Q4. Anil and Beena were partners in a fim sharing profits in the ratio of 4:3. On Ist April, 2019, they
admitted Chahat as a new partner for 1/4th share in the profit of the firm. On the date of Chahat's
admission, the Balance Sheet of Anil and Beena showed a General Reserve of Rs. 70.000, a debit
balance of Rs. 7.000 in the Profit and Loss Ac and an Investment Fluctuation Fund of Rs. 10.000
The following was agreed upon the Chahat's admission ;
(a) Chahat will bring Rs. 80,000 as her capital and her share of goodwill premium of Rs. 21,000 in
cash.
(b) The market value of investment was Rs. 17.000 less than the book value.
(c) New profit sharing ratio was agreed at 2:1:1.
Pass the necessary journal entries for the above on Chahat's admission.
Answers
A journal entry is the recording of financial transactions of a business in their accounting books.
- The correct journal entries are -
General Reserve Dr 70,000
To Anil's Capital A/c 40,000
To Beena's Capital A/c 30,000
( Being General Reserve distributed among old partners)
Anil's Capital A/c 4,000
Beena's Capital A/c 3,000
To P&L A/c 7,000
(Being loss of 7000 divided among partners )
IFF A/c 10,000
Revaluation A/c 7,000
To Investments A/c 17,000
(Being fall in value of IFF)
Anil's Capital A/c 4,000
Beena's Capital A/c 3,000
To Revaluation A/c 7,000
(Being loss of 7000 divided)
Bank A/c 1,01,000
To Chahat's Capital A/c 80,000
To Premium for Goodwill 21,000
(Being cash brought by Chahat)
Premium for goodwill A/c 21,000
To Anil's Capital A/c 6,000 ( 21,000 x 2/7)
To Beena's Capital 15,000 ( 21,000 x 5/7)
(Being premium for goodwill transferred)
Working Notes
Sacrificing Ratio = Old Share - New Share
Anil = 4/7 - 2/4 = 2/28
Beena = 3/7 - 1/4 = 5/28
SR = 2/28 : 5/28 = 2:5
Answer:
Explanation:
The correct journal entries are -
General Reserve Dr 70,000
To Anil's Capital A/c 40,000
To Beena's Capital A/c 30,000
( Being General Reserve distributed among old partners)
Anil's Capital A/c 4,000
Beena's Capital A/c 3,000
To P&L A/c 7,000
(Being loss of 7000 divided among partners )
IFF A/c 10,000
Revaluation A/c 7,000
To Investments A/c 17,000
(Being fall in value of IFF)
Anil's Capital A/c 4,000
Beena's Capital A/c 3,000
To Revaluation A/c 7,000
(Being loss of 7000 divided)
Bank A/c 1,01,000
To Chahat's Capital A/c 80,000
To Premium for Goodwill 21,000
(Being cash brought by Chahat)
Premium for goodwill A/c 21,000
To Anil's Capital A/c 6,000 ( 21,000 x 2/7)
To Beena's Capital 15,000 ( 21,000 x 5/7)
(Being premium for goodwill transferred)
Working Notes
Sacrificing Ratio = Old Share - New Share
Anil = 4/7 - 2/4 = 2/28
Beena = 3/7 - 1/4 = 5/28
SR = 2/28 : 5/28 = 2:5