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Admission of a Partner
Admission of A Partner
Partnership firm suffering from shortage of
funds or administrative in capabilities may decide
to admit a partner.
According to Section 31 (1) of the Indian
Partnership Act 1932, a person can be admitted
only with the consent of all the existing partners.
A person who is admitted to the firm is known
as an incoming or a new partner.
On admission of a new partner, the existing partnership comes
to an end and a new partnership comes into effect.
new firm is reconstituted under a fresh agreement.
New partner acquires two rights.
a) Right to share the assets of the partnership firm.
b) Right to share the future profits of the partnership firm.
Problems at the time of admission
of new partners
Old Ratio
Ratio in which old partners distributed their profits/losses before
the new partner enters
60%
40%
Share of A
3
5
=
Share of B
2
5
=
If old ratio is not given it will
be assume to equal
50%
50%
Profit sharing ratio
Old Share/Ratio
60%
40%
50%
30%
20%
New Share/Ratio
20%
60%
40%
50%
30%
TO
New Ratio
The ratio in which all partners (including incoming partner) share
the future profits and losses
50%
30%
20%
Sacrifice
The part which the old partners sacrifice from their shares of
profit in favor of a new partner
20%
Sacrifice
of A
Sacrifice
of B
10%
10%
20%
10% 10%
3
5
2
5
= 1
+
1
5
Share
Effect
3
5
2
5
+
Suppose if new partner takes
1
5
Share
Two basic problems
A and B are partners sharing profits and losses in the ratio of
First problem
Who will sacrifice and in what ratio
Second Problem
How to calculate new ratio
Difference between
Sacrifice (Amount)
Amount in which new
partners takes his share
It is the ratio in which new
partner takes his share
Sacrifice ratio
1
10
1
10
From A From B
3
15
1
15
From A From B
3
25
2
25
From A From B
In the ratio of ( 3:1 )
In Equal ratio ( 1:1 )
In the existing ratio of ( 3:2 )
New ratio
To calculate the new ratio first calculate sacrifice amount
Sacrifice
= Old Ratio -
New Ratio
Old ratio
Sacrifice ratio
Sacrifice amount
New ratio
Steps to calculate the new
ratio
When nothing is mention about new ratio and
sacrifice ratio(old ratio/existing ratio = sacrifice
ratio)
When new partner takes his share of profit in
different ratio
When new partner takes his share of profit in
equal ratio
A ,B and C are partner sharing profits and losses in the ratio
of 3: 2:1. D is admitted for 1/6th share in the profits.
Calculate the new profit ratio and sacrifice ratio
A ,B and C are partner sharing profits and losses in the ratio of
3: 2:1. D is admitted for 1/6th share in the profits. Calculate the
new profit ratio and sacrifice ratio
Sacrifice of A
1
6
=
3
6
= 3
36
Sacrifice Ratio (Assumed) = 3:2:1
x
Sacrifice of B
1
6
=
2
6
=
2
36
x
New share of A 3
6
= 3
36
= 15
36
New share of B
2
6
=
2
36
=
10
36
Sacrifice of C
1
6
=
1
6
=
1
36
x
New share of C
1
6
=
1
36
=
5
36
Sacrifice
= Old Ratio -
New Ratio
A ,B and C are partner sharing profits and losses in the ratio of
3: 2:1. D is admitted for 1/6th share in the profits. Calculate the
new profit ratio and sacrifice ratio
New Ratio of A,B,C,D
15
36
10
36
5
36
5
36
=
Problem
Ram and Shyam are partners sharing profits in the ratio of 7:5.
They admit Gopi as a new partner for 1/6th share in the future
profits of the firm which he gets equally from Ram and Shyam .
Calculate new profit sharing ratio of Ram ,Shyam and Gopi
Sacrifice of Ram
1
6
=
1
2
= 1
12
Given Sacrifice Ratio(1:1)
x
Sacrifice of Shyam
1
6
=
1
2
=
1
12
x
New share of Ram
7
12
=
1
12
=
6
12
New share of Shyam
5
12
=
1
12
=
4
12
New Ratio of Ram
,Shyam and Gopi
6
12
4
12
2
12
=
Sacrifice
= Old Ratio -
New Ratio
Lucy and Zeny are partner sharing profit and losses in the ratio
of 4: 3. Allen is admitted for 1/5th profit which he acquires in
the ratio of 1: 2 from Lucy and Zeny. Calculate new profit
sharing ratio.
Sacrifice of Lucy
1
5
=
1
3
= 1
15
Given Sacrifice Ratio(1:2)
x
Sacrifice of Zeny
1
5
=
2
3
=
2
15
x
New share of Lucy
4
7
=
1
15
=
53
105
New share of Zeny
3
7
=
2
15
=
31
105
New Ratio of Lucy ,
Zeny and Allen
53
105
31
105
21
105
=
Sacrifice
= Old Ratio -
New Ratio
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
A and B are partners sharing profits in the ratio of 7:3. They
admitted C as a new partner for 3/7 share which she acquired
2/7 from A and 1/7 from B. Calculate the new profit sharing
ratio of A, B and C.
New share of A
7
10
=
Given Sacrifice amount
2
7
=
29
70
New share of B
3
10
=
1
7
=
11
70
New Ratio of A ,B , C
29
70
11
70
40
70
=
Sacrifice
= Old Ratio -
New Ratio
A and B are partners in a firm sharing profits in 4:1 ratio. They
admitted C as a new partner for 1/5 share in the profits, which
he acquired wholly from A. Determine the new profit sharing
ratio of the partners
New share of A
4
5
=
Given Sacrifice amount
1
5
=
3
5
New share of B
1
5
=
0
0
=
1
5
New Ratio of A ,B , C
3
5
1
5
1
5
=
Sacrifice
= Old Ratio -
New Ratio
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
E and R are partners sharing profits and losses in the ratio of
7:5. They agree to admit C into partnership. E surrenders 1/4th
of her share and R 1/2th of her share in favor of C. Calculate
the New Profit Ratio and the sacrificing ratio
7
12
=
1
4
=
7
48
x
5
12
=
1
2
=
5
24
x
Sacrifice of E
Sacrifice of R
New share of E
7
12
=
7
48
=
21
48
New share of R
5
12
=
5
24
=
10
48
Sacrifice
= Old Ratio -
New Ratio
Sacrifice ratio
of E & R
=
7
48
5
24
7 , 10
=
E and R are partners sharing profits and losses in the ratio of
7:5. They agree to admit C into partnership. E surrenders 1/4th
of her share and R 1/2th of her share in favor of C. Calculate
the New Profit Ratio and the sacrificing ratio
New Ratio of E, ,R,C
21
48
10
48
17
48
=
A and B were partners sharing profits in the ratio of 3:2. They
admitted X and Y as new partners. A surrendered ¼th of his
share in favor of X and B surrendered 1/3rd of his share in favor
of Y. Calculate the new profit sharing ratio of A, B, X and Y
3
5
=
1
4
=
3
20
x
2
5
=
1
3
=
2
15
x
Sacrifice of A
Sacrifice of B
New share of A
3
5
=
3
20
=
27
60
New share of B
2
5
=
2
15
=
16
60
Sacrifice
= Old Ratio -
New Ratio
Sacrifice ratio
of A & B
=
3
20
2
15
9 , 8
=
A and B were partners sharing profits in the ratio of 3:2. They
admitted X and Y as new partners. A surrendered ¼th of his
share in favor of X and B surrendered 1/3rd of his share in favor
of Y. Calculate the new profit sharing ratio of A, B, X and Y
New Ratio of
A,B,X,Y
27
60
16
60
9
60
=
8
60
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
When remaining share is distributed among the existing
partner in equal ratio
When remaining share is distributed among the existing
partner in old ratio/unchanged
When remaining share is distributed among the existing
partner in different ratio
Case 1
When remaining share
is distributed among
the existing partner in
equal ratio
A and B are partners sharing profits in the ratio of 3:2. They
admit C as a new partner for 1/4th share in the future profits
of the firm. New profit sharing ratio of A and B will be equal
Let the total
profit
3
1
Remaining Share
Of A & B
1
1
4
=
4
New share of A
3
4
=
1
2
=
3
8
x
New share of B
3
4
=
1
2
=
3
8
x
=
New Ratio of
A,B,C
3
8
3
8
2
8
=
=
-
Sacrifice of A
3
5
-
3
8
= =
9
40
Sacrifice of B 2
5
-
3
8
= = 1
40
Sacrifice ratio
of A & B
=
9
40
1
40
9 , 1
=
New Ratio
= Old Ratio -
Sacrifice
A and B are partners sharing profits in the ratio of 3:2. They
admit C as a new partner for 1/4th share in the future profits
of the firm. New profit sharing ratio of X and Y will be equal
Case 2
When remaining share
is distributed among
the existing partner in
old ratio/unchanged
X and Y are partners sharing profits in the ratio of 3:2. They
admitted S as a new partner for 1/5 share in the future profits
of the firm. New profit sharing ratio of X and Y will remains as
same
Let the total profit
4
1
Remaining Share Of
X & Y
1
1
5
=
5
New share of X
4
5
=
3
5
=
12
25
x
New share of X
4
5
=
2
5
=
8
25
x
=
New Ratio of
X, Y, Z.
12
25
8
25
5
25
=
=
Sacrifice of X
3
5
-
12
25
= =
3
25
Sacrifice of Y
2
5
-
8
25
=
= 2
25
Sacrifice ratio of
X & Y
=
3
25
2
25
3 , 2
=
New Ratio
= Old Ratio -
Sacrifice
X and Y are partners sharing profits in the ratio of 3:2. They
admitted S as a new partner for 1/5 share in the future profits
of the firm. New profit sharing ratio of X and Y will remains as
same
Case 3
When remaining share
is distributed among
the existing partner in
different ratio
A and B are partners. They admit C as a new partner for 1/4th
share in the future profits of the firm. A and B decided to share
the future profits in the ratio of 2:1
Let the total profit
3
1
Remaining Share Of
A & B
1
1
4
=
4
New share of A
3
4
=
2
3
=
6
12
x
New share of B
3
4
=
1
3
=
3
12
x
=
New Ratio of
A, B, C.
6
12
3
12
3
12
=
=
Sacrifice of A
1
2
-
6
12
= =
0
12
Sacrifice of B
1
2
-
3
12
= = 1
4
Sacrifice ratio of
A & B
=
0
12
1
4
New Ratio
= Old Ratio -
Sacrifice
Whole sacrifice is made by B
A and B are partners. They admit C as a new partner for 1/4th
share in the future profits of the firm. A and B decided to share
the future profits in the ratio of 2:1
Old ratio is not given it will be
assume to equal
X and Y are partners sharing profits in the ratio of 3:2. They
admitted S as a new partner for 1/5 share in the future profits
of the firm. New profit sharing ratio of X and Y will remains as
same
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
R and M are partners in a firm sharing profits in the ratio of
5:3. They admit B as a new partner. The new profit sharing ratio
will be 4:2:1. Calculate the sacrificing ratio.
Given New Ratio(3:1)
Sacrifice of M
5
8
-
4
7
= =
3
56
3
8
-
2
7
= =
5
56
Sacrifice ratio
of R & M
=
56
3 5
56
= 3 , 5
New Ratio
= Old Ratio -
Sacrifice
Sacrifice of R
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
A, B and C are partners sharing profits and losses in the ratio
4 : 3: 1. D is admitted for 1/6th share of profits. It was
decided that C will retain his original share. Calculate new ratio
and sacrifice ratio
Sacrifice of A
1
6
=
4
7
= 4
42
Given Sacrifice Ratio(4:3:0)
x
Sacrifice of B
1
6
=
3
7
=
3
42
x
New share of A
4
8
=
4
42
=
68
168
New share of B
3
8
=
3
42
=
168
Assumed
51
Sacrifice
= Old Ratio -
New Ratio
A, B and C are partners sharing profits and losses in the ratio
4 : 3: 1. D is admitted for 1/6th share of profits. It was
decided that C will retain his original share. Calculate new ratio
and sacrifice ratio
New Ratio of
A ,B,C,D
68
168
51
168
21
168 168
28
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
B and C are partners sharing profits and losses in the
ratio of 5: 4. D is admitted for 1/6th share of profits of
which he acquires 1/18 from B and 2/18th from C.
Calculate new profit sharing ratio .
New ratio 9:6:3
Sacrificing ratio = (1:2)
Kokila and Mala were sharing profits in the ratio of 4:3.
Chandra was admitted in the business as a partner with
3/7th share in the profits of the firm which she takes
2/7th from Kokila and 1/7th from Mala. Find out New
Profit Ratio and the sacrificing ratio
New ratio (2:2:3)
Sacrificing ratio = (2:1)
A and B are partners sharing profits in the ratio of 2:1.
They admit C into partnership giving him 1/5th share in the
profits which he acquires from A and B in the ratio of
1:2. Calculate the new profit sharing ratio.
New ratio 9:6:3
Sacrificing ratio = (1:2)
Muthu and Siva were partners in a firm sharing profits in the
ratio of 7:3. Bala was admitted on 1/5th shares in the profits.
What would be their New Profit Ratio and their sacrificing ratio.
1. If Bala acquired his shares equally, from the old
partners.
2. If he acquired his profit share in the original ratio of the
old partners.
3. If he acquired it as 3/20th from Muthu and 1/20th from
Siva.
4. If he acquires his share entirely from Muthu
New ratio 6:2:2 Sacrificing ratio = (1:1)
New ratio 28:12:10
New ratio 11:5:4
New ratio 5:3:2
Sacrificing ratio = (7:3)
Sacrificing ratio = (3:1)
Sacrificing ratio = (NA)
M and S are partners in a firm sharing profits and losses in the
ratio of 7:3. T admitted as new partner. M surrenders 1/5th
share of his profit in favour of M and S surrenders 1/3rd of his
share in favour of T. Calculate New Profit Sharing Ratio and the
sacrificing ratio
New ratio 28:12:10
Sacrificing ratio = (3:7)
E and R are partners sharing profits and losses in the
ratio of 4:5. They agree to admit C into partnership. E
surrenders 1/5th of her share and R 1/4th of her share in
favour of C. Calculate the New Profit Ratio and the
sacrificing ratio
New ratio 9:6:3
Sacrificing ratio = (16:25)
E and R are partners sharing profits and losses in the
ratio of 6:4. They agree to admit C into partnership. E
surrenders 1/3rd of her share and R gives 1/10th from
his share in favour of C. Calculate the New Profit Ratio
and the sacrificing ratio
New ratio 4:3:3
Sacrificing ratio = (2:1)
P ,Q ,R are partners sharing profits and losses in the ratio
of 8:7:5. They agree to admit S into partnership. P
surrenders 1/8th of his share and Q , R gives 1/7th and
1/5th of their share in favour of S. Calculate the New
Profit Ratio and the sacrificing ratio
New ratio 7:6:4:3
Sacrificing ratio = (1:1:1)
M and S are partners in a firm sharing profits and losses in the
ratio of 5:3. T admitted as new partner for 1/4th share in the
profits. New ratio between M and S will be 3:2
New ratio 9:6:5
Sacrificing ratio = (7:3)
M and S are partners in a firm sharing profits and losses in the
ratio of 4:3. T admitted as new partner for 1/3th share in the
profits. New ratio between M and S will be 3:2
New ratio 6:4:5
Sacrificing ratio = (18:17)
M and S are partners in a firm sharing profits and losses
in the ratio of 2:1. T admitted as new partner for 1/4th
share in the profits. New ratio between M and S will be
remain as same
New ratio 6:3:3.
Sacrificing ratio = (3:7)
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
Value of the reputation of a firm in respect of the profits
expected in future over and above the normal profits.
The incoming partner acquires his share in the profits of
the firm from the existing partners
Average profit method
Super profit method
Capitalization method
Average profits
Total profits
=
No of years
Goodwill = Average profits x No Of Years Purchased
Super profit Actual/average profits
= Normal profits
Goodwill = Super Profit x No of years purchased
The profit for the last five years of a firm were as follows –
year 2002 Rs. 4,00,000; year 2003 Rs. 3,98,000; year 2004
Rs. 4,50,000; year 2005 Rs. 4,45,000 and year 2006 Rs.
5,00,000. Calculate goodwill of the firm on the basis of 3 years
purchase of 5 years average profits
Total profit = 4,00,000 3,98,000 450000 500000
445000
+ + + +
=
4,38,600
21,93,000
=
Average profits =
21,93,000
Average profits
Total profits
=
No of years
5
Goodwill = Average profits x No Of Years Purchased
Goodwill 4,38,600
= x 3 = 1315800
The books of a business showed that the capital employed on
December 31, 2006, Rs. 5,00,000 and the profits for the last
five years were: 1997– Rs. 40,000: 1998-Rs. 50,000; 1999-Rs.
55,000; 2000-Rs.70,000 and 2001-Rs. 85,000. find out the
value of goodwill based on 3 years purchase of the super profits
of the business, given that the normal rate of return is 10%.
Normal profits = Capital employed x
Normal rate of return
100
= 5,00,000 x 10
100
= 50,000
Total profit = 4,00,000 50,000 55,000 85,000
70,000
+ + + +
=
60,000
3,00,000
=
Average profits =
3,00,000
Average profits Total profits
=
No of years
5
Goodwill = Super Profit x No of years purchased
Super profit Actual/average profits
= Normal profits
= 50,000
60,000 = 10,000
= 10,000 x 3
= 30,000
The books of a business showed that the capital employed on
December 31, 2006, Rs. 5,00,000 and the profits for the last
five years were: 1997– Rs. 40,000: 1998-Rs. 50,000; 1999-Rs.
55,000; 2000-Rs.70,000 and 2001-Rs. 85,000. find out the
value of goodwill based on 3 years purchase of the super profits
of the business, given that the normal rate of return is 10%.
Share of goodwill paid privately
Paid share of goodwill in cash
(Premium Method)
Paid for goodwill other than cash
Do not pay his share of goodwill in cash.
(Revaluation Method)
Pay only part of his share of goodwill .
(Premium-cum-revaluation Method)
When any existing partner may gain and other may
sacrifice
Particulars L.F) Dr Amount Cr Amount
No entry
Premium Method
When his share of goodwill is retained in the firm
When his share of goodwill is withdrawn from the
firm
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To New Partner’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
Gaining partners Capital/current A/c
To Sacrificing partner’s Capital/Current A/c
(goodwill brought by new partner
transferred to old partner in SR)
XXXX
XXXX
XXXX
XXXX
Always first calculate sacrifice ratio
XXXX
XXXX
X and Y are partners sharing profits in the ratio of 2:1. They admit Z
into partnership giving him 1/5th share in the profits which he acquires
from X and Y in the equal ratio. He will bring Rs 1,65,000 as his share
of capital and Rs 30000 for his share of goodwill. Pass journal entries
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To Z Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
To X’s Capital A/c
To Y’s Capital A/c
(goodwill brought by new partner
transferred to old partner in SR=1:1)
1,95,000
1,65,000
30,000
15,000
30,000
15,000
A and B are partners sharing profits in the ratio of 3:2. They admit C
into partnership giving him 3/7th share in the profits which he acquires
2/7th from A and 1/7th B. He will bring 60,000 as goodwill and Rs
2,00,000 for capital. Calculate the new sharing profit and pass journal
entries
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To C Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
(goodwill brought by new partner
transferred to old partner in SR=2:1)
2,60,000
2,00,000,
60,000
40,000
60,000
20,000
X and Y are partners sharing profits and losses in the ratio of
3:2. They decide to admit A into partnership with 1/3th share in
profits. A brings in Rs. 30,000 for capital and amount of premium
in cash's. Goodwill of the firm is valued at 2 years purchase of
the super profit of the firm. Actual profit of the firm is 30000
and normal profit of the firm is 24000 Give Journal entries
Goodwill = Super Profit x No of years purchased
Super profit Actual/average profits
= Normal profits
= 24000
30000 = 6000
= 6000 x 2
= 12000
A share of goodwill = 12000
1
3
x = 4000
X and Y are partners sharing profits and losses in the ratio of 3:2. They
decide to admit A into partnership with 1/3th share in profits. A brings in
Rs. 30,000 for capital and amount of premium in cash's. Goodwill of the
firm is valued at 2 years purchase of the super profit of the firm. Actual
profit of the firm is 30000 and normal profit of the firm is 24000 Give
necessary journal entries
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To A’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
To X Capital A/c
To Y Capital A/c
(goodwill brought by new partner
transferred to old partner in SR= OR)
34,000
30,000
4,000
2,400
4,000
1,600
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To New Partner’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
Gaining partners Capital/current A/c
To Sacrificing partner’s Capital/Current A/c
(goodwill brought by new partner transferred to
old partner in SR)
XXXX
XXXX
XXXX
XXXX
Old Partner’s Capital A/c Dr.
To Cash A/c
(Amount brought by new partner
withdrawn by existing partner in SR)
XXXX
XXXX
XXXX
XXXX
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To Mohan Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
To Ram Capital A/c
To Shyam Capital A/c
(goodwill brought by new partner
transferred to old partner in SR)
8,40,000
6,00,000
2,40,000
1,60,000
Ram Capital A/c
Shyam Capital A/c Dr.
To Cash A/c
(Amount brought by new partner
withdrawn by existing partner in SR)
20,000
2,40,000
80,000
40,000
60,000
Ram and Shyam are partners sharing profits and losses in the ratio of
3:2. They decide to admit Mohan into partnership with 1/4 share which
he acquires in the ratio of 2:1. Mohan brings in Rs. 6,00,000 for capital
and Rs 2,40,000 for goodwill. Old partners withdraw 1/4th their share of
their goodwill in cash. Give necessary journal entries
Liabilities Rs. Assets Rs.
Capital A/c Goodwill 6,000
A’s Capital 50,000 Plant & Machinery 65,000
B’s Capital 50,000 Furniture 15,000
Investment 20,000
Stock 20,000
Bills payable 10,000 Sundry Debtor 30,000
Sundry Creditor 50,000 Cash in hand 15,000
Particulars L.F) Dr Amount Cr Amount
A’s Capital A/c Dr.
B’s capital A/c
To Goodwill A/c
( goodwill already appears written off in
old ratio in all partners)
3000
6000
If there is any goodwill appearing in the books it has to be
write off among all partners in old ratio
3000
A and B are partners in a firm sharing profits in 3:2 ratio, they admitted
C for 1/4 share in the profits of the firm. C brings Rs. 1,00,000 for his
share of goodwill. Goodwill already appears in the books Rs. 60,000. The
new profit sharing ratio between A, B and C will be 2:1:1. Record the
necessary journal entries
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill and capital)
Premium for goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
(goodwill brought by new partner transferred
to old partner in SR = Old Ratio – New Ratio)
1,00,000
1,00,000
1,00,000
40,000
60,000
A Capital A/c
B Capital A/c Dr.
To goodwill A/c
(goodwill written off among old partners in the
old ratio)
24,000
36,000
60,000
When new partner brings his share of goodwill for
consideration other than cash
Particulars Dr Amount Cr Amount
Assets A/c Dr.
To New Partner’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
To old partner’s Capital A/c
(goodwill brought by new partner
transferred to old partner in SR)
XXXX
XXXX
XXXX
XXXX
E and F were partners in a firm sharing profits in the ratio of 3:
2. They admitted G as a new partner for 1/3 share. E, F and G
will share future profits equally. G brought Rs. 50,000 in cash
and machinery worth Rs. 70,000 goodwill. Pass necessary journal
entries.
Sacrifice of E
3
5
-
1
3
= =
4
15
Sacrifice of F
2
5
-
1
3
=
=
1
15
Sacrifice ratio of
E & F
=
4
15
1
15
4 , 1
=
New Ratio
= Old Ratio -
Sacrifice
Particulars Dr Amount Cr Amount
Cash A/c Dr.
Machinery A/c Dr
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill and capital)
Premium for goodwill A/c Dr.
