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A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2 . Following is their Balance Sheet as at 31st March, 2018:


Liabilities

Assets

Capital A/cs:

Building

35,000

A

50,000

Machinery

25,000

B

30,000

80,000

Stock

15,000

Creditors

20,000

Debtors

15,000

Investments 5,000
Bank 5,000

1,00,000

1,00,000



C is admitted as a partner on 1st April, 2018 on the following terms:
(a) C is to pay ₹ 20,000 as capital for 1/4th share. He also pays ₹ 5,000 as premium for goodwill.
(b) Debtors amounted to ₹ 3,000 is to be written off as bad and a Provision of 10% is created against Doubtful Debts on the remaining amount.
(c) No entry has been passed in respect of a debt of ₹ 300 recovered by A from a customer , which was previously written off as bad in previous year . The amount is to be paid by A.
(d) Investments are taken over by B at their market value of ₹ 4,900 against cash payment .
You are required to prepare Revaluation Account, Partner's Capital Accounts and new Balance Sheet

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Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bad Debts

3,000

A's Capital A/c

300

Provision for Doubtful Debts

1,200

Loss transferred to

Investment (5,000 – 4,900)

100

A Capital

2,400

B Capital

1,600

4,300

4,300

Partners’ Capital Accounts

Dr.

Cr.

Particulars

A

B

C

Particulars

A

B

C

Revaluation

2,400

1,600

Balance b/d

50,000

30,000

Revaluation

300

Bank

20,000

Premium for Goodwill

3,000

2,000

Balance c/d

50,300

30,400

20,000

53,000

32,000

20,000

53,000

32,000

20,000

Balance Sheet

as on April 01, 2018 after C’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital A/cs:

Buildings

35,000

A

50,300

Machinery

25,000

B

30,400

Stock

15,000

C

20,000

1,00,700

Debtors

15,000

Creditors

20,000

Less: Bad Debts

3,000

12,000

Less: 10% Provision for Doubtful Debts

1,200

10,800

Bank

34,900

1,20,700

1,20,700

Bank Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

5,000

C’s Capital

20,000

Premium for Goodwill

5,000

Investments

4,900

Balance c/d

34,900

34,900

34,900


Working Notes:

WN1


WN2
Distribution of Premium for Goodwill


WN3
Sale of Investments

Bank A/c

Dr.

4,900

Revaluation A/c

Dr.

100

To Investment

5,000


WN4

Bad debt Recovered

A's Capital A/c

Dr.

300

To Revaluation A/c

300


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Similar questions
Q. A, B and C are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1 .Their Balance Sheet as at 31st March, 2018 is:

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

30,000

Cash in Hand 18,000
Bills Payable

16,000

Debtors

25,000

General Reserve

12,000

Less: Provision for D. Debts

3,000

22,000

Capital A/cs: Stock 18,000
A

40,000

Furniture 30,000
B 40,000 Machinery 70,000
C

30,000

1,10,000

Goodwill

10,000

1,68,000

1,68,000


Z is admitted as a new partner on 1st April, 2018 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to ₹ 15,000.
(c) An accrued income of ₹ 4,500 does not appear in the books of the firm . It is now to be recorded.
(d) X takes over the Investments at an agreed value of ₹ 18,000.
(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2 .
(f) Z will bring in ₹ 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm's goodwill valued at twice the average profits of the last three years which were ₹ 90,000 ; ₹ 78,000 and ₹ 75,000 respectively.
(h) Half of the amount of the goodwill is to be withdrawn by X and Y .
You are required to pass journal entries , prepare Revaluation Account , Partners' Capital and Current Accounts and the Balance Sheet of the new firm.

B retires on 1st April, 2018 on the following terms :
(a) Provision for Doubtful Debts be raised by ₹ 1,000.
(b) Stock to be depreciated by 10% and Furniture by 5% .
(c) Their is an outstanding claim of damages of ₹ 1,100 and it is to be provided for.
(d) Creditors will be written back by ₹ 6,000.
(e) Goodwill of the firm is valued at ₹ 22,000.
(f) Bis paid in full with the cash brought in by A and C in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at ₹ 10,000.
Prepare Revaluation Account , Partners' Capital Accounts and the Balance Sheet of A and C .

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