Question

Admission of a New Partner / 193
71
29. A and C are partners in a firm in the same ratio. They are agree to bring B as a new
partner in the firm. In the end of year 2017, their balance sheet is as follows --
Balance Sheet
(As on 31st Dec., 2017)
Amount
Liabilities
Amount
₹
20,000
12,000
Assets
Amount
₹
4,000
25,000
Creditors
Bills payable
Capital :
A:
10,000 Cash in hand
8,000 Debtors
Stock
2,000
7,000
3,600
400
15,000
28,000
6,000
4,000
61,000
C:
Furniture
10,000 Machinery
28,000
s valued for
e of 5% be
1/4 share in
s: Ashwini
3:3 : 2]
• Adjustment :
The following adjustments are to be done before B's admission :
(i) Furniture's value 250.
(ii) The provision of BDR * 300 on debtors.
(iii) Investment 600.
(iv) Newly admitted partner brought ? 4,000 for capital and * 3,000 for
goodwill
: On the basis of above information prepare (1) Revaluation A/c,
(2) Partner's Capital A/c.
ney agree to
me business
of goodwill​

Answer 1

Explanation:

Calculation of new profit sharing ratio:

A's old share= 3/5

B's old share= 2/5

C is admitted for 1/8th share.

Remaining share= 1-[1/8]

= 7/8

A's new share= 3/5 * 7/8 = 21/40

B's new share= 2/5 * 7/8 = 14/40

C's share= 1/8 * 5/5= 5/40

New profit sharing ratio= 21:14:5

(ii) JOURNAL

1. Cash a/c... Dr. 20880

To C's Capital a/c 15000

To Premium for Goodwill a/c 5880

(Being capital and premium for goodwill brought in by C)

2. Premium for Goodwill a/c... Dr. 5880

To A's Capital a/c 3528

To B's Capital a/c 2352

(Being premium for goodwill distributed among the partners in the ratio of 3:2)

PARTNER'S CAPITAL A/C

Dr. Cr.

Particulars A B C Particulars A B C

By Balance b/d 51450 36750 Nil

By Cash a/c Nil Nil 15000

To Balance c/d 54978 39102 15000 By Premium for Goodwill a/c 3528 2352 Nil

Total 54978 39102 15000 Total 54978 39102 15000

(iii) BALANCE SHEET

( after admission of C)

Liabilities Amount

(in Rs.) Assets Amount

(in Rs.)

Cash (1500+20880) 22380

Capital

- A

- B

- C

54978

39102

15000 Debtors 19500

Creditors 11800 Stock 28000

Furniture 2500

Machinery 48500

Total 120880 Total 120880

Working Note:

1. Calculation of goodwill:

Average profit= [21000+24000+25560]/3

= 23520

Goodwill= 23520 * 2

= 47040

2. C's share of Goodwill= 47040 * 1/8

= 5880

Distribution among partners:

A's share= 5880 * 3/5= 3528

B's share= 5880 * 2/5= 2352