To E Capital A/c
To F Capital A/c
(Goodwill brought by new partner transferred
to old partner in SR)
50,000
1,20,000
1,20,000
96,000
70,000
24,000
E and F were partners in a firm sharing profits in the ratio of
3: 2. They admitted G as a new partner for 1/3 share. E, F and
G will share future profits equally. G brought Rs. 50,000 in cash
and machinery worth Rs. 70,000 goodwill. Pass necessary journal
entries.
A and B were partners in a firm sharing profits in the ratio of 7:
5. They admitted C as a new partner for 1/6 share. A, B and C
will share future profits ratio 13:7:4. C brought following assets
to his capital and his share of goodwill. Stock Rs. 60,000 ,
debtors Rs 80,000, Land Rs 2,00,000, plant and machinery Rs
1,20,000. Goodwill of the firm be valued at Rs 7,50,000 Pass
necessary journal entries.
New Ratio
= Old Ratio -
Sacrifice of A
7
12
-
13
24
= =
1
24
Sacrifice of B 5
12
-
7
24
=
=
3
24
Sacrifice ratio
of A & B
=
1
24
3
24
1, 3
=
Total Goodwill x 1
6
=
7,50,000
x 1
6
= = 1,25,000
A and B were partners in a firm sharing profits in the ratio of 7:
5. They admitted C as a new partner for 1/6 share. A, B and C
will share future profits ratio 13:7:4. C brought following assets
to his capital and his share of goodwill. Stock Rs. 60,000 ,
debtors Rs 80,000, Land Rs 2,00,000, plant and machinery Rs
1,20,000. Goodwill of the firm be valued at Rs 7,50,000 Pass
necessary journal entries.
Particulars Dr Amount Cr Amount
Purchase A/c Dr.
Debtors A/c Dr
Land A/c Dr
Machinery A/c Dr
To C’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill and capital)
Premium for goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
(Goodwill brought by new partner transferred
to old partner in SR)
60,000
1,25,000
1,25,000
31,250
1,20,000
93,750
3,35,000
2,00,000
80,000
A and B were partners in a firm sharing profits in the ratio of 7:
5. They admitted C as a new partner for 1/6 share. A, B and C
will share future profits ratio 13:7:4. C brought following assets
to his capital and his share of goodwill. Stock Rs. 60,000 ,
debtors Rs 80,000, Land Rs 2,00,000,Plant and machinery Rs
1,20,000.Goodwill of the firm be valued at Rs 7,50,000 Pass
necessary journal entries.
Ledger Posting
regarding goodwill
V and S are partners sharing Profit/losses in the ratio 3 : 2. They
admit A into partnership for 1/5th share in profits
Liabilities Rs. Assets Rs.
Capital A/c Goodwill 5,000
V Capital 60,000 Plant & Machinery 65,000
S Capital 50,000 Furniture 15,000
Bills payable 10,000 Investment 20,000
Sundry Creditor 50,000 Stock 20,000
Sundry Debtor 30,000
Cash in hand 15,000
170000 170000
1. A was admitted on the following terms:
2. A is to bring capital Rs. 40,000 and goodwill Rs. 15,000 for 1/5th
share of profits which he acquires from A and B in the ratio of
1 : 2.
3. Half of the goodwill is withdrawn by partners.
4. Calculate the new ratio; pass necessary journal entries and partner’s
capital account and balance sheet of the new firm.
Problem
Particulars Dr. Amount Cr. Amount
Cash A/c Dr.
To A’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill and capital)
Premium for goodwill A/c Dr.
To V Capital A/c
To S Capital A/c
(goodwill brought by new partner transferred
to old partner in SR)
55,000
40,000
15,000
5,000
V Capital A/c
S Capital A/c Dr.
To Cash A/c
(Amount brought by new partner withdrawn by
existing partner in SR)
5,000
15,000
10,000
2,500
7,500
V Capital A/c
S Capital A/c Dr.
To goodwill A/c
2,000
3,000
5,000
(Old goodwill written off in old ratio old
partners)
Particulars V S A Particulars V S A
By Balance b/d 60000 50000
Partners capital A/c
To Goodwill 3000 2000
Cr.
Dr.
Liabilities Rs. Assets Rs.
Capital A/c Goodwill 5,000
V 60,000 Plant & Machinery 65,000
S 50,000 Furniture 15,000
Bills payable 10,000 Investment 20,000
Sundry Creditor 50,000 Stock 20,000
Sundry Debtor 30,000
Cash in hand 15,000
170000 170000
Particulars Dr. Amount Cr. Amount
V Capital A/c
S Capital A/c Dr.
To goodwill A/c
2,000
3,000
5,000
(Old goodwill written off in old ratio old partners)
Particulars V S A Particulars V S A
By Balance b/d 60000 50000
By Cash 40000
Partners capital A/c
To goodwill 3000 2000
Cr.
Dr.
Particulars Dr. Amount Cr. Amount
Cash A/c Dr.
To A’s Capital A/c
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill and capital)
55,000
40,000
15,000
Particulars V S A Particulars V S A
By Balance b/d60,000 50,000
By Cash
By premium
for goodwill
40,000
5,000 10,000
Partners capital A/c
To Goodwill 3,000 2,000
Cr.
Dr.
Particulars Dr. Amount Cr. Amount
Premium for goodwill A/c Dr.
To V Capital A/c
To S Capital A/c
(goodwill brought by new partner transferred
to old partner in SR)
15,000
5,000
10,000
Particulars V S A Particulars V S A
By Balance b/d 60,000 50,000
By Cash
By premium
for goodwill
To Cash 2,500 5,000 40,000
5,000 10,000
Partners capital A/c
To goodwill 3,000 2,000
Cr.
Dr.
Particulars Dr. Amount Cr. Amount
V Capital A/c
S Capital A/c Dr.
To cash A/c
(Amount brought by new partner withdrawn by
existing partner in SR)
5,000
2,500
7,500
59,500 53,000 40,000
To balance c/d
65,000 60,000 40,000 65,000 60,000 40,000
Liabilities Rs. Assets Rs.
Capital A/c
V’s Capital 59500 Plant & Machinery 65,000
S’s Capital 53,000 Furniture 15,000
A’s capital 40000 Investment 20,000
Sundry Creditor 50,000 Stock 20,000
Bills payable 10,000 Sundry Debtor 30,000
Cash in hand 62500
Final Balance Sheet
Revaluation method
Revaluation Method
When the new partner do not brings his share of
goodwill in cash. Following entry will be passed
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner
for his share of goodwill )
Gaining Partners A/c Dr.
To Sacrificing Partner's Capital/Current
Cash A/c Dr.
To New Partners Capital A/C
(transferring goodwill share from new partner
current A/c to old partners capital A/c in SR
XXXX
XXXX
XXXX
XXXX
A and B are partners sharing profits and losses in the ratio of 3:2. They
admit C for 1/5 share of profits, which he acquires equally from A and B.
Goodwill is valued at Rs. 30,000. C brings in Rs. 16,000 as his capital but
no amount for goodwill. Pass necessary journal entries without raising
Goodwill A/c
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner
for his share of goodwill )
C Current A/c Dr.(30000 x 1/5)
To A Capital A/c
To B Capital A/c
Cash A/c Dr.
To C Capital A/C
(transferring goodwill share from new
partner current A/c to old partners
capital A/c in SR
16,000
16,000
6,000
3,000
3,000
A and B are partners sharing profits and losses equally. They admit C
and new ratio of A,B,C is 4:3:2. C is unable to bring anything for
goodwill but brings Rs 25,000 as capital. Goodwill of the firm is valued at
Rs 18,000. Give the necessary journal entries. journal entries with
raising Goodwill and Subsequently written off A/c
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner)
Goodwill A/c Dr.(18,000)
To A Capital A/c
To B Capital A/c
Cash A/c Dr.
To C Capital A/C
(Raising goodwill to old partners capital in old ratio)
25,000
25,000
18,000
9,000
9,000
A Capital A/c
B Capital A/c
C Capital A/c
To Goodwill A/c
8,000
6000
4000
18,000
(Written off goodwill to All partners capital in New
ratio)
A and B are partners sharing profits and losses equally. They admit C
and new ratio of A,B,C is 4:3:2. C is unable to bring anything for
goodwill but brings Rs 25,000 as capital. Goodwill of the firm is valued at
Rs 18,000. Give the necessary journal entries. journal entries with
raising Goodwill and Subsequently written off A/c
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner)
Goodwill A/c Dr.(18,000)
To A Capital A/c
To B Capital A/c
Cash A/c Dr.
To C Capital A/C
(Raising goodwill to old partners capital in old ratio)
25,000
25,000
18,000
9,000
9,000
A Capital A/c
B Capital A/c
C Capital A/c
To Goodwill A/c
8,000
6000
4000
18,000
(Written off goodwill to All partners capital in New
ratio)
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C
for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued
at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary
1. Without raising goodwill
2. With raising of Goodwill and subsequently written off
Particulars Dr Cr
C Current A/c Dr.
To A Capital
To B Capital
6,000
3,000
3,000
Without raising of Goodwill and subsequently written off
Sacrifice of A
1
5
=
1
2
=
1
10
Given Sacrifice Ratio(1:1)
x
Sacrifice of B
1
5
= 1
2
=
1
10
x
New share of A 3
5
= 1
10
= 5
10
New share of B
2
5
= 1
10
= 3
10
New Ratio of A,B and C 5
10
3
10
2
10
=
Sacrifice
= Old Ratio
-
New Ratio
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C
for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued
at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
With raising of Goodwill and subsequently written off
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C
for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued
at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
Particulars Dr Cr
Goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
30,000
18,000
12,000
A Capital A/c
B Capital A/c
C Current A/c
To Goodwill A/c
15,000
9,000
6,000
30,000
(Written off goodwill to All
partners capital in New
ratio)
(Raising goodwill to
old partners capital in
old ratio)
New Ratio of A,B and C 5 : 3 : 2
=
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C
for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued
at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
Particulars Dr Cr
C Current A/c Dr.
To A Capital
To B Capital
6,000
3,000
3,000
Particulars Dr Cr
Goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
30,000
18,000
12,000
A Capital A/c
B Capital A/c
C Current A/c
To Goodwill A/c
15,000
9,000
6,000
30,000
(Written off goodwill to All
partners capital in New
ratio)
(Raising goodwill to
old partners capital in
old ratio)
Liabilities Rs. Assets Rs.
Capital A/c Goodwill 6,000
A’s Capital 50,000 Plant & Machinery 65,000
B’s Capital 50,000 Furniture 15,000
Investment 20,000
Stock 20,000
Bills payable 10,000 Sundry Debtor 30,000
Sundry Creditor 50,000 Cash in hand 15,000
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
A and B are partners sharing profits and losses in the ratio of 3:2. They admit C
for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued
at Rs. 30,000 and Not able to Bring his share for goodwill. Goodwill already appears
in the books Rs 6000 Pass necessary
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
Liabilities Rs. Assets Rs.
Capital A/c Goodwill 6,000
A’s Capital 50,000 Plant & Machinery 65,000
B’s Capital 50,000 Furniture 15,000
Investment 20,000
Stock 20,000
Bills payable 10,000 Sundry Debtor 30,000
Sundry Creditor 50,000 Cash in hand 15,000
Particulars L.F) Dr Amount Cr Amount
A’s Capital A/c Dr.
B’s capital A/c
To Goodwill A/c
( goodwill already appears written off in
old ratio in all partners)
3000
6000
If there is any goodwill appearing in the books it has to be
write off among all partners in old ratio
3000
Premium cum
Revaluation method
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner
for his share of goodwill )
Premium for goodwill A/c Dr
New partners current A/c Dr.
To old partner’s Capital A/c
Cash A/c Dr.
To new partners Capital A/c
To premium for goodwill A/c
(transferring goodwill share from new
partner current A/c to old partners
capital A/c
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
A and B are partners sharing profits and losses in the ratio of 3 : 2. C is
admitted as new partners. C will bring Rs 20000 for his share of capital for
1/5th share in profits. C brings only Rs 2000 out of his share of goodwill of
6000. Pass the necessary journal entries.
1. Without raising goodwill
2. Without raising of Goodwill and subsequently written off
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner for his share of
goodwill )
Premium for goodwill A/c Dr
C Current A/c Dr.
To A Capital A/c
To B Capital A/c
Cash A/c Dr.
To C Capital A/c
To premium for goodwill A/c
(transferring goodwill share from new partner current A/c to
old partners capital A/c
Old ratio assumed to be sacrifice ratio
22,000
20,000
2,000
4,000
3,600
2,000
2,400
A and B are partners sharing profits and losses in the ratio of 3 : 2. C is
admitted as new partners. C will bring Rs 20000 for his share of capital for
1/5th share in profits. C brings only Rs 2000 out of his share of goodwill of
6000. Pass the necessary journal entries.
Particulars L.F) Dr Amount Cr Amount
(only capital is brought by new partner
for his share of goodwill )
Premium for goodwill A/c Dr
C Current A/c Dr.
To A Capital A/c
To B Capital A/c
Cash A/c Dr.
To C Capital A/c
To premium for goodwill A/c
(transferring goodwill share from new partner
current A/c to old partners capital A/c
Old ratio assumed to be sacrifice ratio
22,000
20,000
2,000
4,000
3,600
2,000
2,400
When partners Admits and some
existing may
A and B are partners in a firm sharing profits in the ratio of
4:1. They admit C as a new partner for 1/6 share in the profit.
New ratio will be 3:2:1.C brings Rs 20,000 for Goodwill.
Calculate the sacrificing ratio and pass necessary journal entries
Gain/Sacrifice of A
4
5
-
3
6
= =
9
30
1
5
-
2
6
= = -4
30
Gain/Sacrifice of B
A’s Share of goodwill = 1,20,000 9
30
x = 36,000 (For Sacrifice)
B’s Share of goodwill = 1,20,000 4
30
x = 16,000 (For Gain)
Total Goodwill 20,000 x
6
1
= = 1,20,000
Given New Ratio (2:2:2:1)
New Ratio
= Old Ratio -
Sacrifice
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To premium for goodwill A/c
(Amount brought by new partner for his share
of goodwill)
Premium for goodwill A/c Dr.
B Capital A/c ( 1,20,00 x 4/30)
To A Capital A/c ( 1,20,000 x 9/30
(goodwill brought by new partner transferred
to old partner in SR/GR)
20,000
20,000
20,000
16,000
36,000
A and B are partners in a firm sharing profits in the ratio of
4:1. They admit C as a new partner for 1/6 share in the profit.
New ratio will be 3:2:1.C brings Rs 20,000 for Goodwill.
Calculate the sacrificing ratio and pass necessary journal entries
H,R,K are partners in a firm sharing profits in the ratio of
3:2:1. They admit G as a new partner for 1/7 share in the
profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital
and 45000 for his share of Goodwill. Calculate the sacrificing
ratio and pass necessary journal entries
Given New Ratio (2:2:2:1)
New Ratio
= Old Ratio -
Sacrifice
Gain/Sacrifice of H
3
6
-
3
7
= =
9
42
2
6
-
2
7
= = 2
42
Gain/Sacrifice of R
1
6
-
2
7
= = -5
42
Gain/Sacrifice of k
H,R,K are partners in a firm sharing profits in the ratio of
3:2:1. They admit G as a new partner for 1/7 share in the
profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital
and 45000 for his share of Goodwill. Calculate the sacrificing
ratio and pass necessary journal entries
H’s Share of goodwill = 3,15,000 9
42
x = 67,500 (For Sacrifice)
R’s Share of goodwill = 3,15,000 2
42
x = 15,000 (For Sacrifice)
Total Goodwill 45,000 x
7
1
= = 3,15,000
K’s Share of goodwill = 3,15,000 5
42
x = 37,500 (For Gain)
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To Premium for Goodwill A/c
To G capital
(Amount brought by new partner for his
share of goodwill and capital)
Premium for goodwill A/c Dr.
M Capital A/c Dr.
To H Capital A/c
To R Capital A/c
(goodwill brought by new partner
transferred to old partner in SR/GR)
3,45,000
3,00,000
45,000
37,500
67,500
H,R,K are partners in a firm sharing profits in the ratio of
3:2:1. They admit G as a new partner for 1/7 share in the
profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital
and 45000 for his share of Goodwill. Calculate the sacrificing
ratio and pass necessary journal entries
45,000
15,000
Sometimes the value of goodwill is not given at the time of
admission of a new partner.
In such a situation goodwill has to be valued on the basis of
total capital of the firm and the profit sharing ratio of the
partners
A and B are partners with the capital of Rs 25,000 and Rs 15,000
respectively. They admit C as a partner with 1/4th share in the profits of
the firm. C bring in Rs 18000 as his capital. Calculate the amount of
goodwill and pass the necessary journal entries.
Total required capital of the
new firms
= 18,000
4
1
X
= 72,000
Less:- Actual Capital Employed
Capital of A
Capital of B
Capital of C
25,000
15,000
18,000 = 58,000
Goodwill of the firm = 14,000
A and B are partners with the capital of Rs 25,000 and Rs 15,000
respectively. They admit C as a partner with 1/4th share in the profits of
the firm. C bring in Rs 18000 as his capital. Calculate the amount of
goodwill and pass the necessary journal entries.
Particulars Dr Amount Cr Amount
Cash A/c Dr.
To C’s Capital A/c
(Amount brought by new partner for his share
of goodwill)
C’s Current A/c Dr.
To A Capital A/c
To B Capital A/c
(goodwill brought by new partner transferred
to old partner in SR(Assumed equal)
18,000
18,000
35,00
1,750
1,750
A share of goodwill Total Goodwill x 1
6
=
14,000 x 1
4
= = 35,00
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
Particulars Dr Amount Cr Amount
Goodwill A/c Dr.
To Old Partner’s Capital A/c
(Goodwill Raising in old Ratio)
All Partners Capital A/c Dr.
To Goodwill A/c
(goodwill written off in New Ratio)
XXXX
XXXX
XXXX
XXXX
Always first calculate New Ratio
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
•Sometimes the balance sheet of the firm may show
reserves and accumulated profits and losses.
•Only the old partners are entitled to have these
accumulated balances in old ratio.
•The new partner is not entitled to have any share in
such accumulated balances
Accumulated profits
Accumulated losses
Balance of undistributed profits like
•Reserve fund ,
•General reserves ,
•Profit and loss (Cr balance),
•Reserves for contingencies,
Belong to old partners so they should be credited to their capital A/c
Firm may have accumulated losses like
•Profit and loss (debit balance)
•Deferred revenue expenditure
•Advertisement suspense A/c
Belong to old partners so they should be debited to their capital A/c
Liability Amount Assets Amount
Particulars A B Particulars A B
By Balance b/d
By Reserves fund
To Advertisement Suspense
A/C
xx
Partners capital A/c
To Profit and losses
Cr.
Dr.
xx xx
xx
By Reserves for
contingencies
By Accumulated Profits
To Deferred revenue
expenditure
xx
xx xx
xx
xx
xx xx
xx
xx
xx
By Profit/Loss A/c
xx xx
Reserves fund
Reserves for Contingencies
Accumulated profits
Profit and loss A/c
Profit and Loss A/c
Deferred Revenue expenditure
Advertisement Suspense A/C
Balance Sheet
Old Partners
Old Ratio
Old Partners
Old Ratio
L and M are partners sharing profits and losses in the ratio of 5:3. O
is admitted as a new partner. On that date L and M has General
reserves Rs 1,60,000 and Rs 2,40000 (Cr) in the balance sheet. Record
entries. New ratio is 5:3:2.
Problem
Particulars Dr. Amount Cr. Amount
Profit and Loss A/c Dr
To L Capital A/c .
To M Capital A/c
(Amount brought by new partner for his share
of goodwill and capital)
2,40,000
90,000
General reserves A/c Dr
To L Capital A/c .
To M Capital A/c
1,00,000
1,60,000
60,000
(Reserves distributed among old partners in old ratio
Solution
1,50,000
R and M were partners in a firm sharing profits and losses in the ratio of
4:1. They admitted S as a new partner. On the date of admission the
balance sheet of R and M showed a balance of Rs.1,00,000 in general
reserve and Rs. 32,000 (Dr) in Profit and Loss Account. S brings Rs
60,000 as premium for his share of goodwill. journalize
Problem
Particulars Dr. Amount Cr. Amount
Solution
R Capital A/c . Dr.
M Capital A/o . Dr.
To Profit and loss A/c
(loss written off among old partners in old ratio)
25,600
32,000
General reserves A/c Dr
To R Capital A/c .
To M Capital A/c
80,000
1,00,000
20,000
Reserves distributed among old partners in old ratio
6,400
Cash A/c Dr.
To Premium for goodwill
Capital and goodwill brought in cash
60,000
60,000
Premium for goodwill A/c Dr.
To R Capital A/c
To M Capital A/c
60,000
12,000
48,000
For transfer of goodwill in sacrifice ratio
•Firm may have specific funds like workmen compensation
fund and investment fluctuating fund.
•If there is no liability against these funds they should
• be distributed among the old partners in old ratio
•The new partner is not entitled to have any share in
such funds
Following will not be distributed among old
partners as they are liability for the firm
Provident fund Employee saving fund
Liability Amount Assets Amount
Workmen compensation fund
Investment fluctuating fund
Particulars V S A Particulars V S A
By Balance b/d
Partners capital A/c Cr.
Dr.
xx xx
By Workmen compensation
fund
By Investment
fluctuating fund
xx xx
xx xx
Old Partners
Old Ratio
Workmen Compensation Fund
Is created to pay compensation to the workers in case of
accident according to workmen compensation act
It has been created out of the profits of the previous
year so if there is no claim it is be distributed among
the old partner in old ratio.
Liability Amount Assets Amount
Workmen's compensation fund 10,000
R and S are partners in a firm sharing profits in the ratio of 4:1.
They admit N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If claim on account of workmen compensation is estimated at Rs 4000
3. If claim on account of workmen compensation is estimated at Rs
15000
Particulars Dr. Amount Cr. Amount
Case 1st
Workmen compensation fund Dr
to R Capital A/c .
To S Capital A/c
8000
10000
2000
Liability Amount Assets Amount
New balance sheet
Workmen compensation fund NIL
Liability Amount Assets Amount
Workmen's compensation fund 10,000
R and S are partners in a firm sharing profits in the ratio of 4:1.
They admit N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If claim on account of workmen compensation is estimated at Rs 4000
3. If claim on account of workmen compensation is estimated at Rs 15000
Particulars Dr. Amount Cr. Amount
Case 1st
Workmen compensation fund Dr
to R Capital A/c .
To S Capital A/c
4,800
6,000
1,200
Liability Amount Assets Amount
New balance sheet
Workmen compensation fund 4000
Liability Amount Assets Amount
Workmen's compensation fund 10,000
R and S are partners in a firm sharing profits in the ratio of 4:1.
They admit N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If claim on account of workmen compensation is estimated at Rs 4000
3. If claim on account of workmen compensation is estimated at Rs 15000
Particulars Dr. Amount Cr. Amount
Case 3rd
Revaluation A/c Dr
To workmen compensation fund
5,000
5,000
R Capital A/c .
S Capital A/c
Revaluation A/c
4,000
1,000
5,000
Liability Amount Assets Amount
New balance sheet
Workmen compensation fund 15000
Investment fluctuating fund
Created out of profit to cover up the losses in
case the value of the investment falls.
It is to be distributed among the old partner in
old ratio if the investment remains same or
otherwise.
Liability Amount Assets Amount
Investment Fluctuating Fund 18000 Investment 200000
R and S are partners in a firm sharing profits in the ratio of 3:1. They admit
N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If the market value of investment is valued at Rs 190000
3. If the market value of investment is valued at Rs Rs 215000
4. If the market value of investment is valued at Rs Rs 170000
Particulars Dr. Amount Cr. Amount
Case 1st
Investment Fluctuating Fund Dr
to R Capital A/c .
