Question

A and B share profits in the proportion of 3/4 and 1/4. Their Balance Sheet as at 31st March, 2018 was:

Liabilities ` Assets `

Sundry Creditors 41,500 Cash at Bank 26,500

General Reserve 4,000 Bills Receivable 3,000

Capital A/cs: Debtors 16,000

A 30,000 Stock 20,000

B 16,000 46,000 Fixtures 1,000

Land and Building 25,000

91,500 91,500

On 1st April, 2018, C was admitted into partnership for 1/5th share on the following terms:

(a) C pays ` 10,000 as his capital.

(b) C pays ` 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

(c) Stock and Fixtures be reduced by 10% and a 5% Provision for Doubtful Debts be created on Debtors

and Bills Receivable.

(d) The value of Land and Building be appreciated by 20%.

(e) There being a claim against the firm for damages, a liability to the extent of ` 1,000 should be created.

(f ) An item of ` 650 included in Sundry Creditors is not likely to be claimed and hence should be written

back.

Record the above transactions (Journal entries) in the books of the firm assuming that the profit-sharing

ratio between A and B has not changed. Prepare Balance Sheet on the admission of C.A and B share profits in the proportion of 3/4 and 1/4. Their Balance Sheet as at 31st March, 2018 was:

Liabilities ` Assets `

Sundry Creditors 41,500 Cash at Bank 26,500

General Reserve 4,000 Bills Receivable 3,000

Capital A/cs: Debtors 16,000

A 30,000 Stock 20,000

B 16,000 46,000 Fixtures 1,000

Land and Building 25,000

91,500 91,500

On 1st April, 2018, C was admitted into partnership for 1/5th share on the following terms:

(a) C pays ` 10,000 as his capital.

(b) C pays ` 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

(c) Stock and Fixtures be reduced by 10% and a 5% Provision for Doubtful Debts be created on Debtors

and Bills Receivable.

(d) The value of Land and Building be appreciated by 20%.

(e) There being a claim against the firm for damages, a liability to the extent of ` 1,000 should be created.

(f ) An item of ` 650 included in Sundry Creditors is not likely to be claimed and hence should be written

back.

Record the above transactions (Journal entries) in the books of the firm assuming that the profit-sharing

ratio between A and B has not changed. Prepare Balance Sheet on the admission of C.​

Answer 1

Journal entries & Balance Sheet on the admission of C.​

Explanation:

Pls refer to the pic below