}{4} share with 1, 00, 000 capital \\ Total capital of the firm = 1, 00, 000 \times 4 = 4, 00, 000 \\ New Capital : \\ A = 4, 00, 000 \times \frac{9}{20} = 1, 80, 000 \\ B = 4, 00, 000 \times \frac{6}{20} = 1, 20, 000 \end{array}$

Particulars	A	B
New Capital	1,80,000	1,20,000
Less: Existing Capital	2,05,500	1,62,000
Net Effect	(25,500) to be withdrawn	(42,000) to be withdrawn

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C

Revaluation A/c	4,500	3,000		Balance b/d	1,50,000	1,25,000
				Bank A/c			1,00,000
Balance c/d	2,05,500	1,62,000	1,00,000	Premium for Goodwill A/c	30,000	20,000
				General Reserve A/c	30,000	20,000

	2,10,000	1,65,000	1,00,000		2,10,000	1,65,000	1,00,000

Balance c/d	1,80,000	1,20,000	1,00,000	Balance b/d	2,05,500	1,62,000	1,00,000
Current A/c	25,500	42,000
	2,05,500	1,62,000	1,00,000		2,05,500	1,62,000	1,00,000

Question 89:

	Books of ….
	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		1,50,000
	To C’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				50,000
	(Capital and Goodwill amount brought in by C)

	Premium for Goodwill A/c	Dr.		50,000
	To A’s Capital A/c				30,000
	To B’s Capital A/c				20,000
	(Goodwill brought in by C credited to old partners’ capital accounts in their sacrificing ratio)

	Plant A/c	Dr.		10,000
	Creditors A/c	Dr.		7,000
	To Revaluation A/c				17,000
	(Plant value appreciated and creditors liability reduced)

	Revaluation A/c	Dr.		24,500
	To Provision for Doubtful Debts A/c				4,500
	To Liability for Compensation A/c				10,000
	To Stock A/c				10,000
	(Stock value decreased, provision against debtors created, workers liability increased)

	A’s Capital A/c	Dr.		4,500
	B’s Capital A/c	Dr.		3,000
	To Revaluation A/c				7,500
	(Revaluation loss distributed among old partners in their old ratio)

	General Reserve A/c	Dr.		50,000
	To A’s Capital A/c				30,000
	To B’s Capital A/c				20,000
	(General Reserve distributed between old partners in their old ratio)

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (75,000 – 7,000)		68,000	Debtors	90,000
Liability for Compensation		10,000	Less: Provision for Doubtful Debts	4,500	85,500
			Plant		1,60,000
Capital A/cs:			Patents		50,000
A	1,80,000		Stock		90,000
B	1,20,000		Cash at Bank (10,000 + 50,000 +1,00,000)		1,60,000
C	1,00,000	4,00,000

Current A/c:
A	25,500
B	42,000	67,500
		5,45,500			5,45,500

Working Notes

$\begin{array}{l} C is admitted for \frac{1}{4} share \\ Let the total share = 1 \\ Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \\ Old ratio = 60 : 40 or 3 : 2 \end{array}$

$\begin{array}{l} A = \frac{3}{4} \times \frac{3}{5} = \frac{9}{20} \\ B = \frac{3}{4} \times \frac{2}{5} = \frac{6}{20} \\ C = \frac{1}{4} or \frac{5}{20} \\ New profit sharing ratio = 9 : 6 : 5 \end{array}$

$\begin{array}{l} C is admitted for \frac{1}{4} share with 1, 00, 000 capital \\ Total capital of the firm = 1, 00, 000 \times 4 = 4, 00, 000 \\ New Capital : \\ A = 4, 00, 000 \times \frac{9}{20} = 1, 80, 000 \\ B = 4, 00, 000 \times \frac{6}{20} = 1, 20, 000 \end{array}$

Particulars	A	B
New Capital	1,80,000	1,20,000
Less: Existing Capital	2,05,500	1,62,000
Net Effect	(25,500) to be withdrawn	(42,000) to be withdrawn

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C

Revaluation A/c	4,500	3,000		Balance b/d	1,50,000	1,25,000
				Bank A/c			1,00,000
Balance c/d	2,05,500	1,62,000	1,00,000	Premium for Goodwill A/c	30,000	20,000
				General Reserve A/c	30,000	20,000

	2,10,000	1,65,000	1,00,000		2,10,000	1,65,000	1,00,000

Balance c/d	1,80,000	1,20,000	1,00,000	Balance b/d	2,05,500	1,62,000	1,00,000
Current A/c	25,500	42,000
	2,05,500	1,62,000	1,00,000		2,05,500	1,62,000	1,00,000

Answer:

Let the total share be = 1

$\begin{array}{l} Z is admitted for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}$

Total combined capital of X and Y after adjustment = 2,40,000 + 1,80,000 = Rs 4,20,000

$\begin{array}{l} Total capital of the firm =Total combined capital of X and Y \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 4,20,000 × \frac{5}{4} = 5,25,000 \\ Z's share of capital = Total Capital of the firm \times Profit share of the new partner \\ Z's share of capital = 5,25,000 × \frac{1}{5} = Rs 1,05,000 \end{array}$

Question 90:

Let the total share be = 1

$\begin{array}{l} Z is admitted for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}$

Total combined capital of X and Y after adjustment = 2,40,000 + 1,80,000 = Rs 4,20,000

$\begin{array}{l} Total capital of the firm =Total combined capital of X and Y \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 4,20,000 × \frac{5}{4} = 5,25,000 \\ Z's share of capital = Total Capital of the firm \times Profit share of the new partner \\ Z's share of capital = 5,25,000 × \frac{1}{5} = Rs 1,05,000 \end{array}$

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts A/c		5,000	Land and Building A/c	25,000
Profit transferred to:			Stock A/c	10,000
X’s Capital A/c	18,000
Y’s Capital A/c	12,000	30,000
		35,000		35,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

Balance c/d	85,000	60,000	36,250	Balance b/d	25,000	20,000
				Bank A/c			36,250
				Premium for Goodwill A/c	15,000	10,000
				General Reserve A/c	21,000	14,000
				Workmen Compensation Reserve A/c	6,000	4,000
				Revaluation A/c	18,000	12,000
	85,000	60,000	36,250		85,000	60,000	36,250

Balance Sheet (after Z’s admission) as on ….
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	30,000
Workmen Compensation Reserve		5,000	Less: Provision for Doubtful Debts	7,500	22,500
			Land and Building		45,000
Capital A/c:			Plant and Machinery		25,000
X	85,000		Stock (30,000 + 10,000)		40,000
Y	60,000		Cash at Bank		83,750
Z	36,250	1,81,250

		2,16,250			2,16,250

Working Notes

Let the total share be = 1

$\begin{array}{l} Z is admitted for \frac{1}{5} share, i.e. 20% \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}$

Total Capital of X and Y after adjustment = 85,000 + 60,000 = Rs 1,45,000

$\begin{array}{l} Total capital of the firm =Total combined capital of X and Y \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 1,45,000 × \frac{5}{4} = 1,81,250 \\ Z's share of capital = Total Capital of the firm \times Profit share of the new partner \\ Z's share of capital = 1,81,250 × \frac{1}{5} = 36,250 \end{array}$

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	22,500	Balance c/d	83,750
C’s Capital A/c	36,250
Premium for Goodwill A/c	25,000
	83,750		83,750

Question 91:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts A/c		5,000	Land and Building A/c	25,000
Profit transferred to:			Stock A/c	10,000
X’s Capital A/c	18,000
Y’s Capital A/c	12,000	30,000
		35,000		35,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

Balance c/d	85,000	60,000	36,250	Balance b/d	25,000	20,000
				Bank A/c			36,250
				Premium for Goodwill A/c	15,000	10,000
				General Reserve A/c	21,000	14,000
				Workmen Compensation Reserve A/c	6,000	4,000
				Revaluation A/c	18,000	12,000
	85,000	60,000	36,250		85,000	60,000	36,250

Balance Sheet (after Z’s admission) as on ….
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	30,000
Workmen Compensation Reserve		5,000	Less: Provision for Doubtful Debts	7,500	22,500
			Land and Building		45,000
Capital A/c:			Plant and Machinery		25,000
X	85,000		Stock (30,000 + 10,000)		40,000
Y	60,000		Cash at Bank		83,750
Z	36,250	1,81,250

		2,16,250			2,16,250

Working Notes

Let the total share be = 1

$\begin{array}{l} Z is admitted for \frac{1}{5} share, i.e. 20% \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \end{array}$

Total Capital of X and Y after adjustment = 85,000 + 60,000 = Rs 1,45,000

$\begin{array}{l} Total capital of the firm =Total combined capital of X and Y \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 1,45,000 × \frac{5}{4} = 1,81,250 \\ Z's share of capital = Total Capital of the firm \times Profit share of the new partner \\ Z's share of capital = 1,81,250 × \frac{1}{5} = 36,250 \end{array}$

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	22,500	Balance c/d	83,750
C’s Capital A/c	36,250
Premium for Goodwill A/c	25,000
	83,750		83,750

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Stock A/c	1,150	Provision for Doubtful Debts A/c		2,000
Furniture A/c	1,500	Loss transferred to:
Outstanding Liabilities A/c	1,000	A’s Capital A/c	990
		B’s Capital A/c	660	1,650
	3,650			3,650

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Investment A/c	6,000	4,000		Balance b/d	35,000	30,000
Revaluation A/c	990	660		Cash A/c			23,450
Balance c/d	40,310	30,040	23,450	Premium for Goodwill A/c	6,300	700
				General Reserve A/c	6,000	4,000
	47,300	34,700	23,450		47,300	34,700	23,450

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		37,000	Debtors	19,000
			Furniture (15,000 – 1,500)	13,500
			Investments (20,000 – 10,000)	10,000
Capital A/c:			Machinery	33,000
X	40,310		Stock (23,000 – 1,150)	21,850
Y	30,040		Cash	33,450
Z	23,450	93,800

		1,30,800		1,30,800

Working Notes

WN 1: Calculation of Capital
Let the total share be 1

$\begin{array}{l} C is admitted for \frac{1}{4} share \\ Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \end{array}$

Total Capital of A and B after adjustment = 40,310 + 30,040 = Rs 70,350

$\begin{array}{l} Total capital of the firm =Total combined capital of A and B \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 70,350 × \frac{4}{3} = 93,800 \\ C's share of capital = Total Capital of the firm \times Profit share of the new partner \\ C's share of capital = 93,800 × \frac{1}{4} = 23,450 \end{array}$

WN 2: Calculation of Sacrificing Ratio

$\begin{array}{l} Sacrificing Ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrificing ratio = 9 : 1 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	12,000	Bank Loan A/c	9,000
C’s Capital A/c	23,450
Premium for Goodwill A/c	7,000	Balance c/d	33,450

	42,450		42,450

Question 92:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Stock A/c	1,150	Provision for Doubtful Debts A/c		2,000
Furniture A/c	1,500	Loss transferred to:
Outstanding Liabilities A/c	1,000	A’s Capital A/c	990
		B’s Capital A/c	660	1,650
	3,650			3,650

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Investment A/c	6,000	4,000		Balance b/d	35,000	30,000
Revaluation A/c	990	660		Cash A/c			23,450
Balance c/d	40,310	30,040	23,450	Premium for Goodwill A/c	6,300	700
				General Reserve A/c	6,000	4,000
	47,300	34,700	23,450		47,300	34,700	23,450

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		37,000	Debtors	19,000
			Furniture (15,000 – 1,500)	13,500
			Investments (20,000 – 10,000)	10,000
Capital A/c:			Machinery	33,000
X	40,310		Stock (23,000 – 1,150)	21,850
Y	30,040		Cash	33,450
Z	23,450	93,800

		1,30,800		1,30,800

Working Notes

WN 1: Calculation of Capital
Let the total share be 1

$\begin{array}{l} C is admitted for \frac{1}{4} share \\ Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \end{array}$

Total Capital of A and B after adjustment = 40,310 + 30,040 = Rs 70,350

$\begin{array}{l} Total capital of the firm =Total combined capital of A and B \times Reciprocal of Share of Old Partners \\ Total capital of the firm = 70,350 × \frac{4}{3} = 93,800 \\ C's share of capital = Total Capital of the firm \times Profit share of the new partner \\ C's share of capital = 93,800 × \frac{1}{4} = 23,450 \end{array}$

WN 2: Calculation of Sacrificing Ratio

$\begin{array}{l} Sacrificing Ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrificing ratio = 9 : 1 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	12,000	Bank Loan A/c	9,000
C’s Capital A/c	23,450
Premium for Goodwill A/c	7,000	Balance c/d	33,450

	42,450		42,450

Answer:

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

	Revaluation A/c	Dr.		14,700
	To Typewriter A/c				1,000
	To Fixed Assets A/c				13,700
	(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

	Stationery A/c	Dr.		1,000
	Investment A/c	Dr.		2,000
	To Revaluation A/c				3,000
	(Increase in stationery and investment transferred to Revaluation Account)

	X’s Capital A/c	Dr.		7,800
	Y’s Capital A/c	Dr.		3,900
	To Revaluation A/c				11,700
	(Revaluation loss transferred to X and Y’s Capital Account in their old ratio)

	Reserve Fund A/c	Dr.		18,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				6,000
	(Reserve Fund distributed)

	Cash A/c	Dr.		55,000
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				15,000
	(Z brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		15,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				5,000
	(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		2,500
	To Cash				7,500
	(Half of the Premium for Goodwill withdrawn by X and Y)

	X’s Capital A/c	Dr.		10,000
	To Investments A/c				10,000
	(X took over the Investment)

	Cash A/c	Dr.		4,800
	To X’s Capital A/c				4,800
	(X’ brought cash to make up deficiency in capital)

	Y’s Capital A/c	Dr.		26,600
	To Cash A/c				26,600
	(Y withdrew excess capital after all adjustments)

	Cash A/c	Dr.		1,000
	To Bad Debts Recovered A/c				1,000
	(Amount received from customer which was written-of as Bad Debts)

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	X’s Capital (Goodwill)	5,000
Z’s Capital	40,000	Y’s Capital (Goodwill)	2,500
Premium for Goodwill	15,000	Y’s Capital	26,600
Bad Debts Recovered	1,000
X’s Capital	5,800	Balance c/d	32,700
	66,800		66,800

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Typewriter (5,000 × 20%)	1,000	Investment	2,000
Fixed Assets (1,37,000 × 10%)	13,700	Stationery	1,000
		Loss transferred to
		X Capital	7,800
		Y Capital	3,900
	14,700		14,700

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	7,800	3,900		Balance b/d	75,000	62,000
Investment	10,000			Reserve Fund	12,000	6,000
Cash (withdraw of goodwill)	5,000	2,500		Cash			40,000
Balance c/d	74,200	66,600	40,000	Premium for Goodwill	10,000	5,000
	97,000	73,000	40,000		97,000	73,000	40,000
Cash		26,600		Balance b/d	74,200	66,600	40,000
Balance c/d adjusted	80,000	40,000	40,000	Cash	5,800
	80,000	66,600	40,000		80,000	66,600	40,000

Balance Sheet as on March 31, 2016 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		25,000	Cash	32,700
Capital A/cs:			Sundry Debtors	15,000
X	80,000		Stock	10,000
Y	40,000		Typewriter (5,000 – 1,000)	4,000
Z	40,000	1,60,000	Fixed Assets (1,37,000 – 13,700)	1,23,300


		1,85,000		1,85,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Revaluation Loss

WN3: Distribution of Premium for Goodwill

WN4: Adjustment of Capital

Total Capital of the firm on the basis of Z’s share

Total Capital of the firm	=	1,60,000
Less: Z’s Capital	=	40,000
Combined Capital of X and Y	=	1,20,000

Question 93:

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

	Revaluation A/c	Dr.		14,700
	To Typewriter A/c				1,000
	To Fixed Assets A/c				13,700
	(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

	Stationery A/c	Dr.		1,000
	Investment A/c	Dr.		2,000
	To Revaluation A/c				3,000
	(Increase in stationery and investment transferred to Revaluation Account)

	X’s Capital A/c	Dr.		7,800
	Y’s Capital A/c	Dr.		3,900
	To Revaluation A/c				11,700
	(Revaluation loss transferred to X and Y’s Capital Account in their old ratio)

	Reserve Fund A/c	Dr.		18,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				6,000
	(Reserve Fund distributed)

	Cash A/c	Dr.		55,000
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				15,000
	(Z brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		15,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				5,000
	(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		2,500
	To Cash				7,500
	(Half of the Premium for Goodwill withdrawn by X and Y)

	X’s Capital A/c	Dr.		10,000
	To Investments A/c				10,000
	(X took over the Investment)

	Cash A/c	Dr.		4,800
	To X’s Capital A/c				4,800
	(X’ brought cash to make up deficiency in capital)

	Y’s Capital A/c	Dr.		26,600
	To Cash A/c				26,600
	(Y withdrew excess capital after all adjustments)

	Cash A/c	Dr.		1,000
	To Bad Debts Recovered A/c				1,000
	(Amount received from customer which was written-of as Bad Debts)

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	X’s Capital (Goodwill)	5,000
Z’s Capital	40,000	Y’s Capital (Goodwill)	2,500
Premium for Goodwill	15,000	Y’s Capital	26,600
Bad Debts Recovered	1,000
X’s Capital	5,800	Balance c/d	32,700
	66,800		66,800

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Typewriter (5,000 × 20%)	1,000	Investment	2,000
Fixed Assets (1,37,000 × 10%)	13,700	Stationery	1,000
		Loss transferred to
		X Capital	7,800
		Y Capital	3,900
	14,700		14,700

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	7,800	3,900		Balance b/d	75,000	62,000
Investment	10,000			Reserve Fund	12,000	6,000
Cash (withdraw of goodwill)	5,000	2,500		Cash			40,000
Balance c/d	74,200	66,600	40,000	Premium for Goodwill	10,000	5,000
	97,000	73,000	40,000		97,000	73,000	40,000
Cash		26,600		Balance b/d	74,200	66,600	40,000
Balance c/d adjusted	80,000	40,000	40,000	Cash	5,800
	80,000	66,600	40,000		80,000	66,600	40,000

Balance Sheet as on March 31, 2016 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		25,000	Cash	32,700
Capital A/cs:			Sundry Debtors	15,000
X	80,000		Stock	10,000
Y	40,000		Typewriter (5,000 – 1,000)	4,000
Z	40,000	1,60,000	Fixed Assets (1,37,000 – 13,700)	1,23,300


		1,85,000		1,85,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Revaluation Loss

WN3: Distribution of Premium for Goodwill

WN4: Adjustment of Capital

Total Capital of the firm on the basis of Z’s share

Total Capital of the firm	=	1,60,000
Less: Z’s Capital	=	40,000
Combined Capital of X and Y	=	1,20,000

Answer:

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2016
Apr. 01	Revaluation A/c	Dr.		18,000
	To Investments A/c				12,000
	To Plant A/c				6,000
	(Decrease in investments and plant transferred to Revaluation Account)

Apr. 01	Creditors A/c	Dr.		3,000
	To Revaluation A/c				3,000
	(Decrease in creditors transferred to Revaluation Account)

Apr. 01	Hari’s Capital A/c	Dr.		7,500
	Ram’s Capital A/c	Dr.		7,500
	To Revaluation A/c				15,000
	(Revaluation loss distributed between Hari and Ram in their old ratio i.e. 1:1)

Apr. 01	Bank A/c	Dr.		63,000
	To Suraj’s Capital A/c				23,000
	To Premium for Goodwill A/c				40,000
	(Suraj brought capital and share of goodwill)

Apr. 01	Premium for Goodwill A/c	Dr.		40,000
	To Hari’s Capital A/c				40,000
	(Goodwill brought by Suraj transferred to Hari’s Capital Account)

Apr. 01	Hari’s Capital A/c	Dr.		30,000
	To Bank A/c				30,000
	(Hari withdraw Rs 30,000 on account of goodwill)
2017
Mar. 31	Profit and Loss appropriate A/c	Dr.		60,000
	To Hari’s Capital A/c				20,000
	To Ram’s Capital A/c				30,000
	To Suraj’s Capital A/c				10,000
	(Profit earned after Suraj’s admission distributed)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investments (30,000 – 18,000)	12,000	Creditors	3,000
Plant (35,000 – 29,000)	6,000	Loss transferred to
		Hari Capital	7,500
		Ram Capital	7,500
	18,000		18,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Hari	Ram	Suraj	Particulars	Hari	Ram	Suraj
Revaluation	7,500	7,500		Balance b/d	60,000	60,000
Bank (withdrawal of Goodwill)	30,000			Premium for Goodwill	40,000
Balance c/d	62,500	52,500
	1,00,000	60,000			1,00,000	60,000
Bank (Drawings)	15,000	22,500	7,500	Balance c/d	62,500	52,500
				Bank			23,000
Balance c/d	67,500	60,000	25,500	Profit and Loss Appropriation	20,000	30,000	10,000
	82,500	82,500	33,000		82,500	82,500	33,000

Balance Sheet as on March 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (1,05,000 – 3,000)		1,02,000	Cash at Bank	88,000
Capital A/cs:			Book Debts	60,000
Hari	67,500		Stock	50,000
Ram	60,000		Investments (30,000 – 12,000)	18,000
Suraj	25,500	1,53,000	Furniture	10,000
			Plant	29,000
		2,55,000		2,55,000

Working Notes

WN1

Hari Sacrifices share in favour of Suraj

WN2

Calculation of Suraj’s Capital

Let the combined share of all partners be = 1

Combined share of Hari and Ram = 1 − Suraj’s share

Combined Capital of Hari and Ram after all adjustments = 62,500 + 52,500 = Rs 1,15,000

WN3

Distribution of Profit earned after Suraj’s admission

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	40,000	Hari’s Capital (Goodwill)	30,000
Suraj’s Capital	23,000	Hari’s Capital (Drawings)	15,000
Premium for Goodwill	40,000	Ram’s Capital (Drawings)	22,500
Revenue (Profit)	60,000	Suraj’s Capital (Drawings)	7,500
		Balance c/d	88,000
	1,63,000		1,63,000

WN4

Journal entry for recording drawings of partners

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Hari’s Capital A/c	Dr.		15,000
Ram’s Capital A/c	Dr.		22,500
Suraj’s Capital A/c	Dr.		7,500
To Bank A/c				45,000
(Drawings made by partners)

Question 94:

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2016
Apr. 01	Revaluation A/c	Dr.		18,000
	To Investments A/c				12,000
	To Plant A/c				6,000
	(Decrease in investments and plant transferred to Revaluation Account)

Apr. 01	Creditors A/c	Dr.		3,000
	To Revaluation A/c				3,000
	(Decrease in creditors transferred to Revaluation Account)

Apr. 01	Hari’s Capital A/c	Dr.		7,500
	Ram’s Capital A/c	Dr.		7,500
	To Revaluation A/c				15,000
	(Revaluation loss distributed between Hari and Ram in their old ratio i.e. 1:1)

Apr. 01	Bank A/c	Dr.		63,000
	To Suraj’s Capital A/c				23,000
	To Premium for Goodwill A/c				40,000
	(Suraj brought capital and share of goodwill)

Apr. 01	Premium for Goodwill A/c	Dr.		40,000
	To Hari’s Capital A/c				40,000
	(Goodwill brought by Suraj transferred to Hari’s Capital Account)

Apr. 01	Hari’s Capital A/c	Dr.		30,000
	To Bank A/c				30,000
	(Hari withdraw Rs 30,000 on account of goodwill)
2017
Mar. 31	Profit and Loss appropriate A/c	Dr.		60,000
	To Hari’s Capital A/c				20,000
	To Ram’s Capital A/c				30,000
	To Suraj’s Capital A/c				10,000
	(Profit earned after Suraj’s admission distributed)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investments (30,000 – 18,000)	12,000	Creditors	3,000
Plant (35,000 – 29,000)	6,000	Loss transferred to
		Hari Capital	7,500
		Ram Capital	7,500
	18,000		18,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Hari	Ram	Suraj	Particulars	Hari	Ram	Suraj
Revaluation	7,500	7,500		Balance b/d	60,000	60,000
Bank (withdrawal of Goodwill)	30,000			Premium for Goodwill	40,000
Balance c/d	62,500	52,500
	1,00,000	60,000			1,00,000	60,000
Bank (Drawings)	15,000	22,500	7,500	Balance c/d	62,500	52,500
				Bank			23,000
Balance c/d	67,500	60,000	25,500	Profit and Loss Appropriation	20,000	30,000	10,000
	82,500	82,500	33,000		82,500	82,500	33,000

Balance Sheet as on March 31, 2017
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (1,05,000 – 3,000)		1,02,000	Cash at Bank	88,000
Capital A/cs:			Book Debts	60,000
Hari	67,500		Stock	50,000
Ram	60,000		Investments (30,000 – 12,000)	18,000
Suraj	25,500	1,53,000	Furniture	10,000
			Plant	29,000
		2,55,000		2,55,000

Working Notes

WN1

Hari Sacrifices share in favour of Suraj

WN2

Calculation of Suraj’s Capital

Let the combined share of all partners be = 1

Combined share of Hari and Ram = 1 − Suraj’s share

Combined Capital of Hari and Ram after all adjustments = 62,500 + 52,500 = Rs 1,15,000

WN3

Distribution of Profit earned after Suraj’s admission

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	40,000	Hari’s Capital (Goodwill)	30,000
Suraj’s Capital	23,000	Hari’s Capital (Drawings)	15,000
Premium for Goodwill	40,000	Ram’s Capital (Drawings)	22,500
Revenue (Profit)	60,000	Suraj’s Capital (Drawings)	7,500
		Balance c/d	88,000
	1,63,000		1,63,000

WN4

Journal entry for recording drawings of partners

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Hari’s Capital A/c	Dr.		15,000
Ram’s Capital A/c	Dr.		22,500
Suraj’s Capital A/c	Dr.		7,500
To Bank A/c				45,000
(Drawings made by partners)

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		100	Building A/c	6,350
Stock		750
Furniture		500
Profit transferred to:
A’s Capital A/c	3,000
B’s Capital A/c	2,000	5,000
		6,350		6,350

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C

Balance c/d	40,500	23,500	21,000	Balance b/d	29,000	15,000
				Bank A/c			21,000
				Premium for Goodwill A/c	2,500	2,500
				Revaluation A/c	3,000	2,000
				General Reserve A/c	3,000	2,000
				Workmen Compensation Reserve A/c	3,000	2,000

	40,500	23,500	21,000		40,500	23,500	21,000

Balance c/d	52,500	31,500	21,000	Balance b/d	40,500	23,500	21,000
				Cash A/c	12,000	8,000
	52,500	31,500	21,000		52,500	31,500	21,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	9,400
Outstanding Expenses		2,500	Less: Provision for Doubtful Debts	500	8,900
			Machinery		9,000
			Building		51,350
			Furniture (5,000 – 500)		4,500
Capital A/c:			Stock (15,000 – 750)		14,250
A	52,500		Cash		49,500
B	31,500
C	21,000	1,05,000

		1,37,500			1,37,500

Working Notes:

WN 1: Calculation of Goodwill

$\begin{array}{l} Total Capital of the firm = A’s Capital + B’s Capital + C’s Capital + General Reserve +Workmen Compensation Reserve + Revaluation Profit \\ Total Capital of the firm = 29, 000 + 15, 000 + 21, 000 + 5, 000 + 5, 000 + 5, 000 = 80, 000 \end{array}$

$\begin{array}{l} Capital of the firm = Capital of New Partner \times Reciprocal of his profit share \\ Capital of the firm = 21,000 × 5 = Rs 1,05,000 \\ Goodwill = 1,05,000 - 80,000 = Rs 25,000 \\ C's share of goodwill = 25,000 × \frac{1}{5} = 5,000 \end{array}$

WN 2: Calculation of Sacrificing Ratio

Old ratio = 3 : 2

New ratio = 5 : 3 : 2

$\begin{array}{l} Sacrifice made by A = \frac{3}{5} - \frac{5}{10} = \frac{1}{10} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \end{array}$

Therefore, sacrificing ratio between A and B is 1 : 1.

WN 3: Calculation of New Capital and Adjustment for Cash

$\begin{array}{l} New Capital \\ A = 1,05,000 × \frac{5}{10} = 52,500 \\ B = 1,05,000 × \frac{3}{10} = 31,500 \end{array}$

Particulars	A	B
New Capital	52,500	31,500
Less: Existing Capital	40,500	23,500
Net Effect	12,000 to be brought in	8,000 to be brought in

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	3,500	Balance c/d	49,500
C’s Capital A/c	21,000
Premium for Goodwill A/c	5,000
Amit’s Capital A/c	12,000
Sumit’s Capital A/c	8,000
	49,500		49,500

Question 95:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		100	Building A/c	6,350
Stock		750
Furniture		500
Profit transferred to:
A’s Capital A/c	3,000
B’s Capital A/c	2,000	5,000
		6,350		6,350

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C

Balance c/d	40,500	23,500	21,000	Balance b/d	29,000	15,000
				Bank A/c			21,000
				Premium for Goodwill A/c	2,500	2,500
				Revaluation A/c	3,000	2,000
				General Reserve A/c	3,000	2,000
				Workmen Compensation Reserve A/c	3,000	2,000

	40,500	23,500	21,000		40,500	23,500	21,000

Balance c/d	52,500	31,500	21,000	Balance b/d	40,500	23,500	21,000
				Cash A/c	12,000	8,000
	52,500	31,500	21,000		52,500	31,500	21,000

Balance Sheet as on April 01, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	9,400
Outstanding Expenses		2,500	Less: Provision for Doubtful Debts	500	8,900
			Machinery		9,000
			Building		51,350
			Furniture (5,000 – 500)		4,500
Capital A/c:			Stock (15,000 – 750)		14,250
A	52,500		Cash		49,500
B	31,500
C	21,000	1,05,000

		1,37,500			1,37,500

Working Notes:

WN 1: Calculation of Goodwill

$\begin{array}{l} Total Capital of the firm = A’s Capital + B’s Capital + C’s Capital + General Reserve +Workmen Compensation Reserve + Revaluation Profit \\ Total Capital of the firm = 29, 000 + 15, 000 + 21, 000 + 5, 000 + 5, 000 + 5, 000 = 80, 000 \end{array}$

$\begin{array}{l} Capital of the firm = Capital of New Partner \times Reciprocal of his profit share \\ Capital of the firm = 21,000 × 5 = Rs 1,05,000 \\ Goodwill = 1,05,000 - 80,000 = Rs 25,000 \\ C's share of goodwill = 25,000 × \frac{1}{5} = 5,000 \end{array}$

WN 2: Calculation of Sacrificing Ratio

Old ratio = 3 : 2

New ratio = 5 : 3 : 2

$\begin{array}{l} Sacrifice made by A = \frac{3}{5} - \frac{5}{10} = \frac{1}{10} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \end{array}$

Therefore, sacrificing ratio between A and B is 1 : 1.

WN 3: Calculation of New Capital and Adjustment for Cash

$\begin{array}{l} New Capital \\ A = 1,05,000 × \frac{5}{10} = 52,500 \\ B = 1,05,000 × \frac{3}{10} = 31,500 \end{array}$

Particulars	A	B
New Capital	52,500	31,500
Less: Existing Capital	40,500	23,500
Net Effect	12,000 to be brought in	8,000 to be brought in

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	3,500	Balance c/d	49,500
C’s Capital A/c	21,000
Premium for Goodwill A/c	5,000
Amit’s Capital A/c	12,000
Sumit’s Capital A/c	8,000
	49,500		49,500

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Profit transferred to:			Plant and Machinery A/c	14,000
Ishu’s Capital A/c	18,480		Provision for Doubtful Debts A/c	7,000
Vishu’s Capital A/c	12,320	30,800	Creditors A/c	9,800
		30,800		30,800

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Ishu	Vishu	Nishu	Particulars	Ishu	Vishu	Nishu

				Balance b/d	1,19,000	1,12,000
				Bank A/c			56,000
Balance c/d	1,53,080	1,34,720	56,000	Premium for Goodwill A/c	8,400	5,600
				Revaluation A/c	18,480	12,320
				General Reserve A/c	6,000	4,000
				Investment Fluctuation Reserve A/c	1,200	800

	1,53,080	1,34,720	56,000		1,53,080	1,34,720	56,000

Cash A/c		22,720		Balance b/d	1,53,080	1,34,720	56,000
Balance c/d	1,68,000	1,12,000	56,000	Cash A/c	14,920
	1,68,000	1,34,720	56,000		1,68,000	1,34,720	56,000

Balance Sheet as on April 01, 2015 after Nishu’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (66,000 – 9,800)		56,200	Debtors	42,000
			Plant and Machinery (70,000 + 14,000)	84,000
			Building	98,000
Capital A/cs:			Investments	19,000
Ishu	1,68,000		Cash at Bank	1,49,200
Vishu	1,12,000
Nishu	56,000	3,36,000

		3,92,200		3,92,200

Working Notes

WN 1: Calculation of New Profit Sharing Ratio

Let the total share be 1

$Nishu is admitted for \frac{1}{6}$

$\begin{array}{l} Remaining share = 1- \frac{1}{6} = \frac{5}{6} \\ Old ratio = 3 : 2 \\ New Profit sharing ratio : \\ Ishu = \frac{3}{5} × \frac{5}{6} = \frac{15}{30} \\ Vishu = \frac{2}{5} × \frac{5}{6} = \frac{10}{30} \\ Nishu = \frac{1}{6} or \frac{5}{30} \end{array}$

NPR = 15 : 10 : 5 or 3 : 2 : 1

WN 2: Calculation of New Capital

$\begin{array}{l} Nishu's is admitted for \frac{1}{6} share with 56,000 capital \\ Total capital of the firm = 56,000 × \frac{6}{1} = 3,36,000 \end{array}$

$\begin{array}{l} Ishu = \frac{3}{6} × 3,36,000 = 1,68,000 \\ Vishu = \frac{2}{6} × 3,36,000 = 1,12,000 \end{array}$

WN 3: Adjustment for Cash

Ishu = 1,68,000 – 1,53,080 = 14,920 (To be brought in)

Vishu = 1,12,000 – 1,34,720 = (22,720) (To be withdrawn)

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	87,000	Vishu’s Capital A/c	22,720
Nishu’s Capital A/c	56,000	Balance c/d	1,49,200
Premium for Goodwill A/c	14,000
Ishu’s Capital A/c	14,920
	1,71,920		1,71,920

Question 96:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Profit transferred to:			Plant and Machinery A/c	14,000
Ishu’s Capital A/c	18,480		Provision for Doubtful Debts A/c	7,000
Vishu’s Capital A/c	12,320	30,800	Creditors A/c	9,800
		30,800		30,800

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Ishu	Vishu	Nishu	Particulars	Ishu	Vishu	Nishu

				Balance b/d	1,19,000	1,12,000
				Bank A/c			56,000
Balance c/d	1,53,080	1,34,720	56,000	Premium for Goodwill A/c	8,400	5,600
				Revaluation A/c	18,480	12,320
				General Reserve A/c	6,000	4,000
				Investment Fluctuation Reserve A/c	1,200	800

	1,53,080	1,34,720	56,000		1,53,080	1,34,720	56,000

Cash A/c		22,720		Balance b/d	1,53,080	1,34,720	56,000
Balance c/d	1,68,000	1,12,000	56,000	Cash A/c	14,920
	1,68,000	1,34,720	56,000		1,68,000	1,34,720	56,000

Balance Sheet as on April 01, 2015 after Nishu’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (66,000 – 9,800)		56,200	Debtors	42,000
			Plant and Machinery (70,000 + 14,000)	84,000
			Building	98,000
Capital A/cs:			Investments	19,000
Ishu	1,68,000		Cash at Bank	1,49,200
Vishu	1,12,000
Nishu	56,000	3,36,000

		3,92,200		3,92,200

Working Notes

WN 1: Calculation of New Profit Sharing Ratio

Let the total share be 1

$Nishu is admitted for \frac{1}{6}$

$\begin{array}{l} Remaining share = 1- \frac{1}{6} = \frac{5}{6} \\ Old ratio = 3 : 2 \\ New Profit sharing ratio : \\ Ishu = \frac{3}{5} × \frac{5}{6} = \frac{15}{30} \\ Vishu = \frac{2}{5} × \frac{5}{6} = \frac{10}{30} \\ Nishu = \frac{1}{6} or \frac{5}{30} \end{array}$

NPR = 15 : 10 : 5 or 3 : 2 : 1

WN 2: Calculation of New Capital

$\begin{array}{l} Nishu's is admitted for \frac{1}{6} share with 56,000 capital \\ Total capital of the firm = 56,000 × \frac{6}{1} = 3,36,000 \end{array}$

$\begin{array}{l} Ishu = \frac{3}{6} × 3,36,000 = 1,68,000 \\ Vishu = \frac{2}{6} × 3,36,000 = 1,12,000 \end{array}$

WN 3: Adjustment for Cash

Ishu = 1,68,000 – 1,53,080 = 14,920 (To be brought in)

Vishu = 1,12,000 – 1,34,720 = (22,720) (To be withdrawn)

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	87,000	Vishu’s Capital A/c	22,720
Nishu’s Capital A/c	56,000	Balance c/d	1,49,200
Premium for Goodwill A/c	14,000
Ishu’s Capital A/c	14,920
	1,71,920		1,71,920

Answer:

Revaluation Account
Dr.													Cr.
Particulars				Amount Rs		Particulars					Amount Rs
Stock				70,000		Provision for Doubtful Debts					5,000
Profit :						Building					50,000
X			21,000			Bad Debts Recovered					40,000
Y			14,000	35,000		Accrued Income					10,000

				1,05,000							1,05,000

Partners’ Capital Accounts
Dr.												Cr.
Particulars	X	Y			Z		Particulars	X	Y	Z

Advertisement	6,000	4,000					Balance b/d	1,76,000	2,54,000
Goodwill	6,000	4,000					Revaluation A/c	21,000	14,000
Bank A/c (b/fig.)		20,000					Premium for Goodwill	72,000	36,000
Balance c/d	4,00,000	3,00,000			3,00,000		Z’s Current A/c	48,000	24,000
							Z’s Loan A/c			3,00,000
							Bank A/c (b/fig.)	95,000
	4,12,000	3,28,000			3,00,000			4,12,000	3,28,000	3,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Investment Fluctuation Reserve		5,000	Investment		45,000
Workmen Compensation Reserve		10,000	Stock		2,30,000
Claim for Workmen Compensation		10,000	Bank		4,73,000
X’s Current A/c		3,000	Debtors	1,00,000
Y’s Current A/c		1,500	Less : Prov. for DD	5,000	95,000
Capital			Building		1,10,000
X	4,00,000		Accrued Income		10,000
Y	3,00,000		Z’s Current A/c		76,500
Z	3,00,000	10,00,000
Employees Provident fund		10,000
		10,39,500			10,39,500

Working Notes:

WN 1: Calculation of Sacrificing and New Ratio

$\begin{array}{l} X's Sacrifice = \frac{3}{5} × \frac{1}{3} = \frac{1}{5} \\ Y's Sacrifice = \frac{1}{10} \\ X:Y = 2:1 \\ X's New Share = \frac{3}{5} - \frac{1}{5} = \frac{2}{5} × \frac{2}{2} = \frac{4}{10} \\ Y's New Share = \frac{2}{5} - \frac{1}{10} = \frac{3}{10} \\ Z's New Share = \frac{1}{5} + \frac{1}{10} = \frac{3}{10} \\ X:Y:Z = 4:3:3 \end{array}$

WN 2: Calculation of Goodwill

$\begin{array}{l} Average Profit = Rs 9,30,000 = \frac{4, 80, 000 + 9, 30, 000 + 13, 80, 000}{3} \\ Normal Profit = Rs 6,30,000 \\ Super Profit = Rs 3,00,000 = 9,30,000 - 6,30,000 \\ Goodwill = 3, 0 0,000 \times 2 = Rs 6,00,000 \end{array}$

WN 3 :Treatment of Reserves

$\begin{array}{l} Workmen Compensation Reserve and Investment Fluctuation Reserve = 10,000 + 5,000 = Rs 15,000 \\ R's share in Workmen Compensation Reserve and Investment Fluctuation Reserve = 15,000 \times \frac{3}{10} = Rs 4,500 \\ Rs 4,500 to be shared by X&Y in the ratio of 2:1 \end{array}$

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

	Z’s Current A/c	Dr.		4,500
	To X’s Current A/c				3,000
	To Y’s Current A/c				1,500
	(Adjustment entry made for Workmen Compensation Reserve and Investment Fluctuation Reserve)

WN4: Adjustment of Capitals

$\begin{array}{l} Z's Capital for \frac{3}{10} th share = Rs 3,00,000 ( Loan of Z) \\ So, Total capital of the firm would be = 3, 00, 000 \times \frac{10}{3} = Rs 10,00,000 \\ X's new Capital = 10, 00,000 \times \frac{4}{10} = Rs 4,00,000 \\ Y's new Capital = 10, 00,000 \times \frac{3}{10} = Rs 3,00,000 \end{array}$

WN 5: Amount of Bank Balance

Closing Bank Balance = 2,50,000 + 1,08,000 + 95,000 + 40,000 - 20,000 = Rs 4,73,000

WN 6: Amount to be transferred to Z’s Current A/c

Amount to be transferred to Z’s Current A/c = 48,000 + 24,000 + 4,500 = Rs 76,500

WN 7: Calculation of Goodwill brought in by Z
$Z' s share = \frac{3}{10} \times 6, 00, 000 = 1, 80, 000$
$Amount brought in cash = 60 % \times 1, 80, 000 = 1, 08, 000$
$X' s Capital A / c = \frac{2}{3} \times 1, 08, 000 = 72, 000$
$Y' s Capital A / c = \frac{1}{3} \times 1, 08, 000 = 36, 000$

Question 97:

Revaluation Account
Dr.													Cr.
Particulars				Amount Rs		Particulars					Amount Rs
Stock				70,000		Provision for Doubtful Debts					5,000
Profit :						Building					50,000
X			21,000			Bad Debts Recovered					40,000
Y			14,000	35,000		Accrued Income					10,000

				1,05,000							1,05,000

Partners’ Capital Accounts
Dr.												Cr.
Particulars	X	Y			Z		Particulars	X	Y	Z

Advertisement	6,000	4,000					Balance b/d	1,76,000	2,54,000
Goodwill	6,000	4,000					Revaluation A/c	21,000	14,000
Bank A/c (b/fig.)		20,000					Premium for Goodwill	72,000	36,000
Balance c/d	4,00,000	3,00,000			3,00,000		Z’s Current A/c	48,000	24,000
							Z’s Loan A/c			3,00,000
							Bank A/c (b/fig.)	95,000
	4,12,000	3,28,000			3,00,000			4,12,000	3,28,000	3,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Investment Fluctuation Reserve		5,000	Investment		45,000
Workmen Compensation Reserve		10,000	Stock		2,30,000
Claim for Workmen Compensation		10,000	Bank		4,73,000
X’s Current A/c		3,000	Debtors	1,00,000
Y’s Current A/c		1,500	Less : Prov. for DD	5,000	95,000
Capital			Building		1,10,000
X	4,00,000		Accrued Income		10,000
Y	3,00,000		Z’s Current A/c		76,500
Z	3,00,000	10,00,000
Employees Provident fund		10,000
		10,39,500			10,39,500

Working Notes:

WN 1: Calculation of Sacrificing and New Ratio

$\begin{array}{l} X's Sacrifice = \frac{3}{5} × \frac{1}{3} = \frac{1}{5} \\ Y's Sacrifice = \frac{1}{10} \\ X:Y = 2:1 \\ X's New Share = \frac{3}{5} - \frac{1}{5} = \frac{2}{5} × \frac{2}{2} = \frac{4}{10} \\ Y's New Share = \frac{2}{5} - \frac{1}{10} = \frac{3}{10} \\ Z's New Share = \frac{1}{5} + \frac{1}{10} = \frac{3}{10} \\ X:Y:Z = 4:3:3 \end{array}$

WN 2: Calculation of Goodwill

$\begin{array}{l} Average Profit = Rs 9,30,000 = \frac{4, 80, 000 + 9, 30, 000 + 13, 80, 000}{3} \\ Normal Profit = Rs 6,30,000 \\ Super Profit = Rs 3,00,000 = 9,30,000 - 6,30,000 \\ Goodwill = 3, 0 0,000 \times 2 = Rs 6,00,000 \end{array}$