To S Capital A/c
13500
18000
4500
Problem
Liability Amount Assets Amount
New balance sheet
Investment 200000
Liability Amount Assets Amount
Investment Fluctuating Fund 18000 Investment 200000
R and S are partners in a firm sharing profits in the ratio of 3:1. They admit
N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If the market value of investment is valued at Rs 190000
3. If the market value of investment is valued at Rs Rs 215000
4. If the market value of investment is valued at Rs Rs 170000
Particulars Dr. Amount Cr. Amount
Case 2nd
Investment Fluctuating Fund Dr
To Investment A/C
To R capital A/c .
To S Capital A/c
10000
18000
6000
2000
Problem
Liability Amount Assets Amount
New balance sheet
Investment 190000
Liability Amount Assets Amount
Investment Fluctuating Fund 18000 Investment 200000
R and S are partners in a firm sharing profits in the ratio of 3:1. They admit
N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If the market value of investment is valued at Rs 190000
3. If the market value of investment is valued at Rs Rs 215000
4. If the market value of investment is valued at Rs Rs 170000
Particulars Dr. Amount Cr. Amount
Investment Fluctuating Fund Dr
to R Capital A/c .
To S Capital A/c
11250
18000
3750
15000
15000
Revaluation A/c Dr
to R Capital A/c .
To S Capital A/c
15000
13500
4500
Investment A/c Dr
to Revaluation A/c
Problem
Liability Amount Assets Amount
New balance sheet
Investment 215000
Liability Amount Assets Amount
Investment Fluctuating Fund 18000 Investment 200000
R and S are partners in a firm sharing profits in the ratio of 3:1. They admit
N as a new partner
Show the accounting treatment under following cases
1. If there is no claim/no information
2. If the market value of investment is valued at Rs 190000
3. If the market value of investment is valued at Rs Rs 215000
4. If the market value of investment is valued at Rs Rs 170000
Particulars Dr. Amount Cr. Amount
Investment fluctuating fund Dr
Revaluation A/c Dr.
To investment
9000
18000
3000
Revaluation A/c Dr
to R Capital A/c .
To S Capital A/c
12000
12000
30000
Problem
Liability Amount Assets Amount
Investment 170000
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
1. At the time of admission of a partner, the assets
and liabilities are revalued so that
2. The profit and loss arising on account of such
revaluation may be adjusted in the old partners’
capital accounts. In their old ratio
3. Incoming partner may not be affected by the profit
or loss on account of revaluation of assets and
liabilities.
4. Revaluation account is opened
5. Revaluation is a nominal account.
For profit items
For Loss Items
Particulars Amount Particulars Amount
To Decrease in value of Assets XX
XX
By increase in value of assets
Dr.
To Increase in the value of
Liabilities.
By decrease in value of
Liability
XX XX
XX
XX
To Unrecorded Liabilities. By Unrecorded Assets.
To Profit transferred to old
partner’s Capital account (in old
ratio)
By Loss transferred to old
partner’s Capital account (in
old ratio)
XX
XX
Cr.
Performa of Revaluation A/c
Particulars Dr Amount Cr Amount
Concerned Assets A/c Dr.
Concerned Liabilities A/c Dr
To Revaluation A/c.
XXXX
XXXX
Particulars Dr Amount Cr Amount
Revaluation A/c. Dr
To Concerned Assets A/c
To Concerned Liabilities A/c
XXXX
XXXX
Particulars Dr Amount Cr Amount
Revaluation A/c. Dr
To old Partners’ Capital A/c.
(For transferring profit on
revaluation in old ratio old partners))
XXXX
XXXX
Particulars Dr Amount Cr Amount
Old Partners’ Capital A/c.
To Revaluation A/c. Dr
(For transferring loss on revaluation
in old ratio old partners)
XXXX
XXXX
particulars Amount particulars Amount
a
Particulars amount Particulars amount
To partners Capital A/C
Profit On Revaluation
By revaluation A/c(profit)
To revaluation A/c
(Loss)
By Partners Capital Account
(loss on revaluation
Old Partners
Old Ratio
Old Partners
Old Ratio
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
Liability Amount Asset Amount
Land 50000
The value of Land having appreciated by brought upto
60000
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C .
10000
10000
Liability Amount Asset Amount
Land 60000
Liability Amount Asset Amount
Land 50000
There has been appreciation in the value of the Land by 5%
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C.
2500
2500
Liability Amount Asset Amount
Land 52500
Liability Amount Asset Amount
Land 50000
There has been increase in the value of Land by 7000
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C.
7000
7000
Liability Amount Asset Amount
Land 57000
Liability Amount Asset Amount
Land 50,000
The value of Land be appreciated by 120%
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C.
60,000
60,000
Liability Amount Asset Amount
Land 1,10,000
Liability Amount Asset Amount
Land 50000
The value of Land be increased to 120%
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C
10.000
1.0000
Liability Amount Asset Amount
Land 60,000
Liability Amount Asset Amount
Land 50000
The value of Land be appreciated by 120% more
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C.
60000
60000
Liability Amount Asset Amount
Land 110000
Liability Amount Asset Amount
Land 50000
The value of Land be valued at 120%
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C.
10000
10000
Liability Amount Asset Amount
Land 60000
Liability Amount Asset Amount
Land 50000
The value of Land be brought up to its market value
which is 20% more
Particulars Debit Credit
Land A/C Dr.
To Revaluation A/C
10,000
10,000
Liability Amount Asset Amount
Land 60000
Rs 3,000 proved to be bad
Liability Amount Asset Amount
Debtors 50,000
Less Provision 2000 48,000
Particulars Debit Credit
Revaluation A/C Dr.
To Bad debts A/c .
1,000
1,000
Liability Amount Asset Amount
Debtors 47,000
Reserve for bad debts be created @ 5%
Liability Amount Asset Amount
Debtors 50,000
Less Provision 2000 48,000
Particulars Debit Credit
Revaluation A/C Dr.
To provision for doubtful debts A/c.
500
500
Liability Amount Asset Amount
Provision 2,500
Debtors 50,000
4,7500
Liability Amount Asset Amount
Debtors 50000
Less Provision 2000 48000
Reserve for bad debts be increased by 2000
Particulars Debit Credit
Revaluation A/C Dr.
To provision for doubtful debts A/c .
2,000
2,000
Liability Amount Asset Amount
Provision 4,000
Debtors 50,000
46,000
Liability Amount Asset Amount
Debtors 50000
Less Provision 2000 48000
Reserve for bad debts was found to be short by 1700
Particulars Debit Credit
Revaluation A/C Dr.
To provision for doubtful debts A/c
.
1700
1700
Liability Amount Asset Amount
Provision 3700
Debtors 50000
46300
Liability Amount Asset Amount
Debtors 50000
Less Provision 2000 48000
It was decided that all the debtors are good
Particulars Debit Credit
Provision for doubtful debts A/c dr.
To Revaluation a/c .
2000
2000
Liability Amount Asset Amount
Debtors 50000 50000
Liability Amount Asset Amount
Debtors 50000
Less Provision 2000 48000
It was decided that 95% of the debtors are good
Particulars Debit Credit
Revaluation A/C Dr.
To provision for doubtful debts A/c.
500
500
Liability Amount Asset Amount
Provision 2500
Debtors 50000
47500
Liability Amount Asset Amount
Debtors 50000
Less Provision 2000 48000
It was decided that provision for doubtful debts
be brought up to 7% of debtors
Particulars Debit Credit
Revaluation A/C Dr.
To provision for doubtful debts A/c.
1500
1500
Liability Amount Asset Amount
Provision 3500
Debtors 50000
46500
1. S and V were partners sharing profit and loss in the ratio of 3:2. They
decided to admit F into the partnership and revalue their assets and
liabilities as indicated here under:
2. Bring into record investment of Rs. 18,000 which had not so far been
recorded in the books of the firm.
3. To depreciate stock and furniture by Rs. 18,000, Rs.6,000
respectively.
4. To provide claim on outstanding salary Rs 24000
Particulars Amount Particulars Amount
To Stock 18,000
18,000 By Investment
Dr.
To Furniture 6,000
24000
To Outstanding Salary By Loss transferred to
S Capital A/c
V Capital A/c
18000
Cr.
Revaluation A/c
30,000
12000
48,000 48,000
R and L were partners sharing profit and losses in the ratio of 4:3. They
decided to revalue their assets and liabilities as indicated below:
1. To increase the value of buildings by Rs. 60,000.
2. Provision for doubtful debts to be decreased by Rs.8000.
3. To decrease machinery by Rs.16,000, furniture by Rs.4, 000 and
stock by Rs. 12,000.
4. A provision for outstanding liabilities was to be created for Rs.1000.
Particulars Amount Particulars Amount
To Furniture
60,000
4,000
By Building
To Stock 12,000
1,6000
To Machinery
To profit transferred to
R Capital A/c
L Capital A/c
20,000
Revaluation A/c
35,000
15,000
68,000 68,000
8,000
By Provision for
doubtful debts
To Outstanding Liability 1,000
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
A and B are partners . They admit C into partnership for 1/5th share.
Liabilities Rs. Assets Rs.
Capital A/C Bills Receivable 5,000
A 60,000 Plant & Machinery 65,000
B 50,000 Furniture 15,000
Outstanding Salary 10,000 Investment 20,000
Sundry Creditor 40,000 Stock 20,000
Workmen’s Compensation Fund 10000 Sundry Debtor 30,000
Bank 15,000
1. Claim on workmen compensations is Rs 15000
2. Create provision for doubtful debts at 5%
3. Machinery is to reduced by Rs 5000
4. Furniture is to increased to Rs 18000
5. Stock was found over-valued by Rs 3000
6. Outstanding salary brought upto Rs 12000
7. There was typewriter is not recorded in the books Rs 5000 was now
to be recorded was sold for Rs 8000.
Pass Journal entries and prepare revaluation account and balance sheet
Particulars Amount Particulars Amount
To Provision For Doubtful Debts
3000
1500
By Furniture
Dr.
To Machinery 5000
5000
To Workmen Compensation Fund
By Loss transferred to
A Capital A/c
B Capital A/c
2750
Cr.
Revaluation A/c
5500
16500 16500
8000
By Cash
To Stock 3000
To Outstanding Salary
2000
2750
A, B are partners sharing profits and losses in the ratio of 5 : 2.
Liabilities Amount Assets Amount
Creditors 50,000 Investment 15,000
Capital accounts Machinery 80,000
A Capital 40,000 Furniture 4,000
B Capital 61,000 101000
Bank overdraft 4,000 Stock 20,000
Bills payable 25,000 Debtors 70,000
General reserves. 30,000 Less provision 3,000 67,000
Bank Loan 28,000 Cash 52,000
1. The machinery was written up by 20%
2. The stock was to be reduced by Rs 1,000
3. The furniture was to be reduced to Rs 1,600
4. The provision for doubtful debts would be 10%
5. The provision of Rs 800 was to made of outstanding expenses
6. A liability on account of damages of Rs 7,000 included in creditors is
settled at Rs 12,000.
Pass Journal entries and prepare revaluation account and balance sheet
Particulars Amount Particulars Amount
To Furniture
16000
2400
By Machinery
Dr.
To Provision for doubtful debts 4000
1000
To Stock
To Profit transferred to
A Capital A/c
B Capital A/c
2000
Cr.
Revaluation A/c
2800
16000 16000
To cash
To Provision for outstanding exp 800
5000
800
A and B are partners has the following balance sheet
Liabilities Amount Assets Amount
Creditors 3000 Cash 1000
Bills payable 5000 Bank 3000
Provision for debts 2000 Stock 7000
Outstanding salary 6000 Plant 5000
Capital debtors 18000
A 30000 Building 20000
B 10000 40000 Patents 2000
56000 56000
1. Bills payable have been under estimated by 500
2. Creditors are to paid 5% more to cover up certain services
3. Outstanding salaries be brought to Rs 2000
4. A provision of 1500 be created for outstanding repair bills
5. Debtors are all good
6. Patents are value less
7. Pass Journal entries and prepare revaluation account and balance
sheet
Particulars Amount Particulars Amount
500
To B/P A/c
Dr.
To Provision For Outstanding Bills 1500
To profit transferred to
A Capital A/c
B Capital A/c
925
Cr.
Revaluation A/c
1850
6000 6000
150
To Creditors
2000
To Patents
925
2000
By Provision for debts
4000
By Outstanding Salary
A and B are partners has the following balance sheet as on 31st December 2011
Liabilities Amount Assets Amount
Creditors 3000 Cash 1000
Bills payable 5000 Investment 3000
Provision for doubtful debts 2000 Stock 7000
Outstanding expenses 6000 Debtors 20000
Capital Plant 18000
A 30000 Building 5000
B 10000 40000 Patents 2000
56000 56000
1. Bills payable have been over by estimated 2000
2. Creditors are to paid 5% less.
3. Provision for doubtful debts to be 5% on debtors.Rs 1500 was
considered at bad debts.
4. A provision of 1050 be created for outstanding repair bills
5. Stock was found over valued by Rs 2000
6. Present value of investment Rs 5000 and was sold
7. Building was under valued by Rs 5000.
8. Pass Journal entries and prepare revaluation account and balance
sheet
Particulars Amount Particulars Amount
To Debtors
2000
1500
By B/P A/c
Dr.
To Provision For Outstanding Bills 1050
To profit transferred to
A Capital A/c
B Capital A/c
3795
Cr.
Revaluation A/c
6325
10225 10225
150
By Creditors
2000
To Stock
2530
1075
By Provision for debts
2000
By Cash
5000
By Building
Comprehensive Question
•Revaluation Account
•Goodwill treatment
•Undistributed Profits
•Capital Account
•New Balance Sheet
A and B are partners sharing profits and losses in the ratio of 2:1
Liabilities Amount Assets Amount
Creditors 65900 Land and building 50,000
A Capital 30000 Plant and machinery 35,000
B Capital 20,000 Stock 20,000
Debtors 9,700
Cash 1,200
1,15,900 1,15,900
1. M was admit for 1/3rd share and brings Rs 15,000 as capital and
Rs 6,000 for goodwill
2. Amount of goodwill was withdrawn by old partners
3. That the value of stock and plant and machinery were to be
reduces by 10%
4. The a provision of 5% was to be created for doubtful debts
5. That the building account was to be appreciated by 20%
6. Investment worth Rs 1400 not recorded has to be brought into the
books. Prepare revaluation account, capital account and balance
sheet
1. That the building account was to be appreciated by 20%
2. The a provision of 5% was to be created for doubtful debts
3. That the value of stock and plant and machinery were to be reduces
by 10%
4. Investment worth Rs 1400 not recorded has to be brought into the
books
Particulars Amount Particulars Amount
10,000
By Building
To Plant and Machinery 3,500
485
To Provision for doubtful
debts
To profit transferred to
A Capital A/c
B Capital A/c
3610
Revaluation A/c
5415
1805
11,400 11,400
Adjustments
To Stock A/c 2,000
14,00
By Investment
1. That the building account was to be appreciated by 20%
2. The a provision of 5% was to be created for doubtful debts
3. That the value of stock and plant and machinery were to be reduces
by 10%
4. Investment worth Rs 1400 not recorded has to be brought into the
books
Particulars Amount Particulars Amount
10,000
By Building
To Plant and Machinery 3,500
485
To Provision for doubtful
debts
To profit transferred to
A Capital A/c
B Capital A/c
3610
Revaluation A/c
5415
1805
11,400 11,400
Adjustments
To Stock A/c 2,000
14,00
By Investment
Particulars A B M Particulars A B M
By Balance b/d 30,000 20,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Creditors 65900 Land and building 50,000
A capital 30000 Plant and machinery 35,000
B capital 20,000 Stock 20,000
Debtors 9,700
Cash 1,200
1,15,900 1,15,900
Particulars A B M Particulars A B M
By Balance b/d 30,000 20,000
Partners capital A/c
Dr.
4,000
By Premium For
Goodwill
2,000
By Cash 15,000
Cr.
Particulars Dr. Amount Cr. Amount
Cash Capital A/c Dr.
To Premium for goodwill
To C’s capital A/c
Capital and goodwill brought in cash
21,000
6,000
Premium for goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
6,000
4,000
2,000
For transfer of goodwill in sacrifice ratio (2:1)
15,000
A Capital A/c
B Capital A/c
To cash A/c
4,000
2,000
6,000
For withdrawal of half goodwill by old partners
4,000
To Cash 2,000
Particulars Dr. Amount Cr. Amount
Revaluation A/c Dr.
To A Capital A/c
To B Capital A/c
Profit on revaluation transferred to old
partners capital in old ratio
5415
36,10
18,05
Particulars A B M Particulars A B M
By Balance b/d 30,000 20,000
Partners capital A/c
Dr.
4,000
By Premium For
Goodwill
2,000
By Cash 15,000
4,000
To Cash 2,000
By Revaluation 3,610 1,805
37610 23805
37610 23805 15,000
15,000
To balance c/d 33610 20805 15,000
Liabilities Amount Assets Amount
Creditors 65900 Land and building 60,000
A capital 35610 Plant and machinery 31500
B capital 21,805 Stock 18,000
M capital 15000 Debtors 9700
Less provisions 485
9,215
Cash 16,200
Investment 1,400
1,36,315 1,36,315
Opening cash balance 12,00
Add:- share For goodwill 6,000
Add:- Cash bought by M as capital 15,000
Half goodwill withdrawn by old partners (6000)
Closing cash balance 16200
Balance Sheet
A and B are partners sharing profits and losses in the ratio of 5:3. C was
admitted for 1/4th share which he takes equally from A and B
Liabilities Rs. Assets Rs.
Provident fund 10,000 Machinery 30,000
Creditors 2,000 Furniture 20,000
A Capital 40,000 Debtors 15,000
B Capital 30,000 Stock 15,000
Workmen compensation fund 4,000 Bank 6,000
86,000 86,000
1. C will brings Rs 30,000 as his share of capital and goodwill
2. Goodwill of the firm is valued at 3years purchased of the average super
profits of last years. Average profits of the last four years are Rs 20,000
while the normal profits that can be earned with the capital are Rs 12000
3. Furniture is undervalued by Rs 12000
4. And the value of stock is reduced to Rs 13,000.
5. Provident fund be raised by Rs 1,000
6. Creditors are unrecorded to the extent of Rs 6,000
1. Furniture is undervalued by Rs 12000
2. And the value of stock is reduced to Rs 13,000.
3. Provident fund be raised by Rs 1,000
4. Creditors are unrecorded to the extent of Rs 6,000
Particulars Amount Particulars Amount
12,000
By furniture
To Creditors 6,000
1,000
To Provident fund
To profit transferred to
A Capital A/c
B Capital A/c
1875
Revaluation A/c
3,000
1125
12,000 12,000
Adjustments
To Stock A/c 2,000
Calculation of goodwill
Goodwill = Super Profit x No of years purchased
Super profit Actual/average profits
= Normal profits
= 12,000
20,000 = 8,000
= 8,000 x 3
= 24,000
C share of goodwill = 24,000
1
4
x = 6000
C share of Capital = Total money brought – C share of goodwill
= 6,000
30,000 = 24,000
Particulars A B C Particulars A B C
By Balance b/d 40,000 30,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Provident fund 10,000 Machinery 30,000
Creditors 2,000 Furniture 20,000
A Capital 40,000 Debtors 15,000
B Capital 30,000 Stock 15,000
Workmen compensation fund 4,000 Bank 6,000
86,000 86,000
By workmen
comp fund
2,500 1,500
Particulars Dr. Amount Cr. Amount
Cash Capital A/c Dr.
To Premium for goodwill
To C’s capital A/c
Capital and goodwill brought in cash
30,000
6,000
Premium for Goodwill A/c Dr.
To A Capital A/c
To B Capital A/c
6,000
3,000
3,000
For transfer of goodwill in sacrifice ratio (2:1)
24,000
Particulars A B C Particulars A B C
By Balance b/d 40,000 30,000
Partners capital A/c Cr.
Dr.
By Workmen
Comp Fund
2,500 1,500
3,000
By Premium For
Goodwill
3,000
By Bank 24,000
Particulars A B C Particulars A B C
By Balance b/d 40,000 30,000
Partners capital A/c Cr.
Dr.
By workmen
comp fund
2,500 1,500
3,000
By Premium For
Goodwill
3,000
By Bank 24,000
Particulars Dr. Amount Cr. Amount
Revaluation A/c Dr.
To A Capital A/c
To B Capital A/c
Profit on revaluation transferred to old
partners capital in old ratio
3,000
1,875
1,125
By Revaluation 1,875 1,125
Particulars A B C Particulars A B C
By Balance b/d 40,000 30,000
Partners capital A/c Cr.
Dr.
By workmen
comp fund
2,500 1,500
3,000
By Premium For
Goodwill
3,000
By Bank 24,000
47375 35625 47375 35625 24,000
24,000
To balance c/d 47375 35625 24,000 By Revaluation 1,875 1,125
Liabilities Amount Assets Amount
Provident fund 11,000 Machinery 30,000
Creditors 8,000 Furniture 32,000
A Capital 47,375 Debtors 15,000
B Capital 35625 Stock 13,000
C’s capital 24000 Bank 36,000
1,26,000 1,26,000
Opening bank balance 6000
Add:- share For goodwill 6,000
Add:- Cash bought by C as capital 24,000
Closing bank balance 36000
Balance Sheet
X and y are partners sharing profits and losses in the ratio of 5:3
Liabilities Rs. Assets Rs.
Creditors 28,000 Investment 10,000
Workmen compensation fund 4,000 Plant 30,000
Z loan 30,000 Stock 56,000
X capital 50,000 Debtors 40,000
Less provision :- 1,800
38,200
Y capital 40,000 Goodwill 10,000
Cash 7800
1,52,000 1,52,000
1. Z in admitted and new ratio is 4:3:2 between X, Y and Z.
2. Z loan should be treated as his capital
3. Goodwill of the firm is valued at Rs 27000
4. Rs 8000 of the investment were to be taken over by X and Y in their profit
sharing ratio
5. Stock is to be reduced by 10%
6. Provision for doubtful debts 5% on debtors and provision for discount on
debtors be 2% on debtors
7. X withdraws Rs 6000 in cash.
1. Stock is to be reduced by 10%
2. Provision for doubtful debts 5% on debtors and provision for discount
on debtors be 2% on debtors
Particulars Amount Particulars Amount
By Loss transferred to
X Capital A/c
Y Capital A/c
41,00
Revaluation A/c
6,560
2,460
6,560 6,560
Adjustments
5,600
To Stock
200
To Provision for doubtful
debts
760
To Provision for discount on
debtors
Particulars X Y Z Particulars X Y Z
By Balance b/d 50,000 40,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Creditors 28,000 Investment 10,000
Workmen compensation fund 4,000 Plant 30,000
Z loan 30,000 Stock 56,000
X Capital 50,000 Debtors 40,000
Less provision :- 1,800
38,200
Y Capital 40,000 Goodwill 10,000
Cash 7800
1,52,000 1,52,000
By Workmen
Comp Fund
2500 1,500
To Goodwill 6250 3750
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
Particulars Dr. Amount Cr. Amount
A capital Dr.
B capital Dr.
To Revaluation A/c
Loss on revaluation transferred to old partners
capital in old ratio
41,00
2,460
6,560
By Revaluation 41,00 2,460
By Balance b/d 50,000 40,000
By Workmen
Comp Fund
2500 1,500
By Goodwill 6250 3750
Particulars Dr. Amount Cr. Amount
Z loan A/c Dr.
to Z’s capital A/c
Z loan transferred to his capital A/c
30,000
30,000
Z Current A/c Dr.
To X Capital A/c
To Y Capital A/c
6,000
4875
1125
For transfer of goodwill in sacrifice ratio (2:1)
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
4875
By Z’s Current
By Z loan A/c 30,000
1125
By Revaluation 41,00 2,460
By Balance b/d 50,000 40,000
By Workmen
Comp Fund
2500 1,500
By Goodwill 6250 3750
Particulars Dr. Amount Cr. Amount
X capital Dr.
Y capital Dr.
To Investment A/c
Z loan transferred to his capital A/c
5000
8,000
X capital Dr.
