The following is the Balance Sheet of A and B as at March 31, 2013. C is admitted as a partner
on that date when the position of A and B was as under :
Liabilities ` Assets `
A’s Capital
B’s Capital
Creditors
General Reserve
Workmen’s
Compensation
Fund
10,000
8,000
12,000
16,000
4,000
Debtors
Land and Building
Plant and Machinery
Stock of Goods
Cash and Bank Balance
11,000
8,000
10,000
12,000
9,000
50,000 50,000
A and B shared profits in the proportion of 3 : 2. The following terms of admission are agreed
upon :
(a) Revaluation of Assets :
Land and Building-`18,000 ; and Stock of Goods-`16,000
(b) The liability on Workmen’s Compensation Fund is determined at `2,000.
(c) C bought in as his share of goodwill `10,000 in cash.
(d) C was to bring further cash as would make his capital equal to 20% of the combined
capitals of partners A and B after above revaluation and adjustments are carried out.
(e) The future profit sharing proportions are : A-2/5th ;B-2/5th
; C-1/5th
Prepare the new Balance Sheet of the firm and the Capital Accounts of the partners. [2008]
Answers
Answer:
ANSWER
(i) JOURNAL
1. Cash a/c... Dr. 160000
To C's Capital a/c 100000
To Premium for Goodwill a/c 60000
(Being capital and premium for goodwill brought in by C)
2. Premium for Goodwill a/c... Dr. 60000
To A's Capital a/c 40000
To B's Capital a/c 20000
(Being premium for goodwill distributed among the partners in the ratio of 2:1)
3. Revaluation a/c.... Dr. 8000
To Stock a/c 4000
To Provision for doubtful debts a/c 3000
To Creditors a/c 1000
(Being decrease in assets and increase in liabilities transferred to revaluation account)
4. Plant a/c.... Dr. 20000
Building a/c... Dr. 15000
To Revaluation a/c 35000
(Being increase in assets transferred to revaluation account)
5. Revaluation a/c... Dr. 27000
To A's Capital a/c 18000
To B's Capital a/c 9000
(Being profit on revaluation transferred to the partner's capital account)
(ii) REVALUATION A/C
Dr. Cr.
Particulars Amount
(in Rs.) Particulars Amount
(in Rs.)
To Stock a/c 4000 By Plant a/c 20000
To Provision for
doubtful debts a/c 3000 By Building a/c 15000
To Creditors a/c 1000
To Profit on Revaluation
- A's Capital a/c
- B's Capital a/c
18000
9000
TOTAL 35000 TOTAL 35000
(iii) PARTNER'S CAPITAL A/C
Dr. Cr.
Particulars A B C Particulars A B C
By Balance b/d 180000 150000
By Cash a/c 100000
By Premium for Goodwill a/c 40000 20000
To Balance c/d 238000 179000 100000 By Profit on revaluation a/c 18000 9000
TOTAL 238000 179000 100000 TOTAL 238000 179000 100000
(iv) BALANCE SHEET
(After admission of C)
Liabilities Amount
(in Rs.) Assets Amount
(in Rs.)
Bills Payable 10000 Cash in Hand (10000+160000) 170000
Creditors (58000+1000) 59000 Cash at Bank 40000
Outstanding Expenses 2000 Sundry Debtors (60000-3000) 57000
Capital
- A
- B
- C
238000
179000
100000 Stock (40000-4000) 36000
Plant (100000+20000) 120000
Building (150000+15000) 165000
TOTAL 588000 TOTAL 588000
Explanation:
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