WN 3 :Treatment of Reserves

$\begin{array}{l} Workmen Compensation Reserve and Investment Fluctuation Reserve = 10,000 + 5,000 = Rs 15,000 \\ R's share in Workmen Compensation Reserve and Investment Fluctuation Reserve = 15,000 \times \frac{3}{10} = Rs 4,500 \\ Rs 4,500 to be shared by X&Y in the ratio of 2:1 \end{array}$

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

	Z’s Current A/c	Dr.		4,500
	To X’s Current A/c				3,000
	To Y’s Current A/c				1,500
	(Adjustment entry made for Workmen Compensation Reserve and Investment Fluctuation Reserve)

WN4: Adjustment of Capitals

$\begin{array}{l} Z's Capital for \frac{3}{10} th share = Rs 3,00,000 ( Loan of Z) \\ So, Total capital of the firm would be = 3, 00, 000 \times \frac{10}{3} = Rs 10,00,000 \\ X's new Capital = 10, 00,000 \times \frac{4}{10} = Rs 4,00,000 \\ Y's new Capital = 10, 00,000 \times \frac{3}{10} = Rs 3,00,000 \end{array}$

WN 5: Amount of Bank Balance

Closing Bank Balance = 2,50,000 + 1,08,000 + 95,000 + 40,000 - 20,000 = Rs 4,73,000

WN 6: Amount to be transferred to Z’s Current A/c

Amount to be transferred to Z’s Current A/c = 48,000 + 24,000 + 4,500 = Rs 76,500

WN 7: Calculation of Goodwill brought in by Z
$Z' s share = \frac{3}{10} \times 6, 00, 000 = 1, 80, 000$
$Amount brought in cash = 60 % \times 1, 80, 000 = 1, 08, 000$
$X' s Capital A / c = \frac{2}{3} \times 1, 08, 000 = 72, 000$
$Y' s Capital A / c = \frac{1}{3} \times 1, 08, 000 = 36, 000$

Answer:

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

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				20,000
	(Goodwill written-off)

	Revaluation A/c	Dr.		10,000
	To Plant A/c				6,000
	To Stock A/c				1,000
	To Reserve for Doubtful Debts A/c				3,000
	(Decrease in Plant and stock and creation of Reserve for Doubtful Debts transferred to Revaluation Account)

	A’s Capital A/c	Dr.		7,500
	B’s Capital A/c	Dr.		2,500
	To Revaluation A/c				10,000
	(Revaluation loss transferred to partners’ capital accounts in old ratio)

	Bank A/c	Dr.		55,000
	To C’s Capital A/c				35,000
	To Premium for Goodwill A/c				20,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		20,000
	To A’s Capital A/c				15,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed between A and B in sacrificing ratio)

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant (30,000 ´ 20%)	6,000
Stock (10,000 ´ 10%)	1,000	Loss transferred to
Reserve for Doubtful Debts	3,000	A Capital	7,500
(30,000 ´ 10%)		B Capital	2,500
	10,000		10,000

Partners’ Capital Accounts
Particulars	A	B	C	Particulars	A	B	C
Goodwill	15,000	5,000		Balance b/d	50,000	30,000
Revaluation (Loss)	7,500	2,500		Premium for Goodwill	15,000	5,000
Balance c/d	42,500	27,500
	65,000	35,000			65,000	35,000
				Balance c/d	42,500	27,50
Balance c/d	42,500	27,500	35,000	Bank			35,000
	42,500	27,500	35,000		42,500	27,500	35,000

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Plant (30,000 – 6,000)		24,000
A	42,500		Stock (10,000 – 1,000)		9,000
B	27,500		Debtors	30,000
C	35,000	1,05,000	Less: Reserve for D. Debts	3,000	27,000
Sundry Creditors		20,000	Cash at Bank		65,000

		1,25,000			1,25,000

Working Notes

WN1

WN2

Writing-off of Goodwill

WN3

Distribution of Premium for Goodwill

WN4

Calculation of C’s share of capital

Combined Capital of A and B after adjustments = 42,500 + 27,500
= 70,000

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000
C’s Capital	35,000
Premium for Goodwill	20,000	Balance c/d	65,000

	65,000		65,000

Question 98:

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

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				20,000
	(Goodwill written-off)

	Revaluation A/c	Dr.		10,000
	To Plant A/c				6,000
	To Stock A/c				1,000
	To Reserve for Doubtful Debts A/c				3,000
	(Decrease in Plant and stock and creation of Reserve for Doubtful Debts transferred to Revaluation Account)

	A’s Capital A/c	Dr.		7,500
	B’s Capital A/c	Dr.		2,500
	To Revaluation A/c				10,000
	(Revaluation loss transferred to partners’ capital accounts in old ratio)

	Bank A/c	Dr.		55,000
	To C’s Capital A/c				35,000
	To Premium for Goodwill A/c				20,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		20,000
	To A’s Capital A/c				15,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed between A and B in sacrificing ratio)

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant (30,000 ´ 20%)	6,000
Stock (10,000 ´ 10%)	1,000	Loss transferred to
Reserve for Doubtful Debts	3,000	A Capital	7,500
(30,000 ´ 10%)		B Capital	2,500
	10,000		10,000

Partners’ Capital Accounts
Particulars	A	B	C	Particulars	A	B	C
Goodwill	15,000	5,000		Balance b/d	50,000	30,000
Revaluation (Loss)	7,500	2,500		Premium for Goodwill	15,000	5,000
Balance c/d	42,500	27,500
	65,000	35,000			65,000	35,000
				Balance c/d	42,500	27,50
Balance c/d	42,500	27,500	35,000	Bank			35,000
	42,500	27,500	35,000		42,500	27,500	35,000

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Plant (30,000 – 6,000)		24,000
A	42,500		Stock (10,000 – 1,000)		9,000
B	27,500		Debtors	30,000
C	35,000	1,05,000	Less: Reserve for D. Debts	3,000	27,000
Sundry Creditors		20,000	Cash at Bank		65,000

		1,25,000			1,25,000

Working Notes

WN1

WN2

Writing-off of Goodwill

WN3

Distribution of Premium for Goodwill

WN4

Calculation of C’s share of capital

Combined Capital of A and B after adjustments = 42,500 + 27,500
= 70,000

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000
C’s Capital	35,000
Premium for Goodwill	20,000	Balance c/d	65,000

	65,000		65,000

Answer:

Partner’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	3,00,000	3,00,000
				Bank			2,00,000
				Premium for Goodwill	16,000	4,000
Balance c/d	3,16,000	3,04,000	2,00,000
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000
Bank	1,16,000	1,04,000		Balance b/d	3,16,000	3,04,000	2,00,000
Balance c/d	2,00,000	2,00,000	2,00,000
Proportionate
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Sundry Creditors		60,000	Cash at Bank	40,000
Outstanding Expenses		15,000	Sundry Debtors	36,000
Capital A/cs:			Stock	84,000
A	2,00,000		Furniture and Fittings	65,000
B	2,00,000		Plant and Machinery	4,50,000
C	2,00,000	6,00,000
		6,75,000		6,75,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Cash	40,000	A’s Capital	1,16,000
C’s Capital	2,00,000	B’s Capital	1,04,000
Premium for Goodwill	20,000
		Balance c/d	40,000
	2,60,000		2,60,000

Calculation of Goodwill

Goodwill = Super Profit × Number of Years Purchases

= 30,000 × 2 = Rs 60,000

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Premium for Goodwill	Dr.		20,000
To A’s Capital A/C	Dr.			16,000
To B’s Capital A/c				4,000
(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e. 4:1)

Calculation of Proportionate Capital

Capital of the firm is Rs 6,00,000

Question 99:

Partner’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	3,00,000	3,00,000
				Bank			2,00,000
				Premium for Goodwill	16,000	4,000
Balance c/d	3,16,000	3,04,000	2,00,000
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000
Bank	1,16,000	1,04,000		Balance b/d	3,16,000	3,04,000	2,00,000
Balance c/d	2,00,000	2,00,000	2,00,000
Proportionate
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Sundry Creditors		60,000	Cash at Bank	40,000
Outstanding Expenses		15,000	Sundry Debtors	36,000
Capital A/cs:			Stock	84,000
A	2,00,000		Furniture and Fittings	65,000
B	2,00,000		Plant and Machinery	4,50,000
C	2,00,000	6,00,000
		6,75,000		6,75,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Cash	40,000	A’s Capital	1,16,000
C’s Capital	2,00,000	B’s Capital	1,04,000
Premium for Goodwill	20,000
		Balance c/d	40,000
	2,60,000		2,60,000

Calculation of Goodwill

Goodwill = Super Profit × Number of Years Purchases

= 30,000 × 2 = Rs 60,000

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Premium for Goodwill	Dr.		20,000
To A’s Capital A/C	Dr.			16,000
To B’s Capital A/c				4,000
(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e. 4:1)

Calculation of Proportionate Capital

Capital of the firm is Rs 6,00,000

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant	7,000	Building	14,000
Provision for D. Debts (1,000 – 300)	700
Profit transferred to
Jain Capital	3,600
Gupta Capital	2,700
	14,000		14,000

Partner’s Capital Accounts
Dr.							Cr.
	Jain	Gupta	Mishra	Particulars	Jain	Gupta	Mishra
				Balance b/d	70,000	60,000
				Revaluation	3,600	2,700
Balance c/d	85,600	71,700		Premium for Goodwill	12,000	9,000
	85,600	71,700			85,600	71,700
				Balance b/d	85,600	71,700
				Cash			52,433
Balance c/d	85,600	71,700	52,433
	85,600	71,700	52,433		85,600	71,700	52,433

Balance Sheet as on April 01, 2017 after Mishra’s admission
Liabilities		Amount Rs	Particulars		Amount Rs

Sundry Creditors		20,000	Cash		88,233
Bills Payable		3,000	Debtors	20,500
Bank Over draft		17,000	Less: Prov. for D. Debts	1,000	19,500
Capital A/cs:			Stock		20,000
Jain	85,600		Plant (40,000 – 7,000)		33,000
Gupta	71,700		Building (75,000 + 14,000)		89,000
Mishra	52,433	2,09,733
		2,49,733			2,49,733

Working Notes

WN1

WN2

Distribution of Revaluation Profit

WN3

Calculation of Mishra’s Capital

Combined Capital of Jain and Gupta after all adjustments = 85,600 + 71,700 = Rs 1,57,300

WN4

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	14,800
Mishra’s Capital A/c	52,433
Premium for Goodwill	21,000	Balance c/d	88,233
	88,233		88,233

Question 100:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant	7,000	Building	14,000
Provision for D. Debts (1,000 – 300)	700
Profit transferred to
Jain Capital	3,600
Gupta Capital	2,700
	14,000		14,000

Partner’s Capital Accounts
Dr.							Cr.
	Jain	Gupta	Mishra	Particulars	Jain	Gupta	Mishra
				Balance b/d	70,000	60,000
				Revaluation	3,600	2,700
Balance c/d	85,600	71,700		Premium for Goodwill	12,000	9,000
	85,600	71,700			85,600	71,700
				Balance b/d	85,600	71,700
				Cash			52,433
Balance c/d	85,600	71,700	52,433
	85,600	71,700	52,433		85,600	71,700	52,433

Balance Sheet as on April 01, 2017 after Mishra’s admission
Liabilities		Amount Rs	Particulars		Amount Rs

Sundry Creditors		20,000	Cash		88,233
Bills Payable		3,000	Debtors	20,500
Bank Over draft		17,000	Less: Prov. for D. Debts	1,000	19,500
Capital A/cs:			Stock		20,000
Jain	85,600		Plant (40,000 – 7,000)		33,000
Gupta	71,700		Building (75,000 + 14,000)		89,000
Mishra	52,433	2,09,733
		2,49,733			2,49,733

Working Notes

WN1

WN2

Distribution of Revaluation Profit

WN3

Calculation of Mishra’s Capital

Combined Capital of Jain and Gupta after all adjustments = 85,600 + 71,700 = Rs 1,57,300

WN4

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	14,800
Mishra’s Capital A/c	52,433
Premium for Goodwill	21,000	Balance c/d	88,233
	88,233		88,233

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Plant and Machinery A/c		2,000	Land and Building A/c	4,000
			Provision for Doubtful Debts A/c	4,000
Profit transferred to:
Neha’s Capital A/c	3,600
Tara’s Capital A/c	2,400	6,000
		8,000		8,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	Neha	Tara	Prachi	Particulars	Neha	Tara	Prachi

Balance c/d	26,600	22,400	12,250	Balance b/d	8,000	10,000
				Bank A/c			12,250
				Premium for Goodwill A/c	6,000	4,000
				General Reserve A/c	7,200	4,800
				Workmen Compensation Fund A/c	1,800	1,200
				Revaluation A/c	3,600	2,400
	26,600	22,400	12,250		26,600	22,400	12,250

Balance Sheet as on April 01, 2012 after Prachi’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		15,000	Debtors	19,000
Workmen Compensation Reserve		2,000	Land and Building	18,000
			Plant and Machinery (12,000 – 2,000)	10,000
Capital A/c:			Stock	6,000
Neha	26,600		Cash	25,250
Tara	22,400
Prachi	12,250	61,250

		78,250		78,250

Working Notes

$\begin{array}{l} Let the total share = 1 \\ Prachi enters for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \\ Total adjusted capital of Neha and Tara = 26,600 + 22,400 = 49,000 \\ Total capital of the firm = Total combined Capital of Neha and Tara \times Reciprocal of their combined share \\ Total capital of the firm = 49,000 × \frac{5}{4} = 61,250 \\ Prachi's share of capital = 61,250 × \frac{1}{5} = 12,250 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	3,000	Balance c/d	25,250
Prachi’s Capital A/c	12,250
Premium for Goodwill A/c	10,000

	25,250		25,250

Question 101:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Plant and Machinery A/c		2,000	Land and Building A/c	4,000
			Provision for Doubtful Debts A/c	4,000
Profit transferred to:
Neha’s Capital A/c	3,600
Tara’s Capital A/c	2,400	6,000
		8,000		8,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	Neha	Tara	Prachi	Particulars	Neha	Tara	Prachi

Balance c/d	26,600	22,400	12,250	Balance b/d	8,000	10,000
				Bank A/c			12,250
				Premium for Goodwill A/c	6,000	4,000
				General Reserve A/c	7,200	4,800
				Workmen Compensation Fund A/c	1,800	1,200
				Revaluation A/c	3,600	2,400
	26,600	22,400	12,250		26,600	22,400	12,250

Balance Sheet as on April 01, 2012 after Prachi’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		15,000	Debtors	19,000
Workmen Compensation Reserve		2,000	Land and Building	18,000
			Plant and Machinery (12,000 – 2,000)	10,000
Capital A/c:			Stock	6,000
Neha	26,600		Cash	25,250
Tara	22,400
Prachi	12,250	61,250

		78,250		78,250

Working Notes

$\begin{array}{l} Let the total share = 1 \\ Prachi enters for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \\ Total adjusted capital of Neha and Tara = 26,600 + 22,400 = 49,000 \\ Total capital of the firm = Total combined Capital of Neha and Tara \times Reciprocal of their combined share \\ Total capital of the firm = 49,000 × \frac{5}{4} = 61,250 \\ Prachi's share of capital = 61,250 × \frac{1}{5} = 12,250 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	3,000	Balance c/d	25,250
Prachi’s Capital A/c	12,250
Premium for Goodwill A/c	10,000

	25,250		25,250

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Plant and Machinery A/c		5,000	Land and Building A/c	13,000
Outstanding Repairs A/c		100	Provision for doubtful debts A/c	500
Profit transferred to:			Creditors A/c	1,200
A’s Capital A/c	6,000
B’s Capital A/c	3,600	9,600
		14,700		14,700

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Goodwill A/c	6,250	3,750		Balance b/d	55,000	30,000
Investment A/c	6,250	3,750		Bank A/c			23,350
Cash A/c		2,400		Premium for Goodwill A/c	3,250	1,950
				General Reserve A/c	10,000	6,000
Balance c/d	61,750	31,650	23,350	Revaluation A/c	6,000	3,600
	74,250	41,550	23,350		74,250	41,550	23,350

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (19,000 – 1,200)		17,800	Debtors	25,000
Bills Payable		8,000	Land and Building	38,000
Outstanding Salaries		2,400	Plant and Machinery	30,000
Provision for Bad and Doubtful Debts		1,000	Investments	4,000
Outstanding Repairs		100	Prepaid Insurance	500
Capital A/cs:			Stock	20,000
A	61,750		Cash	28,550
B	31,650
C	23,350	1,16,750

		1,46,050		1,46,050

Working Notes

$\begin{array}{l} Let the total share = 1 \\ C enters for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \\ Total adjusted capital of A and B = 61,750 + 31,650 = 93,400 \\ Total capital of the firm = Total combined capital of A and B \times Reciprocal of their profit share \\ Total capital of the firm = 93,400 × \frac{5}{4} = 1,16,750 \\ Prachi's share of capital = 1,16,750 × \frac{1}{5} = 23,350 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,400	B’s Capital A/c	2,400
C’s Capital A/c	23,350
Premium for Goodwill A/c	5,200
		Balance c/d	28,550
	31,250		31,250

Question 102:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Plant and Machinery A/c		5,000	Land and Building A/c	13,000
Outstanding Repairs A/c		100	Provision for doubtful debts A/c	500
Profit transferred to:			Creditors A/c	1,200
A’s Capital A/c	6,000
B’s Capital A/c	3,600	9,600
		14,700		14,700

Partners’ Capital Accounts
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C

Goodwill A/c	6,250	3,750		Balance b/d	55,000	30,000
Investment A/c	6,250	3,750		Bank A/c			23,350
Cash A/c		2,400		Premium for Goodwill A/c	3,250	1,950
				General Reserve A/c	10,000	6,000
Balance c/d	61,750	31,650	23,350	Revaluation A/c	6,000	3,600
	74,250	41,550	23,350		74,250	41,550	23,350

Balance Sheet as on April 01, 2016 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (19,000 – 1,200)		17,800	Debtors	25,000
Bills Payable		8,000	Land and Building	38,000
Outstanding Salaries		2,400	Plant and Machinery	30,000
Provision for Bad and Doubtful Debts		1,000	Investments	4,000
Outstanding Repairs		100	Prepaid Insurance	500
Capital A/cs:			Stock	20,000
A	61,750		Cash	28,550
B	31,650
C	23,350	1,16,750

		1,46,050		1,46,050

Working Notes

$\begin{array}{l} Let the total share = 1 \\ C enters for \frac{1}{5} share \\ Remaining share = 1 - \frac{1}{5} = \frac{4}{5} \\ Total adjusted capital of A and B = 61,750 + 31,650 = 93,400 \\ Total capital of the firm = Total combined capital of A and B \times Reciprocal of their profit share \\ Total capital of the firm = 93,400 × \frac{5}{4} = 1,16,750 \\ Prachi's share of capital = 1,16,750 × \frac{1}{5} = 23,350 \end{array}$

Cash Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,400	B’s Capital A/c	2,400
C’s Capital A/c	23,350
Premium for Goodwill A/c	5,200
		Balance c/d	28,550
	31,250		31,250

Answer:

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

62,000

Provision for Doubtful Debts

10,000

Profit transferred to:

Building

2,00,000

X

88,800

Y

59,200

1,48,000

2,10,000

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

12,000

8,000

Balance b/d

3,52,000

5,08,000

Goodwill

40,800

27,200

Revaluation

88,800

59,200

Balance c/d

7,08,000

6,92,000

6,00,000

Premium for Goodwill

1,92,000

96,000

Z’s Current A/c

1,28,000

64,000

Bank A/c

6,00,000

7,60,800

7,27,200

6,00,000

7,60,800

7,27,200

6,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Investment Fluctuation Reserve		10,000	Investment		90,000
Workmen Compensation Reserve		20,000	Stock		5,38,000
Claim for Workmen Compensation		20,000	Debtors	2,00,000
Z’s Loan A/c		6,00,000	Less : Provision for DD	10,000	1,90,000
X’s Current A/c		6,000	Building		3,20,000
Y’s Current A/c		3,000	Bank (5,00,000 + 6,00,000 + 2,88,000)		13,88,000
Capital			Z’s Current A/c		2,01,000
X	7,08,000
Y	6,92,000
Z	6,00,000	20,00,000
Employees Provident Fund		68,000
		27,27,000			27,27,000

Working Notes:

WN 1: Calculation of Sacrificing Ratio

$\begin{array}{l} X's Sacrifice = \frac{3}{5} - \frac{4}{10} = \frac{2}{10} \\ Y's Sacrifice = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ X:Y=2:1 \end{array}$

WN 2: Calculation of Goodwill

$\begin{array}{l} Average Profit = \frac{9, 60, 000 + 18, 60, 000 + 27, 60, 000}{3} = Rs 18,60,000 \\ Normal Profit = Rs 10,60,000 \\ Super Profit =18,60,000 - 10,60,000 = Rs 8,00,000 \\ Goodwill = 8, 0 0,000 \times 2 =Rs 16,00,000 \end{array}$

WN 3: Treatment of Reserves

$\begin{array}{l} Workmen Compensation Reserve and Investment Fluctuation Reserve = 20,000 +10,000 = R s 30,000 \\ Z's share in Workmen Compensation Reserve and Investment Fluctuation Reserve = 30,000 \times \frac{3}{10} = Rs 9,000 \\ Rs 9,000 to be shared by X and Y in the ratio of 2:1 \end{array}$

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

	Z’s Current A/c	Dr.		9,000
	To X’s Current A/c				6,000
	To Y’s Current A/c				3,000
	(Adjustment entry made for Workmen Compensation Reserve and Investment Fluctuation Reserve)

WN 4: Calculation of Z’s Capital

$\begin{array}{l} X and Y's Capital for \frac{7}{10} th share = 7,08,000+6,92,000 = Rs 14,00,000 \\ So, Z's Capital would be 14, 00, 000 \times \frac{10}{7} \times \frac{3}{10} = Rs 6,00,000 \end{array}$

WN 5: Amount of Goodwill and Capital brought in by Z
(a) $Z' s share in goodwill = \frac{3}{10} \times 16, 00, 000 = 4, 80, 000$
     $Amount brought in cash = 4, 80, 000 \times \frac{60}{100} = 2, 88, 000$

(b) Amount credited to Partners' Capital A/c:
      $X' s Capital A / c = 2, 88, 000 \times \frac{2}{3} = 1, 92, 000$
      $Y' s Capital A / c = 2, 88, 000 \times \frac{1}{3} = 96, 000$