To Bank A/c
8,000
8,000
For amount of cash withdrawn from firm
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
4875
By Z’s Current
By Z loan A/c 30,000
1125
To Revaluation 41,00 2,460
By Balance b/d 50,000 40,000
By Workmen
Comp Fund
2500 1,500
To Goodwill 6250 3750
3,000
To Investment 5,000 3,000
To Bank 8,000
57375 42625 57375 42625 30,000
30,000
To balance c/d 36,025 33,415 30,000
Liabilities Amount Assets Amount
Creditors 28,000 Investment 2,000
X Capital 36025 Plant 30,000
Y Capital 33415 Stock 50,400
Z Capital 30,000 Debtors 40,000
Less provision for doubtful
debts - 2,000
Less provision for discount
on debtors:- 760
37,240
Z Current A/c 6,000
Cash 1800
1,27,440 1,27,440
Opening bank balance 7800
less- cash withdrawn by C 8,000
Closing bank balance 1800
Balance Sheet
Calculation of new partners capital on the basis of old partners
capital.
There are two possible conditions
New partners capital
New partner brings his share
in proportionate ( Of total
capital)
New partner brings his share
of the combined capital of old
partners
A and B are partners sharing profit and losses in the ratio of 3:2. They
admit C as a new partners for 1/5th profit. Capital of A and B after all
the necessary adjustment regarding goodwill, reserves, and revaluation are
60000 and 30000 respectively brings in 20% of the combined capital of A
and B. calculates C capital.
Combined capital of A & B = 90,000 (60,000 + 30,000)
Share Of C’s Capital 90,000
=
20
100
X = 18,000
When new partners brings his share on the basis of the combined
capital of old partners
Jain and Gupta were partners sharing profits in the ratio of 3:2.
Liabilities Amount Assets Amount
Creditors 20,000 Cash in hand 14,800
Bills payable
3000
Sundry debtors 20,500
Less provision 300 20,200
Bank overdraft
17,000
Stock
20,000
General reserve 15,000 Plant 40,000
Jain capital 70,000 Building 70,000
Gupta capital 60,000 Motor vehicles 20,000
1,85,000 1,85,000
Mishra brings his capital of the 1/4th of the combined capital of Jain and Gupta
after all adjustment
1. Building to be appreciated by Rs 14,000 and stock to be depreciated by Rs
6,000
2. Provision for doubtful debts on debtors to be raised to Rs 1,000
3. A provision be made for Rs 1,800 for outstanding legal charges
4. Mishra brings Rs 10,000 for goodwill
1. Building to be appreciated by Rs 14,000 and stock to be depreciated
by Rs 6,000
2. Provision for doubtful debts on debtors to be raised to Rs 1,000
3. A provision be made for Rs 1,800 for outstanding legal charges
Particulars Amount Particulars Amount
14,000
By Building
To Provision for legal charges 1,800
7,00
To Provision for doubtful
debts
To profit transferred to
Jain Capital A/c
Gupta Capital A/c
3300
Revaluation A/c
5,500
2200
14,000 14,000
Adjustments
To Stock A/c 6,000
Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra
By Balance b/d 70,000 60,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Creditors 20,000 Cash in hand 14,800
Bills payable
3000
Sundry debtors 20,500
Less provision 300 20,200
Bank overdraft 17,000 Stock 20,000
General Reserve 15,000 Plant 40,000
Jain capital 70,000 Building 70,000
Gupta capital 60,000 Motor vehicles 20,000
1,85,000
1,85,000
By Reserve Fund 9,000 6,000
Particulars Dr. Amount Cr. Amount
Revaluation A/c Dr.
To Jain’s Capital A/c
To Gupta Capital A/c
Profit on revaluation transferred to
capital A/c)
55,00
33,00
22,00
Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra
Partners capital A/c Cr.
Dr.
By Revaluation 3,300 2,200
By Balance b/d 70,000 60,000
By Reserve Fund 9,000 6,000
Particulars Dr. Amount Cr. Amount
Cash Capital A/c Dr.
To Premium for goodwill
Capital and goodwill brought in cash
10,000
10,000
Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra
Partners capital A/c Cr.
Dr.
6,000
By Premium For
Goodwill
4,000
Premium for goodwill A/c Dr.
To Jain’s Capital A/c
To Gupta Capital A/c
10,000
6,000
4,000
For transfer of goodwill in sacrifice ratio
By Revaluation 3,300 2,200
By Balance b/d 70,000 60,000
By Reserve Fund 9,000 6,000
Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra
Partners capital A/c
Dr.
88,300 72,200 88,300 19800
To balance c/d 88,300 72,200
By Balance b/d 88,300 72,200
Cr.
6,000
By Premium For
Goodwill
4,000
By Revaluation 3,300 2,200
By Balance b/d 70,000 60,000
By Reserve Fund9,000 6,000
Combined capital of the Jain and Gupta = 88300 + 72200 = 1,60,500
Share Of Mishra ‘s Capital = 1,60,500
1
4
X = 40,125
Calculation of Mishra capital
Particulars A B C Particulars A B C
Partners capital A/c Cr.
Dr.
Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra
88,300 72,200 88,300 72,200
40,125
To balance c/d 88,300 72,200 By Bank A/c
40,125
40,125
Particulars Dr. Amount Cr. Amount
Bank A/c Dr.
To Mishra Capital A/c
Cash brought in by new partner for his
share of capital
40,125
40,125
88,300 72,200 88,300 19800
To balance c/d 88,300 72,200
By Balance b/d 88,300 72,200
6,000
By Premium For
Goodwill
4,000
By Revaluation 3,300 2,200
By Balance b/d 70,000 60,000
By Reserve Fund9,000 6,000
Balance Sheet
Liabilities Amount Assets Amount
Creditors 20,000 Cash in hand 14,800
Bills payable 3000 Bank 33125
Provision for legal charges
1,800
Sundry debtors 20,500
Less provision 1000 19,500
General reserve 15,000 Stock 14,000
Jain capital 88,300 Plant 40,000
Gupta capital 72,200 Building 84,000
Mishra capital 40125 Motor vehicles 20,000
1,85,000 1,85,000
Opening bank balance ( bank overdraft) 17,000
Add:- Premium For goodwill 10,000
Add:- Cash bought by Gupta as capital 40,150
Closing bank balance 33125
A and B are partners sharing profit and losses in the ratio of 3:2. They
admit C as a new partners for 1/5th profit. Capital of A and B after all
the necessary adjustment regarding goodwill, reserves, and revaluation are
40000 and 20000 respectively. C brings in proportionate capital after all
the adjustment. Calculate C capital
Let the total profit
4
1
Remaining Share Of A & B 1
1
5
=
5
=
=
For
4
5
Required capital( A + B = 60,000 (40,000 + 20,000)
Total capital
= 60,000
5
4
X = 75,000
Share Of C
75,000
=
1
5
X = 15,000
When new partners bring in proportionate capital of total capital
Ram and shyam share the profits and losses in the ratio of 3:1.
Liabilities Amount Assets Amount
Creditors 2,800 Cash in hand 2,000
Provident fund
1,200
Sundry debtors 6,500
Less provision 500 6,000
Ram capital account
6,000
Stock
3,000
Shyam capital account 4,000 Investment 5,000
General reserve 2,000
3,11,000 3,11,000
1. They admit Mohan for 1/5th share on the following terms
2. Mohan will brings Rs 6000 as his share of premium
3. That unaccounted accrued income of Rs 100 be provided for
4. The market value of investment was Rs 4,500
5. The debtors whose dues of Rs 500 was written off has paid Rs 400
6. Mohan will brings in proportionate capital after all the adjustments
1. That unaccounted accrued income of Rs 100 be provided for
2. The market value of investment was Rs 4,500
3. The debtors whose dues of Rs 500 was written off has paid Rs 400
Particulars Amount Particulars Amount
100
By accrued income
500
To Investment
Revaluation A/c
500 500
Adjustments
400
By bank( bad debts
recovered)
Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan
By Balance b/d 6,000 4,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Creditors 2,800 Cash in hand 2,000
Provident fund
1,200
Sundry debtors 6,500
Less provision 500 6,000
Ram capital account 6,000 Stock 3,000
Shyam capital account 4,000 Investment 5,000
General reserve 2,000
3,11,000 3,11,000
By Reserve Fund 1500 500
Particulars Dr. Amount Cr. Amount
Cash Capital A/c Dr.
To Premium for goodwill
Capital and goodwill brought in cash
6,000
6,000
Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan
Partners capital A/c Cr.
Dr.
4500
By Premium For
Goodwill
1500
Premium for goodwill A/c Dr.
To Ram’s Capital A/c
To Shyam Capital A/c
6,000
4,500
1,500
For transfer of goodwill in sacrifice ratio
By Balance b/d 6,000 4,000
By Reserve Fund 1500 500
Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan
Partners capital A/c
Dr.
12,000 6,000 12,000 6,000
To balance c/d 12,000 6,000
By Balance b/d 12,000 6,000
Cr.
Combined capital of the Jain and Gupta = 12,000 + 6000 = 18,000
Share Of Mohan‘s Capital =
1
4
X
= 45,00
Calculation of Mohan capital
4500
By Premium For
Goodwill
1500
By Balance b/d 6,000 4,000
By Reserve Fund 1500 500
For 4/5th share combined capital is = 18,000
Total capital of the new firm is = 18,000 X
5
4
18,000 X
5
4
Particulars A B C Particulars A B C
Partners capital A/c Cr.
Dr.
Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan
12,000 6,000 12,000 6,000
4,500
To balance c/d 12,000 6,000 By Bank A/c
4,500
4,500
Particulars Dr. Amount Cr. Amount
Bank A/c Dr.
To Mohan Capital A/c
Proportionate cash brought by new partner
4,500
4,500
12,000 6,000 12,000 6,000
To balance c/d 12,000 6,000
By Balance b/d 12,000 6,000
4500
By Premium For
Goodwill
1500
By Balance b/d 6,000 4,000
By Reserve Fund 1500 500
4,500
Liabilities Amount Assets Amount
Creditors 2,800 Cash in hand 12,900
Provident fund
1,200
Sundry debtors 6,500
Less provision 500 6,000
Ram Capital
12,000
Stock
3,000
Shyam Capital 6,000 Investment 45,00
Mohan Capital 4,500 Accrued income 1,00
26500 26500
Opening bank balance 2,000
Add:- Premium For goodwill 2,000
Add:- Cash bought by Gupta as capital 4,500
Add:- bad debts recovered 400
Closing bank balance 12,900
Balance Sheet
Adjustment of old partners capital account on the basis of new
partner’s capital
Adjustment of old
partners capital A/c
Adjustment by
Withdrawing/Paying Cash
Adjustment by Opening
Current Account
1666244440447_5. ADDMISSION-OF-PARTNER.pptx
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 20,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
cash. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by Cash
Total capital of the new firms
Share Of A ‘s Capital
= 20,000
10
2
X = 1,00,000
= 1,00,000
5
10
X = 50,000
Share Of B ‘s Capital = 1,00,000
3
10
X = 30,000
45,000
50,000 -5,000
70,000
30,000 40,000
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 20,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
cash. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by Cash
Particulars Dr. Amount Cr. Amount
Cash A/c Dr.
To A’s Capital
5,000
5,000
(deficit cash brought in)
B’s Capital Dr.
To Cash A/c
40,000
40,000
(excess cash withdrawn )
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 20,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
cash. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by Cash
Particulars A B C Particulars A B C
By Balance b/d 45,000 70000
By Cash
By Cash
Cash brought in
20000
5000
Partners capital A/c
To Cash
Cash withdrawn
40,000
50,000 30,000 20,000
To balance c/d
50,000 70,000 20,000 50,000 70000 20,000
Liabilities Amount Assets Amount
Outstanding expenses 5,000 Profit and loss 16,000
Creditors 36,000 Fixed assets 80,000
Provision for doubtful debts 800 Stock 5,000
Debtors 24,000
X capital 68000 Goodwill 8000
Y capital 31,000 Cash 7800
1,40,800 1,40,800
Z is admitted into partnership on the following terms
1. Fixed assets are to be depreciated by 20%
2. Provision for doubtful debts should remain at 5% on debtors
3. Goodwill of the firm is valued at Rs 20,000
4. The new sharing ratio will be 5:3:2
5. Z will be pay Rs 20,000 as capital and the capital of the old partners will be
adjusted on the basis of new partner capital and his share in the business
actual cash to be brought in or withdraw by old partners as the case may be
X and Y were partners in a firm sharing 3 :1.
1. Fixed assets are to be depreciated to Rs 57500
2. Make a provision for doubtful debts at 5% on debtors
3. Liability for claim included in creditors for Rs 10,000 is settled at rs
8000
Particulars Amount Particulars Amount
By Loss transferred to
X Capital A/c
Y Capital A/c
12,300
Revaluation A/c
16,400
4,100
16,400 16,400
Adjustments
16,000
To Fixed Assets
400
To Provision for doubtful
debts
Particulars X Y Z Particulars X Y Z
By Balance b/d 68,000 31,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Outstanding expenses 5,000 Cash 7800
Creditors 36,000 Fixed assets 80,000
Provision for doubtful debts 800 Stock 5,000
Debtors 24,000
X capital 68000 Goodwill 8000
Y capital 31,000 Profit and loss 16,000
1,40,800 1,40,800
To Goodwill 6,000 2,000
To Profit / Loss 12,000 4,000
Particulars Dr. Amount Cr. Amount
X Capital A/c
Y Capital A/c
to Revaluation Dr.
Profit on revaluation transferred to
capital A/c)
12,300
4,100
16,400
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
To Revaluation 12,300 4,100
By Balance b/d 68,000 31,000
To Goodwill 6,000 2,000
To Profit / Loss 12,000 4,000
Given New Ratio (5: 3 : 2)
Gain /Sac
Gain/Sacrifice of X
New Ratio
= Old Ratio -
3
4
-
5
10
= =
5
20
1
4
-
3
10
= = -1
20
Gain/Sacrifice of Y
X’s Share of goodwill = 20,000 5
20
x = 5,000 (For Sacrifice)
Y’s Share of goodwill = 20,000 1
20
x = 1,000 (For Gain)
Z’s Share of goodwill = 20,000 2
10
x = 4,000
Particulars Dr. Amount Cr. Amount
Cash A/c Dr.
To Z’s Capital A/c
Capital and goodwill brought in cash
20,000
20,000
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
4,000
By Z’s Current
Z’s Current A/c Dr.
Y Capital A/c Dr.
To X Capital A/c
4,000
5,000
10,00
For transfer of goodwill in sacrifice ratio
By Cash A/c 20,000
1,000
To X Capital
To Revaluation 12,300 4,100
By Balance b/d 68,000 31,000
To Goodwill 6,000 2,000
To Profit / Loss 12,000 4,000
1,000
By Y Capital
Particulars X Y Z Particulars X Y Z
Partners capital A/c
Dr.
73,000 31,000 73,000 31,000
To balance c/d 42,700 19,900
By Balance b/d 42,700 19,900
Cr.
20,000
20,000
20,000
20,000
Total capital of the new firms
Share of X ‘s Capital
= 20,000
10
2
X = 1,00,000
= 1,00,000 5
10
X = 50,000
Share of Y ‘s Capital = 1,00,000
3
10
X = 30,000
42,700
50,000 73,00
19,900
30,000 10,100
4,000
By Z’s Current
By Cash A/c 20,000
1,000
To X Capital
To Revaluation 12,300 4,100
By Balance b/d 68,000 31,000
To Goodwill 6,000 2,000
To Profit / Loss 12,000 4,000
1,000
By Y Capital
50,000 30,000 50,000 30,000
To balance c/d 50,000 30,000 20,000
20,000 20,000
By Cash A/c 7300 10,100
Particulars A B C Particulars A B C
Partners capital A/c Cr.
Dr.
Particulars X Y Z Particulars X Y Z
50,000 30,000 50,000 30,000
To balance c/d 50,000 30,000 20,000
20,000
Particulars Dr. Amount Cr. Amount
Cash A/c Dr.
To X Capital A/c
To Y Capital A/c
Proportionate cash brought by new partner
17,400
20,000
7300
10,100
By Cash A/c 7300 10,100
73,000 31,000 73,000 31,000
To balance c/d 42,700 19,900
By Balance b/d 42,700 19,900
20,000
20,000
20,000
20,000
4,000
By Z’s Current
By Cash A/c 20,000
1,000
To X Capital
To Revaluation 12,300 4,100
By Balance b/d 68,000 31,000
To Goodwill 6,000 2,000
To Profit / Loss 12,000 4,000
1,000
By Y Capital
Liabilities Amount Assets Amount
Outstanding expenses 5,000 Cash 45,200
Creditors 36,000 Fixed assets 64,000
Provision for doubtful debts 8,00 Stock 5,000
X capital 50,000 Debtors 24,000
Less provision 1,200
22,800
Y capital 30,000 Z current A/c 4,000
Z capital 20,000
1,41,000 1,41,000
Opening cash balance 7800
Add:- Cash bought by Z as capital 20,000
Add:- cash brought by X 7300
Add:- cash brought by Y 10,100
Closing Cash balance 45,200
Balance Sheet
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 40,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 1,20,000 and Rs. 45,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
opening current A/c. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by opening current A/c
Total capital of the new firms
Share Of A ‘s Capital
= 40,000
5
1
X = 2,00,000
= 2,00,000
5
10
X = 100,000
Share Of B ‘s Capital = 2,00,000
3
10
X = 60,000
1,20,000
1,00,000 20,000
45,000
60,000 -15,000
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 40,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 1,20,000 and Rs. 45,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
opening current A/c. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by opening current A/c
Particulars A B C Particulars A B C
By Balance b/d 1,20,000 45,000
By Cash
By B’s current
A/c
40000
15000
Partners capital A/c
To A’s current
A/c
20,000
100,000 60,000 40,000
To balance c/d
1,20,000 60,000 40,000 1,20,000 60000 40,000
A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he
brings in Rs. 40,000 as his capital. The capitals of A and B, after all
adjustments are Rs. 1,20,000 and Rs 45,000 respectively. It is agreed
that old partners’ capitals capital should be adjusted on the basis of C
share in the profits and his share of capital and adjustment be made by
opening current A/c. New ratio of partners will be 5 : 3 : 2.
When old partners capital accounts are adjusted by Cash
Particulars Dr. Amount Cr. Amount
B’s Current A/c Dr.
To B’s Capital
15,000
15,000
(deficit cash brought in)
A’s Capital Dr.
To A’s Current A/c
20,000
20,000
(excess cash withdrawn )
X and Y were partners in a firm sharing 5 :3. They admit Z as a new partner.
Liabilities Amount Assets Amount
Creditors 27,000 Land and Building 25,000
X capital 50000 Plant and Machinery 30,000
Y capital 35,000 Stock 15,000
General Reserves 16,000 Debtors 20,000
Less Provision :- 1,500
Investment 20,000
Cash 19500
1,28,000 1,28,00
1. Z brings Rs 20,000 as capital and enters for 1/3rd share in the profits
2. Goodwill of the firm was valued at Rs 12,000
3. Land and building were to be valued at Rs 35,000 and plant and machinery at
Rs 25,000
4. The provision for doubtful debts were found to be in excess by Rs 400
5. A liability for Rs 1,000 included in creditors was not likely to arise
6. The capital of the partners be adjusted on the basis of Z’s contribution of
the capital of the firm. The excess or shortfall in any to be transferred to
current account
New profit sharing ratio
Let the total profit
2
1
Remaining Share Of
X & Y
1
1
3
=
3
New share of X
2
3
=
5
8
=
10
24
x
New share of X
2
3
=
3
8
=
6
24
x
=
New Ratio of X, Y, Z. 10
24
6
24
8
24
=
=
New Ratio of X, Y, Z. 5 3 4
=
1. Land and building were to be valued at Rs 35,000 and plant and
machinery at Rs 25,000
2. The provision for doubtful debts were found to be in excess by Rs 400
3. A liability for Rs 1,000 included in creditors was not likely to arise
Particulars Amount Particulars Amount
10,000
By Land and Building
To Plant and Machinery A/c 5,000
4,00
By Provision for doubtful
debts
To Profit Transferred to
X Capital A/c
Y Capital A/c
4,000
Revaluation A/c
6,400
2,400
11,400 11,400
Adjustments
1,000
By Creditors
Particulars X Y Z Particulars X Y Z
By Balance b/d 50,000 35,000
Partners capital A/c Cr.
Dr.
Liabilities Rs. Assets Rs.
Creditors 27,000 Land and Building 25,000
X capital 50000 Plant and Machinery 30,000
Y capital 35,000 Stock 15,000
General Reserves 16,000 Debtors 20,000
Less Provision :- 1,500
Investment 20,000
Cash 19500
1,28,000 1,28,00
By Reserve Fund 10,000 6,000
Particulars Dr. Amount Cr. Amount
Revaluation A/c Dr.
To X Capital A/c
To Y Capital A/c
Profit on revaluation transferred to
capital A/c)
64,00
4,000
2,400
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
By Revaluation 4,000 2,400
By Balance b/d 50,000 35,000
By Reserve Fund 10,000 6,000
Particulars Dr. Amount Cr. Amount
Bank A/c Dr.
To Z’s Capital A/c
Capital and goodwill brought in cash
20,000
20,000
Particulars X Y Z Particulars X Y Z
Partners capital A/c Cr.
Dr.
25,00
By Z’s Current 15,00
Z’s Current A/c (12000 x 1/3rd ) Dr.
To X Capital A/c
To Y Capital A/c
4,000
25,00
15,00
For transfer of goodwill in sacrifice ratio (5:3)
By Revaluation 4,000 2,400
By Balance b/d 50,000 35,000
By Reserve Fund 10,000 6,000
By Bank A/c 20,000
Particulars X Y Z Particulars X Y Z
Partners capital A/c
Dr.
66,500 44,900 66,500 44,900
To balance c/d 66,500 44,900
By Balance b/d 66,500 44,900
Cr.
20,000
25,00
By Z’s Current 15,00
By Revaluation 4,000 2,400
By Balance b/d 50,000 35,000
By Reserve Fund10,000 6,000
By Bank A/c 20,000
20,000
20,000
20,000
Total capital of the new firms
Share of X ‘s Capital
= 20,000
3
1
X = 60,000
= 60,000 5
12
X = 25,000
Share of Y ‘s Capital = 60,000
3
12
X = 15,000
66,500
25,000 41,500
44,900
15,000 29,900
66,500 44,900 66,500 44,900
To balance c/d 25,000 15,000 20,000
20,000 20,000
To current A/c 41,500 29,900
Particulars A B C Particulars A B C
Partners capital A/c Cr.
Dr.
Particulars X Y Z Particulars X Y Z
66,500 44,900 66,500 44,900
To balance c/d 25,000 15,000 20,000
20,000
Particulars Dr. Amount Cr. Amount
X Capital A/c Dr.
Y Capital A/c Dr
To X Current A/c
To Y Current A/c
Proportionate cash brought by new partner
41,500
29,900
20,000
66,500 44,900 66,500 44,900
To balance c/d 66,500 44,900
By Balance b/d 66,500 44,900
20,000
25,00
By Z’s Current 15,00
By Revaluation 4,000 2,400
By Balance b/d 50,000 35,000
By Reserve Fund10,000 6,000
By Bank A/c 20,000
20,000
20,000
20,000
41,500
29,900
To current A/c 41,500 29,900
Liabilities Amount Assets Amount
Creditors 26,000 Land and Building 35,000
X Capital 25,000 Plant and Machinery 25,000
Y Capital 15,000 Stock 15,000
Z Capital 20,000 Debtors 20,000
Less Provision :- 1,100
18900
X’ Current A/c 41,500 Investment 20,000
Y Current A/c 29,900 Cash 39500
Z Current A/c 4,000
1,57,400 1,57,400
Opening bank balance 19,500
Add:- Cash bought by Z as capital 20,000
Closing bank balance 39,500
Balance Sheet

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1666244440447_5. ADDMISSION-OF-PARTNER.pptx

  • 1. Admission of a Partner
  • 2. Admission of A Partner Partnership firm suffering from shortage of funds or administrative in capabilities may decide to admit a partner. According to Section 31 (1) of the Indian Partnership Act 1932, a person can be admitted only with the consent of all the existing partners. A person who is admitted to the firm is known as an incoming or a new partner.
