Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March, 2018. A and B share profits and losses in the ratio of 2 : 1.
C is admitted as a partner on the date of the Balance Sheet on the following terms:
(a) C will bring in ₹ 1,00,000 as his capital and ₹ 60,000 as his share of goodwill for 1/4th share in the profits.
(b) Plant is to be appreciated to ₹ 1,20,000 and the value of building is to be appreciated by 10%.
(c) Stock is found overvalued by ₹ 4,000.
(d) A Provision for doubtful debts is to be created at 5% of Sundry Debtors.
(e) Creditors were unrecorded to the extent of ₹ 1,000.
Pass the necessary journal entries, prepare the Revaluation Account and Partners Capital Accounts, and show the Balance Sheet after the admission of C.
Answers
The necessary journal entries are given below:
Explanation:
As per the journal entry,
An amount of Rs. 1,60,000 has been debited from the Bank A/c and has been transferred an amount of Rs. 1,00,000 and Rs. 60,000 to the C's Capital A/c and to the Premium for Goodwill A/c respectively.
This has been the Capital and premium for goodwill brought by C for 1/4 share
An amount of Rs.60,000 has been debited from the Premium for Goodwill A/c and has been transferred an amount of Rs. 40,000 and Rs. 20,000 to the A's Capital A/c and to the B's Capital A/c respectively.
This has been the Premium for Goodwill brought transferred to old partners' capital account in their sacrificing ratio.
An amount of Rs.20,000 and Rs. 15, 000 has been debited from the Plant A/c and the Building A/c respectively and has been transferred an amount of Rs. 35000 to the Revaluation A/c
This has been the Increase in value of assets.
An amount of Rs.8,000 has been debited from the Revaluation A/c and has been transferred an amount of Rs. 4000, Rs. 3000 and Rs. 1000 to the Stock , to the Provision for Doubtful Debts A/c and to the Creditors A/c (Unrecorded)
This has been the Assets and liabilities revalued.
An amount of Rs.27,000 has been debited from the Revaluation A/c and has been transferred an amount of Rs. 18000 and Rs. 9000 to the A's Capital A/c and to the B's Capital A/c respectively.
This has been the Profit on revaluation transferred to old partners.