(c) Amount adjusted with Current A/c
$Amount debited to Z' s Current A / c = 4, 80, 000 \times \frac{40}{100} = 1, 92, 000$
$Amount credited to X' s A / c = 1, 92, 000 \times \frac{2}{3} = 1, 28, 000$
$Amount credited to Y' s A / c = 1, 92, 000 \times \frac{1}{3} = 64, 000$

(d) Amount of Capital to be brought in by Z
      Net Capital of X and Y for 7/10 share of Capital = 14,00,000
      $Total Capital of Firm = 14, 00, 000 \times \frac{10}{7} = 20, 00, 000$
      $Z' s Share of Capital = 20, 00, 000 \times \frac{3}{10} = 6, 00, 000$

WN 6: Z Current A/c = 1,28,000 + 64,000 + 9,000 = 2,01,000

Question 103:

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stock

62,000

Provision for Doubtful Debts

10,000

Profit transferred to:

Building

2,00,000

X

88,800

Y

59,200

1,48,000

2,10,000

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

12,000

8,000

Balance b/d

3,52,000

5,08,000

Goodwill

40,800

27,200

Revaluation

88,800

59,200

Balance c/d

7,08,000

6,92,000

6,00,000

Premium for Goodwill

1,92,000

96,000

Z’s Current A/c

1,28,000

64,000

Bank A/c

6,00,000

7,60,800

7,27,200

6,00,000

7,60,800

7,27,200

6,00,000

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs
Investment Fluctuation Reserve		10,000	Investment		90,000
Workmen Compensation Reserve		20,000	Stock		5,38,000
Claim for Workmen Compensation		20,000	Debtors	2,00,000
Z’s Loan A/c		6,00,000	Less : Provision for DD	10,000	1,90,000
X’s Current A/c		6,000	Building		3,20,000
Y’s Current A/c		3,000	Bank (5,00,000 + 6,00,000 + 2,88,000)		13,88,000
Capital			Z’s Current A/c		2,01,000
X	7,08,000
Y	6,92,000
Z	6,00,000	20,00,000
Employees Provident Fund		68,000
		27,27,000			27,27,000

Working Notes:

WN 1: Calculation of Sacrificing Ratio

$\begin{array}{l} X's Sacrifice = \frac{3}{5} - \frac{4}{10} = \frac{2}{10} \\ Y's Sacrifice = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ X:Y=2:1 \end{array}$

WN 2: Calculation of Goodwill

$\begin{array}{l} Average Profit = \frac{9, 60, 000 + 18, 60, 000 + 27, 60, 000}{3} = Rs 18,60,000 \\ Normal Profit = Rs 10,60,000 \\ Super Profit =18,60,000 - 10,60,000 = Rs 8,00,000 \\ Goodwill = 8, 0 0,000 \times 2 =Rs 16,00,000 \end{array}$

WN 3: Treatment of Reserves

$\begin{array}{l} Workmen Compensation Reserve and Investment Fluctuation Reserve = 20,000 +10,000 = R s 30,000 \\ Z's share in Workmen Compensation Reserve and Investment Fluctuation Reserve = 30,000 \times \frac{3}{10} = Rs 9,000 \\ Rs 9,000 to be shared by X and Y in the ratio of 2:1 \end{array}$

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

	Z’s Current A/c	Dr.		9,000
	To X’s Current A/c				6,000
	To Y’s Current A/c				3,000
	(Adjustment entry made for Workmen Compensation Reserve and Investment Fluctuation Reserve)

WN 4: Calculation of Z’s Capital

$\begin{array}{l} X and Y's Capital for \frac{7}{10} th share = 7,08,000+6,92,000 = Rs 14,00,000 \\ So, Z's Capital would be 14, 00, 000 \times \frac{10}{7} \times \frac{3}{10} = Rs 6,00,000 \end{array}$

WN 5: Amount of Goodwill and Capital brought in by Z
(a) $Z' s share in goodwill = \frac{3}{10} \times 16, 00, 000 = 4, 80, 000$
     $Amount brought in cash = 4, 80, 000 \times \frac{60}{100} = 2, 88, 000$

(b) Amount credited to Partners' Capital A/c:
      $X' s Capital A / c = 2, 88, 000 \times \frac{2}{3} = 1, 92, 000$
      $Y' s Capital A / c = 2, 88, 000 \times \frac{1}{3} = 96, 000$

(c) Amount adjusted with Current A/c
$Amount debited to Z' s Current A / c = 4, 80, 000 \times \frac{40}{100} = 1, 92, 000$
$Amount credited to X' s A / c = 1, 92, 000 \times \frac{2}{3} = 1, 28, 000$
$Amount credited to Y' s A / c = 1, 92, 000 \times \frac{1}{3} = 64, 000$

(d) Amount of Capital to be brought in by Z
      Net Capital of X and Y for 7/10 share of Capital = 14,00,000
      $Total Capital of Firm = 14, 00, 000 \times \frac{10}{7} = 20, 00, 000$
      $Z' s Share of Capital = 20, 00, 000 \times \frac{3}{10} = 6, 00, 000$

WN 6: Z Current A/c = 1,28,000 + 64,000 + 9,000 = 2,01,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts		2,000	Land and Building	10,000
Profit transferred to:			Stock	4,000
A’s Capital A/c	7,200
B’s Capital A/c	4,800	12,000
		14,000		14,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Profit and Loss A/c	3,000	2,000		Balance b/d	10,000	10,000
Balance c/d	34,000	26,000	15,000	Cash A/c (WN3)			15,000
				Premium for Goodwill A/c	6,000	4,000
				Revaluation A/c	7,200	4,800
				General Reserve A/c	9,000	6,000
				Workmen Compensation Reserve A/c	4,800	3,200
	34,000	26,000	15,000		34,000	26,000	15,000

Balance Sheet as at April 01, 2017
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Plant and Machinery		10,000
A	34,000		Land and Building	8,000
B	26,000		Add: Appreciation	10,000	18,000
C	15,000	75,000	Debtors	12,000
Workmen Compensation Claim		2,000	Less: Provision for DD	3,000	9,000
Creditors		10,000	Stock		16,000
			Cash (9,000 + 15,000 + 10,000)		34,000
		87,000			87,000

Working Notes:

WN 1: Calculation of adjusted capital balances of A and B

Adjusted Capital of A = 34,000

Adjusted Capital of B = 26,000

Combined Capital of A and B = Rs 60,000

WN 2: Calculation of Total Capital of New Firm

WN 3: Calculation of C’s Capital

Question 104:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts		2,000	Land and Building	10,000
Profit transferred to:			Stock	4,000
A’s Capital A/c	7,200
B’s Capital A/c	4,800	12,000
		14,000		14,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Profit and Loss A/c	3,000	2,000		Balance b/d	10,000	10,000
Balance c/d	34,000	26,000	15,000	Cash A/c (WN3)			15,000
				Premium for Goodwill A/c	6,000	4,000
				Revaluation A/c	7,200	4,800
				General Reserve A/c	9,000	6,000
				Workmen Compensation Reserve A/c	4,800	3,200
	34,000	26,000	15,000		34,000	26,000	15,000

Balance Sheet as at April 01, 2017
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Plant and Machinery		10,000
A	34,000		Land and Building	8,000
B	26,000		Add: Appreciation	10,000	18,000
C	15,000	75,000	Debtors	12,000
Workmen Compensation Claim		2,000	Less: Provision for DD	3,000	9,000
Creditors		10,000	Stock		16,000
			Cash (9,000 + 15,000 + 10,000)		34,000
		87,000			87,000

Working Notes:

WN 1: Calculation of adjusted capital balances of A and B

Adjusted Capital of A = 34,000

Adjusted Capital of B = 26,000

Combined Capital of A and B = Rs 60,000

WN 2: Calculation of Total Capital of New Firm

WN 3: Calculation of C’s Capital

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		5,000	Land and Building A/c	1,00,000
Stock A/c		60,000	Investments A/c	5,000
Profit transferred to:
Amit’s Capital A/c	24,000
Sumit’s Capital A/c	16,000	40,000
		1,05,000		1,05,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Amit	Sumit	Puneet	Particulars	Amit	Sumit	Puneet

Cash A/c	60,000	30,000		Balance b/d	1,76,000	2,54,000
				Loan from Puneet’s A/c			3,00,000
Balance c/d	2,18,000	2,82,000	3,00,000	Premium for Goodwill A/c	60,000	30,000
				Revaluation A/c	24,000	16,000
				General Reserve A/c	18,000	12,000

	2,78,000	3,12,000	3,00,000		2,78,000	3,12,000	3,00,000

Balance c/d	4,00,000	3,00,000	3,00,000	Balance b/d	2,18,000	2,82,000	3,00,000
				Cash A/c	1,82,000	18,000
	4,00,000	3,00,000	3,00,000		4,00,000	3,00,000	3,00,000

Balance Sheet as on April 01, 2011 after Puneet’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		50,000	Debtors	3,00,000
Employees’ Provident Fund		10,000	Less: Provision for Doubtful Debts	15,000	2,85,000
			Investments		55,000
			Land and Building (3,20,000 + 1,00,000)		4,20,000
Capital A/c:			Stock (1,10,000 – 60,000)		50,000
Amit	4,00,000		Cash at Bank		2,50,000
Sumit	3,00,000
Puneet	3,00,000	10,00,000

		10,60,000			10,60,000

Working Notes

WN 1: Calculation of Sacrificing Ratio

Old ratio = 3 : 2
$\begin{array}{l} Amit Sacrifices = \frac{1}{3} × \frac{3}{5} = \frac{1}{5} or \frac{2}{10} \\ Sumit Sacrifices = \frac{1}{4} × \frac{2}{5} = \frac{2}{20} or \frac{1}{10} \\ Puneet's Share = \frac{2}{10} + \frac{1}{10} = \frac{3}{10} \end{array}$

Sacrificing ratio between Amit and Sumit is 2 : 1

WN 2: Calculation of Goodwill

$Puneet's share of goodwill = 3,00,000 × \frac{3}{10} = 90,000$

WN 3: Calculation of New Profit Sharing Ratio

$\begin{array}{l} New Profit sharing ratio: \\ Amit = \frac{3}{5} - \frac{2}{10} = \frac{4}{10} \\ Sumit = \frac{2}{5} - \frac{1}{10} = \frac{3}{10} \\ Puneet = \frac{3}{10} \end{array}$

New Profit Sharing Ratio = 4 : 3 : 3

WN 4: Calculation of New Capital and Adjustment for Cash

Total Capital of the firm = Rs 10,00,000

$\begin{array}{l} Amit = \frac{4}{10} × 10,00,000 = 4,00,000 \\ Sumit = \frac{3}{10} × 10,00,000 = 3,00,000 \\ Puneet = \frac{3}{10} × 10,00,000 = 3,00,000 \end{array}$

Particulars	Amit	Sumit	Puneet
New Capital	4,00,000	3,00,000	3,00,000
Less: Existing Capital	2,18,000	2,82,000	3,00,000
Net Effect	1,82,000 to be brought in	18,000 to be brought in	NIL

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	50,000	Amit’s Capital A/c	60,000
Premium for Goodwill A/c	90,000	Sumit’s Capital A/c	30,000
Amit’s Capital A/c	1,82,000	Balance c/d	2,50,000
Sumit’s Capital A/c	18,000
	3,40,000		3,40,000

Question 105:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts A/c		5,000	Land and Building A/c	1,00,000
Stock A/c		60,000	Investments A/c	5,000
Profit transferred to:
Amit’s Capital A/c	24,000
Sumit’s Capital A/c	16,000	40,000
		1,05,000		1,05,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Amit	Sumit	Puneet	Particulars	Amit	Sumit	Puneet

Cash A/c	60,000	30,000		Balance b/d	1,76,000	2,54,000
				Loan from Puneet’s A/c			3,00,000
Balance c/d	2,18,000	2,82,000	3,00,000	Premium for Goodwill A/c	60,000	30,000
				Revaluation A/c	24,000	16,000
				General Reserve A/c	18,000	12,000

	2,78,000	3,12,000	3,00,000		2,78,000	3,12,000	3,00,000

Balance c/d	4,00,000	3,00,000	3,00,000	Balance b/d	2,18,000	2,82,000	3,00,000
				Cash A/c	1,82,000	18,000
	4,00,000	3,00,000	3,00,000		4,00,000	3,00,000	3,00,000

Balance Sheet as on April 01, 2011 after Puneet’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		50,000	Debtors	3,00,000
Employees’ Provident Fund		10,000	Less: Provision for Doubtful Debts	15,000	2,85,000
			Investments		55,000
			Land and Building (3,20,000 + 1,00,000)		4,20,000
Capital A/c:			Stock (1,10,000 – 60,000)		50,000
Amit	4,00,000		Cash at Bank		2,50,000
Sumit	3,00,000
Puneet	3,00,000	10,00,000

		10,60,000			10,60,000

Working Notes

WN 1: Calculation of Sacrificing Ratio

Old ratio = 3 : 2
$\begin{array}{l} Amit Sacrifices = \frac{1}{3} × \frac{3}{5} = \frac{1}{5} or \frac{2}{10} \\ Sumit Sacrifices = \frac{1}{4} × \frac{2}{5} = \frac{2}{20} or \frac{1}{10} \\ Puneet's Share = \frac{2}{10} + \frac{1}{10} = \frac{3}{10} \end{array}$

Sacrificing ratio between Amit and Sumit is 2 : 1

WN 2: Calculation of Goodwill

$Puneet's share of goodwill = 3,00,000 × \frac{3}{10} = 90,000$

WN 3: Calculation of New Profit Sharing Ratio

$\begin{array}{l} New Profit sharing ratio: \\ Amit = \frac{3}{5} - \frac{2}{10} = \frac{4}{10} \\ Sumit = \frac{2}{5} - \frac{1}{10} = \frac{3}{10} \\ Puneet = \frac{3}{10} \end{array}$

New Profit Sharing Ratio = 4 : 3 : 3

WN 4: Calculation of New Capital and Adjustment for Cash

Total Capital of the firm = Rs 10,00,000

$\begin{array}{l} Amit = \frac{4}{10} × 10,00,000 = 4,00,000 \\ Sumit = \frac{3}{10} × 10,00,000 = 3,00,000 \\ Puneet = \frac{3}{10} × 10,00,000 = 3,00,000 \end{array}$

Particulars	Amit	Sumit	Puneet
New Capital	4,00,000	3,00,000	3,00,000
Less: Existing Capital	2,18,000	2,82,000	3,00,000
Net Effect	1,82,000 to be brought in	18,000 to be brought in	NIL

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	50,000	Amit’s Capital A/c	60,000
Premium for Goodwill A/c	90,000	Sumit’s Capital A/c	30,000
Amit’s Capital A/c	1,82,000	Balance c/d	2,50,000
Sumit’s Capital A/c	18,000
	3,40,000		3,40,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Stock		77,500	Land & Building	2,50,000
Investments		55,000	Provision for Doubtful Debts	5,000
Profit transferred to:
X	73,500
Y	49,000	1,22,500

		2,55,000		2,55,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Advertisement Suspense	15,000	10,000		Balance b/d	4,40,000	6,35,000
Goodwill	51,000	34,000		Bank A/c			9,27,643
Balance c/d	11,65,500	9,99,000	9,27,643	Premium for Goodwill	4,30,800	2,15,400
				Z’s Current A/c	2,87,200	1,43,600
				Revaluation A/c	73,500	49,000

	12,31,500	10,43,000	9,27,643		12,31,500	10,43,000	9,27,643

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital A/c			2,87,200	Z’s Current A/c	5,000	2,500
Y’s Capital A/c			1,43,600	Balance c/d			4,38,300
X’s Current A/c			5,000
Y’s Current A/c			2,500
Balance c/d	5,000	2,500
	5,000	2,500	4,38,300		5,000	2,500	4,38,300

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	6,25,000	Balance c/d	21,98,843
Z’s Capital	9,27,643
Premium for Goodwill	6,46,200
	21,98,843		21,98,843

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Workmen Compensation Reserve		25,000	Land and Building		4,00,000
Employee Provident Fund		85,000	Stock		6,72,500
Capital A/cs:			Investments		45,000
X	11,65,500		Bank Balance		21,98,843
Y	9,99,000		Debtors	1,00,000
Z	9,27,643	30,92,143	Less: Provision for DD	5,000	95,000
X’s Current		5,000	Z’s Current		4,38,300
Y’s Current		2,500
Workmen Compensation Claim		25,000
Z’s Loan		7,50,000
		39,84,643*			38,49,643*

Working Notes:

WN 1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio – New Ratio

Old Ratio of X and Y = 3:2

New Ratio of X, Y and Z = 4:3:3

$\begin{array}{l} Share surrendered by X = \frac{3}{5} - \frac{4}{10} = \frac{2}{10} \\ Share surrendered by Y = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ ∴ Sacrificing Ratio of X and Y = 2 : 1 \end{array}$

WN 2: Calculation of Z’s Share of Goodwill

$\begin{array}{l} Average Profit = \frac{12, 00, 000 + 23, 25, 000 + 34, 50, 000}{3} = 23, 25, 000 \\ Normal Profit = 5, 30, 000 \\ Super Profit = Average Profit - Normal Profit \\ = 23, 25, 000 - 5, 30, 000 = 17, 95, 000 \\ Goodwill of the firm = 17, 95, 000 \times 2 = Rs 35, 90, 000 \\ Z' s share of Goodwill = 35, 90, 000 \times \frac{3}{10} = Rs 10, 77, 000 \\ Goodwill brought by cheque = 10, 77, 000 \times 60 % = 6, 46, 200 \\ ∴ Remaining goodwill of Rs 4, 30, 800 will be taken out of his Current A / c \end{array}$

WN 3: For adjustment of Workmen Compensation Reserve and Investment Fluctuation Reserve

Workmen Compensation Reserve = 50,000 – 25,000 = Rs 25,000

In Investment Fluctuation Reserve, no balance after adjustment of change in the value.

Journal entry with respect to Workmen Compensation Reserve:

	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Z’s Current A/c	Dr.		7,500*
		To X’s Current A/c				5,000
		To Y’s Current A/c				2,500
		(Workmen Compensation Reserve adjusted)

* $25, 000 \times \frac{3}{10} = 7, 500$

WN 4: Calculation of Z’s Capital

Combined Capital of X and Y = 11,65,500 + 9,99,000 =Rs 21,64,500

Capital of X and Y is for $\frac{7}{10} t h$ share

$∴ Capital of Z for \frac{3}{10} th share = 21, 64, 500 \times \frac{10}{7} \times \frac{3}{10} = Rs 9, 27, 643$

Note: There seems to be some printing error in the question. The answer as per the above solution and as per the textbook does not match. Moreover, the Balance Sheet is also not tallying.

Question 1:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Stock		77,500	Land & Building	2,50,000
Investments		55,000	Provision for Doubtful Debts	5,000
Profit transferred to:
X	73,500
Y	49,000	1,22,500

		2,55,000		2,55,000

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Advertisement Suspense	15,000	10,000		Balance b/d	4,40,000	6,35,000
Goodwill	51,000	34,000		Bank A/c			9,27,643
Balance c/d	11,65,500	9,99,000	9,27,643	Premium for Goodwill	4,30,800	2,15,400
				Z’s Current A/c	2,87,200	1,43,600
				Revaluation A/c	73,500	49,000

	12,31,500	10,43,000	9,27,643		12,31,500	10,43,000	9,27,643

Partners’ Current Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital A/c			2,87,200	Z’s Current A/c	5,000	2,500
Y’s Capital A/c			1,43,600	Balance c/d			4,38,300
X’s Current A/c			5,000
Y’s Current A/c			2,500
Balance c/d	5,000	2,500
	5,000	2,500	4,38,300		5,000	2,500	4,38,300

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	6,25,000	Balance c/d	21,98,843
Z’s Capital	9,27,643
Premium for Goodwill	6,46,200
	21,98,843		21,98,843

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Workmen Compensation Reserve		25,000	Land and Building		4,00,000
Employee Provident Fund		85,000	Stock		6,72,500
Capital A/cs:			Investments		45,000
X	11,65,500		Bank Balance		21,98,843
Y	9,99,000		Debtors	1,00,000
Z	9,27,643	30,92,143	Less: Provision for DD	5,000	95,000
X’s Current		5,000	Z’s Current		4,38,300
Y’s Current		2,500
Workmen Compensation Claim		25,000
Z’s Loan		7,50,000
		39,84,643*			38,49,643*

Working Notes:

WN 1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio – New Ratio

Old Ratio of X and Y = 3:2

New Ratio of X, Y and Z = 4:3:3

$\begin{array}{l} Share surrendered by X = \frac{3}{5} - \frac{4}{10} = \frac{2}{10} \\ Share surrendered by Y = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ ∴ Sacrificing Ratio of X and Y = 2 : 1 \end{array}$

WN 2: Calculation of Z’s Share of Goodwill

$\begin{array}{l} Average Profit = \frac{12, 00, 000 + 23, 25, 000 + 34, 50, 000}{3} = 23, 25, 000 \\ Normal Profit = 5, 30, 000 \\ Super Profit = Average Profit - Normal Profit \\ = 23, 25, 000 - 5, 30, 000 = 17, 95, 000 \\ Goodwill of the firm = 17, 95, 000 \times 2 = Rs 35, 90, 000 \\ Z' s share of Goodwill = 35, 90, 000 \times \frac{3}{10} = Rs 10, 77, 000 \\ Goodwill brought by cheque = 10, 77, 000 \times 60 % = 6, 46, 200 \\ ∴ Remaining goodwill of Rs 4, 30, 800 will be taken out of his Current A / c \end{array}$

WN 3: For adjustment of Workmen Compensation Reserve and Investment Fluctuation Reserve

Workmen Compensation Reserve = 50,000 – 25,000 = Rs 25,000

In Investment Fluctuation Reserve, no balance after adjustment of change in the value.