  • 3. On admission of a new partner, the existing partnership comes to an end and a new partnership comes into effect. new firm is reconstituted under a fresh agreement. New partner acquires two rights. a) Right to share the assets of the partnership firm. b) Right to share the future profits of the partnership firm.
  • 4. Problems at the time of admission of new partners
  • 5. Old Ratio Ratio in which old partners distributed their profits/losses before the new partner enters 60% 40% Share of A 3 5 = Share of B 2 5 = If old ratio is not given it will be assume to equal 50% 50%
  • 9. New Ratio The ratio in which all partners (including incoming partner) share the future profits and losses 50% 30% 20%
  • 10. Sacrifice The part which the old partners sacrifice from their shares of profit in favor of a new partner 20% Sacrifice of A Sacrifice of B 10% 10%
  • 13. 3 5 2 5 + Suppose if new partner takes 1 5 Share Two basic problems A and B are partners sharing profits and losses in the ratio of First problem Who will sacrifice and in what ratio Second Problem How to calculate new ratio
  • 14. Difference between Sacrifice (Amount) Amount in which new partners takes his share It is the ratio in which new partner takes his share Sacrifice ratio 1 10 1 10 From A From B 3 15 1 15 From A From B 3 25 2 25 From A From B In the ratio of ( 3:1 ) In Equal ratio ( 1:1 ) In the existing ratio of ( 3:2 )
  • 15. New ratio To calculate the new ratio first calculate sacrifice amount Sacrifice = Old Ratio - New Ratio
  • 16. Old ratio Sacrifice ratio Sacrifice amount New ratio Steps to calculate the new ratio
  • 17. When nothing is mention about new ratio and sacrifice ratio(old ratio/existing ratio = sacrifice ratio) When new partner takes his share of profit in different ratio When new partner takes his share of profit in equal ratio
  • 18. A ,B and C are partner sharing profits and losses in the ratio of 3: 2:1. D is admitted for 1/6th share in the profits. Calculate the new profit ratio and sacrifice ratio
  • 19. A ,B and C are partner sharing profits and losses in the ratio of 3: 2:1. D is admitted for 1/6th share in the profits. Calculate the new profit ratio and sacrifice ratio Sacrifice of A 1 6 = 3 6 = 3 36 Sacrifice Ratio (Assumed) = 3:2:1 x Sacrifice of B 1 6 = 2 6 = 2 36 x New share of A 3 6 = 3 36 = 15 36 New share of B 2 6 = 2 36 = 10 36 Sacrifice of C 1 6 = 1 6 = 1 36 x New share of C 1 6 = 1 36 = 5 36 Sacrifice = Old Ratio - New Ratio
  • 20. A ,B and C are partner sharing profits and losses in the ratio of 3: 2:1. D is admitted for 1/6th share in the profits. Calculate the new profit ratio and sacrifice ratio New Ratio of A,B,C,D 15 36 10 36 5 36 5 36 =
  • 21. Problem Ram and Shyam are partners sharing profits in the ratio of 7:5. They admit Gopi as a new partner for 1/6th share in the future profits of the firm which he gets equally from Ram and Shyam . Calculate new profit sharing ratio of Ram ,Shyam and Gopi Sacrifice of Ram 1 6 = 1 2 = 1 12 Given Sacrifice Ratio(1:1) x Sacrifice of Shyam 1 6 = 1 2 = 1 12 x New share of Ram 7 12 = 1 12 = 6 12 New share of Shyam 5 12 = 1 12 = 4 12 New Ratio of Ram ,Shyam and Gopi 6 12 4 12 2 12 = Sacrifice = Old Ratio - New Ratio
  • 22. Lucy and Zeny are partner sharing profit and losses in the ratio of 4: 3. Allen is admitted for 1/5th profit which he acquires in the ratio of 1: 2 from Lucy and Zeny. Calculate new profit sharing ratio. Sacrifice of Lucy 1 5 = 1 3 = 1 15 Given Sacrifice Ratio(1:2) x Sacrifice of Zeny 1 5 = 2 3 = 2 15 x New share of Lucy 4 7 = 1 15 = 53 105 New share of Zeny 3 7 = 2 15 = 31 105 New Ratio of Lucy , Zeny and Allen 53 105 31 105 21 105 = Sacrifice = Old Ratio - New Ratio
  • 24. A and B are partners sharing profits in the ratio of 7:3. They admitted C as a new partner for 3/7 share which she acquired 2/7 from A and 1/7 from B. Calculate the new profit sharing ratio of A, B and C. New share of A 7 10 = Given Sacrifice amount 2 7 = 29 70 New share of B 3 10 = 1 7 = 11 70 New Ratio of A ,B , C 29 70 11 70 40 70 = Sacrifice = Old Ratio - New Ratio
  • 25. A and B are partners in a firm sharing profits in 4:1 ratio. They admitted C as a new partner for 1/5 share in the profits, which he acquired wholly from A. Determine the new profit sharing ratio of the partners New share of A 4 5 = Given Sacrifice amount 1 5 = 3 5 New share of B 1 5 = 0 0 = 1 5 New Ratio of A ,B , C 3 5 1 5 1 5 = Sacrifice = Old Ratio - New Ratio
  • 27. E and R are partners sharing profits and losses in the ratio of 7:5. They agree to admit C into partnership. E surrenders 1/4th of her share and R 1/2th of her share in favor of C. Calculate the New Profit Ratio and the sacrificing ratio 7 12 = 1 4 = 7 48 x 5 12 = 1 2 = 5 24 x Sacrifice of E Sacrifice of R New share of E 7 12 = 7 48 = 21 48 New share of R 5 12 = 5 24 = 10 48 Sacrifice = Old Ratio - New Ratio Sacrifice ratio of E & R = 7 48 5 24 7 , 10 =
  • 28. E and R are partners sharing profits and losses in the ratio of 7:5. They agree to admit C into partnership. E surrenders 1/4th of her share and R 1/2th of her share in favor of C. Calculate the New Profit Ratio and the sacrificing ratio New Ratio of E, ,R,C 21 48 10 48 17 48 =
  • 29. A and B were partners sharing profits in the ratio of 3:2. They admitted X and Y as new partners. A surrendered ¼th of his share in favor of X and B surrendered 1/3rd of his share in favor of Y. Calculate the new profit sharing ratio of A, B, X and Y 3 5 = 1 4 = 3 20 x 2 5 = 1 3 = 2 15 x Sacrifice of A Sacrifice of B New share of A 3 5 = 3 20 = 27 60 New share of B 2 5 = 2 15 = 16 60 Sacrifice = Old Ratio - New Ratio Sacrifice ratio of A & B = 3 20 2 15 9 , 8 =
  • 30. A and B were partners sharing profits in the ratio of 3:2. They admitted X and Y as new partners. A surrendered ¼th of his share in favor of X and B surrendered 1/3rd of his share in favor of Y. Calculate the new profit sharing ratio of A, B, X and Y New Ratio of A,B,X,Y 27 60 16 60 9 60 = 8 60
  • 32. When remaining share is distributed among the existing partner in equal ratio When remaining share is distributed among the existing partner in old ratio/unchanged When remaining share is distributed among the existing partner in different ratio
  • 33. Case 1 When remaining share is distributed among the existing partner in equal ratio
  • 34. A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner for 1/4th share in the future profits of the firm. New profit sharing ratio of A and B will be equal Let the total profit 3 1 Remaining Share Of A & B 1 1 4 = 4 New share of A 3 4 = 1 2 = 3 8 x New share of B 3 4 = 1 2 = 3 8 x = New Ratio of A,B,C 3 8 3 8 2 8 = =
  • 35. - Sacrifice of A 3 5 - 3 8 = = 9 40 Sacrifice of B 2 5 - 3 8 = = 1 40 Sacrifice ratio of A & B = 9 40 1 40 9 , 1 = New Ratio = Old Ratio - Sacrifice A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner for 1/4th share in the future profits of the firm. New profit sharing ratio of X and Y will be equal
  • 36. Case 2 When remaining share is distributed among the existing partner in old ratio/unchanged
  • 37. X and Y are partners sharing profits in the ratio of 3:2. They admitted S as a new partner for 1/5 share in the future profits of the firm. New profit sharing ratio of X and Y will remains as same Let the total profit 4 1 Remaining Share Of X & Y 1 1 5 = 5 New share of X 4 5 = 3 5 = 12 25 x New share of X 4 5 = 2 5 = 8 25 x = New Ratio of X, Y, Z. 12 25 8 25 5 25 = =
  • 38. Sacrifice of X 3 5 - 12 25 = = 3 25 Sacrifice of Y 2 5 - 8 25 = = 2 25 Sacrifice ratio of X & Y = 3 25 2 25 3 , 2 = New Ratio = Old Ratio - Sacrifice X and Y are partners sharing profits in the ratio of 3:2. They admitted S as a new partner for 1/5 share in the future profits of the firm. New profit sharing ratio of X and Y will remains as same
  • 39. Case 3 When remaining share is distributed among the existing partner in different ratio
  • 40. A and B are partners. They admit C as a new partner for 1/4th share in the future profits of the firm. A and B decided to share the future profits in the ratio of 2:1 Let the total profit 3 1 Remaining Share Of A & B 1 1 4 = 4 New share of A 3 4 = 2 3 = 6 12 x New share of B 3 4 = 1 3 = 3 12 x = New Ratio of A, B, C. 6 12 3 12 3 12 = =
  • 41. Sacrifice of A 1 2 - 6 12 = = 0 12 Sacrifice of B 1 2 - 3 12 = = 1 4 Sacrifice ratio of A & B = 0 12 1 4 New Ratio = Old Ratio - Sacrifice Whole sacrifice is made by B A and B are partners. They admit C as a new partner for 1/4th share in the future profits of the firm. A and B decided to share the future profits in the ratio of 2:1 Old ratio is not given it will be assume to equal
  • 42. X and Y are partners sharing profits in the ratio of 3:2. They admitted S as a new partner for 1/5 share in the future profits of the firm. New profit sharing ratio of X and Y will remains as same
  • 44. R and M are partners in a firm sharing profits in the ratio of 5:3. They admit B as a new partner. The new profit sharing ratio will be 4:2:1. Calculate the sacrificing ratio. Given New Ratio(3:1) Sacrifice of M 5 8 - 4 7 = = 3 56 3 8 - 2 7 = = 5 56 Sacrifice ratio of R & M = 56 3 5 56 = 3 , 5 New Ratio = Old Ratio - Sacrifice Sacrifice of R
  • 46. A, B and C are partners sharing profits and losses in the ratio 4 : 3: 1. D is admitted for 1/6th share of profits. It was decided that C will retain his original share. Calculate new ratio and sacrifice ratio Sacrifice of A 1 6 = 4 7 = 4 42 Given Sacrifice Ratio(4:3:0) x Sacrifice of B 1 6 = 3 7 = 3 42 x New share of A 4 8 = 4 42 = 68 168 New share of B 3 8 = 3 42 = 168 Assumed 51 Sacrifice = Old Ratio - New Ratio
  • 47. A, B and C are partners sharing profits and losses in the ratio 4 : 3: 1. D is admitted for 1/6th share of profits. It was decided that C will retain his original share. Calculate new ratio and sacrifice ratio New Ratio of A ,B,C,D 68 168 51 168 21 168 168 28
  • 49. B and C are partners sharing profits and losses in the ratio of 5: 4. D is admitted for 1/6th share of profits of which he acquires 1/18 from B and 2/18th from C. Calculate new profit sharing ratio . New ratio 9:6:3 Sacrificing ratio = (1:2)
  • 50. Kokila and Mala were sharing profits in the ratio of 4:3. Chandra was admitted in the business as a partner with 3/7th share in the profits of the firm which she takes 2/7th from Kokila and 1/7th from Mala. Find out New Profit Ratio and the sacrificing ratio New ratio (2:2:3) Sacrificing ratio = (2:1)
  • 51. A and B are partners sharing profits in the ratio of 2:1. They admit C into partnership giving him 1/5th share in the profits which he acquires from A and B in the ratio of 1:2. Calculate the new profit sharing ratio. New ratio 9:6:3 Sacrificing ratio = (1:2)
  • 52. Muthu and Siva were partners in a firm sharing profits in the ratio of 7:3. Bala was admitted on 1/5th shares in the profits. What would be their New Profit Ratio and their sacrificing ratio. 1. If Bala acquired his shares equally, from the old partners. 2. If he acquired his profit share in the original ratio of the old partners. 3. If he acquired it as 3/20th from Muthu and 1/20th from Siva. 4. If he acquires his share entirely from Muthu New ratio 6:2:2 Sacrificing ratio = (1:1) New ratio 28:12:10 New ratio 11:5:4 New ratio 5:3:2 Sacrificing ratio = (7:3) Sacrificing ratio = (3:1) Sacrificing ratio = (NA)
  • 53. M and S are partners in a firm sharing profits and losses in the ratio of 7:3. T admitted as new partner. M surrenders 1/5th share of his profit in favour of M and S surrenders 1/3rd of his share in favour of T. Calculate New Profit Sharing Ratio and the sacrificing ratio New ratio 28:12:10 Sacrificing ratio = (3:7)
  • 54. E and R are partners sharing profits and losses in the ratio of 4:5. They agree to admit C into partnership. E surrenders 1/5th of her share and R 1/4th of her share in favour of C. Calculate the New Profit Ratio and the sacrificing ratio New ratio 9:6:3 Sacrificing ratio = (16:25)
  • 55. E and R are partners sharing profits and losses in the ratio of 6:4. They agree to admit C into partnership. E surrenders 1/3rd of her share and R gives 1/10th from his share in favour of C. Calculate the New Profit Ratio and the sacrificing ratio New ratio 4:3:3 Sacrificing ratio = (2:1)
  • 56. P ,Q ,R are partners sharing profits and losses in the ratio of 8:7:5. They agree to admit S into partnership. P surrenders 1/8th of his share and Q , R gives 1/7th and 1/5th of their share in favour of S. Calculate the New Profit Ratio and the sacrificing ratio New ratio 7:6:4:3 Sacrificing ratio = (1:1:1)
  • 57. M and S are partners in a firm sharing profits and losses in the ratio of 5:3. T admitted as new partner for 1/4th share in the profits. New ratio between M and S will be 3:2 New ratio 9:6:5 Sacrificing ratio = (7:3)
  • 58. M and S are partners in a firm sharing profits and losses in the ratio of 4:3. T admitted as new partner for 1/3th share in the profits. New ratio between M and S will be 3:2 New ratio 6:4:5 Sacrificing ratio = (18:17)
  • 59. M and S are partners in a firm sharing profits and losses in the ratio of 2:1. T admitted as new partner for 1/4th share in the profits. New ratio between M and S will be remain as same New ratio 6:3:3. Sacrificing ratio = (3:7)
  • 61. Value of the reputation of a firm in respect of the profits expected in future over and above the normal profits.
  • 62. The incoming partner acquires his share in the profits of the firm from the existing partners
  • 63. Average profit method Super profit method Capitalization method
  • 64. Average profits Total profits = No of years Goodwill = Average profits x No Of Years Purchased Super profit Actual/average profits = Normal profits Goodwill = Super Profit x No of years purchased
  • 65. The profit for the last five years of a firm were as follows – year 2002 Rs. 4,00,000; year 2003 Rs. 3,98,000; year 2004 Rs. 4,50,000; year 2005 Rs. 4,45,000 and year 2006 Rs. 5,00,000. Calculate goodwill of the firm on the basis of 3 years purchase of 5 years average profits Total profit = 4,00,000 3,98,000 450000 500000 445000 + + + + = 4,38,600 21,93,000 = Average profits = 21,93,000 Average profits Total profits = No of years 5 Goodwill = Average profits x No Of Years Purchased Goodwill 4,38,600 = x 3 = 1315800
  • 66. The books of a business showed that the capital employed on December 31, 2006, Rs. 5,00,000 and the profits for the last five years were: 1997– Rs. 40,000: 1998-Rs. 50,000; 1999-Rs. 55,000; 2000-Rs.70,000 and 2001-Rs. 85,000. find out the value of goodwill based on 3 years purchase of the super profits of the business, given that the normal rate of return is 10%. Normal profits = Capital employed x Normal rate of return 100 = 5,00,000 x 10 100 = 50,000 Total profit = 4,00,000 50,000 55,000 85,000 70,000 + + + + = 60,000 3,00,000 = Average profits = 3,00,000 Average profits Total profits = No of years 5
  • 67. Goodwill = Super Profit x No of years purchased Super profit Actual/average profits = Normal profits = 50,000 60,000 = 10,000 = 10,000 x 3 = 30,000 The books of a business showed that the capital employed on December 31, 2006, Rs. 5,00,000 and the profits for the last five years were: 1997– Rs. 40,000: 1998-Rs. 50,000; 1999-Rs. 55,000; 2000-Rs.70,000 and 2001-Rs. 85,000. find out the value of goodwill based on 3 years purchase of the super profits of the business, given that the normal rate of return is 10%.
  • 68. Share of goodwill paid privately Paid share of goodwill in cash (Premium Method) Paid for goodwill other than cash Do not pay his share of goodwill in cash. (Revaluation Method) Pay only part of his share of goodwill . (Premium-cum-revaluation Method) When any existing partner may gain and other may sacrifice
  • 69. Particulars L.F) Dr Amount Cr Amount No entry
  • 71. When his share of goodwill is retained in the firm When his share of goodwill is withdrawn from the firm
  • 73. Particulars Dr Amount Cr Amount Cash A/c Dr. To New Partner’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. Gaining partners Capital/current A/c To Sacrificing partner’s Capital/Current A/c (goodwill brought by new partner transferred to old partner in SR) XXXX XXXX XXXX XXXX Always first calculate sacrifice ratio XXXX XXXX
  • 74. X and Y are partners sharing profits in the ratio of 2:1. They admit Z into partnership giving him 1/5th share in the profits which he acquires from X and Y in the equal ratio. He will bring Rs 1,65,000 as his share of capital and Rs 30000 for his share of goodwill. Pass journal entries Particulars Dr Amount Cr Amount Cash A/c Dr. To Z Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To X’s Capital A/c To Y’s Capital A/c (goodwill brought by new partner transferred to old partner in SR=1:1) 1,95,000 1,65,000 30,000 15,000 30,000 15,000
  • 75. A and B are partners sharing profits in the ratio of 3:2. They admit C into partnership giving him 3/7th share in the profits which he acquires 2/7th from A and 1/7th B. He will bring 60,000 as goodwill and Rs 2,00,000 for capital. Calculate the new sharing profit and pass journal entries Particulars Dr Amount Cr Amount Cash A/c Dr. To C Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To A’s Capital A/c To B’s Capital A/c (goodwill brought by new partner transferred to old partner in SR=2:1) 2,60,000 2,00,000, 60,000 40,000 60,000 20,000
  • 76. X and Y are partners sharing profits and losses in the ratio of 3:2. They decide to admit A into partnership with 1/3th share in profits. A brings in Rs. 30,000 for capital and amount of premium in cash's. Goodwill of the firm is valued at 2 years purchase of the super profit of the firm. Actual profit of the firm is 30000 and normal profit of the firm is 24000 Give Journal entries Goodwill = Super Profit x No of years purchased Super profit Actual/average profits = Normal profits = 24000 30000 = 6000 = 6000 x 2 = 12000 A share of goodwill = 12000 1 3 x = 4000
  • 77. X and Y are partners sharing profits and losses in the ratio of 3:2. They decide to admit A into partnership with 1/3th share in profits. A brings in Rs. 30,000 for capital and amount of premium in cash's. Goodwill of the firm is valued at 2 years purchase of the super profit of the firm. Actual profit of the firm is 30000 and normal profit of the firm is 24000 Give necessary journal entries Particulars Dr Amount Cr Amount Cash A/c Dr. To A’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To X Capital A/c To Y Capital A/c (goodwill brought by new partner transferred to old partner in SR= OR) 34,000 30,000 4,000 2,400 4,000 1,600
  • 79. Particulars Dr Amount Cr Amount Cash A/c Dr. To New Partner’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. Gaining partners Capital/current A/c To Sacrificing partner’s Capital/Current A/c (goodwill brought by new partner transferred to old partner in SR) XXXX XXXX XXXX XXXX Old Partner’s Capital A/c Dr. To Cash A/c (Amount brought by new partner withdrawn by existing partner in SR) XXXX XXXX XXXX XXXX
  • 80. Particulars Dr Amount Cr Amount Cash A/c Dr. To Mohan Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To Ram Capital A/c To Shyam Capital A/c (goodwill brought by new partner transferred to old partner in SR) 8,40,000 6,00,000 2,40,000 1,60,000 Ram Capital A/c Shyam Capital A/c Dr. To Cash A/c (Amount brought by new partner withdrawn by existing partner in SR) 20,000 2,40,000 80,000 40,000 60,000 Ram and Shyam are partners sharing profits and losses in the ratio of 3:2. They decide to admit Mohan into partnership with 1/4 share which he acquires in the ratio of 2:1. Mohan brings in Rs. 6,00,000 for capital and Rs 2,40,000 for goodwill. Old partners withdraw 1/4th their share of their goodwill in cash. Give necessary journal entries
  • 81. Liabilities Rs. Assets Rs. Capital A/c Goodwill 6,000 A’s Capital 50,000 Plant & Machinery 65,000 B’s Capital 50,000 Furniture 15,000 Investment 20,000 Stock 20,000 Bills payable 10,000 Sundry Debtor 30,000 Sundry Creditor 50,000 Cash in hand 15,000 Particulars L.F) Dr Amount Cr Amount A’s Capital A/c Dr. B’s capital A/c To Goodwill A/c ( goodwill already appears written off in old ratio in all partners) 3000 6000 If there is any goodwill appearing in the books it has to be write off among all partners in old ratio 3000
  • 82. A and B are partners in a firm sharing profits in 3:2 ratio, they admitted C for 1/4 share in the profits of the firm. C brings Rs. 1,00,000 for his share of goodwill. Goodwill already appears in the books Rs. 60,000. The new profit sharing ratio between A, B and C will be 2:1:1. Record the necessary journal entries Particulars Dr Amount Cr Amount Cash A/c Dr. To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To A Capital A/c To B Capital A/c (goodwill brought by new partner transferred to old partner in SR = Old Ratio – New Ratio) 1,00,000 1,00,000 1,00,000 40,000 60,000 A Capital A/c B Capital A/c Dr. To goodwill A/c (goodwill written off among old partners in the old ratio) 24,000 36,000 60,000
  • 83. When new partner brings his share of goodwill for consideration other than cash Particulars Dr Amount Cr Amount Assets A/c Dr. To New Partner’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To old partner’s Capital A/c (goodwill brought by new partner transferred to old partner in SR) XXXX XXXX XXXX XXXX
  • 84. E and F were partners in a firm sharing profits in the ratio of 3: 2. They admitted G as a new partner for 1/3 share. E, F and G will share future profits equally. G brought Rs. 50,000 in cash and machinery worth Rs. 70,000 goodwill. Pass necessary journal entries. Sacrifice of E 3 5 - 1 3 = = 4 15 Sacrifice of F 2 5 - 1 3 = = 1 15 Sacrifice ratio of E & F = 4 15 1 15 4 , 1 = New Ratio = Old Ratio - Sacrifice
  • 85. Particulars Dr Amount Cr Amount Cash A/c Dr. Machinery A/c Dr To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To E Capital A/c To F Capital A/c (Goodwill brought by new partner transferred to old partner in SR) 50,000 1,20,000 1,20,000 96,000 70,000 24,000 E and F were partners in a firm sharing profits in the ratio of 3: 2. They admitted G as a new partner for 1/3 share. E, F and G will share future profits equally. G brought Rs. 50,000 in cash and machinery worth Rs. 70,000 goodwill. Pass necessary journal entries.
