Question

A,B and C were in partnership, sharing profits and losses as to A one-
and cone - sixth. As from 14 January, 2016 they admitted Dinto partnership on the
following terms:
D to have a one - sixth share which he purchased entirely from a paying AP 3,000 for that
share of goodwill of this amount, A had withdrawn 6,000 and put the balance in the firm
as additional capital. As a condition to admission of D as a partner, D also brought: 5,000
capital into the firm. It was further agreed that the investments should be valued at its
market value of 3,600 and plant be valued at 5,800.
The balance sheet of the old firm on 31.12.2015 was as follows:
Cash at bank 8,000; debtors 12,000; stock 10,000; investments at cost 6,000,
furniture 2,000; plant 7,000, creditors 21,000; capital: R12,000 and the drawings were
A6,000, B6,000, C3,000 and D3,000.
You are required to journalese the opening adjustments, prepare the opening balance sheet
of the new firm as on 1st January, 2016 and give the capital account of each as on 31
December, 2016​

Answer 1

Answer:

Profit Sharing Ratio: Calculation of new profit sharing ratio.

2. Goodwill: Valuation and adjustment of goodwill among the sacrificing old partners.

3. Revaluation of Assets and Liabilities: Assets and liabilities are revalued to ascertain the current value of the assets and liabilities of the partnership firm. Moreover, the profit or loss due to the revaluation need to be distributed among the old partners.

4. Accumulated profits, losses and reserves are distributed among the old partners in their old ratio.

5. Adjustment of capital of the partners.