Journal entry with respect to Workmen Compensation Reserve:

	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Z’s Current A/c	Dr.		7,500*
		To X’s Current A/c				5,000
		To Y’s Current A/c				2,500
		(Workmen Compensation Reserve adjusted)

* $25, 000 \times \frac{3}{10} = 7, 500$

WN 4: Calculation of Z’s Capital

Combined Capital of X and Y = 11,65,500 + 9,99,000 =Rs 21,64,500

Capital of X and Y is for $\frac{7}{10} t h$ share

$∴ Capital of Z for \frac{3}{10} th share = 21, 64, 500 \times \frac{10}{7} \times \frac{3}{10} = Rs 9, 27, 643$

Note: There seems to be some printing error in the question. The answer as per the above solution and as per the textbook does not match. Moreover, the Balance Sheet is also not tallying.

Answer:

Old Ratio of A and B = 21 : 9
Let the total share be = 1
$\begin{array}{l} C' s Share of Profit = \frac{9}{21} \\ Remaining Share = 1 - \frac{9}{21} = \frac{12}{21} \\ A' s Share = \frac{12}{21} \times \frac{21}{30} = \frac{84}{210} \\ B' s Share = \frac{12}{21} \times \frac{9}{30} = \frac{36}{210} \\ C' s Share = \frac{9}{21} or \frac{90}{210} \\ New Profit Share = 84 : 36 : 90 or 14 : 6 : 15 \end{array}$

Question 2:

Old Ratio of A and B = 21 : 9
Let the total share be = 1
$\begin{array}{l} C' s Share of Profit = \frac{9}{21} \\ Remaining Share = 1 - \frac{9}{21} = \frac{12}{21} \\ A' s Share = \frac{12}{21} \times \frac{21}{30} = \frac{84}{210} \\ B' s Share = \frac{12}{21} \times \frac{9}{30} = \frac{36}{210} \\ C' s Share = \frac{9}{21} or \frac{90}{210} \\ New Profit Share = 84 : 36 : 90 or 14 : 6 : 15 \end{array}$

Answer:

Ashok admits for share of profit

Ravi sacrifices in favour of Ashok =

Mukesh sacrifices in favour of Ashok =

New Ratio = Old Ratio − Sacrificing Ratio

Question 3:

Ashok admits for share of profit

Ravi sacrifices in favour of Ashok =

Mukesh sacrifices in favour of Ashok =

New Ratio = Old Ratio − Sacrificing Ratio

Answer:

Old ratio of A and B = 7 : 3

$\begin{array}{l} A' s Share = \frac{7}{10} \\ A surrenders in favour of C = \frac{7}{10} \times \frac{1}{7} = \frac{1}{10} \\ A' s New Share = \frac{7}{10} - \frac{1}{10} = \frac{6}{10} \end{array}$
$\begin{array}{l} B' s share = \frac{3}{10} \\ B surrenders in favour of C = \frac{3}{10} \times \frac{1}{3} = \frac{1}{10} \\ B' s New share = \frac{3}{10} - \frac{1}{10} = \frac{2}{10} \\ C' s share = \frac{1}{10} + \frac{1}{10} = \frac{2}{10} \\ New Profit Ratio = 6 : 2 : 2 or 3 : 1 : 1 \end{array}$

Question 4:

Old ratio of A and B = 7 : 3

$\begin{array}{l} A' s Share = \frac{7}{10} \\ A surrenders in favour of C = \frac{7}{10} \times \frac{1}{7} = \frac{1}{10} \\ A' s New Share = \frac{7}{10} - \frac{1}{10} = \frac{6}{10} \end{array}$
$\begin{array}{l} B' s share = \frac{3}{10} \\ B surrenders in favour of C = \frac{3}{10} \times \frac{1}{3} = \frac{1}{10} \\ B' s New share = \frac{3}{10} - \frac{1}{10} = \frac{2}{10} \\ C' s share = \frac{1}{10} + \frac{1}{10} = \frac{2}{10} \\ New Profit Ratio = 6 : 2 : 2 or 3 : 1 : 1 \end{array}$

Answer:

Old Ratio = 1 : 1

Let the total share be = 1

$\begin{array}{l} Share of Black = \frac{1}{4} or \frac{5}{20} \\ Remaining Share = 1 - \frac{1}{4} = \frac{3}{4} \\ Red' s Share = \frac{3}{5} \times \frac{3}{4} = \frac{9}{20} \\ White' s Share = \frac{2}{5} \times \frac{3}{4} = \frac{6}{20} \\ New Profit Sharing Ratio = 9 : 6 : 5 \end{array}$

Question 5:

Old Ratio = 1 : 1

Let the total share be = 1

$\begin{array}{l} Share of Black = \frac{1}{4} or \frac{5}{20} \\ Remaining Share = 1 - \frac{1}{4} = \frac{3}{4} \\ Red' s Share = \frac{3}{5} \times \frac{3}{4} = \frac{9}{20} \\ White' s Share = \frac{2}{5} \times \frac{3}{4} = \frac{6}{20} \\ New Profit Sharing Ratio = 9 : 6 : 5 \end{array}$

Answer:

(i) Let the total share be = 1

Old ratio = 2 : 3 : 1

W is admitted for

\frac{1}{6} th

share

Z’s share =

\frac{1}{6}

\begin{array}{l} Total Share of Z and W = \frac{1}{6} + \frac{1}{6} = \frac{1}{3} \\ Remaining Share = 1 - \frac{1}{3} = \frac{2}{3} \\ Old Ratio between X and Y = 2 : 3 \\ X' s New Share = \frac{2}{3} \times \frac{2}{5} = \frac{4}{15} \\ Y' s New Share = \frac{2}{3} \times \frac{3}{5} = \frac{6}{15} \\ Z' s Share = \frac{1}{6} or \frac{5}{30} \\ W' s Share = \frac{1}{6} or \frac{5}{30} \\ New Profit share ratio = 8 : 12 : 5 : 5 \end{array}

(ii) Old Ratio = 3 : 2 : 5

\begin{array}{l} A sacrifices = \frac{1}{5} \times \frac{1}{5} = \frac{1}{25} \\ A' s New Share = \frac{3}{10} - \frac{1}{25} = \frac{13}{50} \\ B sacrifices = \frac{1}{5} \times \frac{1}{5} = \frac{1}{25} \\ B' s New Share = \frac{2}{10} - \frac{1}{25} = \frac{8}{50} \\ C sacrifices = \frac{1}{5} \times \frac{3}{5} = \frac{3}{25} \\ C' s New Share = \frac{5}{10} - \frac{3}{25} = \frac{19}{50} \\ D' s Profit Share = \frac{1}{5} or \frac{10}{50} \\ New Profit Sharing ratio = 13 : 8 : 19 : 10 \end{array}

Question 6:

(i) Let the total share be = 1

Old ratio = 2 : 3 : 1

W is admitted for

\frac{1}{6} th

share

Z’s share =

\frac{1}{6}

\begin{array}{l} Total Share of Z and W = \frac{1}{6} + \frac{1}{6} = \frac{1}{3} \\ Remaining Share = 1 - \frac{1}{3} = \frac{2}{3} \\ Old Ratio between X and Y = 2 : 3 \\ X' s New Share = \frac{2}{3} \times \frac{2}{5} = \frac{4}{15} \\ Y' s New Share = \frac{2}{3} \times \frac{3}{5} = \frac{6}{15} \\ Z' s Share = \frac{1}{6} or \frac{5}{30} \\ W' s Share = \frac{1}{6} or \frac{5}{30} \\ New Profit share ratio = 8 : 12 : 5 : 5 \end{array}

(ii) Old Ratio = 3 : 2 : 5

\begin{array}{l} A sacrifices = \frac{1}{5} \times \frac{1}{5} = \frac{1}{25} \\ A' s New Share = \frac{3}{10} - \frac{1}{25} = \frac{13}{50} \\ B sacrifices = \frac{1}{5} \times \frac{1}{5} = \frac{1}{25} \\ B' s New Share = \frac{2}{10} - \frac{1}{25} = \frac{8}{50} \\ C sacrifices = \frac{1}{5} \times \frac{3}{5} = \frac{3}{25} \\ C' s New Share = \frac{5}{10} - \frac{3}{25} = \frac{19}{50} \\ D' s Profit Share = \frac{1}{5} or \frac{10}{50} \\ New Profit Sharing ratio = 13 : 8 : 19 : 10 \end{array}

Answer:

Old ratio = 3 : 2

Let the total share be = 1

$\begin{array}{l} Z' s Share of Profit = \frac{1}{5} \\ Remaining Share = 1 - \frac{1}{5} = \frac{4}{5} \\ X' s Share = \frac{4}{5} \times \frac{3}{5} = \frac{12}{25} \\ Y' s Share = \frac{4}{5} \times \frac{2}{5} = \frac{8}{25} \\ Z' s Share = \frac{1}{5} or \frac{5}{25} \\ New Profit Share = 12 : 8 : 5 \\ Sacrificing ratio = 3 : 2 \end{array}$

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Question 7:

Old ratio = 3 : 2

Let the total share be = 1

$\begin{array}{l} Z' s Share of Profit = \frac{1}{5} \\ Remaining Share = 1 - \frac{1}{5} = \frac{4}{5} \\ X' s Share = \frac{4}{5} \times \frac{3}{5} = \frac{12}{25} \\ Y' s Share = \frac{4}{5} \times \frac{2}{5} = \frac{8}{25} \\ Z' s Share = \frac{1}{5} or \frac{5}{25} \\ New Profit Share = 12 : 8 : 5 \\ Sacrificing ratio = 3 : 2 \end{array}$

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Answer:

Sacrificing Share = Old Ratio − New Ratio

Question 8:

Sacrificing Share = Old Ratio − New Ratio

Answer:

Old ratio = 3 : 2
$\begin{array}{l} Share acquired from X = \frac{2}{7} \\ X' s New Share = \frac{3}{5} - \frac{2}{7} = \frac{11}{35} \\ Share acquired from Y = \frac{1}{7} \\ Y' s New Share = \frac{2}{5} - \frac{1}{7} = \frac{9}{35} \\ Z' s Profit Share = \frac{2}{7} + \frac{1}{7} = \frac{3}{7} or \frac{15}{35} \\ New Profit Sharing Ratio = 11 : 9 : 15 \end{array}$

$\begin{array}{l} Sacrificing Ratio = Old Ratio - New Ratio \\ Sacrifice made by X = \frac{3}{5} - \frac{11}{35} = \frac{10}{35} \\ Sacrifice made by Y = \frac{2}{5} - \frac{9}{35} = \frac{5}{35} \\ Sacrificing Ratio = 10 : 5 or 2 : 1 \end{array}$

Question 9:

Old ratio = 3 : 2
$\begin{array}{l} Share acquired from X = \frac{2}{7} \\ X' s New Share = \frac{3}{5} - \frac{2}{7} = \frac{11}{35} \\ Share acquired from Y = \frac{1}{7} \\ Y' s New Share = \frac{2}{5} - \frac{1}{7} = \frac{9}{35} \\ Z' s Profit Share = \frac{2}{7} + \frac{1}{7} = \frac{3}{7} or \frac{15}{35} \\ New Profit Sharing Ratio = 11 : 9 : 15 \end{array}$

$\begin{array}{l} Sacrificing Ratio = Old Ratio - New Ratio \\ Sacrifice made by X = \frac{3}{5} - \frac{11}{35} = \frac{10}{35} \\ Sacrifice made by Y = \frac{2}{5} - \frac{9}{35} = \frac{5}{35} \\ Sacrificing Ratio = 10 : 5 or 2 : 1 \end{array}$

Answer:

Profit sharing ratio of A and B = 4 : 1

Thus, Profit sharing ratio of B and C will also be 4 : 1

Let B’s Profit Share = 1

Since, C’s share of profit is 25% of B’s Profit Share

$∴ C' s Profit Share = \frac{1}{4} \times 1 = 0.25$

A’s Profit Share is 4 times the B’s Profit Share, thus, A’s Profit Share = 4

New Profit Share = 4 : 1 : 0.25 or 16 : 4 : 1

Sacrificing Ratio = Old Ratio – New Ratio

$\begin{array}{l} A = \frac{4}{5} - \frac{16}{21} = \frac{68}{105} \\ B = \frac{1}{5} - \frac{4}{21} = \frac{17}{105} \\ Sacrificing Ratio = 68 : 17 or 4 : 1 \end{array}$

Question 10:

Profit sharing ratio of A and B = 4 : 1

Thus, Profit sharing ratio of B and C will also be 4 : 1

Let B’s Profit Share = 1

Since, C’s share of profit is 25% of B’s Profit Share

$∴ C' s Profit Share = \frac{1}{4} \times 1 = 0.25$

A’s Profit Share is 4 times the B’s Profit Share, thus, A’s Profit Share = 4

New Profit Share = 4 : 1 : 0.25 or 16 : 4 : 1

Sacrificing Ratio = Old Ratio – New Ratio

$\begin{array}{l} A = \frac{4}{5} - \frac{16}{21} = \frac{68}{105} \\ B = \frac{1}{5} - \frac{4}{21} = \frac{17}{105} \\ Sacrificing Ratio = 68 : 17 or 4 : 1 \end{array}$

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

P’s share = X’s Sacrifiece

Q’s share = Y’s Sacrifice

Question 11:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

P’s share = X’s Sacrifiece

Q’s share = Y’s Sacrifice

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

∴New Profit Sharing Ratio = 75 : 48 : 37

Question 12:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

∴New Profit Sharing Ratio = 75 : 48 : 37

Answer:

$\begin{array}{l} Calculation of New Profit Sharing Ratio \\ X:Y:Z = 9 : 6 : 5 (Old Ratio) \\ W's share = \frac{1}{4} \\ Y' s sacrifice = \frac{1}{10} o r \frac{2}{20} \\ Remaining share of W = \frac{1}{4} - \frac{1}{10} = \frac{3}{20}, Contributed by X & Z in the ratio of 2:1 \\ X' s sacrifice = \frac{3}{20} \times \frac{2}{3} = \frac{2}{20} \\ Z' s sacrifice = \frac{3}{20} \times \frac{1}{3} = \frac{1}{20} \\ Sacrificing Ratio= \frac{2}{20} : \frac{2}{20} : \frac{1}{20} = 2 : 2 : 1 \\ X' s New Share = \frac{9}{20} - \frac{2}{20} = \frac{7}{20} \\ Y' s New Share = \frac{6}{20} - \frac{2}{20} = \frac{4}{20} \\ Z' s New Share = \frac{5}{20} - \frac{1}{20} = \frac{4}{20} \\ W' s New Share = \frac{1}{4} \times \frac{5}{5} = \frac{5}{20} \\ X:Y:Z:W = 7 : 4 : 4 : 5 \end{array}$

Question 13:

$\begin{array}{l} Calculation of New Profit Sharing Ratio \\ X:Y:Z = 9 : 6 : 5 (Old Ratio) \\ W's share = \frac{1}{4} \\ Y' s sacrifice = \frac{1}{10} o r \frac{2}{20} \\ Remaining share of W = \frac{1}{4} - \frac{1}{10} = \frac{3}{20}, Contributed by X & Z in the ratio of 2:1 \\ X' s sacrifice = \frac{3}{20} \times \frac{2}{3} = \frac{2}{20} \\ Z' s sacrifice = \frac{3}{20} \times \frac{1}{3} = \frac{1}{20} \\ Sacrificing Ratio= \frac{2}{20} : \frac{2}{20} : \frac{1}{20} = 2 : 2 : 1 \\ X' s New Share = \frac{9}{20} - \frac{2}{20} = \frac{7}{20} \\ Y' s New Share = \frac{6}{20} - \frac{2}{20} = \frac{4}{20} \\ Z' s New Share = \frac{5}{20} - \frac{1}{20} = \frac{4}{20} \\ W' s New Share = \frac{1}{4} \times \frac{5}{5} = \frac{5}{20} \\ X:Y:Z:W = 7 : 4 : 4 : 5 \end{array}$

Answer:

D is admitted for share of profit

Let the combined share of profit of A, B C and D be = 1

Combined share of A, B and C after D’s admission = 1 − D’s shares

New Ratio = Old Ratio × combined share of A, B and C

Sacrificing Ratio = Old Ratio − New Ratio

Question 14:

D is admitted for share of profit

Let the combined share of profit of A, B C and D be = 1

Combined share of A, B and C after D’s admission = 1 − D’s shares

New Ratio = Old Ratio × combined share of A, B and C

Sacrificing Ratio = Old Ratio − New Ratio

Answer:

E is admitted for share

Let combined share of profit of all partners after E’s admission = 1

Combined share of A, B, C and D after E’s admission = 1 − E’s Share

New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D

Question 15:

E is admitted for share

Let combined share of profit of all partners after E’s admission = 1

Combined share of A, B, C and D after E’s admission = 1 − E’s Share

New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D

Answer:

Old ratio = 3 : 2

Let the total share be = 1

$\begin{array}{l} Remaining Share = 1 - \frac{1}{4} = \frac{3}{4} \\ A and B decided to share future profits and losses in the ratio of 1 : 1 \\ A' s Share = \frac{1}{2} \times \frac{3}{4} = \frac{3}{8} \\ B' s Share = \frac{1}{2} \times \frac{3}{4} = \frac{3}{8} \\ C' s Share = \frac{1}{4} or \frac{2}{8} \\ New Profit Sharing Ratio = 3 : 3 : 2 \\ Sacrificing Ratio = Old Ratio - New Ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrificing ratio of A and B = 9 : 1 \end{array}$

Question 16:

Old ratio = 3 : 2

Let the total share be = 1

$\begin{array}{l} Remaining Share = 1 - \frac{1}{4} = \frac{3}{4} \\ A and B decided to share future profits and losses in the ratio of 1 : 1 \\ A' s Share = \frac{1}{2} \times \frac{3}{4} = \frac{3}{8} \\ B' s Share = \frac{1}{2} \times \frac{3}{4} = \frac{3}{8} \\ C' s Share = \frac{1}{4} or \frac{2}{8} \\ New Profit Sharing Ratio = 3 : 3 : 2 \\ Sacrificing Ratio = Old Ratio - New Ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrificing ratio of A and B = 9 : 1 \end{array}$

Answer:

$\begin{array}{l} X:Y:Z = 1:2:2 (New Ratio) \\ Z's Share = \frac{2}{5} \\ Sacrificing Ratio = 4:1 \\ X's Sacrifice = \frac{2}{5} \times \frac{4}{5} = \frac{8}{25} \\ Y's Sacrifice = \frac{2}{5} \times \frac{1}{5} = \frac{2}{25} \\ X's Old ratio = \frac{1}{5} + \frac{8}{25} = \frac{13}{25} \\ Y's Old ratio = \frac{2}{5} + \frac{2}{25} = \frac{12}{25} \\ X:Y = 13:12 \end{array}$

Question 17:

$\begin{array}{l} X:Y:Z = 1:2:2 (New Ratio) \\ Z's Share = \frac{2}{5} \\ Sacrificing Ratio = 4:1 \\ X's Sacrifice = \frac{2}{5} \times \frac{4}{5} = \frac{8}{25} \\ Y's Sacrifice = \frac{2}{5} \times \frac{1}{5} = \frac{2}{25} \\ X's Old ratio = \frac{1}{5} + \frac{8}{25} = \frac{13}{25} \\ Y's Old ratio = \frac{2}{5} + \frac{2}{25} = \frac{12}{25} \\ X:Y = 13:12 \end{array}$

Answer:

Since goodwill has been paid privately, thus, no entry will be recorded in the books of the firm.

Question 18:

Since goodwill has been paid privately, thus, no entry will be recorded in the books of the firm.

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		48,000
		To Premium for Goodwill A/c				48,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		48,000
		To X’s Capital A/c				28,800
		To Y’s Capital A/c				19,200
		(Goodwill distributed among old partners in their sacrificing ratio)

Working Notes:

Let the total share = 1

Z is admitted for

\frac{1}{4} th

share

\begin{array}{l} Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \\ Old ratio of X and Y = 3 : 2 \\ X' s new share = \frac{3}{5} \times \frac{3}{4} = \frac{9}{20} \\ Y' s share = \frac{2}{5} \times \frac{3}{4} = \frac{6}{20} \\ Z' s share = \frac{1}{4} or \frac{5}{20} \\ New profit sharing ratio = 9 : 6 : 5 \\ Sacrificing ratio of X and Y = 3 : 2 \end{array}

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Question 19:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		48,000
		To Premium for Goodwill A/c				48,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		48,000
		To X’s Capital A/c				28,800
		To Y’s Capital A/c				19,200
		(Goodwill distributed among old partners in their sacrificing ratio)

Working Notes:

Let the total share = 1

Z is admitted for

\frac{1}{4} th

share

\begin{array}{l} Remaining share = 1 - \frac{1}{4} = \frac{3}{4} \\ Old ratio of X and Y = 3 : 2 \\ X' s new share = \frac{3}{5} \times \frac{3}{4} = \frac{9}{20} \\ Y' s share = \frac{2}{5} \times \frac{3}{4} = \frac{6}{20} \\ Z' s share = \frac{1}{4} or \frac{5}{20} \\ New profit sharing ratio = 9 : 6 : 5 \\ Sacrificing ratio of X and Y = 3 : 2 \end{array}

Note: When nothing has been specified about the new profit sharing ratio, it has been assumed that the sacrificing ratio will be same as old ratio, i.e. 3 : 2.