  • 86. A and B were partners in a firm sharing profits in the ratio of 7: 5. They admitted C as a new partner for 1/6 share. A, B and C will share future profits ratio 13:7:4. C brought following assets to his capital and his share of goodwill. Stock Rs. 60,000 , debtors Rs 80,000, Land Rs 2,00,000, plant and machinery Rs 1,20,000. Goodwill of the firm be valued at Rs 7,50,000 Pass necessary journal entries. New Ratio = Old Ratio - Sacrifice of A 7 12 - 13 24 = = 1 24 Sacrifice of B 5 12 - 7 24 = = 3 24 Sacrifice ratio of A & B = 1 24 3 24 1, 3 =
  • 87. Total Goodwill x 1 6 = 7,50,000 x 1 6 = = 1,25,000 A and B were partners in a firm sharing profits in the ratio of 7: 5. They admitted C as a new partner for 1/6 share. A, B and C will share future profits ratio 13:7:4. C brought following assets to his capital and his share of goodwill. Stock Rs. 60,000 , debtors Rs 80,000, Land Rs 2,00,000, plant and machinery Rs 1,20,000. Goodwill of the firm be valued at Rs 7,50,000 Pass necessary journal entries.
  • 88. Particulars Dr Amount Cr Amount Purchase A/c Dr. Debtors A/c Dr Land A/c Dr Machinery A/c Dr To C’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To A Capital A/c To B Capital A/c (Goodwill brought by new partner transferred to old partner in SR) 60,000 1,25,000 1,25,000 31,250 1,20,000 93,750 3,35,000 2,00,000 80,000 A and B were partners in a firm sharing profits in the ratio of 7: 5. They admitted C as a new partner for 1/6 share. A, B and C will share future profits ratio 13:7:4. C brought following assets to his capital and his share of goodwill. Stock Rs. 60,000 , debtors Rs 80,000, Land Rs 2,00,000,Plant and machinery Rs 1,20,000.Goodwill of the firm be valued at Rs 7,50,000 Pass necessary journal entries.
  • 90. V and S are partners sharing Profit/losses in the ratio 3 : 2. They admit A into partnership for 1/5th share in profits Liabilities Rs. Assets Rs. Capital A/c Goodwill 5,000 V Capital 60,000 Plant & Machinery 65,000 S Capital 50,000 Furniture 15,000 Bills payable 10,000 Investment 20,000 Sundry Creditor 50,000 Stock 20,000 Sundry Debtor 30,000 Cash in hand 15,000 170000 170000 1. A was admitted on the following terms: 2. A is to bring capital Rs. 40,000 and goodwill Rs. 15,000 for 1/5th share of profits which he acquires from A and B in the ratio of 1 : 2. 3. Half of the goodwill is withdrawn by partners. 4. Calculate the new ratio; pass necessary journal entries and partner’s capital account and balance sheet of the new firm. Problem
  • 91. Particulars Dr. Amount Cr. Amount Cash A/c Dr. To A’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. To V Capital A/c To S Capital A/c (goodwill brought by new partner transferred to old partner in SR) 55,000 40,000 15,000 5,000 V Capital A/c S Capital A/c Dr. To Cash A/c (Amount brought by new partner withdrawn by existing partner in SR) 5,000 15,000 10,000 2,500 7,500 V Capital A/c S Capital A/c Dr. To goodwill A/c 2,000 3,000 5,000 (Old goodwill written off in old ratio old partners)
  • 92. Particulars V S A Particulars V S A By Balance b/d 60000 50000 Partners capital A/c To Goodwill 3000 2000 Cr. Dr. Liabilities Rs. Assets Rs. Capital A/c Goodwill 5,000 V 60,000 Plant & Machinery 65,000 S 50,000 Furniture 15,000 Bills payable 10,000 Investment 20,000 Sundry Creditor 50,000 Stock 20,000 Sundry Debtor 30,000 Cash in hand 15,000 170000 170000 Particulars Dr. Amount Cr. Amount V Capital A/c S Capital A/c Dr. To goodwill A/c 2,000 3,000 5,000 (Old goodwill written off in old ratio old partners)
  • 93. Particulars V S A Particulars V S A By Balance b/d 60000 50000 By Cash 40000 Partners capital A/c To goodwill 3000 2000 Cr. Dr. Particulars Dr. Amount Cr. Amount Cash A/c Dr. To A’s Capital A/c To premium for goodwill A/c (Amount brought by new partner for his share of goodwill and capital) 55,000 40,000 15,000
  • 94. Particulars V S A Particulars V S A By Balance b/d60,000 50,000 By Cash By premium for goodwill 40,000 5,000 10,000 Partners capital A/c To Goodwill 3,000 2,000 Cr. Dr. Particulars Dr. Amount Cr. Amount Premium for goodwill A/c Dr. To V Capital A/c To S Capital A/c (goodwill brought by new partner transferred to old partner in SR) 15,000 5,000 10,000
  • 95. Particulars V S A Particulars V S A By Balance b/d 60,000 50,000 By Cash By premium for goodwill To Cash 2,500 5,000 40,000 5,000 10,000 Partners capital A/c To goodwill 3,000 2,000 Cr. Dr. Particulars Dr. Amount Cr. Amount V Capital A/c S Capital A/c Dr. To cash A/c (Amount brought by new partner withdrawn by existing partner in SR) 5,000 2,500 7,500 59,500 53,000 40,000 To balance c/d 65,000 60,000 40,000 65,000 60,000 40,000
  • 96. Liabilities Rs. Assets Rs. Capital A/c V’s Capital 59500 Plant & Machinery 65,000 S’s Capital 53,000 Furniture 15,000 A’s capital 40000 Investment 20,000 Sundry Creditor 50,000 Stock 20,000 Bills payable 10,000 Sundry Debtor 30,000 Cash in hand 62500 Final Balance Sheet
  • 99. When the new partner do not brings his share of goodwill in cash. Following entry will be passed Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner for his share of goodwill ) Gaining Partners A/c Dr. To Sacrificing Partner's Capital/Current Cash A/c Dr. To New Partners Capital A/C (transferring goodwill share from new partner current A/c to old partners capital A/c in SR XXXX XXXX XXXX XXXX
  • 100. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000. C brings in Rs. 16,000 as his capital but no amount for goodwill. Pass necessary journal entries without raising Goodwill A/c Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner for his share of goodwill ) C Current A/c Dr.(30000 x 1/5) To A Capital A/c To B Capital A/c Cash A/c Dr. To C Capital A/C (transferring goodwill share from new partner current A/c to old partners capital A/c in SR 16,000 16,000 6,000 3,000 3,000
  • 101. A and B are partners sharing profits and losses equally. They admit C and new ratio of A,B,C is 4:3:2. C is unable to bring anything for goodwill but brings Rs 25,000 as capital. Goodwill of the firm is valued at Rs 18,000. Give the necessary journal entries. journal entries with raising Goodwill and Subsequently written off A/c Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner) Goodwill A/c Dr.(18,000) To A Capital A/c To B Capital A/c Cash A/c Dr. To C Capital A/C (Raising goodwill to old partners capital in old ratio) 25,000 25,000 18,000 9,000 9,000 A Capital A/c B Capital A/c C Capital A/c To Goodwill A/c 8,000 6000 4000 18,000 (Written off goodwill to All partners capital in New ratio)
  • 102. A and B are partners sharing profits and losses equally. They admit C and new ratio of A,B,C is 4:3:2. C is unable to bring anything for goodwill but brings Rs 25,000 as capital. Goodwill of the firm is valued at Rs 18,000. Give the necessary journal entries. journal entries with raising Goodwill and Subsequently written off A/c Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner) Goodwill A/c Dr.(18,000) To A Capital A/c To B Capital A/c Cash A/c Dr. To C Capital A/C (Raising goodwill to old partners capital in old ratio) 25,000 25,000 18,000 9,000 9,000 A Capital A/c B Capital A/c C Capital A/c To Goodwill A/c 8,000 6000 4000 18,000 (Written off goodwill to All partners capital in New ratio)
  • 103. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary 1. Without raising goodwill 2. With raising of Goodwill and subsequently written off Particulars Dr Cr C Current A/c Dr. To A Capital To B Capital 6,000 3,000 3,000 Without raising of Goodwill and subsequently written off
  • 104. Sacrifice of A 1 5 = 1 2 = 1 10 Given Sacrifice Ratio(1:1) x Sacrifice of B 1 5 = 1 2 = 1 10 x New share of A 3 5 = 1 10 = 5 10 New share of B 2 5 = 1 10 = 3 10 New Ratio of A,B and C 5 10 3 10 2 10 = Sacrifice = Old Ratio - New Ratio A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off With raising of Goodwill and subsequently written off
  • 105. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off Particulars Dr Cr Goodwill A/c Dr. To A Capital A/c To B Capital A/c 30,000 18,000 12,000 A Capital A/c B Capital A/c C Current A/c To Goodwill A/c 15,000 9,000 6,000 30,000 (Written off goodwill to All partners capital in New ratio) (Raising goodwill to old partners capital in old ratio) New Ratio of A,B and C 5 : 3 : 2 =
  • 106. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000 and Not able to Bring his share for goodwill. Pass necessary 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off Particulars Dr Cr C Current A/c Dr. To A Capital To B Capital 6,000 3,000 3,000 Particulars Dr Cr Goodwill A/c Dr. To A Capital A/c To B Capital A/c 30,000 18,000 12,000 A Capital A/c B Capital A/c C Current A/c To Goodwill A/c 15,000 9,000 6,000 30,000 (Written off goodwill to All partners capital in New ratio) (Raising goodwill to old partners capital in old ratio)
  • 107. Liabilities Rs. Assets Rs. Capital A/c Goodwill 6,000 A’s Capital 50,000 Plant & Machinery 65,000 B’s Capital 50,000 Furniture 15,000 Investment 20,000 Stock 20,000 Bills payable 10,000 Sundry Debtor 30,000 Sundry Creditor 50,000 Cash in hand 15,000 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off
  • 108. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C for 1/5 share of profits, which he acquires equally from A and B. Goodwill is valued at Rs. 30,000 and Not able to Bring his share for goodwill. Goodwill already appears in the books Rs 6000 Pass necessary 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off
  • 109. Liabilities Rs. Assets Rs. Capital A/c Goodwill 6,000 A’s Capital 50,000 Plant & Machinery 65,000 B’s Capital 50,000 Furniture 15,000 Investment 20,000 Stock 20,000 Bills payable 10,000 Sundry Debtor 30,000 Sundry Creditor 50,000 Cash in hand 15,000 Particulars L.F) Dr Amount Cr Amount A’s Capital A/c Dr. B’s capital A/c To Goodwill A/c ( goodwill already appears written off in old ratio in all partners) 3000 6000 If there is any goodwill appearing in the books it has to be write off among all partners in old ratio 3000
  • 111. Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner for his share of goodwill ) Premium for goodwill A/c Dr New partners current A/c Dr. To old partner’s Capital A/c Cash A/c Dr. To new partners Capital A/c To premium for goodwill A/c (transferring goodwill share from new partner current A/c to old partners capital A/c XXXX XXXX XXXX XXXX XXXX XXXX
  • 112. A and B are partners sharing profits and losses in the ratio of 3 : 2. C is admitted as new partners. C will bring Rs 20000 for his share of capital for 1/5th share in profits. C brings only Rs 2000 out of his share of goodwill of 6000. Pass the necessary journal entries. 1. Without raising goodwill 2. Without raising of Goodwill and subsequently written off Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner for his share of goodwill ) Premium for goodwill A/c Dr C Current A/c Dr. To A Capital A/c To B Capital A/c Cash A/c Dr. To C Capital A/c To premium for goodwill A/c (transferring goodwill share from new partner current A/c to old partners capital A/c Old ratio assumed to be sacrifice ratio 22,000 20,000 2,000 4,000 3,600 2,000 2,400
  • 113. A and B are partners sharing profits and losses in the ratio of 3 : 2. C is admitted as new partners. C will bring Rs 20000 for his share of capital for 1/5th share in profits. C brings only Rs 2000 out of his share of goodwill of 6000. Pass the necessary journal entries. Particulars L.F) Dr Amount Cr Amount (only capital is brought by new partner for his share of goodwill ) Premium for goodwill A/c Dr C Current A/c Dr. To A Capital A/c To B Capital A/c Cash A/c Dr. To C Capital A/c To premium for goodwill A/c (transferring goodwill share from new partner current A/c to old partners capital A/c Old ratio assumed to be sacrifice ratio 22,000 20,000 2,000 4,000 3,600 2,000 2,400
  • 114. When partners Admits and some existing may
  • 115. A and B are partners in a firm sharing profits in the ratio of 4:1. They admit C as a new partner for 1/6 share in the profit. New ratio will be 3:2:1.C brings Rs 20,000 for Goodwill. Calculate the sacrificing ratio and pass necessary journal entries Gain/Sacrifice of A 4 5 - 3 6 = = 9 30 1 5 - 2 6 = = -4 30 Gain/Sacrifice of B A’s Share of goodwill = 1,20,000 9 30 x = 36,000 (For Sacrifice) B’s Share of goodwill = 1,20,000 4 30 x = 16,000 (For Gain) Total Goodwill 20,000 x 6 1 = = 1,20,000 Given New Ratio (2:2:2:1) New Ratio = Old Ratio - Sacrifice
  • 116. Particulars Dr Amount Cr Amount Cash A/c Dr. To premium for goodwill A/c (Amount brought by new partner for his share of goodwill) Premium for goodwill A/c Dr. B Capital A/c ( 1,20,00 x 4/30) To A Capital A/c ( 1,20,000 x 9/30 (goodwill brought by new partner transferred to old partner in SR/GR) 20,000 20,000 20,000 16,000 36,000 A and B are partners in a firm sharing profits in the ratio of 4:1. They admit C as a new partner for 1/6 share in the profit. New ratio will be 3:2:1.C brings Rs 20,000 for Goodwill. Calculate the sacrificing ratio and pass necessary journal entries
  • 117. H,R,K are partners in a firm sharing profits in the ratio of 3:2:1. They admit G as a new partner for 1/7 share in the profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital and 45000 for his share of Goodwill. Calculate the sacrificing ratio and pass necessary journal entries Given New Ratio (2:2:2:1) New Ratio = Old Ratio - Sacrifice Gain/Sacrifice of H 3 6 - 3 7 = = 9 42 2 6 - 2 7 = = 2 42 Gain/Sacrifice of R 1 6 - 2 7 = = -5 42 Gain/Sacrifice of k
  • 118. H,R,K are partners in a firm sharing profits in the ratio of 3:2:1. They admit G as a new partner for 1/7 share in the profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital and 45000 for his share of Goodwill. Calculate the sacrificing ratio and pass necessary journal entries H’s Share of goodwill = 3,15,000 9 42 x = 67,500 (For Sacrifice) R’s Share of goodwill = 3,15,000 2 42 x = 15,000 (For Sacrifice) Total Goodwill 45,000 x 7 1 = = 3,15,000 K’s Share of goodwill = 3,15,000 5 42 x = 37,500 (For Gain)
  • 119. Particulars Dr Amount Cr Amount Cash A/c Dr. To Premium for Goodwill A/c To G capital (Amount brought by new partner for his share of goodwill and capital) Premium for goodwill A/c Dr. M Capital A/c Dr. To H Capital A/c To R Capital A/c (goodwill brought by new partner transferred to old partner in SR/GR) 3,45,000 3,00,000 45,000 37,500 67,500 H,R,K are partners in a firm sharing profits in the ratio of 3:2:1. They admit G as a new partner for 1/7 share in the profit. New ratio will be 2:2:2:1.G brings Rs 3,00,000 for capital and 45000 for his share of Goodwill. Calculate the sacrificing ratio and pass necessary journal entries 45,000 15,000
  • 120. Sometimes the value of goodwill is not given at the time of admission of a new partner. In such a situation goodwill has to be valued on the basis of total capital of the firm and the profit sharing ratio of the partners
  • 121. A and B are partners with the capital of Rs 25,000 and Rs 15,000 respectively. They admit C as a partner with 1/4th share in the profits of the firm. C bring in Rs 18000 as his capital. Calculate the amount of goodwill and pass the necessary journal entries. Total required capital of the new firms = 18,000 4 1 X = 72,000 Less:- Actual Capital Employed Capital of A Capital of B Capital of C 25,000 15,000 18,000 = 58,000 Goodwill of the firm = 14,000
  • 122. A and B are partners with the capital of Rs 25,000 and Rs 15,000 respectively. They admit C as a partner with 1/4th share in the profits of the firm. C bring in Rs 18000 as his capital. Calculate the amount of goodwill and pass the necessary journal entries. Particulars Dr Amount Cr Amount Cash A/c Dr. To C’s Capital A/c (Amount brought by new partner for his share of goodwill) C’s Current A/c Dr. To A Capital A/c To B Capital A/c (goodwill brought by new partner transferred to old partner in SR(Assumed equal) 18,000 18,000 35,00 1,750 1,750 A share of goodwill Total Goodwill x 1 6 = 14,000 x 1 4 = = 35,00
  • 124. Particulars Dr Amount Cr Amount Goodwill A/c Dr. To Old Partner’s Capital A/c (Goodwill Raising in old Ratio) All Partners Capital A/c Dr. To Goodwill A/c (goodwill written off in New Ratio) XXXX XXXX XXXX XXXX Always first calculate New Ratio
  • 126. •Sometimes the balance sheet of the firm may show reserves and accumulated profits and losses. •Only the old partners are entitled to have these accumulated balances in old ratio. •The new partner is not entitled to have any share in such accumulated balances
  • 127. Accumulated profits Accumulated losses Balance of undistributed profits like •Reserve fund , •General reserves , •Profit and loss (Cr balance), •Reserves for contingencies, Belong to old partners so they should be credited to their capital A/c Firm may have accumulated losses like •Profit and loss (debit balance) •Deferred revenue expenditure •Advertisement suspense A/c Belong to old partners so they should be debited to their capital A/c
  • 128. Liability Amount Assets Amount Particulars A B Particulars A B By Balance b/d By Reserves fund To Advertisement Suspense A/C xx Partners capital A/c To Profit and losses Cr. Dr. xx xx xx By Reserves for contingencies By Accumulated Profits To Deferred revenue expenditure xx xx xx xx xx xx xx xx xx xx By Profit/Loss A/c xx xx Reserves fund Reserves for Contingencies Accumulated profits Profit and loss A/c Profit and Loss A/c Deferred Revenue expenditure Advertisement Suspense A/C Balance Sheet Old Partners Old Ratio Old Partners Old Ratio
  • 129. L and M are partners sharing profits and losses in the ratio of 5:3. O is admitted as a new partner. On that date L and M has General reserves Rs 1,60,000 and Rs 2,40000 (Cr) in the balance sheet. Record entries. New ratio is 5:3:2. Problem Particulars Dr. Amount Cr. Amount Profit and Loss A/c Dr To L Capital A/c . To M Capital A/c (Amount brought by new partner for his share of goodwill and capital) 2,40,000 90,000 General reserves A/c Dr To L Capital A/c . To M Capital A/c 1,00,000 1,60,000 60,000 (Reserves distributed among old partners in old ratio Solution 1,50,000
  • 130. R and M were partners in a firm sharing profits and losses in the ratio of 4:1. They admitted S as a new partner. On the date of admission the balance sheet of R and M showed a balance of Rs.1,00,000 in general reserve and Rs. 32,000 (Dr) in Profit and Loss Account. S brings Rs 60,000 as premium for his share of goodwill. journalize Problem Particulars Dr. Amount Cr. Amount Solution R Capital A/c . Dr. M Capital A/o . Dr. To Profit and loss A/c (loss written off among old partners in old ratio) 25,600 32,000 General reserves A/c Dr To R Capital A/c . To M Capital A/c 80,000 1,00,000 20,000 Reserves distributed among old partners in old ratio 6,400 Cash A/c Dr. To Premium for goodwill Capital and goodwill brought in cash 60,000 60,000 Premium for goodwill A/c Dr. To R Capital A/c To M Capital A/c 60,000 12,000 48,000 For transfer of goodwill in sacrifice ratio
  • 131. •Firm may have specific funds like workmen compensation fund and investment fluctuating fund. •If there is no liability against these funds they should • be distributed among the old partners in old ratio •The new partner is not entitled to have any share in such funds
  • 132. Following will not be distributed among old partners as they are liability for the firm Provident fund Employee saving fund
  • 133. Liability Amount Assets Amount Workmen compensation fund Investment fluctuating fund Particulars V S A Particulars V S A By Balance b/d Partners capital A/c Cr. Dr. xx xx By Workmen compensation fund By Investment fluctuating fund xx xx xx xx Old Partners Old Ratio
  • 134. Workmen Compensation Fund Is created to pay compensation to the workers in case of accident according to workmen compensation act It has been created out of the profits of the previous year so if there is no claim it is be distributed among the old partner in old ratio.
  • 135. Liability Amount Assets Amount Workmen's compensation fund 10,000 R and S are partners in a firm sharing profits in the ratio of 4:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If claim on account of workmen compensation is estimated at Rs 4000 3. If claim on account of workmen compensation is estimated at Rs 15000 Particulars Dr. Amount Cr. Amount Case 1st Workmen compensation fund Dr to R Capital A/c . To S Capital A/c 8000 10000 2000 Liability Amount Assets Amount New balance sheet Workmen compensation fund NIL
  • 136. Liability Amount Assets Amount Workmen's compensation fund 10,000 R and S are partners in a firm sharing profits in the ratio of 4:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If claim on account of workmen compensation is estimated at Rs 4000 3. If claim on account of workmen compensation is estimated at Rs 15000 Particulars Dr. Amount Cr. Amount Case 1st Workmen compensation fund Dr to R Capital A/c . To S Capital A/c 4,800 6,000 1,200 Liability Amount Assets Amount New balance sheet Workmen compensation fund 4000
  • 137. Liability Amount Assets Amount Workmen's compensation fund 10,000 R and S are partners in a firm sharing profits in the ratio of 4:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If claim on account of workmen compensation is estimated at Rs 4000 3. If claim on account of workmen compensation is estimated at Rs 15000 Particulars Dr. Amount Cr. Amount Case 3rd Revaluation A/c Dr To workmen compensation fund 5,000 5,000 R Capital A/c . S Capital A/c Revaluation A/c 4,000 1,000 5,000 Liability Amount Assets Amount New balance sheet Workmen compensation fund 15000
  • 138. Investment fluctuating fund Created out of profit to cover up the losses in case the value of the investment falls. It is to be distributed among the old partner in old ratio if the investment remains same or otherwise.