Answer:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		10,000
		To Premium for Goodwill A/c				10,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		10,000
		F’s Capital A/c $(40, 000 \times \frac{1}{20})$	Dr.		2,000
		To E’s Capital A/c $(40, 000 \times \frac{6}{20})$				12,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Working Notes

Sacrificing ratio = Old ratio – New ratio

Old ratio between E and F = 4 : 1

New ratio between E, F and G = 2 : 1 : 1

\begin{array}{l} Sacrifice made by E = \frac{4}{5} - \frac{2}{4} = \frac{6}{20} \\ Sacrifice made by F = \frac{1}{5} - \frac{1}{4} = - \frac{1}{20} (gain) \end{array}

Value of Firm’s Goodwill = 10,000 × 4 = Rs 40,000

Question 20:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		10,000
		To Premium for Goodwill A/c				10,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		10,000
		F’s Capital A/c $(40, 000 \times \frac{1}{20})$	Dr.		2,000
		To E’s Capital A/c $(40, 000 \times \frac{6}{20})$				12,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Working Notes

Sacrificing ratio = Old ratio – New ratio

Old ratio between E and F = 4 : 1

New ratio between E, F and G = 2 : 1 : 1

\begin{array}{l} Sacrifice made by E = \frac{4}{5} - \frac{2}{4} = \frac{6}{20} \\ Sacrifice made by F = \frac{1}{5} - \frac{1}{4} = - \frac{1}{20} (gain) \end{array}

Value of Firm’s Goodwill = 10,000 × 4 = Rs 40,000

Answer:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		1,10,000
		To Premium for Goodwill A/c				30,000
		To Z’s Capital A/c				80,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		30,000
		To X’s Capital A/c				10,000
		To Y’s Capital A/c				20,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Balance c/d	2,10,000	1,20,000	80,000	Balance b/d	2,00,000	1,00,000
				Bank A/c			80,000
				Premium for Goodwill A/c	10,000	20,000
	2,10,000	1,20,000	80,000		2,10,000	1,20,000	80,000

Working Notes:

Old ratio = 2 : 1

Z is admitted for

\frac{1}{5} th

share

New ratio = 3 : 1 : 1

Sacrificing ratio = Old ratio – New Ratio

\begin{array}{l} Sacrifice made by X = \frac{2}{3} - \frac{3}{5} = \frac{1}{15} \\ Sacrifice made by Y = \frac{1}{3} - \frac{1}{5} = \frac{2}{15} \\ Sacrificing ratio = 1 : 2 \end{array}

Question 21:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		1,10,000
		To Premium for Goodwill A/c				30,000
		To Z’s Capital A/c				80,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		30,000
		To X’s Capital A/c				10,000
		To Y’s Capital A/c				20,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Balance c/d	2,10,000	1,20,000	80,000	Balance b/d	2,00,000	1,00,000
				Bank A/c			80,000
				Premium for Goodwill A/c	10,000	20,000
	2,10,000	1,20,000	80,000		2,10,000	1,20,000	80,000

Working Notes:

Old ratio = 2 : 1

Z is admitted for

\frac{1}{5} th

share

New ratio = 3 : 1 : 1

Sacrificing ratio = Old ratio – New Ratio

\begin{array}{l} Sacrifice made by X = \frac{2}{3} - \frac{3}{5} = \frac{1}{15} \\ Sacrifice made by Y = \frac{1}{3} - \frac{1}{5} = \frac{2}{15} \\ Sacrificing ratio = 1 : 2 \end{array}

Answer:

	Books of…
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		91,500
		To Premium for Goodwill A/c $(84, 000 \times \frac{3}{8})$				31,500
		To Samir’s Capital A/c				60,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		31,500
		Satish’s Capital A/c $(84, 000 \times \frac{5}{56})$	Dr.		7,500
		To Sushil’s Capital A/c $(84, 000 \times \frac{26}{56})$				39,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	Sushil	Satish	Samir	Particulars	Sushil	Satish	Samir

Sushil’s Capital A/c		7,500		Balance b/d	48,000	42,000
Balance c/d	87,000	34,500	60,000	Bank A/c			60,000
				Premium for Goodwill A/c	31,500
				Satish’s Capital A/c	7,500
	87,000	42,000	60,000		87,000	42,000	60,000

Balance Sheet as on April 01, 2017 after Samir’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Bank Loan		23,000	Bank		97,500
Creditors		55,000	Stock		12,000
Capital A/cs:			Plant & Machinery		30,000
Sushil	87,000		Debtors	18,300
Satish	34,500		Less : Provision for Doubtful Debts	300	18,000
Samir	60,000	1,81,500	Building		1,02,000
		2,59,500			2,59,500

Working Notes:

Old ratio = 5 : 2

New ratio = 2 : 3 : 3

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by Sushil = \frac{5}{7} - \frac{2}{8} = \frac{26}{56} \\ Sacrifice made by Satish = \frac{2}{7} - \frac{3}{8} = - \frac{5}{56} (gain) \end{array}

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	6,000	Balance c/d	97,500
Premium for Goodwill A/c	31,500
Samir’s Capital A/c	60,000
	97,500		97,500

Question 22:

	Books of…
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		91,500
		To Premium for Goodwill A/c $(84, 000 \times \frac{3}{8})$				31,500
		To Samir’s Capital A/c				60,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		31,500
		Satish’s Capital A/c $(84, 000 \times \frac{5}{56})$	Dr.		7,500
		To Sushil’s Capital A/c $(84, 000 \times \frac{26}{56})$				39,000
		(Goodwill distributed among old partners in their sacrificing ratio)

Partners’ Capital Accounts
Dr.								Cr.
Particulars	Sushil	Satish	Samir	Particulars	Sushil	Satish	Samir

Sushil’s Capital A/c		7,500		Balance b/d	48,000	42,000
Balance c/d	87,000	34,500	60,000	Bank A/c			60,000
				Premium for Goodwill A/c	31,500
				Satish’s Capital A/c	7,500
	87,000	42,000	60,000		87,000	42,000	60,000

Balance Sheet as on April 01, 2017 after Samir’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Bank Loan		23,000	Bank		97,500
Creditors		55,000	Stock		12,000
Capital A/cs:			Plant & Machinery		30,000
Sushil	87,000		Debtors	18,300
Satish	34,500		Less : Provision for Doubtful Debts	300	18,000
Samir	60,000	1,81,500	Building		1,02,000
		2,59,500			2,59,500

Working Notes:

Old ratio = 5 : 2

New ratio = 2 : 3 : 3

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by Sushil = \frac{5}{7} - \frac{2}{8} = \frac{26}{56} \\ Sacrifice made by Satish = \frac{2}{7} - \frac{3}{8} = - \frac{5}{56} (gain) \end{array}

Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	6,000	Balance c/d	97,500
Premium for Goodwill A/c	31,500
Samir’s Capital A/c	60,000
	97,500		97,500

Answer:

C is admitted for share

Let the combined share of A, B and C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs 14,000

Question 23:

C is admitted for share

Let the combined share of A, B and C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs 14,000

Answer:

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		1,800
	B’s Capital A/c	Dr.		1,200
	To Goodwill A/c				3,000
	(Goodwill written-off)

	Cash A/c	Dr.		40,000
	To C’s Capital A/c	Dr.			30,000
	To Premium for Goodwill A/c				10,000
	(C brought capital and his share of goodwill in cash)

	Premium for Goodwill	Dr.		10,000
	To A’s Capital A/c				5,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed)

Sacrificing Ratio = Old Ratio − New Ratio

Distribution of Premium for Goodwill C’s share of Goodwill)

Goodwill written-off

Question 24:

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		1,800
	B’s Capital A/c	Dr.		1,200
	To Goodwill A/c				3,000
	(Goodwill written-off)

	Cash A/c	Dr.		40,000
	To C’s Capital A/c	Dr.			30,000
	To Premium for Goodwill A/c				10,000
	(C brought capital and his share of goodwill in cash)

	Premium for Goodwill	Dr.		10,000
	To A’s Capital A/c				5,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed)

Sacrificing Ratio = Old Ratio − New Ratio

Distribution of Premium for Goodwill C’s share of Goodwill)

Goodwill written-off

Answer:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		21,000
	To Premium for Goodwill A/c				21,000
	(C brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				9,000
	To B’s Capital A/c				12,000
	(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4)

C’s share = A’s sacrifice + B’s sacrifice

New Ratio is 12:6:7

C’s will bring Premium for Goodwill

Distribution of Premium for Goodwill-

Question 25:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		21,000
	To Premium for Goodwill A/c				21,000
	(C brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				9,000
	To B’s Capital A/c				12,000
	(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4)

C’s share = A’s sacrifice + B’s sacrifice

New Ratio is 12:6:7

C’s will bring Premium for Goodwill

Distribution of Premium for Goodwill-

Answer:

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

	Stock A/c	Dr.		60,000
	Debtors A/c	Dr.		80,000
	Land A/c	Dr.		1,00,000
	Plant and Machinery A/c	Dr.		40,000
	To Z’s Capital A/c				1,30,000
	To Premium for Goodwill A/c				1,50,000
	(Z brought assets for his share of goodwill and Capital)

	Premium for Goodwill A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Z’s share of Goodwill distributed between X and Y in sacrificing ratio)

Working Notes:

WN1

WN2

Distribution of Z’s Goodwill

Question 26:

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

	Stock A/c	Dr.		60,000
	Debtors A/c	Dr.		80,000
	Land A/c	Dr.		1,00,000
	Plant and Machinery A/c	Dr.		40,000
	To Z’s Capital A/c				1,30,000
	To Premium for Goodwill A/c				1,50,000
	(Z brought assets for his share of goodwill and Capital)

	Premium for Goodwill A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Z’s share of Goodwill distributed between X and Y in sacrificing ratio)

Working Notes:

WN1

WN2

Distribution of Z’s Goodwill

Answer:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		2,36,000
		To Premium for Goodwill A/c				36,000
		To Amit’s Capital A/c				2,00,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		36,000
		To Sachin’s Current A/c				3,600
		To Kapil’s Current A/c				32,400
		(Goodwill distributed among old partners in their sacrificing ratio)

		Sachin’s Current A/c	Dr.		3,600
		Kapil’s Current A/c	Dr.		32,400
		To Bank A/c				36,000
		(Goodwill withdrawn by the old partners)

Working Notes

$\begin{array}{l} Old ratio = 2 : 3 \\ New ratio = 3 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by Sachin = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrifice made by Kapil = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrificing ratio = 1 : 9 \end{array}$

Question 27:

	Books of...
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		2,36,000
		To Premium for Goodwill A/c				36,000
		To Amit’s Capital A/c				2,00,000
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		36,000
		To Sachin’s Current A/c				3,600
		To Kapil’s Current A/c				32,400
		(Goodwill distributed among old partners in their sacrificing ratio)

		Sachin’s Current A/c	Dr.		3,600
		Kapil’s Current A/c	Dr.		32,400
		To Bank A/c				36,000
		(Goodwill withdrawn by the old partners)

Working Notes

$\begin{array}{l} Old ratio = 2 : 3 \\ New ratio = 3 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by Sachin = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \\ Sacrifice made by Kapil = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrificing ratio = 1 : 9 \end{array}$

Answer:

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

	Cash A/c	Dr.		13,000
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				3,000
	(Premium for Goodwill transferred to A’s Capital)

	A’s Capital A/c	Dr.		3,000
	To Cash A/c				3,000
	(Premium for Goodwill withdrawn)

Working Notes:

Calculation of Sacrificing Ratio

Here only A is sacrificing his share of profit in favour of C. Hence, A will get the whole amount of premium for goodwill.

Question 28:

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

	Cash A/c	Dr.		13,000
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				3,000
	(Premium for Goodwill transferred to A’s Capital)

	A’s Capital A/c	Dr.		3,000
	To Cash A/c				3,000
	(Premium for Goodwill withdrawn)

Working Notes:

Calculation of Sacrificing Ratio

Here only A is sacrificing his share of profit in favour of C. Hence, A will get the whole amount of premium for goodwill.

Answer:

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

	Cash A/c	Dr.		24,000
	To Shyam’s Capital A/c				15,000
	To Premium for Goodwill A/c				9,000
	(Shyam brought capital and his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		9,000
	To Prabhu’s Capital A/c				4,500
	To Sat Kumar’s Capital A/c				4,500
	(Goodwill brought by Shyam distributed between Prabhu and Sat Kumar i.e. 1:1)

	Prabhu’s Capital A/c	Dr.		4,500
	Sat Kumar’s Capital A/c	Dr.		4,500
	To Cash A/c				9,000
	(Amount of Premium for Goodwill withdrawn by Prabhu and Sat Kumar’s)

Calculation of Future (New) Profit Sharing Ratio

Shyam admitted for share of profit

Let combined share of all partners after Shyam’s admission = 1

Combined share Phrabhu and Sat Kumar after Shyam’s admission

Question 29:

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

	Cash A/c	Dr.		24,000
	To Shyam’s Capital A/c				15,000
	To Premium for Goodwill A/c				9,000
	(Shyam brought capital and his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		9,000
	To Prabhu’s Capital A/c				4,500
	To Sat Kumar’s Capital A/c				4,500
	(Goodwill brought by Shyam distributed between Prabhu and Sat Kumar i.e. 1:1)

	Prabhu’s Capital A/c	Dr.		4,500
	Sat Kumar’s Capital A/c	Dr.		4,500
	To Cash A/c				9,000
	(Amount of Premium for Goodwill withdrawn by Prabhu and Sat Kumar’s)

Calculation of Future (New) Profit Sharing Ratio

Shyam admitted for share of profit

Let combined share of all partners after Shyam’s admission = 1

Combined share Phrabhu and Sat Kumar after Shyam’s admission

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c (60% of 25,000)	Dr.		15,000
		To Premium for Goodwill A/c				15,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		15,000
		To A’s Capital A/c				10,000
		To B’s Capital A/c				5,000
		(Goodwill distributed in among old partners in their sacrificing ratio)

		C’s Current A/c (40% of 25,000)	Dr.		10,000
		To A’s Capital A/c				6,667
		To B’s Capital A/c				3,333
		(Amount of goodwill not brought by new partner debited from current account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 3 : 2

$\begin{array}{l} A' s new share = \frac{3}{5} - \frac{1}{6} = \frac{13}{30} or \frac{26}{60} \\ B' s new share = \frac{2}{5} - \frac{1}{12} = \frac{19}{60} \\ C' s new share = \frac{1}{4} or \frac{15}{60} \\ New profit sharing ratio = 26 : 19 : 15 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{26}{60} = \frac{10}{60} \\ Sacrifice made by B = \frac{2}{5} - \frac{19}{60} = \frac{5}{60} \\ Sacrificing ratio = 10 : 5 or 2 : 1 \end{array}$

Question 30:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c (60% of 25,000)	Dr.		15,000
		To Premium for Goodwill A/c				15,000
		(Goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		15,000
		To A’s Capital A/c				10,000
		To B’s Capital A/c				5,000
		(Goodwill distributed in among old partners in their sacrificing ratio)

		C’s Current A/c (40% of 25,000)	Dr.		10,000
		To A’s Capital A/c				6,667
		To B’s Capital A/c				3,333
		(Amount of goodwill not brought by new partner debited from current account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 3 : 2

$\begin{array}{l} A' s new share = \frac{3}{5} - \frac{1}{6} = \frac{13}{30} or \frac{26}{60} \\ B' s new share = \frac{2}{5} - \frac{1}{12} = \frac{19}{60} \\ C' s new share = \frac{1}{4} or \frac{15}{60} \\ New profit sharing ratio = 26 : 19 : 15 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{5} - \frac{26}{60} = \frac{10}{60} \\ Sacrifice made by B = \frac{2}{5} - \frac{19}{60} = \frac{5}{60} \\ Sacrificing ratio = 10 : 5 or 2 : 1 \end{array}$

Answer:

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

	Cash A/c	Dr.		10,000
	To Premium for Goodwill A/c				10,000
	(C brought premium for Goodwill)

	Premium for Goodwill A/c	Dr.		10,000
	To A’s Capital A/c				6,667
	To B’s Capital A/c				3,333
	(Premium for Goodwill distributed in sacrificing Ratio)

	C’s Current A/c	Dr.		6,000
	To A’s Capital				4,000
	To B’s Capital				2,000
	(Out of the share of goodwill Rs 6,000 not brought by C, and charged from his capital account and distributed)

Working Notes:
WN1

WN2
Distribution of Premium for Goodwill

WN3
Distribution of Goodwill charged from C’s Capital Account

Question 31:

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

	Cash A/c	Dr.		10,000
	To Premium for Goodwill A/c				10,000
	(C brought premium for Goodwill)

	Premium for Goodwill A/c	Dr.		10,000
	To A’s Capital A/c				6,667
	To B’s Capital A/c				3,333
	(Premium for Goodwill distributed in sacrificing Ratio)

	C’s Current A/c	Dr.		6,000
	To A’s Capital				4,000
	To B’s Capital				2,000
	(Out of the share of goodwill Rs 6,000 not brought by C, and charged from his capital account and distributed)

Working Notes:
WN1

WN2
Distribution of Premium for Goodwill

WN3
Distribution of Goodwill charged from C’s Capital Account

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		80,000
		To C’s Capital A/c				80,000
		(Capital brought in by new partner)

		C’s Current A/c $(60, 000 \times \frac{1}{8})$	Dr.		7,500
		To A’s Capital A/c				3,750
		To B’s Capital A/c				3,750
		(Amount of goodwill not brought by new partner debited from his current account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 5 : 3

New ratio = 9 : 5 : 2

$\begin{array}{l} Sacrifice made by A = \frac{5}{8} - \frac{9}{16} = \frac{1}{16} \\ Sacrifice made by B = \frac{3}{8} - \frac{5}{16} = \frac{1}{16} \\ Sacrificing ratio = 1 : 1 \end{array}$

Question 32:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		80,000
		To C’s Capital A/c				80,000
		(Capital brought in by new partner)

		C’s Current A/c $(60, 000 \times \frac{1}{8})$	Dr.		7,500
		To A’s Capital A/c				3,750
		To B’s Capital A/c				3,750
		(Amount of goodwill not brought by new partner debited from his current account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 5 : 3

New ratio = 9 : 5 : 2

$\begin{array}{l} Sacrifice made by A = \frac{5}{8} - \frac{9}{16} = \frac{1}{16} \\ Sacrifice made by B = \frac{3}{8} - \frac{5}{16} = \frac{1}{16} \\ Sacrificing ratio = 1 : 1 \end{array}$

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		3,30,000
		To D’s Capital A/c				1,20,000
		To E’s Capital A/c				1,20,000
		To Premium for Goodwill A/c				90,000
		(Capital and goodwill brought in by the new partners)

		E’s Current A/c	Dr.		45,000
		C’s Capital A/c $(5, 40, 000 \times \frac{4}{60})$	Dr.		36,000
		Premium for Goodwill A/c	Dr.		90,000
		To A’s Capital A/c				1,35,000
		To B’s Capital A/c				36,000
		(Amount of goodwill not brought by new partners debited from their capital account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 5 : 4 : 1

New ratio = 3 : 4 : 2 : 2 : 1

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by A = \frac{5}{10} - \frac{3}{12} = \frac{15}{60} \\ Sacrifice made by B = \frac{4}{10} - \frac{4}{12} = \frac{4}{60} \\ Sacrifice made by C = \frac{1}{10} - \frac{2}{12} = - \frac{4}{60} (gain) \end{array}

Sacrificing ratio = 15 : 4

$\begin{array}{l} Value of Firm' s Goodwill = D' s Share of Goodwill \times Reciprocal of his Profit Share \\ Value of Firm' s Goodwill = 90, 000 \times \frac{12}{2} = Rs 5, 40, 000 \end{array}$

Question 33:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		3,30,000
		To D’s Capital A/c				1,20,000
		To E’s Capital A/c				1,20,000
		To Premium for Goodwill A/c				90,000
		(Capital and goodwill brought in by the new partners)

		E’s Current A/c	Dr.		45,000
		C’s Capital A/c $(5, 40, 000 \times \frac{4}{60})$	Dr.		36,000
		Premium for Goodwill A/c	Dr.		90,000
		To A’s Capital A/c				1,35,000
		To B’s Capital A/c				36,000
		(Amount of goodwill not brought by new partners debited from their capital account and distributed among old partners in their sacrificing ratio)

Working Notes

Old ratio = 5 : 4 : 1

New ratio = 3 : 4 : 2 : 2 : 1

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by A = \frac{5}{10} - \frac{3}{12} = \frac{15}{60} \\ Sacrifice made by B = \frac{4}{10} - \frac{4}{12} = \frac{4}{60} \\ Sacrifice made by C = \frac{1}{10} - \frac{2}{12} = - \frac{4}{60} (gain) \end{array}

Sacrificing ratio = 15 : 4

$\begin{array}{l} Value of Firm' s Goodwill = D' s Share of Goodwill \times Reciprocal of his Profit Share \\ Value of Firm' s Goodwill = 90, 000 \times \frac{12}{2} = Rs 5, 40, 000 \end{array}$

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		80,000
		To Z’s Capital A/c				80,000
		(Capital brought in by new partner)

		Z’s Current A/c	Dr.		20,000
		To X’s Capital A/c				10,000
		To Y’s Capital A/c				10,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)

Since, nothing has been specified about the new profit sharing ratio, thus, it has been assumed that sacrificing ratio is same as old ratio, i.e. 1 : 1.

Working Notes

\begin{array}{l} Total capital of the new firm = Capital of incoming partner \times Reciprocal of his profit share \\ Total capital of the new firm = 80, 000 \times \frac{5}{1} = 4, 00, 000 \\ Combined Capital of X, Y and Z = 1, 30, 000 + 90, 000 + 80, 000 = 3, 00, 000 \\ Value of Firm' s Goodwill = 4, 00, 000 - 3, 00, 000 = 1, 00, 000 \\ Z' s Share in Goodwill = 1, 00, 000 \times \frac{1}{5} = 20, 000 \end{array}

Question 34:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		80,000
		To Z’s Capital A/c				80,000
		(Capital brought in by new partner)

		Z’s Current A/c	Dr.		20,000
		To X’s Capital A/c				10,000
		To Y’s Capital A/c				10,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)

Since, nothing has been specified about the new profit sharing ratio, thus, it has been assumed that sacrificing ratio is same as old ratio, i.e. 1 : 1.

Working Notes

\begin{array}{l} Total capital of the new firm = Capital of incoming partner \times Reciprocal of his profit share \\ Total capital of the new firm = 80, 000 \times \frac{5}{1} = 4, 00, 000 \\ Combined Capital of X, Y and Z = 1, 30, 000 + 90, 000 + 80, 000 = 3, 00, 000 \\ Value of Firm' s Goodwill = 4, 00, 000 - 3, 00, 000 = 1, 00, 000 \\ Z' s Share in Goodwill = 1, 00, 000 \times \frac{1}{5} = 20, 000 \end{array}

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		C’s Current A/c	Dr.		10,000
		To A’s Capital A/c				6,000
		To B’s Capital A/c				4,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio.)

Since, nothing has been specified about new profit sharing ratio, it is assumed that sacrificing ratio is same as the old ratio.

Working Notes

$\begin{array}{l} Total capital of the new firm = Capital of incoming partner \times Reciprocal of his profit share \end{array} \begin{array}{lcl} Total capital of the firm & = & 50, 000 \times \frac{4}{1} = 2, 00, 000 \\ Capital of A, B and C & = & A' Capital A / c + B' s Capital A / c + C' s Capital A / c + Reserves + Profit and Loss A / c - Advertisement expenditure \\ = & 30, 000 + 20, 000 + 50, 000 + 50, 000 + 11, 000 - 1, 000 = 1, 60, 000 \\ Goodwill of the firm & = & 2, 00, 000 - 1, 60, 000 = Rs 40, 000 \\ C' s Share in Goodwill & = & 40, 000 \times \frac{1}{4} = 10, 000 \end{array}$

Question 35:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		C’s Current A/c	Dr.		10,000
		To A’s Capital A/c				6,000
		To B’s Capital A/c				4,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio.)

Since, nothing has been specified about new profit sharing ratio, it is assumed that sacrificing ratio is same as the old ratio.

Working Notes

$\begin{array}{l} Total capital of the new firm = Capital of incoming partner \times Reciprocal of his profit share \end{array} \begin{array}{lcl} Total capital of the firm & = & 50, 000 \times \frac{4}{1} = 2, 00, 000 \\ Capital of A, B and C & = & A' Capital A / c + B' s Capital A / c + C' s Capital A / c + Reserves + Profit and Loss A / c - Advertisement expenditure \\ = & 30, 000 + 20, 000 + 50, 000 + 50, 000 + 11, 000 - 1, 000 = 1, 60, 000 \\ Goodwill of the firm & = & 2, 00, 000 - 1, 60, 000 = Rs 40, 000 \\ C' s Share in Goodwill & = & 40, 000 \times \frac{1}{4} = 10, 000 \end{array}$

Answer:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + Undistributed Profit + Z’s Capital

Total Capital of the firm after Z’s admission = 50,000 + 50,000 + 40,000 + 80,000

Total Capital of the firm after Z’s admission = Rs 2,20,000

Share of Goodwill of Z: Rs 25,000 $(1, 00, 000 \times \frac{1}{4})$

Z’s Current A/c	Dr.	25,000
To X’s Capital A/c			12,500
To Y’s Capital A/c			12,500

Question 36:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + Undistributed Profit + Z’s Capital

Total Capital of the firm after Z’s admission = 50,000 + 50,000 + 40,000 + 80,000

Total Capital of the firm after Z’s admission = Rs 2,20,000

Share of Goodwill of Z: Rs 25,000 $(1, 00, 000 \times \frac{1}{4})$

Z’s Current A/c	Dr.	25,000
To X’s Capital A/c			12,500
To Y’s Capital A/c			12,500

Answer:

$\begin{array}{l} Capital of X & Y = Assets - Outside Liabilities \\ = 13,50,000 - 2,50,000 = Rs 11,00,0000 \\ So, Total Capital of the Firm = 11,00,000 + 5,00,000 = Rs 16,00,000 \\ But as per Z's Share, Total Capital should be 5,00,000 \times \frac{4}{1} = Rs 20,00,000 \\ So, Amount of Hidden Goodwill = 20,00,000 - 16,00,000 = Rs. 4,00,000 \\ ∴ Z's Share of Goodwill = 4,00,000 \times \frac{1}{4} = Rs 1,00,000 \end{array}$

Question 37:

$\begin{array}{l} Capital of X & Y = Assets - Outside Liabilities \\ = 13,50,000 - 2,50,000 = Rs 11,00,0000 \\ So, Total Capital of the Firm = 11,00,000 + 5,00,000 = Rs 16,00,000 \\ But as per Z's Share, Total Capital should be 5,00,000 \times \frac{4}{1} = Rs 20,00,000 \\ So, Amount of Hidden Goodwill = 20,00,000 - 16,00,000 = Rs. 4,00,000 \\ ∴ Z's Share of Goodwill = 4,00,000 \times \frac{1}{4} = Rs 1,00,000 \end{array}$

Answer:

$\begin{array}{l} Existing Capital of the Firm = 1,30,000 + 90,000 + 80,000 = Rs 3,00,000 \\ But as per Z's Share, Total Capital should be 80,000 \times \frac{5}{1} = Rs 4,00,000 \\ So, Amount of Hidden Goodwill = 4,00,000 - 3,00,000 = Rs. 1,00,000 \\ ∴ Z's Share of Goodwill =1,00,000 \times \frac{1}{5} = Rs 20,000 \end{array}$ Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Bank A/c	Dr.		1,00,000
	To Z’s Capital A/c				80,000
	To Premium for Goodwill A/c				20,000
	(Capital and Goodwill brought in cash)

	Premium for Goodwill A/c	Dr.		20,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				10,000
	(Goodwill distributed among old partners)

Question 38:

$\begin{array}{l} Existing Capital of the Firm = 1,30,000 + 90,000 + 80,000 = Rs 3,00,000 \\ But as per Z's Share, Total Capital should be 80,000 \times \frac{5}{1} = Rs 4,00,000 \\ So, Amount of Hidden Goodwill = 4,00,000 - 3,00,000 = Rs. 1,00,000 \\ ∴ Z's Share of Goodwill =1,00,000 \times \frac{1}{5} = Rs 20,000 \end{array}$ Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Bank A/c	Dr.		1,00,000
	To Z’s Capital A/c				80,000
	To Premium for Goodwill A/c				20,000
	(Capital and Goodwill brought in cash)

	Premium for Goodwill A/c	Dr.		20,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				10,000
	(Goodwill distributed among old partners)

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Cash A/c	Dr.		50,000
		To Premium for Goodwill A/c				50,000
		(Goodwill amount brought in by new partner)

		Premium for Goodwill A/c	Dr.		50,000
		C’s Current A/c	Dr.		40,000
		To A’s Capital A/c				45,000
		To B’s Capital A/c				45,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		80,000
		B’s Capital A/c	Dr.		80,000
		To Goodwill A/c				1,60,000
		(Goodwill written-off between old partners)

Note: Since no information about new ratio is given, it is assumed that old partners will sacrifice in their old ratio.

Question 39:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Cash A/c	Dr.		50,000
		To Premium for Goodwill A/c				50,000
		(Goodwill amount brought in by new partner)

		Premium for Goodwill A/c	Dr.		50,000
		C’s Current A/c	Dr.		40,000
		To A’s Capital A/c				45,000
		To B’s Capital A/c				45,000
		(Amount of goodwill not brought by new partner debited from his capital account and distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		80,000
		B’s Capital A/c	Dr.		80,000
		To Goodwill A/c				1,60,000
		(Goodwill written-off between old partners)

Note: Since no information about new ratio is given, it is assumed that old partners will sacrifice in their old ratio.

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		39,600
		To C’s Capital A/c				30,000
		To Premium for Goodwill A/c				9,600
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		9,600
		To A’s Capital A/c				7,200
		To B’s Capital A/c				2,400
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		3,000
		B’s Capital A/c	Dr.		1,000
		To Goodwill A/c				4,000
		(Goodwill written off between old partners)

Working Notes

WN 1: Calculation of Sacrificing Ratio

$\begin{array}{l} Old ratio = 3 : 1 \\ New ratio = 3 : 1 : 1 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{4} - \frac{3}{5} = \frac{3}{20} \\ Sacrifice made by B = \frac{1}{4} - \frac{1}{5} = \frac{1}{20} \\ Sacrificing ratio = 3 : 1 \end{array}$

WN 2: Calculation of Goodwill

Total Profit = 15,000 + 12,000 + 18,000 + 19,000 = 64,000

Average Profit for 4 years = \frac{Total Profit}{4}

Average Profit = \frac{64, 000}{4} = 16, 000

Goodwill = Average profit for 4 years × Numbers of Years’ purchase

Goodwill = 16,000 × 3 = 48,000

C ’ s Share of goodwill = \frac{1}{5} \times 48, 000 = 9, 600

Question 40:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		39,600
		To C’s Capital A/c				30,000
		To Premium for Goodwill A/c				9,600
		(Capital and goodwill brought in by the new partner)

		Premium for Goodwill A/c	Dr.		9,600
		To A’s Capital A/c				7,200
		To B’s Capital A/c				2,400
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		3,000
		B’s Capital A/c	Dr.		1,000
		To Goodwill A/c				4,000
		(Goodwill written off between old partners)

Working Notes

WN 1: Calculation of Sacrificing Ratio

$\begin{array}{l} Old ratio = 3 : 1 \\ New ratio = 3 : 1 : 1 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by A = \frac{3}{4} - \frac{3}{5} = \frac{3}{20} \\ Sacrifice made by B = \frac{1}{4} - \frac{1}{5} = \frac{1}{20} \\ Sacrificing ratio = 3 : 1 \end{array}$

WN 2: Calculation of Goodwill

Total Profit = 15,000 + 12,000 + 18,000 + 19,000 = 64,000

Average Profit for 4 years = \frac{Total Profit}{4}

Average Profit = \frac{64, 000}{4} = 16, 000

Goodwill = Average profit for 4 years × Numbers of Years’ purchase

Goodwill = 16,000 × 3 = 48,000

C ’ s Share of goodwill = \frac{1}{5} \times 48, 000 = 9, 600

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		50,000
		To W’s Capital A/c				50,000
		(Capital amount brought in by new partner)

		W’s Current A/c	Dr.		15,000
		To X’s Capital A/c				2,500
		To Y’s Capital A/c				5,000
		To Z’s Capital A/c				7,500
		(Amount of goodwill not brought by new partner debited from his capital account and distributed in old partners in their sacrificing ratio.)

		X’s Capital A/c	Dr.		10,000
		Y’s Capital A/c	Dr.		20,000
		Z’s Capital A/c	Dr.		30,000
		To Goodwill A/c				60,000
		(Old goodwill written off among old partners in their old ratio)

Working Notes

Goodwill = Average profit for 3 years

Total Profit = 62,500 + 70,000 + 92,500 = 2,25,000

Average Profit = \frac{Total Profit for 3 Years}{3}

Average Profit = \frac{2, 25, 000}{3} = 75, 000

Goodwill = Rs 75,000

W' s Share of goodwill = 75, 000 \times \frac{1}{5} = 15, 000

Note: As no information about new profit sharing ratio is given, it is assumed that old ratio is the sacrificing ratio. Since Z is not bringing any goodwill, his Current A/c will be debited.

Question 41:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		50,000
		To W’s Capital A/c				50,000
		(Capital amount brought in by new partner)

		W’s Current A/c	Dr.		15,000
		To X’s Capital A/c				2,500
		To Y’s Capital A/c				5,000
		To Z’s Capital A/c				7,500
		(Amount of goodwill not brought by new partner debited from his capital account and distributed in old partners in their sacrificing ratio.)

		X’s Capital A/c	Dr.		10,000
		Y’s Capital A/c	Dr.		20,000
		Z’s Capital A/c	Dr.		30,000
		To Goodwill A/c				60,000
		(Old goodwill written off among old partners in their old ratio)

Working Notes

Goodwill = Average profit for 3 years

Total Profit = 62,500 + 70,000 + 92,500 = 2,25,000

Average Profit = \frac{Total Profit for 3 Years}{3}

Average Profit = \frac{2, 25, 000}{3} = 75, 000

Goodwill = Rs 75,000

W' s Share of goodwill = 75, 000 \times \frac{1}{5} = 15, 000

Note: As no information about new profit sharing ratio is given, it is assumed that old ratio is the sacrificing ratio. Since Z is not bringing any goodwill, his Current A/c will be debited.

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		5,15,200
		To B’s Capital A/c				4,81,600
		To Premium for Goodwill A/c				33,600
		(Capital and goodwill brought in by new partner)

		Premium for Goodwill A/c	Dr.		33,600
		To A’s Capital A/c				33,600
		(Goodwill given to A brought in by B)

Working Notes

Goodwill = Average Profit for 5 Years’ × Numbers of Years’ Purchase

Average Profit = \frac{Total Profit}{5}

Total Profit = (8,000) + 20,800 + 27,200 + 32,000 + 40,000 = 1,12,000

\begin{array}{l} Average Profit = \frac{1, 12, 000}{5} = 22, 400 \\ Goodwill = 22, 400 \times 3 = 67, 200 \end{array}

B' s share of Goodwill = 67, 200 \times \frac{1}{2} = 33, 600

Calculation of A’s Capital

= Opening Balance of his Capital + 5 Years’ Profit+ A’s Share of Goodwill – Drawings

= 4,00,000 + 1,12,000 + 33,600 – 64,000= 4,81,600

Question 42:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		5,15,200
		To B’s Capital A/c				4,81,600
		To Premium for Goodwill A/c				33,600
		(Capital and goodwill brought in by new partner)

		Premium for Goodwill A/c	Dr.		33,600
		To A’s Capital A/c				33,600
		(Goodwill given to A brought in by B)

Working Notes

Goodwill = Average Profit for 5 Years’ × Numbers of Years’ Purchase

Average Profit = \frac{Total Profit}{5}

Total Profit = (8,000) + 20,800 + 27,200 + 32,000 + 40,000 = 1,12,000

\begin{array}{l} Average Profit = \frac{1, 12, 000}{5} = 22, 400 \\ Goodwill = 22, 400 \times 3 = 67, 200 \end{array}

B' s share of Goodwill = 67, 200 \times \frac{1}{2} = 33, 600

Calculation of A’s Capital

= Opening Balance of his Capital + 5 Years’ Profit+ A’s Share of Goodwill – Drawings

= 4,00,000 + 1,12,000 + 33,600 – 64,000= 4,81,600

Answer:

(i)

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		20,000
		To Premium for Goodwill A/c				20,000
		(Goodwill brought in by new partner in cash)

		Premium for Goodwill A/c	Dr.		20,000
		To A’s Capital A/c				18,000
		To B’s Capital A/c				2,000
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		24,000
		B’s Capital A/c	Dr.		16,000
		To Goodwill A/c				40,000
		(Old Goodwill written off among old partners in their old ratio)

Working Notes

Old ratio = 3 : 2

New ratio = 3 : 3 : 2

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \end{array}

Sacrificing ratio = 9 : 1

(ii)

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		1,000
		To Premium for Goodwill A/c				1,000
		(Goodwill brought in by new partner in cash)

		Premium for Goodwill A/c	Dr.		1,000
		C’s Current A/c	Dr.		1,000
		To A’s Capital A/c				1,000
		To B’s Capital A/c				1,000
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		3,000
		B’s Capital A/c	Dr.		3,000
		To Goodwill A/c				6,000
		(Old Goodwill written off among old partners in their old ratio)

Question 43:

(i)

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		20,000
		To Premium for Goodwill A/c				20,000
		(Goodwill brought in by new partner in cash)

		Premium for Goodwill A/c	Dr.		20,000
		To A’s Capital A/c				18,000
		To B’s Capital A/c				2,000
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		24,000
		B’s Capital A/c	Dr.		16,000
		To Goodwill A/c				40,000
		(Old Goodwill written off among old partners in their old ratio)

Working Notes

Old ratio = 3 : 2

New ratio = 3 : 3 : 2

Sacrificing ratio = Old ratio – New ratio

\begin{array}{l} Sacrifice made by A = \frac{3}{5} - \frac{3}{8} = \frac{9}{40} \\ Sacrifice made by B = \frac{2}{5} - \frac{3}{8} = \frac{1}{40} \end{array}

Sacrificing ratio = 9 : 1

(ii)

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		1,000
		To Premium for Goodwill A/c				1,000
		(Goodwill brought in by new partner in cash)

		Premium for Goodwill A/c	Dr.		1,000
		C’s Current A/c	Dr.		1,000
		To A’s Capital A/c				1,000
		To B’s Capital A/c				1,000
		(Goodwill distributed among old partners in their sacrificing ratio)

		A’s Capital A/c	Dr.		3,000
		B’s Capital A/c	Dr.		3,000
		To Goodwill A/c				6,000
		(Old Goodwill written off among old partners in their old ratio)

Answer:

WN1: Calculation of Rao’s share of Goodwill

Rao' s Share of Goodwill = 30, 000 \times \frac{1}{4} = 7, 500

WN2: Adjustment of Rao’s share of Goodwill

Murty will get = 7, 500 \times \frac{3}{5} = 4, 500 Rao will get = 7, 500 \times \frac{2}{5} = 3, 000

(a) Where there is no Goodwill Account

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

	Rao’s Capital A/c	Dr.		7,500
	To Murty’s Capital A/c				4,500
	To Shah’s Capital A/c				3,000
	(Rao’s share of goodwill charged from his capital account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

(b) Goodwill appears at Rs 10,000

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

	Murty’s Capital A/c	Dr.		6,000
	Shah’s Capital A/c	Dr.		4,000
	To Goodwill A/c				10,000
	(Goodwill written-off at the time of Rao’s admission in old ratio)

	Rao’s Capital A/c	Dr.		7,500
	To Murty’s Capital A/c				4,500
	To Shah’s Capital A/c				3,000
	(Rao’s share of goodwill charged from his Capital Account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

Question 44:

WN1: Calculation of Rao’s share of Goodwill

Rao' s Share of Goodwill = 30, 000 \times \frac{1}{4} = 7, 500

WN2: Adjustment of Rao’s share of Goodwill

Murty will get = 7, 500 \times \frac{3}{5} = 4, 500 Rao will get = 7, 500 \times \frac{2}{5} = 3, 000

(a) Where there is no Goodwill Account

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

	Rao’s Capital A/c	Dr.		7,500
	To Murty’s Capital A/c				4,500
	To Shah’s Capital A/c				3,000
	(Rao’s share of goodwill charged from his capital account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

(b) Goodwill appears at Rs 10,000

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

	Murty’s Capital A/c	Dr.		6,000
	Shah’s Capital A/c	Dr.		4,000
	To Goodwill A/c				10,000
	(Goodwill written-off at the time of Rao’s admission in old ratio)

	Rao’s Capital A/c	Dr.		7,500
	To Murty’s Capital A/c				4,500
	To Shah’s Capital A/c				3,000
	(Rao’s share of goodwill charged from his Capital Account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

Answer:

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

	Bank A/c	Dr.		11,20,000
	To Z’s Capital A/c				10,00,000
	To Premium for Goodwill A/c				1,20,000
	(Capital and Goodwill brought in cash)

	Premium for Goodwill A/c	Dr.		1,20,000
	Y’s Capital A/c	Dr.		40,000
	To X’s Capital A/c				1,60,000
	(Goodwill distributed among Sacrificing Partners’)

	X’s Capital A/c	Dr		40,000
	Y’s Capital A/c	Dr.		20,000
	To Goodwill A/c				60,000
	(Existing Goodwill written off)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Goodwill A/c	40,000	20,000		Balance b/d	10,00,000	4,00,000
X’s Capital A/c		40,000		Bank				10,00,000
Balance c/d	11,20,000	3,40,000	10,00,000	Y’s Capital A/c	1,20,000
				Premium for Goodwill A/c	40,000

	11,60,000	4,00,000	10,00,000		11,60,000	4,00,000		10,00,000

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		1,20,000	Furniture	40,000
Bills Payable		80,000	Machinery	4,20,000
Capital			Building	4,80,000
X	11,20,000		Debtors	3,60,000
Y	3,40,000		Bank	13,60,000
Z	10,00,000	24,60,000	(2,40,000+10,00,000+1,20,000)

		26,60,000		26,60,000

Working Notes:

$\begin{array}{l} Calculation of Sacrificing Ratio: \\ X= \frac{2}{3} - \frac{2}{5} = \frac{4}{15} \\ Y= \frac{1}{3} - \frac{2}{5} = - \frac{1}{15} (G a i n) \\ Z's Share of Goodwill = 6,00,000 \times \frac{1}{5} = Rs 1,20,000 \\ Y's Share of Goodwill = 6,00,000 \times \frac{1}{15} = Rs 40,000 \end{array}$

Question 45:

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

	Bank A/c	Dr.		11,20,000
	To Z’s Capital A/c				10,00,000
	To Premium for Goodwill A/c				1,20,000
	(Capital and Goodwill brought in cash)

	Premium for Goodwill A/c	Dr.		1,20,000
	Y’s Capital A/c	Dr.		40,000
	To X’s Capital A/c				1,60,000
	(Goodwill distributed among Sacrificing Partners’)

	X’s Capital A/c	Dr		40,000
	Y’s Capital A/c	Dr.		20,000
	To Goodwill A/c				60,000
	(Existing Goodwill written off)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z

Goodwill A/c	40,000	20,000		Balance b/d	10,00,000	4,00,000
X’s Capital A/c		40,000		Bank				10,00,000
Balance c/d	11,20,000	3,40,000	10,00,000	Y’s Capital A/c	1,20,000
				Premium for Goodwill A/c	40,000

	11,60,000	4,00,000	10,00,000		11,60,000	4,00,000		10,00,000

Balance Sheet
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		1,20,000	Furniture	40,000
Bills Payable		80,000	Machinery	4,20,000
Capital			Building	4,80,000
X	11,20,000		Debtors	3,60,000
Y	3,40,000		Bank	13,60,000
Z	10,00,000	24,60,000	(2,40,000+10,00,000+1,20,000)

		26,60,000		26,60,000

Working Notes:

$\begin{array}{l} Calculation of Sacrificing Ratio: \\ X= \frac{2}{3} - \frac{2}{5} = \frac{4}{15} \\ Y= \frac{1}{3} - \frac{2}{5} = - \frac{1}{15} (G a i n) \\ Z's Share of Goodwill = 6,00,000 \times \frac{1}{5} = Rs 1,20,000 \\ Y's Share of Goodwill = 6,00,000 \times \frac{1}{15} = Rs 40,000 \end{array}$

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Revaluation A/c	Dr.		16,000
		To Machinery A/c				16,000
		(Machinery value has reduced)

		Building A/c	Dr.		40,000
		To Revaluation A/c				40,000
		(Building account appreciated)

		Revaluation A/c	Dr.		4,000
		To Provision for Doubtful Debts A/c				4,000
		(Provision created against debtors)

		Revaluation A/c	Dr.		12,000
		To Provision for Warranty Claims A/c				12,000
		(Created provision against warranty claims)

Question 46:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Revaluation A/c	Dr.		16,000
		To Machinery A/c				16,000
		(Machinery value has reduced)

		Building A/c	Dr.		40,000
		To Revaluation A/c				40,000
		(Building account appreciated)

		Revaluation A/c	Dr.		4,000
		To Provision for Doubtful Debts A/c				4,000
		(Provision created against debtors)

		Revaluation A/c	Dr.		12,000
		To Provision for Warranty Claims A/c				12,000
		(Created provision against warranty claims)

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Investments A/c	Dr.		20,000
		To Revaluation A/c				20,000
		(Investment value increased due to unrecorded investment)

		Revaluation A/c	Dr.		5,000
		To Creditors A/c				5,000
		(Creditors increased by 5,000 due to unrecorded liability)