  • 139. Liability Amount Assets Amount Investment Fluctuating Fund 18000 Investment 200000 R and S are partners in a firm sharing profits in the ratio of 3:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If the market value of investment is valued at Rs 190000 3. If the market value of investment is valued at Rs Rs 215000 4. If the market value of investment is valued at Rs Rs 170000 Particulars Dr. Amount Cr. Amount Case 1st Investment Fluctuating Fund Dr to R Capital A/c . To S Capital A/c 13500 18000 4500 Problem Liability Amount Assets Amount New balance sheet Investment 200000
  • 140. Liability Amount Assets Amount Investment Fluctuating Fund 18000 Investment 200000 R and S are partners in a firm sharing profits in the ratio of 3:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If the market value of investment is valued at Rs 190000 3. If the market value of investment is valued at Rs Rs 215000 4. If the market value of investment is valued at Rs Rs 170000 Particulars Dr. Amount Cr. Amount Case 2nd Investment Fluctuating Fund Dr To Investment A/C To R capital A/c . To S Capital A/c 10000 18000 6000 2000 Problem Liability Amount Assets Amount New balance sheet Investment 190000
  • 141. Liability Amount Assets Amount Investment Fluctuating Fund 18000 Investment 200000 R and S are partners in a firm sharing profits in the ratio of 3:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If the market value of investment is valued at Rs 190000 3. If the market value of investment is valued at Rs Rs 215000 4. If the market value of investment is valued at Rs Rs 170000 Particulars Dr. Amount Cr. Amount Investment Fluctuating Fund Dr to R Capital A/c . To S Capital A/c 11250 18000 3750 15000 15000 Revaluation A/c Dr to R Capital A/c . To S Capital A/c 15000 13500 4500 Investment A/c Dr to Revaluation A/c Problem Liability Amount Assets Amount New balance sheet Investment 215000
  • 142. Liability Amount Assets Amount Investment Fluctuating Fund 18000 Investment 200000 R and S are partners in a firm sharing profits in the ratio of 3:1. They admit N as a new partner Show the accounting treatment under following cases 1. If there is no claim/no information 2. If the market value of investment is valued at Rs 190000 3. If the market value of investment is valued at Rs Rs 215000 4. If the market value of investment is valued at Rs Rs 170000 Particulars Dr. Amount Cr. Amount Investment fluctuating fund Dr Revaluation A/c Dr. To investment 9000 18000 3000 Revaluation A/c Dr to R Capital A/c . To S Capital A/c 12000 12000 30000 Problem Liability Amount Assets Amount Investment 170000
  • 144. 1. At the time of admission of a partner, the assets and liabilities are revalued so that 2. The profit and loss arising on account of such revaluation may be adjusted in the old partners’ capital accounts. In their old ratio 3. Incoming partner may not be affected by the profit or loss on account of revaluation of assets and liabilities. 4. Revaluation account is opened 5. Revaluation is a nominal account.
  • 147. Particulars Amount Particulars Amount To Decrease in value of Assets XX XX By increase in value of assets Dr. To Increase in the value of Liabilities. By decrease in value of Liability XX XX XX XX To Unrecorded Liabilities. By Unrecorded Assets. To Profit transferred to old partner’s Capital account (in old ratio) By Loss transferred to old partner’s Capital account (in old ratio) XX XX Cr. Performa of Revaluation A/c
  • 148. Particulars Dr Amount Cr Amount Concerned Assets A/c Dr. Concerned Liabilities A/c Dr To Revaluation A/c. XXXX XXXX Particulars Dr Amount Cr Amount Revaluation A/c. Dr To Concerned Assets A/c To Concerned Liabilities A/c XXXX XXXX
  • 149. Particulars Dr Amount Cr Amount Revaluation A/c. Dr To old Partners’ Capital A/c. (For transferring profit on revaluation in old ratio old partners)) XXXX XXXX Particulars Dr Amount Cr Amount Old Partners’ Capital A/c. To Revaluation A/c. Dr (For transferring loss on revaluation in old ratio old partners) XXXX XXXX
  • 150. particulars Amount particulars Amount a Particulars amount Particulars amount To partners Capital A/C Profit On Revaluation By revaluation A/c(profit) To revaluation A/c (Loss) By Partners Capital Account (loss on revaluation Old Partners Old Ratio Old Partners Old Ratio
  • 152. Liability Amount Asset Amount Land 50000 The value of Land having appreciated by brought upto 60000 Particulars Debit Credit Land A/C Dr. To Revaluation A/C . 10000 10000 Liability Amount Asset Amount Land 60000
  • 153. Liability Amount Asset Amount Land 50000 There has been appreciation in the value of the Land by 5% Particulars Debit Credit Land A/C Dr. To Revaluation A/C. 2500 2500 Liability Amount Asset Amount Land 52500
  • 154. Liability Amount Asset Amount Land 50000 There has been increase in the value of Land by 7000 Particulars Debit Credit Land A/C Dr. To Revaluation A/C. 7000 7000 Liability Amount Asset Amount Land 57000
  • 155. Liability Amount Asset Amount Land 50,000 The value of Land be appreciated by 120% Particulars Debit Credit Land A/C Dr. To Revaluation A/C. 60,000 60,000 Liability Amount Asset Amount Land 1,10,000
  • 156. Liability Amount Asset Amount Land 50000 The value of Land be increased to 120% Particulars Debit Credit Land A/C Dr. To Revaluation A/C 10.000 1.0000 Liability Amount Asset Amount Land 60,000
  • 157. Liability Amount Asset Amount Land 50000 The value of Land be appreciated by 120% more Particulars Debit Credit Land A/C Dr. To Revaluation A/C. 60000 60000 Liability Amount Asset Amount Land 110000
  • 158. Liability Amount Asset Amount Land 50000 The value of Land be valued at 120% Particulars Debit Credit Land A/C Dr. To Revaluation A/C. 10000 10000 Liability Amount Asset Amount Land 60000
  • 159. Liability Amount Asset Amount Land 50000 The value of Land be brought up to its market value which is 20% more Particulars Debit Credit Land A/C Dr. To Revaluation A/C 10,000 10,000 Liability Amount Asset Amount Land 60000
  • 160. Rs 3,000 proved to be bad Liability Amount Asset Amount Debtors 50,000 Less Provision 2000 48,000 Particulars Debit Credit Revaluation A/C Dr. To Bad debts A/c . 1,000 1,000 Liability Amount Asset Amount Debtors 47,000
  • 161. Reserve for bad debts be created @ 5% Liability Amount Asset Amount Debtors 50,000 Less Provision 2000 48,000 Particulars Debit Credit Revaluation A/C Dr. To provision for doubtful debts A/c. 500 500 Liability Amount Asset Amount Provision 2,500 Debtors 50,000 4,7500
  • 162. Liability Amount Asset Amount Debtors 50000 Less Provision 2000 48000 Reserve for bad debts be increased by 2000 Particulars Debit Credit Revaluation A/C Dr. To provision for doubtful debts A/c . 2,000 2,000 Liability Amount Asset Amount Provision 4,000 Debtors 50,000 46,000
  • 163. Liability Amount Asset Amount Debtors 50000 Less Provision 2000 48000 Reserve for bad debts was found to be short by 1700 Particulars Debit Credit Revaluation A/C Dr. To provision for doubtful debts A/c . 1700 1700 Liability Amount Asset Amount Provision 3700 Debtors 50000 46300
  • 164. Liability Amount Asset Amount Debtors 50000 Less Provision 2000 48000 It was decided that all the debtors are good Particulars Debit Credit Provision for doubtful debts A/c dr. To Revaluation a/c . 2000 2000 Liability Amount Asset Amount Debtors 50000 50000
  • 165. Liability Amount Asset Amount Debtors 50000 Less Provision 2000 48000 It was decided that 95% of the debtors are good Particulars Debit Credit Revaluation A/C Dr. To provision for doubtful debts A/c. 500 500 Liability Amount Asset Amount Provision 2500 Debtors 50000 47500
  • 166. Liability Amount Asset Amount Debtors 50000 Less Provision 2000 48000 It was decided that provision for doubtful debts be brought up to 7% of debtors Particulars Debit Credit Revaluation A/C Dr. To provision for doubtful debts A/c. 1500 1500 Liability Amount Asset Amount Provision 3500 Debtors 50000 46500
  • 167. 1. S and V were partners sharing profit and loss in the ratio of 3:2. They decided to admit F into the partnership and revalue their assets and liabilities as indicated here under: 2. Bring into record investment of Rs. 18,000 which had not so far been recorded in the books of the firm. 3. To depreciate stock and furniture by Rs. 18,000, Rs.6,000 respectively. 4. To provide claim on outstanding salary Rs 24000 Particulars Amount Particulars Amount To Stock 18,000 18,000 By Investment Dr. To Furniture 6,000 24000 To Outstanding Salary By Loss transferred to S Capital A/c V Capital A/c 18000 Cr. Revaluation A/c 30,000 12000 48,000 48,000
  • 168. R and L were partners sharing profit and losses in the ratio of 4:3. They decided to revalue their assets and liabilities as indicated below: 1. To increase the value of buildings by Rs. 60,000. 2. Provision for doubtful debts to be decreased by Rs.8000. 3. To decrease machinery by Rs.16,000, furniture by Rs.4, 000 and stock by Rs. 12,000. 4. A provision for outstanding liabilities was to be created for Rs.1000. Particulars Amount Particulars Amount To Furniture 60,000 4,000 By Building To Stock 12,000 1,6000 To Machinery To profit transferred to R Capital A/c L Capital A/c 20,000 Revaluation A/c 35,000 15,000 68,000 68,000 8,000 By Provision for doubtful debts To Outstanding Liability 1,000
  • 170. A and B are partners . They admit C into partnership for 1/5th share. Liabilities Rs. Assets Rs. Capital A/C Bills Receivable 5,000 A 60,000 Plant & Machinery 65,000 B 50,000 Furniture 15,000 Outstanding Salary 10,000 Investment 20,000 Sundry Creditor 40,000 Stock 20,000 Workmen’s Compensation Fund 10000 Sundry Debtor 30,000 Bank 15,000 1. Claim on workmen compensations is Rs 15000 2. Create provision for doubtful debts at 5% 3. Machinery is to reduced by Rs 5000 4. Furniture is to increased to Rs 18000 5. Stock was found over-valued by Rs 3000 6. Outstanding salary brought upto Rs 12000 7. There was typewriter is not recorded in the books Rs 5000 was now to be recorded was sold for Rs 8000. Pass Journal entries and prepare revaluation account and balance sheet
  • 171. Particulars Amount Particulars Amount To Provision For Doubtful Debts 3000 1500 By Furniture Dr. To Machinery 5000 5000 To Workmen Compensation Fund By Loss transferred to A Capital A/c B Capital A/c 2750 Cr. Revaluation A/c 5500 16500 16500 8000 By Cash To Stock 3000 To Outstanding Salary 2000 2750
  • 172. A, B are partners sharing profits and losses in the ratio of 5 : 2. Liabilities Amount Assets Amount Creditors 50,000 Investment 15,000 Capital accounts Machinery 80,000 A Capital 40,000 Furniture 4,000 B Capital 61,000 101000 Bank overdraft 4,000 Stock 20,000 Bills payable 25,000 Debtors 70,000 General reserves. 30,000 Less provision 3,000 67,000 Bank Loan 28,000 Cash 52,000 1. The machinery was written up by 20% 2. The stock was to be reduced by Rs 1,000 3. The furniture was to be reduced to Rs 1,600 4. The provision for doubtful debts would be 10% 5. The provision of Rs 800 was to made of outstanding expenses 6. A liability on account of damages of Rs 7,000 included in creditors is settled at Rs 12,000. Pass Journal entries and prepare revaluation account and balance sheet
  • 173. Particulars Amount Particulars Amount To Furniture 16000 2400 By Machinery Dr. To Provision for doubtful debts 4000 1000 To Stock To Profit transferred to A Capital A/c B Capital A/c 2000 Cr. Revaluation A/c 2800 16000 16000 To cash To Provision for outstanding exp 800 5000 800
  • 174. A and B are partners has the following balance sheet Liabilities Amount Assets Amount Creditors 3000 Cash 1000 Bills payable 5000 Bank 3000 Provision for debts 2000 Stock 7000 Outstanding salary 6000 Plant 5000 Capital debtors 18000 A 30000 Building 20000 B 10000 40000 Patents 2000 56000 56000 1. Bills payable have been under estimated by 500 2. Creditors are to paid 5% more to cover up certain services 3. Outstanding salaries be brought to Rs 2000 4. A provision of 1500 be created for outstanding repair bills 5. Debtors are all good 6. Patents are value less 7. Pass Journal entries and prepare revaluation account and balance sheet
  • 175. Particulars Amount Particulars Amount 500 To B/P A/c Dr. To Provision For Outstanding Bills 1500 To profit transferred to A Capital A/c B Capital A/c 925 Cr. Revaluation A/c 1850 6000 6000 150 To Creditors 2000 To Patents 925 2000 By Provision for debts 4000 By Outstanding Salary
  • 176. A and B are partners has the following balance sheet as on 31st December 2011 Liabilities Amount Assets Amount Creditors 3000 Cash 1000 Bills payable 5000 Investment 3000 Provision for doubtful debts 2000 Stock 7000 Outstanding expenses 6000 Debtors 20000 Capital Plant 18000 A 30000 Building 5000 B 10000 40000 Patents 2000 56000 56000 1. Bills payable have been over by estimated 2000 2. Creditors are to paid 5% less. 3. Provision for doubtful debts to be 5% on debtors.Rs 1500 was considered at bad debts. 4. A provision of 1050 be created for outstanding repair bills 5. Stock was found over valued by Rs 2000 6. Present value of investment Rs 5000 and was sold 7. Building was under valued by Rs 5000. 8. Pass Journal entries and prepare revaluation account and balance sheet
  • 177. Particulars Amount Particulars Amount To Debtors 2000 1500 By B/P A/c Dr. To Provision For Outstanding Bills 1050 To profit transferred to A Capital A/c B Capital A/c 3795 Cr. Revaluation A/c 6325 10225 10225 150 By Creditors 2000 To Stock 2530 1075 By Provision for debts 2000 By Cash 5000 By Building
  • 178. Comprehensive Question •Revaluation Account •Goodwill treatment •Undistributed Profits •Capital Account •New Balance Sheet
  • 179. A and B are partners sharing profits and losses in the ratio of 2:1 Liabilities Amount Assets Amount Creditors 65900 Land and building 50,000 A Capital 30000 Plant and machinery 35,000 B Capital 20,000 Stock 20,000 Debtors 9,700 Cash 1,200 1,15,900 1,15,900 1. M was admit for 1/3rd share and brings Rs 15,000 as capital and Rs 6,000 for goodwill 2. Amount of goodwill was withdrawn by old partners 3. That the value of stock and plant and machinery were to be reduces by 10% 4. The a provision of 5% was to be created for doubtful debts 5. That the building account was to be appreciated by 20% 6. Investment worth Rs 1400 not recorded has to be brought into the books. Prepare revaluation account, capital account and balance sheet
  • 180. 1. That the building account was to be appreciated by 20% 2. The a provision of 5% was to be created for doubtful debts 3. That the value of stock and plant and machinery were to be reduces by 10% 4. Investment worth Rs 1400 not recorded has to be brought into the books Particulars Amount Particulars Amount 10,000 By Building To Plant and Machinery 3,500 485 To Provision for doubtful debts To profit transferred to A Capital A/c B Capital A/c 3610 Revaluation A/c 5415 1805 11,400 11,400 Adjustments To Stock A/c 2,000 14,00 By Investment
  • 181. 1. That the building account was to be appreciated by 20% 2. The a provision of 5% was to be created for doubtful debts 3. That the value of stock and plant and machinery were to be reduces by 10% 4. Investment worth Rs 1400 not recorded has to be brought into the books Particulars Amount Particulars Amount 10,000 By Building To Plant and Machinery 3,500 485 To Provision for doubtful debts To profit transferred to A Capital A/c B Capital A/c 3610 Revaluation A/c 5415 1805 11,400 11,400 Adjustments To Stock A/c 2,000 14,00 By Investment
  • 182. Particulars A B M Particulars A B M By Balance b/d 30,000 20,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Creditors 65900 Land and building 50,000 A capital 30000 Plant and machinery 35,000 B capital 20,000 Stock 20,000 Debtors 9,700 Cash 1,200 1,15,900 1,15,900
  • 183. Particulars A B M Particulars A B M By Balance b/d 30,000 20,000 Partners capital A/c Dr. 4,000 By Premium For Goodwill 2,000 By Cash 15,000 Cr. Particulars Dr. Amount Cr. Amount Cash Capital A/c Dr. To Premium for goodwill To C’s capital A/c Capital and goodwill brought in cash 21,000 6,000 Premium for goodwill A/c Dr. To A Capital A/c To B Capital A/c 6,000 4,000 2,000 For transfer of goodwill in sacrifice ratio (2:1) 15,000 A Capital A/c B Capital A/c To cash A/c 4,000 2,000 6,000 For withdrawal of half goodwill by old partners 4,000 To Cash 2,000
  • 184. Particulars Dr. Amount Cr. Amount Revaluation A/c Dr. To A Capital A/c To B Capital A/c Profit on revaluation transferred to old partners capital in old ratio 5415 36,10 18,05 Particulars A B M Particulars A B M By Balance b/d 30,000 20,000 Partners capital A/c Dr. 4,000 By Premium For Goodwill 2,000 By Cash 15,000 4,000 To Cash 2,000 By Revaluation 3,610 1,805 37610 23805 37610 23805 15,000 15,000 To balance c/d 33610 20805 15,000
  • 185. Liabilities Amount Assets Amount Creditors 65900 Land and building 60,000 A capital 35610 Plant and machinery 31500 B capital 21,805 Stock 18,000 M capital 15000 Debtors 9700 Less provisions 485 9,215 Cash 16,200 Investment 1,400 1,36,315 1,36,315 Opening cash balance 12,00 Add:- share For goodwill 6,000 Add:- Cash bought by M as capital 15,000 Half goodwill withdrawn by old partners (6000) Closing cash balance 16200 Balance Sheet
  • 186. A and B are partners sharing profits and losses in the ratio of 5:3. C was admitted for 1/4th share which he takes equally from A and B Liabilities Rs. Assets Rs. Provident fund 10,000 Machinery 30,000 Creditors 2,000 Furniture 20,000 A Capital 40,000 Debtors 15,000 B Capital 30,000 Stock 15,000 Workmen compensation fund 4,000 Bank 6,000 86,000 86,000 1. C will brings Rs 30,000 as his share of capital and goodwill 2. Goodwill of the firm is valued at 3years purchased of the average super profits of last years. Average profits of the last four years are Rs 20,000 while the normal profits that can be earned with the capital are Rs 12000 3. Furniture is undervalued by Rs 12000 4. And the value of stock is reduced to Rs 13,000. 5. Provident fund be raised by Rs 1,000 6. Creditors are unrecorded to the extent of Rs 6,000
  • 187. 1. Furniture is undervalued by Rs 12000 2. And the value of stock is reduced to Rs 13,000. 3. Provident fund be raised by Rs 1,000 4. Creditors are unrecorded to the extent of Rs 6,000 Particulars Amount Particulars Amount 12,000 By furniture To Creditors 6,000 1,000 To Provident fund To profit transferred to A Capital A/c B Capital A/c 1875 Revaluation A/c 3,000 1125 12,000 12,000 Adjustments To Stock A/c 2,000
  • 188. Calculation of goodwill Goodwill = Super Profit x No of years purchased Super profit Actual/average profits = Normal profits = 12,000 20,000 = 8,000 = 8,000 x 3 = 24,000 C share of goodwill = 24,000 1 4 x = 6000 C share of Capital = Total money brought – C share of goodwill = 6,000 30,000 = 24,000
  • 189. Particulars A B C Particulars A B C By Balance b/d 40,000 30,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Provident fund 10,000 Machinery 30,000 Creditors 2,000 Furniture 20,000 A Capital 40,000 Debtors 15,000 B Capital 30,000 Stock 15,000 Workmen compensation fund 4,000 Bank 6,000 86,000 86,000 By workmen comp fund 2,500 1,500
  • 190. Particulars Dr. Amount Cr. Amount Cash Capital A/c Dr. To Premium for goodwill To C’s capital A/c Capital and goodwill brought in cash 30,000 6,000 Premium for Goodwill A/c Dr. To A Capital A/c To B Capital A/c 6,000 3,000 3,000 For transfer of goodwill in sacrifice ratio (2:1) 24,000 Particulars A B C Particulars A B C By Balance b/d 40,000 30,000 Partners capital A/c Cr. Dr. By Workmen Comp Fund 2,500 1,500 3,000 By Premium For Goodwill 3,000 By Bank 24,000
  • 191. Particulars A B C Particulars A B C By Balance b/d 40,000 30,000 Partners capital A/c Cr. Dr. By workmen comp fund 2,500 1,500 3,000 By Premium For Goodwill 3,000 By Bank 24,000 Particulars Dr. Amount Cr. Amount Revaluation A/c Dr. To A Capital A/c To B Capital A/c Profit on revaluation transferred to old partners capital in old ratio 3,000 1,875 1,125 By Revaluation 1,875 1,125
  • 192. Particulars A B C Particulars A B C By Balance b/d 40,000 30,000 Partners capital A/c Cr. Dr. By workmen comp fund 2,500 1,500 3,000 By Premium For Goodwill 3,000 By Bank 24,000 47375 35625 47375 35625 24,000 24,000 To balance c/d 47375 35625 24,000 By Revaluation 1,875 1,125
  • 193. Liabilities Amount Assets Amount Provident fund 11,000 Machinery 30,000 Creditors 8,000 Furniture 32,000 A Capital 47,375 Debtors 15,000 B Capital 35625 Stock 13,000 C’s capital 24000 Bank 36,000 1,26,000 1,26,000 Opening bank balance 6000 Add:- share For goodwill 6,000 Add:- Cash bought by C as capital 24,000 Closing bank balance 36000 Balance Sheet
  • 194. X and y are partners sharing profits and losses in the ratio of 5:3 Liabilities Rs. Assets Rs. Creditors 28,000 Investment 10,000 Workmen compensation fund 4,000 Plant 30,000 Z loan 30,000 Stock 56,000 X capital 50,000 Debtors 40,000 Less provision :- 1,800 38,200 Y capital 40,000 Goodwill 10,000 Cash 7800 1,52,000 1,52,000 1. Z in admitted and new ratio is 4:3:2 between X, Y and Z. 2. Z loan should be treated as his capital 3. Goodwill of the firm is valued at Rs 27000 4. Rs 8000 of the investment were to be taken over by X and Y in their profit sharing ratio 5. Stock is to be reduced by 10% 6. Provision for doubtful debts 5% on debtors and provision for discount on debtors be 2% on debtors 7. X withdraws Rs 6000 in cash.