		Sundry Creditors A/c	Dr.		1,600
		To Revaluation A/c				1,600
		(Liability for creditors reduced to the extent of 1,600)

Question 47:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Investments A/c	Dr.		20,000
		To Revaluation A/c				20,000
		(Investment value increased due to unrecorded investment)

		Revaluation A/c	Dr.		5,000
		To Creditors A/c				5,000
		(Creditors increased by 5,000 due to unrecorded liability)

		Sundry Creditors A/c	Dr.		1,600
		To Revaluation A/c				1,600
		(Liability for creditors reduced to the extent of 1,600)

Answer:

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

(i)	Provision for Doubtful Debts A/c	Dr.		5,000
	To Revaluation A/c				5,000
	(Provision on Debtors reduced)

(ii)	Revaluation A/c	Dr.		5,000
	To X’s Capital A/c				3,000
	To Y’s Capital A/c				2,000
	(Profit on Revaluation transferred to Partners’ Capital A/c)

Question 48:

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

(i)	Provision for Doubtful Debts A/c	Dr.		5,000
	To Revaluation A/c				5,000
	(Provision on Debtors reduced)

(ii)	Revaluation A/c	Dr.		5,000
	To X’s Capital A/c				3,000
	To Y’s Capital A/c				2,000
	(Profit on Revaluation transferred to Partners’ Capital A/c)

Answer:

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

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Old Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Question 49:

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

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Old Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Answer:

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

	Revaluation A/c	Dr.		76,000
	To Stock A/c				40,000
	To Furniture A/c				36,000
	(Value of assets decreased)

	X’s Capital A/c	Dr.		45,600
	Y’s Capital A/c	Dr.		30,400
	To Revaluation A/c				76,000
	(Loss on Revaluation transferred to Partners’ Capital A/c)

Question 50:

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

	Revaluation A/c	Dr.		76,000
	To Stock A/c				40,000
	To Furniture A/c				36,000
	(Value of assets decreased)

	X’s Capital A/c	Dr.		45,600
	Y’s Capital A/c	Dr.		30,400
	To Revaluation A/c				76,000
	(Loss on Revaluation transferred to Partners’ Capital A/c)

Answer:

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

	X’s Capital A/c	Dr.		24,000
	Y’s Capital A/c	Dr.		16,000
	To Investments A/c				40,000
	(Half of the investments taken over by X and Y)

	Investment A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Value of investments increased)

	Revaluation A/c	Dr.		10,000
	To X’s Capital A/c				6,000
	To Y’s Capital A/c				4,000
	(Profit on revaluation transferred to Partners’ Capital A/c)

Question 51:

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

	X’s Capital A/c	Dr.		24,000
	Y’s Capital A/c	Dr.		16,000
	To Investments A/c				40,000
	(Half of the investments taken over by X and Y)

	Investment A/c	Dr.		10,000
	To Revaluation A/c				10,000
	(Value of investments increased)

	Revaluation A/c	Dr.		10,000
	To X’s Capital A/c				6,000
	To Y’s Capital A/c				4,000
	(Profit on revaluation transferred to Partners’ Capital A/c)

Answer:

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

	Bad Debts A/c	Dr.		6,000
	To Debtors A/c				6,000
	(Bad debts incurred)

	Provision for Doubtful Debts A/c	Dr		6,000
	To Bad Debts A/c				6,000
	(Bad debts adjusted)

	Revaluation A/c (WN 1)	Dr.		1,500
	To Provision for Doubtful Debts A/c				1,500
	(Provision created)

	X’s Capital A/c	Dr.		900
	Y’s Capital A/c	Dr.		600
	To Revaluation A/c				1,500
	(Loss on revaluation transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Provision for Doubtful Debts
$\begin{array}{l} Provision to be created = (76,000 - 6,000) \times \frac{5}{100} = Rs 3,500 \\ Old Provision = Rs 2,000 \\ New Provision to be created = 3,500 - 2,000 = 1,500 \end{array}$

Question 52:

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

	Bad Debts A/c	Dr.		6,000
	To Debtors A/c				6,000
	(Bad debts incurred)

	Provision for Doubtful Debts A/c	Dr		6,000
	To Bad Debts A/c				6,000
	(Bad debts adjusted)

	Revaluation A/c (WN 1)	Dr.		1,500
	To Provision for Doubtful Debts A/c				1,500
	(Provision created)

	X’s Capital A/c	Dr.		900
	Y’s Capital A/c	Dr.		600
	To Revaluation A/c				1,500
	(Loss on revaluation transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Provision for Doubtful Debts
$\begin{array}{l} Provision to be created = (76,000 - 6,000) \times \frac{5}{100} = Rs 3,500 \\ Old Provision = Rs 2,000 \\ New Provision to be created = 3,500 - 2,000 = 1,500 \end{array}$

Answer:

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

	Z’s Capital A/c	Dr.		7,000
	W’s Capital A/c	Dr.		3,500
	To X’s Capital A/c				10,500
	(Adjustment entry made)

Working Notes:

WN 1: Gain/Loss on Revaluation

Gain/Loss = Land & Building + Trade Creditors − Plant & Machinery − Outstanding Expenses
Gain/Loss = 50,000 + 10,000 − 10,000 − 15,000 = 35,000

WN2: Calculation of Sacrifice or Gain

$\begin{array}{l} X :Y : Z = 6:3:1 (Old Ratio) \\ X :Y :Z :W = 3:3:3:1 (New Ratio) \\ Sacrificing (or Gaining) ratio = Old Ratio - New Ratio \\ X's share = \frac{6}{10} - \frac{3}{10} = \frac{6 - 3}{10} = \frac{3}{10} (Sacrifice) \\ Y's share = \frac{3}{10} - \frac{3}{10} = \frac{3 - 3}{10} = 0 \\ Z's share = \frac{1}{10} - \frac{3}{10} = \frac{1 - 3}{10} = - \frac{2}{10} (Gain) \\ W's share = \frac{1}{10} (Gain) \end{array}$

WN 3: Adjustment of Revaluation Profit
$\begin{array}{l} Amount credited in X's Capital A/c = 35,000 \times \frac{3}{10} = Rs 10,500 \\ Amount debited in Z's Capital A/c = 35,000 \times \frac{2}{10} = Rs 7,000 \\ Amount debited in W's Capital A/c = 35,000 \times \frac{1}{10} = Rs 3,500 \end{array}$

Question 53:

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

	Z’s Capital A/c	Dr.		7,000
	W’s Capital A/c	Dr.		3,500
	To X’s Capital A/c				10,500
	(Adjustment entry made)

Working Notes:

WN 1: Gain/Loss on Revaluation

Gain/Loss = Land & Building + Trade Creditors − Plant & Machinery − Outstanding Expenses
Gain/Loss = 50,000 + 10,000 − 10,000 − 15,000 = 35,000

WN2: Calculation of Sacrifice or Gain

$\begin{array}{l} X :Y : Z = 6:3:1 (Old Ratio) \\ X :Y :Z :W = 3:3:3:1 (New Ratio) \\ Sacrificing (or Gaining) ratio = Old Ratio - New Ratio \\ X's share = \frac{6}{10} - \frac{3}{10} = \frac{6 - 3}{10} = \frac{3}{10} (Sacrifice) \\ Y's share = \frac{3}{10} - \frac{3}{10} = \frac{3 - 3}{10} = 0 \\ Z's share = \frac{1}{10} - \frac{3}{10} = \frac{1 - 3}{10} = - \frac{2}{10} (Gain) \\ W's share = \frac{1}{10} (Gain) \end{array}$

WN 3: Adjustment of Revaluation Profit
$\begin{array}{l} Amount credited in X's Capital A/c = 35,000 \times \frac{3}{10} = Rs 10,500 \\ Amount debited in Z's Capital A/c = 35,000 \times \frac{2}{10} = Rs 7,000 \\ Amount debited in W's Capital A/c = 35,000 \times \frac{1}{10} = Rs 3,500 \end{array}$

Answer:

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

	Profit and Loss Adjustment A/c	Dr.		1,750
	To Stock A/c				500
	To Plant and Machinery A/c				875
	To Reserve for Doubtful Debts A/c				375
	(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

	Building A/c	Dr.		2,500
	To Profit and Loss Adjustment A/c				2,500
	(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

	Profit and Loss Adjustment A/c			750
	To A’s Capital A/c				500
	To B’s Capital A/c				250
	(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

	Cash A/c	Dr.		10,500
	To C’s Capital A/c				7,500
	To Premium for Goodwill A/c				3,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				1,000
	(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e 2:1)

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Stock	500
Plant and Machinery	875	Building	2,500
Reserve for Doubtful Debts	375
Profit transferred to
A Capital	500
B Capital	250
	2,500		2,500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			7,500
				Premium for Goodwill	2,000	1,000
Balance c/d	17,500	11,250	7,500	Profit and Loss Adjustment (Profit)	500	250
	17,500	11,250	7,500		17,500	11,250	7,500

Balance Sheet as on March 31, 2016 after admission of C
Liabilities		Amount Rs	Assets		Amounts Rs

Capital Accounts:			Building (25,000 + 2,500)		27,500
A	17,500		Plant and Machinery (17,500 – 875)		16,625
B	11,250		Stock (10,000 – 500)		9,500
C	7,500	36,250
Sundry Creditors		32,950	Sundry Debtors	4,850
			Less: Provision for D. Debts	375	4,475
			Cash in Hand (600 + 10,500)		11,100
		69,200			69,200

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill (in sacrificing ratio)

WN3

Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

Question 54:

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

	Profit and Loss Adjustment A/c	Dr.		1,750
	To Stock A/c				500
	To Plant and Machinery A/c				875
	To Reserve for Doubtful Debts A/c				375
	(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

	Building A/c	Dr.		2,500
	To Profit and Loss Adjustment A/c				2,500
	(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

	Profit and Loss Adjustment A/c			750
	To A’s Capital A/c				500
	To B’s Capital A/c				250
	(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

	Cash A/c	Dr.		10,500
	To C’s Capital A/c				7,500
	To Premium for Goodwill A/c				3,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				1,000
	(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e 2:1)

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Stock	500
Plant and Machinery	875	Building	2,500
Reserve for Doubtful Debts	375
Profit transferred to
A Capital	500
B Capital	250
	2,500		2,500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			7,500
				Premium for Goodwill	2,000	1,000
Balance c/d	17,500	11,250	7,500	Profit and Loss Adjustment (Profit)	500	250
	17,500	11,250	7,500		17,500	11,250	7,500

Balance Sheet as on March 31, 2016 after admission of C
Liabilities		Amount Rs	Assets		Amounts Rs

Capital Accounts:			Building (25,000 + 2,500)		27,500
A	17,500		Plant and Machinery (17,500 – 875)		16,625
B	11,250		Stock (10,000 – 500)		9,500
C	7,500	36,250
Sundry Creditors		32,950	Sundry Debtors	4,850
			Less: Provision for D. Debts	375	4,475
			Cash in Hand (600 + 10,500)		11,100
		69,200			69,200

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill (in sacrificing ratio)

WN3

Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

Answer:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		2,50,000
		To C’s Capital A/c				2,00,000
		To Premium for Goodwill A/c				50,000
		(Capital and Goodwill brought in by new partner)

		Premium for Goodwill A/c	Dr.		50,000
		To A’s Capital A/c				25,000
		To B’s Capital A/c				25,000
		(Goodwill distributed among old partners in their sacrificing ratio, i.e. 1 : 1)

		A’s Capital A/c	Dr.		25,000
		B’s Capital A/c	Dr.		25,000
		To Cash A/c				50,000
		(Goodwill brought in by C is withdrawn by old partners)

		Revaluation A/c (10,000 – 5,000)	Dr.		5,000
		To Provision for Doubtful Debts				5,000
		(Created provision against debtors)

		Revaluation A/c	Dr.		32,500
		To Machinery A/c				20,000
		To Furniture A/c				12,500
		(Value of machinery and furniture has depreciated)

		Stock A/c	Dr.		30,000
		To Revaluation A/c				30,000
		(Value of stock has reduced)

		Building A/c	Dr.		1,47,000
		To Revaluation A/c				1,47,000
		(Value of building has appreciated by 20%)

		Investments A/c	Dr.		20,000
		To Revaluation A/c				20,000
		(Value of investments has increased due to unrecorded investments)

		Revaluation A/c	Dr.		1,59,500
		To A’s Capital A/c				79,750
		To B’s Capital A/c				79,750
		(Revaluation profit distributed among old partners in their old ratio)

Balance Sheet as on March 31, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		6,50,000	Sundry Debtors	2,00,000
Outstanding Expenses		30,000	Less: Provision for Doubtful debts	10,000	1,90,000
Capital A/c:			Stock		2,30,000
A	6,79,750		Furniture (1,00,000 – 12,500)		87,500
B	4,79,750		Investments		20,000
C	2,00,000	13,59,500	Machinery (1,80,000 – 20,000)		1,60,000
			Building (7,35,000 + 1,47,000)		8,82,000
			Cash at Bank		4,70,000
		20,39,500			20,39,500

Working Notes

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B		C

Bank A/c	25,000	25,000		Balance b/d	6,00,000	4,00,000
				Bank A/c				2,00,000
				Revaluation A/c	79,750	79,750
Balance c/d	6,79,750	4,79,750	2,00,000	Premium for Goodwill A/c	25,000	25,000

	7,04,750	5,04,750	2,00,000		7,04,750	5,04,750		2,00,000

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,70,000	A’s Capital A/c	25,000
C’s Capital A/c	2,00,000	B’s Capital A/c	25,000
Premium for Goodwill A/c	50,000	Balance c/d	4,70,000

	5,20,000		5,20,000

Question 55:

	Books of ….
	Journal
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		Bank A/c	Dr.		2,50,000
		To C’s Capital A/c				2,00,000
		To Premium for Goodwill A/c				50,000
		(Capital and Goodwill brought in by new partner)

		Premium for Goodwill A/c	Dr.		50,000
		To A’s Capital A/c				25,000
		To B’s Capital A/c				25,000
		(Goodwill distributed among old partners in their sacrificing ratio, i.e. 1 : 1)

		A’s Capital A/c	Dr.		25,000
		B’s Capital A/c	Dr.		25,000
		To Cash A/c				50,000
		(Goodwill brought in by C is withdrawn by old partners)

		Revaluation A/c (10,000 – 5,000)	Dr.		5,000
		To Provision for Doubtful Debts				5,000
		(Created provision against debtors)

		Revaluation A/c	Dr.		32,500
		To Machinery A/c				20,000
		To Furniture A/c				12,500
		(Value of machinery and furniture has depreciated)

		Stock A/c	Dr.		30,000
		To Revaluation A/c				30,000
		(Value of stock has reduced)

		Building A/c	Dr.		1,47,000
		To Revaluation A/c				1,47,000
		(Value of building has appreciated by 20%)

		Investments A/c	Dr.		20,000
		To Revaluation A/c				20,000
		(Value of investments has increased due to unrecorded investments)

		Revaluation A/c	Dr.		1,59,500
		To A’s Capital A/c				79,750
		To B’s Capital A/c				79,750
		(Revaluation profit distributed among old partners in their old ratio)

Balance Sheet as on March 31, 2017 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		6,50,000	Sundry Debtors	2,00,000
Outstanding Expenses		30,000	Less: Provision for Doubtful debts	10,000	1,90,000
Capital A/c:			Stock		2,30,000
A	6,79,750		Furniture (1,00,000 – 12,500)		87,500
B	4,79,750		Investments		20,000
C	2,00,000	13,59,500	Machinery (1,80,000 – 20,000)		1,60,000
			Building (7,35,000 + 1,47,000)		8,82,000
			Cash at Bank		4,70,000
		20,39,500			20,39,500

Working Notes

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B		C

Bank A/c	25,000	25,000		Balance b/d	6,00,000	4,00,000
				Bank A/c				2,00,000
				Revaluation A/c	79,750	79,750
Balance c/d	6,79,750	4,79,750	2,00,000	Premium for Goodwill A/c	25,000	25,000

	7,04,750	5,04,750	2,00,000		7,04,750	5,04,750		2,00,000

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,70,000	A’s Capital A/c	25,000
C’s Capital A/c	2,00,000	B’s Capital A/c	25,000
Premium for Goodwill A/c	50,000	Balance c/d	4,70,000

	5,20,000		5,20,000

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock A/c	6,250	Provision for Doubtful Debts A/c		18,750
Plant and Machinery A/c	21,250	Loss transferred to:
		X’s Capital A/c	5,250
		Y’s Capital A/c	3,500	8,750
	27,500			27,500

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	1,50,000	Balance c/d	4,89,250
Premium for Goodwill A/c	89,250
Samir’s Capital A/c	2,50,000
	4,89,250		4,89,250

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

Revaluation A/c	5,250	3,500		Balance b/d	3,75,000	1,87,500
				Bank A/c			2,50,000
Balance c/d	4,14,375	2,28,625	2,50,000	Premium for Goodwill A/c	44,625	44,625

	4,19,625	2,32,125	2,50,000		4,19,625	2,32,125	2,50,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		1,87,500	Debtors	2,50,000
Bills Payable		1,00,000	Less: Provision for Doubtful Debts	6,250	2,43,750
Outstanding Rent		25,000	Stock (62,500 – 6,250)		56,250
Capital A/cs:			Plant and Machinery (4,25,000 – 21,250)		4,03,750
X	4,14,375		Prepaid Expenses		12,500
Y	2,28,625		Cash at Bank		4,89,250
Z	2,50,000	8,93,000
		12,05,500			12,05,500

Working Notes

WN 1:Calculation of Sacrificing Ratio

\begin{array}{l} Old ratio = 3 : 2 \\ New profit sharing ratio = 5 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by X = \frac{3}{5} - \frac{5}{10} = \frac{1}{10} \\ Sacrifice made by Y = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ Sacrificing ratio = 1 : 1 \end{array}

WN 2:Calculation of Hidden Goodwill

$\begin{array}{l} Z brings 2, 50, 000 as his capital for \frac{2}{10} share in profits \\ Total Capital of the New Firm = 2, 50, 000 \times \frac{10}{2} = Rs 12, 50, 000 \end{array}$

$\begin{array}{ccl} Capital at the time of Z' s admission & = & X' s Capital A / c + Y' s Capital A / c + Z' s Capital A / c - Revaluation Loss \\ = & 3, 75, 000 + 1, 87, 500 + 2, 50, 000 - 8, 750 = 8, 03, 750 \end{array} \begin{array}{l} Goodwill of the Firm = 12, 50, 000 - 8, 03, 750 = 4, 46, 250 \\ Z' s Share of Goodwill = 4, 46, 250 \times \frac{2}{10} = 89, 250 \end{array}$

Question 56:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs

Stock A/c	6,250	Provision for Doubtful Debts A/c		18,750
Plant and Machinery A/c	21,250	Loss transferred to:
		X’s Capital A/c	5,250
		Y’s Capital A/c	3,500	8,750
	27,500			27,500

Cash at Bank Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	1,50,000	Balance c/d	4,89,250
Premium for Goodwill A/c	89,250
Samir’s Capital A/c	2,50,000
	4,89,250		4,89,250

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z

Revaluation A/c	5,250	3,500		Balance b/d	3,75,000	1,87,500
				Bank A/c			2,50,000
Balance c/d	4,14,375	2,28,625	2,50,000	Premium for Goodwill A/c	44,625	44,625

	4,19,625	2,32,125	2,50,000		4,19,625	2,32,125	2,50,000

Balance Sheet as on April 01, 2017 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		1,87,500	Debtors	2,50,000
Bills Payable		1,00,000	Less: Provision for Doubtful Debts	6,250	2,43,750
Outstanding Rent		25,000	Stock (62,500 – 6,250)		56,250
Capital A/cs:			Plant and Machinery (4,25,000 – 21,250)		4,03,750
X	4,14,375		Prepaid Expenses		12,500
Y	2,28,625		Cash at Bank		4,89,250
Z	2,50,000	8,93,000
		12,05,500			12,05,500

Working Notes

WN 1:Calculation of Sacrificing Ratio

\begin{array}{l} Old ratio = 3 : 2 \\ New profit sharing ratio = 5 : 3 : 2 \\ Sacrificing ratio = Old ratio - New ratio \\ Sacrifice made by X = \frac{3}{5} - \frac{5}{10} = \frac{1}{10} \\ Sacrifice made by Y = \frac{2}{5} - \frac{3}{10} = \frac{1}{10} \\ Sacrificing ratio = 1 : 1 \end{array}

WN 2:Calculation of Hidden Goodwill

$\begin{array}{l} Z brings 2, 50, 000 as his capital for \frac{2}{10} share in profits \\ Total Capital of the New Firm = 2, 50, 000 \times \frac{10}{2} = Rs 12, 50, 000 \end{array}$

$\begin{array}{ccl} Capital at the time of Z' s admission & = & X' s Capital A / c + Y' s Capital A / c + Z' s Capital A / c - Revaluation Loss \\ = & 3, 75, 000 + 1, 87, 500 + 2, 50, 000 - 8, 750 = 8, 03, 750 \end{array} \begin{array}{l} Goodwill of the Firm = 12, 50, 000 - 8, 03, 750 = 4, 46, 250 \\ Z' s Share of Goodwill = 4, 46, 250 \times \frac{2}{10} = 89, 250 \end{array}$

Answer:

Revaluation Account
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Damages		1,500	Land and Building	6,000
Outstanding Electricity Bill		300	(30,000 × 20%)
Stock		2,000	Creditors (unclaimed)	1,200
Furniture		1,000
Reserve for Doubtful Debts (15,000 × 5%)		750
Profit transferred to Capital Accounts		1,650
M	1,100
S	550
		7,200		7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	S	R	Particulars	M	S	R
Bank (Goodwill withdrawn)	2,000	1,000		Balance b/d	30,000	20,000
				Bank			15,000
				Premium 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, 2017 after R’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Provision 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
Capital A/cs:			Sundry Debtors	15,000
M	33,100		Less: 5% Reserve for D. 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:

WN1: Sacrificing Ratio

WN2: Distribution of Premium for Goodwill (in sacrificing ratio)

WN3: Withdrawn of Premium for Goodwill

WN4: Distribution of Revaluation Profit (in old ratio)

Double Entry Book Keeping Ts Grewal %282017%29 Solutions for Class 12 Commerce Accountancy Chapter 3 - Admission Of A Partner

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