  • 195. 1. Stock is to be reduced by 10% 2. Provision for doubtful debts 5% on debtors and provision for discount on debtors be 2% on debtors Particulars Amount Particulars Amount By Loss transferred to X Capital A/c Y Capital A/c 41,00 Revaluation A/c 6,560 2,460 6,560 6,560 Adjustments 5,600 To Stock 200 To Provision for doubtful debts 760 To Provision for discount on debtors
  • 196. Particulars X Y Z Particulars X Y Z By Balance b/d 50,000 40,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Creditors 28,000 Investment 10,000 Workmen compensation fund 4,000 Plant 30,000 Z loan 30,000 Stock 56,000 X Capital 50,000 Debtors 40,000 Less provision :- 1,800 38,200 Y Capital 40,000 Goodwill 10,000 Cash 7800 1,52,000 1,52,000 By Workmen Comp Fund 2500 1,500 To Goodwill 6250 3750
  • 197. Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. Particulars Dr. Amount Cr. Amount A capital Dr. B capital Dr. To Revaluation A/c Loss on revaluation transferred to old partners capital in old ratio 41,00 2,460 6,560 By Revaluation 41,00 2,460 By Balance b/d 50,000 40,000 By Workmen Comp Fund 2500 1,500 By Goodwill 6250 3750
  • 198. Particulars Dr. Amount Cr. Amount Z loan A/c Dr. to Z’s capital A/c Z loan transferred to his capital A/c 30,000 30,000 Z Current A/c Dr. To X Capital A/c To Y Capital A/c 6,000 4875 1125 For transfer of goodwill in sacrifice ratio (2:1) Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. 4875 By Z’s Current By Z loan A/c 30,000 1125 By Revaluation 41,00 2,460 By Balance b/d 50,000 40,000 By Workmen Comp Fund 2500 1,500 By Goodwill 6250 3750
  • 199. Particulars Dr. Amount Cr. Amount X capital Dr. Y capital Dr. To Investment A/c Z loan transferred to his capital A/c 5000 8,000 X capital Dr. To Bank A/c 8,000 8,000 For amount of cash withdrawn from firm Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. 4875 By Z’s Current By Z loan A/c 30,000 1125 To Revaluation 41,00 2,460 By Balance b/d 50,000 40,000 By Workmen Comp Fund 2500 1,500 To Goodwill 6250 3750 3,000 To Investment 5,000 3,000 To Bank 8,000 57375 42625 57375 42625 30,000 30,000 To balance c/d 36,025 33,415 30,000
  • 200. Liabilities Amount Assets Amount Creditors 28,000 Investment 2,000 X Capital 36025 Plant 30,000 Y Capital 33415 Stock 50,400 Z Capital 30,000 Debtors 40,000 Less provision for doubtful debts - 2,000 Less provision for discount on debtors:- 760 37,240 Z Current A/c 6,000 Cash 1800 1,27,440 1,27,440 Opening bank balance 7800 less- cash withdrawn by C 8,000 Closing bank balance 1800 Balance Sheet
  • 201. Calculation of new partners capital on the basis of old partners capital. There are two possible conditions New partners capital New partner brings his share in proportionate ( Of total capital) New partner brings his share of the combined capital of old partners
  • 202. A and B are partners sharing profit and losses in the ratio of 3:2. They admit C as a new partners for 1/5th profit. Capital of A and B after all the necessary adjustment regarding goodwill, reserves, and revaluation are 60000 and 30000 respectively brings in 20% of the combined capital of A and B. calculates C capital. Combined capital of A & B = 90,000 (60,000 + 30,000) Share Of C’s Capital 90,000 = 20 100 X = 18,000 When new partners brings his share on the basis of the combined capital of old partners
  • 203. Jain and Gupta were partners sharing profits in the ratio of 3:2. Liabilities Amount Assets Amount Creditors 20,000 Cash in hand 14,800 Bills payable 3000 Sundry debtors 20,500 Less provision 300 20,200 Bank overdraft 17,000 Stock 20,000 General reserve 15,000 Plant 40,000 Jain capital 70,000 Building 70,000 Gupta capital 60,000 Motor vehicles 20,000 1,85,000 1,85,000 Mishra brings his capital of the 1/4th of the combined capital of Jain and Gupta after all adjustment 1. Building to be appreciated by Rs 14,000 and stock to be depreciated by Rs 6,000 2. Provision for doubtful debts on debtors to be raised to Rs 1,000 3. A provision be made for Rs 1,800 for outstanding legal charges 4. Mishra brings Rs 10,000 for goodwill
  • 204. 1. Building to be appreciated by Rs 14,000 and stock to be depreciated by Rs 6,000 2. Provision for doubtful debts on debtors to be raised to Rs 1,000 3. A provision be made for Rs 1,800 for outstanding legal charges Particulars Amount Particulars Amount 14,000 By Building To Provision for legal charges 1,800 7,00 To Provision for doubtful debts To profit transferred to Jain Capital A/c Gupta Capital A/c 3300 Revaluation A/c 5,500 2200 14,000 14,000 Adjustments To Stock A/c 6,000
  • 205. Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra By Balance b/d 70,000 60,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Creditors 20,000 Cash in hand 14,800 Bills payable 3000 Sundry debtors 20,500 Less provision 300 20,200 Bank overdraft 17,000 Stock 20,000 General Reserve 15,000 Plant 40,000 Jain capital 70,000 Building 70,000 Gupta capital 60,000 Motor vehicles 20,000 1,85,000 1,85,000 By Reserve Fund 9,000 6,000
  • 206. Particulars Dr. Amount Cr. Amount Revaluation A/c Dr. To Jain’s Capital A/c To Gupta Capital A/c Profit on revaluation transferred to capital A/c) 55,00 33,00 22,00 Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra Partners capital A/c Cr. Dr. By Revaluation 3,300 2,200 By Balance b/d 70,000 60,000 By Reserve Fund 9,000 6,000
  • 207. Particulars Dr. Amount Cr. Amount Cash Capital A/c Dr. To Premium for goodwill Capital and goodwill brought in cash 10,000 10,000 Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra Partners capital A/c Cr. Dr. 6,000 By Premium For Goodwill 4,000 Premium for goodwill A/c Dr. To Jain’s Capital A/c To Gupta Capital A/c 10,000 6,000 4,000 For transfer of goodwill in sacrifice ratio By Revaluation 3,300 2,200 By Balance b/d 70,000 60,000 By Reserve Fund 9,000 6,000
  • 208. Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra Partners capital A/c Dr. 88,300 72,200 88,300 19800 To balance c/d 88,300 72,200 By Balance b/d 88,300 72,200 Cr. 6,000 By Premium For Goodwill 4,000 By Revaluation 3,300 2,200 By Balance b/d 70,000 60,000 By Reserve Fund9,000 6,000 Combined capital of the Jain and Gupta = 88300 + 72200 = 1,60,500 Share Of Mishra ‘s Capital = 1,60,500 1 4 X = 40,125 Calculation of Mishra capital
  • 209. Particulars A B C Particulars A B C Partners capital A/c Cr. Dr. Particulars Jain Gupta Mishra Particulars Jain Gupta Mishra 88,300 72,200 88,300 72,200 40,125 To balance c/d 88,300 72,200 By Bank A/c 40,125 40,125 Particulars Dr. Amount Cr. Amount Bank A/c Dr. To Mishra Capital A/c Cash brought in by new partner for his share of capital 40,125 40,125 88,300 72,200 88,300 19800 To balance c/d 88,300 72,200 By Balance b/d 88,300 72,200 6,000 By Premium For Goodwill 4,000 By Revaluation 3,300 2,200 By Balance b/d 70,000 60,000 By Reserve Fund9,000 6,000
  • 210. Balance Sheet Liabilities Amount Assets Amount Creditors 20,000 Cash in hand 14,800 Bills payable 3000 Bank 33125 Provision for legal charges 1,800 Sundry debtors 20,500 Less provision 1000 19,500 General reserve 15,000 Stock 14,000 Jain capital 88,300 Plant 40,000 Gupta capital 72,200 Building 84,000 Mishra capital 40125 Motor vehicles 20,000 1,85,000 1,85,000 Opening bank balance ( bank overdraft) 17,000 Add:- Premium For goodwill 10,000 Add:- Cash bought by Gupta as capital 40,150 Closing bank balance 33125
  • 211. A and B are partners sharing profit and losses in the ratio of 3:2. They admit C as a new partners for 1/5th profit. Capital of A and B after all the necessary adjustment regarding goodwill, reserves, and revaluation are 40000 and 20000 respectively. C brings in proportionate capital after all the adjustment. Calculate C capital Let the total profit 4 1 Remaining Share Of A & B 1 1 5 = 5 = = For 4 5 Required capital( A + B = 60,000 (40,000 + 20,000) Total capital = 60,000 5 4 X = 75,000 Share Of C 75,000 = 1 5 X = 15,000 When new partners bring in proportionate capital of total capital
  • 212. Ram and shyam share the profits and losses in the ratio of 3:1. Liabilities Amount Assets Amount Creditors 2,800 Cash in hand 2,000 Provident fund 1,200 Sundry debtors 6,500 Less provision 500 6,000 Ram capital account 6,000 Stock 3,000 Shyam capital account 4,000 Investment 5,000 General reserve 2,000 3,11,000 3,11,000 1. They admit Mohan for 1/5th share on the following terms 2. Mohan will brings Rs 6000 as his share of premium 3. That unaccounted accrued income of Rs 100 be provided for 4. The market value of investment was Rs 4,500 5. The debtors whose dues of Rs 500 was written off has paid Rs 400 6. Mohan will brings in proportionate capital after all the adjustments
  • 213. 1. That unaccounted accrued income of Rs 100 be provided for 2. The market value of investment was Rs 4,500 3. The debtors whose dues of Rs 500 was written off has paid Rs 400 Particulars Amount Particulars Amount 100 By accrued income 500 To Investment Revaluation A/c 500 500 Adjustments 400 By bank( bad debts recovered)
  • 214. Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan By Balance b/d 6,000 4,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Creditors 2,800 Cash in hand 2,000 Provident fund 1,200 Sundry debtors 6,500 Less provision 500 6,000 Ram capital account 6,000 Stock 3,000 Shyam capital account 4,000 Investment 5,000 General reserve 2,000 3,11,000 3,11,000 By Reserve Fund 1500 500
  • 215. Particulars Dr. Amount Cr. Amount Cash Capital A/c Dr. To Premium for goodwill Capital and goodwill brought in cash 6,000 6,000 Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan Partners capital A/c Cr. Dr. 4500 By Premium For Goodwill 1500 Premium for goodwill A/c Dr. To Ram’s Capital A/c To Shyam Capital A/c 6,000 4,500 1,500 For transfer of goodwill in sacrifice ratio By Balance b/d 6,000 4,000 By Reserve Fund 1500 500
  • 216. Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan Partners capital A/c Dr. 12,000 6,000 12,000 6,000 To balance c/d 12,000 6,000 By Balance b/d 12,000 6,000 Cr. Combined capital of the Jain and Gupta = 12,000 + 6000 = 18,000 Share Of Mohan‘s Capital = 1 4 X = 45,00 Calculation of Mohan capital 4500 By Premium For Goodwill 1500 By Balance b/d 6,000 4,000 By Reserve Fund 1500 500 For 4/5th share combined capital is = 18,000 Total capital of the new firm is = 18,000 X 5 4 18,000 X 5 4
  • 217. Particulars A B C Particulars A B C Partners capital A/c Cr. Dr. Particulars Ram Shyam Mohan Particulars Ram Shyam Mohan 12,000 6,000 12,000 6,000 4,500 To balance c/d 12,000 6,000 By Bank A/c 4,500 4,500 Particulars Dr. Amount Cr. Amount Bank A/c Dr. To Mohan Capital A/c Proportionate cash brought by new partner 4,500 4,500 12,000 6,000 12,000 6,000 To balance c/d 12,000 6,000 By Balance b/d 12,000 6,000 4500 By Premium For Goodwill 1500 By Balance b/d 6,000 4,000 By Reserve Fund 1500 500 4,500
  • 218. Liabilities Amount Assets Amount Creditors 2,800 Cash in hand 12,900 Provident fund 1,200 Sundry debtors 6,500 Less provision 500 6,000 Ram Capital 12,000 Stock 3,000 Shyam Capital 6,000 Investment 45,00 Mohan Capital 4,500 Accrued income 1,00 26500 26500 Opening bank balance 2,000 Add:- Premium For goodwill 2,000 Add:- Cash bought by Gupta as capital 4,500 Add:- bad debts recovered 400 Closing bank balance 12,900 Balance Sheet
  • 219. Adjustment of old partners capital account on the basis of new partner’s capital Adjustment of old partners capital A/c Adjustment by Withdrawing/Paying Cash Adjustment by Opening Current Account
  • 221. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 20,000 as his capital. The capitals of A and B, after all adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by cash. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by Cash Total capital of the new firms Share Of A ‘s Capital = 20,000 10 2 X = 1,00,000 = 1,00,000 5 10 X = 50,000 Share Of B ‘s Capital = 1,00,000 3 10 X = 30,000 45,000 50,000 -5,000 70,000 30,000 40,000
  • 222. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 20,000 as his capital. The capitals of A and B, after all adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by cash. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by Cash Particulars Dr. Amount Cr. Amount Cash A/c Dr. To A’s Capital 5,000 5,000 (deficit cash brought in) B’s Capital Dr. To Cash A/c 40,000 40,000 (excess cash withdrawn )
  • 223. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 20,000 as his capital. The capitals of A and B, after all adjustments are Rs. 45,000 and Rs. 70,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by cash. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by Cash Particulars A B C Particulars A B C By Balance b/d 45,000 70000 By Cash By Cash Cash brought in 20000 5000 Partners capital A/c To Cash Cash withdrawn 40,000 50,000 30,000 20,000 To balance c/d 50,000 70,000 20,000 50,000 70000 20,000
  • 224. Liabilities Amount Assets Amount Outstanding expenses 5,000 Profit and loss 16,000 Creditors 36,000 Fixed assets 80,000 Provision for doubtful debts 800 Stock 5,000 Debtors 24,000 X capital 68000 Goodwill 8000 Y capital 31,000 Cash 7800 1,40,800 1,40,800 Z is admitted into partnership on the following terms 1. Fixed assets are to be depreciated by 20% 2. Provision for doubtful debts should remain at 5% on debtors 3. Goodwill of the firm is valued at Rs 20,000 4. The new sharing ratio will be 5:3:2 5. Z will be pay Rs 20,000 as capital and the capital of the old partners will be adjusted on the basis of new partner capital and his share in the business actual cash to be brought in or withdraw by old partners as the case may be X and Y were partners in a firm sharing 3 :1.
  • 225. 1. Fixed assets are to be depreciated to Rs 57500 2. Make a provision for doubtful debts at 5% on debtors 3. Liability for claim included in creditors for Rs 10,000 is settled at rs 8000 Particulars Amount Particulars Amount By Loss transferred to X Capital A/c Y Capital A/c 12,300 Revaluation A/c 16,400 4,100 16,400 16,400 Adjustments 16,000 To Fixed Assets 400 To Provision for doubtful debts
  • 226. Particulars X Y Z Particulars X Y Z By Balance b/d 68,000 31,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Outstanding expenses 5,000 Cash 7800 Creditors 36,000 Fixed assets 80,000 Provision for doubtful debts 800 Stock 5,000 Debtors 24,000 X capital 68000 Goodwill 8000 Y capital 31,000 Profit and loss 16,000 1,40,800 1,40,800 To Goodwill 6,000 2,000 To Profit / Loss 12,000 4,000
  • 227. Particulars Dr. Amount Cr. Amount X Capital A/c Y Capital A/c to Revaluation Dr. Profit on revaluation transferred to capital A/c) 12,300 4,100 16,400 Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. To Revaluation 12,300 4,100 By Balance b/d 68,000 31,000 To Goodwill 6,000 2,000 To Profit / Loss 12,000 4,000
  • 228. Given New Ratio (5: 3 : 2) Gain /Sac Gain/Sacrifice of X New Ratio = Old Ratio - 3 4 - 5 10 = = 5 20 1 4 - 3 10 = = -1 20 Gain/Sacrifice of Y X’s Share of goodwill = 20,000 5 20 x = 5,000 (For Sacrifice) Y’s Share of goodwill = 20,000 1 20 x = 1,000 (For Gain) Z’s Share of goodwill = 20,000 2 10 x = 4,000
  • 229. Particulars Dr. Amount Cr. Amount Cash A/c Dr. To Z’s Capital A/c Capital and goodwill brought in cash 20,000 20,000 Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. 4,000 By Z’s Current Z’s Current A/c Dr. Y Capital A/c Dr. To X Capital A/c 4,000 5,000 10,00 For transfer of goodwill in sacrifice ratio By Cash A/c 20,000 1,000 To X Capital To Revaluation 12,300 4,100 By Balance b/d 68,000 31,000 To Goodwill 6,000 2,000 To Profit / Loss 12,000 4,000 1,000 By Y Capital
  • 230. Particulars X Y Z Particulars X Y Z Partners capital A/c Dr. 73,000 31,000 73,000 31,000 To balance c/d 42,700 19,900 By Balance b/d 42,700 19,900 Cr. 20,000 20,000 20,000 20,000 Total capital of the new firms Share of X ‘s Capital = 20,000 10 2 X = 1,00,000 = 1,00,000 5 10 X = 50,000 Share of Y ‘s Capital = 1,00,000 3 10 X = 30,000 42,700 50,000 73,00 19,900 30,000 10,100 4,000 By Z’s Current By Cash A/c 20,000 1,000 To X Capital To Revaluation 12,300 4,100 By Balance b/d 68,000 31,000 To Goodwill 6,000 2,000 To Profit / Loss 12,000 4,000 1,000 By Y Capital 50,000 30,000 50,000 30,000 To balance c/d 50,000 30,000 20,000 20,000 20,000 By Cash A/c 7300 10,100
  • 231. Particulars A B C Particulars A B C Partners capital A/c Cr. Dr. Particulars X Y Z Particulars X Y Z 50,000 30,000 50,000 30,000 To balance c/d 50,000 30,000 20,000 20,000 Particulars Dr. Amount Cr. Amount Cash A/c Dr. To X Capital A/c To Y Capital A/c Proportionate cash brought by new partner 17,400 20,000 7300 10,100 By Cash A/c 7300 10,100 73,000 31,000 73,000 31,000 To balance c/d 42,700 19,900 By Balance b/d 42,700 19,900 20,000 20,000 20,000 20,000 4,000 By Z’s Current By Cash A/c 20,000 1,000 To X Capital To Revaluation 12,300 4,100 By Balance b/d 68,000 31,000 To Goodwill 6,000 2,000 To Profit / Loss 12,000 4,000 1,000 By Y Capital
  • 232. Liabilities Amount Assets Amount Outstanding expenses 5,000 Cash 45,200 Creditors 36,000 Fixed assets 64,000 Provision for doubtful debts 8,00 Stock 5,000 X capital 50,000 Debtors 24,000 Less provision 1,200 22,800 Y capital 30,000 Z current A/c 4,000 Z capital 20,000 1,41,000 1,41,000 Opening cash balance 7800 Add:- Cash bought by Z as capital 20,000 Add:- cash brought by X 7300 Add:- cash brought by Y 10,100 Closing Cash balance 45,200 Balance Sheet
  • 233. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 40,000 as his capital. The capitals of A and B, after all adjustments are Rs. 1,20,000 and Rs. 45,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by opening current A/c. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by opening current A/c Total capital of the new firms Share Of A ‘s Capital = 40,000 5 1 X = 2,00,000 = 2,00,000 5 10 X = 100,000 Share Of B ‘s Capital = 2,00,000 3 10 X = 60,000 1,20,000 1,00,000 20,000 45,000 60,000 -15,000
  • 234. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 40,000 as his capital. The capitals of A and B, after all adjustments are Rs. 1,20,000 and Rs. 45,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by opening current A/c. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by opening current A/c Particulars A B C Particulars A B C By Balance b/d 1,20,000 45,000 By Cash By B’s current A/c 40000 15000 Partners capital A/c To A’s current A/c 20,000 100,000 60,000 40,000 To balance c/d 1,20,000 60,000 40,000 1,20,000 60000 40,000
  • 235. A, B share P/L in the ratio of 2:1. C is admitted for 1/5th share, he brings in Rs. 40,000 as his capital. The capitals of A and B, after all adjustments are Rs. 1,20,000 and Rs 45,000 respectively. It is agreed that old partners’ capitals capital should be adjusted on the basis of C share in the profits and his share of capital and adjustment be made by opening current A/c. New ratio of partners will be 5 : 3 : 2. When old partners capital accounts are adjusted by Cash Particulars Dr. Amount Cr. Amount B’s Current A/c Dr. To B’s Capital 15,000 15,000 (deficit cash brought in) A’s Capital Dr. To A’s Current A/c 20,000 20,000 (excess cash withdrawn )
  • 236. X and Y were partners in a firm sharing 5 :3. They admit Z as a new partner. Liabilities Amount Assets Amount Creditors 27,000 Land and Building 25,000 X capital 50000 Plant and Machinery 30,000 Y capital 35,000 Stock 15,000 General Reserves 16,000 Debtors 20,000 Less Provision :- 1,500 Investment 20,000 Cash 19500 1,28,000 1,28,00 1. Z brings Rs 20,000 as capital and enters for 1/3rd share in the profits 2. Goodwill of the firm was valued at Rs 12,000 3. Land and building were to be valued at Rs 35,000 and plant and machinery at Rs 25,000 4. The provision for doubtful debts were found to be in excess by Rs 400 5. A liability for Rs 1,000 included in creditors was not likely to arise 6. The capital of the partners be adjusted on the basis of Z’s contribution of the capital of the firm. The excess or shortfall in any to be transferred to current account
  • 237. New profit sharing ratio Let the total profit 2 1 Remaining Share Of X & Y 1 1 3 = 3 New share of X 2 3 = 5 8 = 10 24 x New share of X 2 3 = 3 8 = 6 24 x = New Ratio of X, Y, Z. 10 24 6 24 8 24 = = New Ratio of X, Y, Z. 5 3 4 =
  • 238. 1. Land and building were to be valued at Rs 35,000 and plant and machinery at Rs 25,000 2. The provision for doubtful debts were found to be in excess by Rs 400 3. A liability for Rs 1,000 included in creditors was not likely to arise Particulars Amount Particulars Amount 10,000 By Land and Building To Plant and Machinery A/c 5,000 4,00 By Provision for doubtful debts To Profit Transferred to X Capital A/c Y Capital A/c 4,000 Revaluation A/c 6,400 2,400 11,400 11,400 Adjustments 1,000 By Creditors
  • 239. Particulars X Y Z Particulars X Y Z By Balance b/d 50,000 35,000 Partners capital A/c Cr. Dr. Liabilities Rs. Assets Rs. Creditors 27,000 Land and Building 25,000 X capital 50000 Plant and Machinery 30,000 Y capital 35,000 Stock 15,000 General Reserves 16,000 Debtors 20,000 Less Provision :- 1,500 Investment 20,000 Cash 19500 1,28,000 1,28,00 By Reserve Fund 10,000 6,000
  • 240. Particulars Dr. Amount Cr. Amount Revaluation A/c Dr. To X Capital A/c To Y Capital A/c Profit on revaluation transferred to capital A/c) 64,00 4,000 2,400 Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. By Revaluation 4,000 2,400 By Balance b/d 50,000 35,000 By Reserve Fund 10,000 6,000
  • 241. Particulars Dr. Amount Cr. Amount Bank A/c Dr. To Z’s Capital A/c Capital and goodwill brought in cash 20,000 20,000 Particulars X Y Z Particulars X Y Z Partners capital A/c Cr. Dr. 25,00 By Z’s Current 15,00 Z’s Current A/c (12000 x 1/3rd ) Dr. To X Capital A/c To Y Capital A/c 4,000 25,00 15,00 For transfer of goodwill in sacrifice ratio (5:3) By Revaluation 4,000 2,400 By Balance b/d 50,000 35,000 By Reserve Fund 10,000 6,000 By Bank A/c 20,000
  • 242. Particulars X Y Z Particulars X Y Z Partners capital A/c Dr. 66,500 44,900 66,500 44,900 To balance c/d 66,500 44,900 By Balance b/d 66,500 44,900 Cr. 20,000 25,00 By Z’s Current 15,00 By Revaluation 4,000 2,400 By Balance b/d 50,000 35,000 By Reserve Fund10,000 6,000 By Bank A/c 20,000 20,000 20,000 20,000 Total capital of the new firms Share of X ‘s Capital = 20,000 3 1 X = 60,000 = 60,000 5 12 X = 25,000 Share of Y ‘s Capital = 60,000 3 12 X = 15,000 66,500 25,000 41,500 44,900 15,000 29,900 66,500 44,900 66,500 44,900 To balance c/d 25,000 15,000 20,000 20,000 20,000 To current A/c 41,500 29,900
  • 243. Particulars A B C Particulars A B C Partners capital A/c Cr. Dr. Particulars X Y Z Particulars X Y Z 66,500 44,900 66,500 44,900 To balance c/d 25,000 15,000 20,000 20,000 Particulars Dr. Amount Cr. Amount X Capital A/c Dr. Y Capital A/c Dr To X Current A/c To Y Current A/c Proportionate cash brought by new partner 41,500 29,900 20,000 66,500 44,900 66,500 44,900 To balance c/d 66,500 44,900 By Balance b/d 66,500 44,900 20,000 25,00 By Z’s Current 15,00 By Revaluation 4,000 2,400 By Balance b/d 50,000 35,000 By Reserve Fund10,000 6,000 By Bank A/c 20,000 20,000 20,000 20,000 41,500 29,900 To current A/c 41,500 29,900
  • 244. Liabilities Amount Assets Amount Creditors 26,000 Land and Building 35,000 X Capital 25,000 Plant and Machinery 25,000 Y Capital 15,000 Stock 15,000 Z Capital 20,000 Debtors 20,000 Less Provision :- 1,100 18900 X’ Current A/c 41,500 Investment 20,000 Y Current A/c 29,900 Cash 39500 Z Current A/c 4,000 1,57,400 1,57,400 Opening bank balance 19,500 Add:- Cash bought by Z as capital 20,000 Closing bank balance 39,500 Balance Sheet