(a) $X, Y$ and $Z$ are partners sharing profits and losses in the ratio of $5 : 3 : 2$ . They decided to admit $W$ for $1 / 6^{t h}$ share. Following is the extract of the Balance Sheet on the date of admission:
Liabilities (Rs.) Assets (Rs.)
General Reserve 36,000 Advertisement Suspense A/c 24,000
Contigency Reserve 6,000
Profit and Loss A/c 18,000
Pass necessary Journal entries.

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Solution

(i) General Reserve a/c.... Dr. 36000
Contingency Reserve a/c.... Dr. 6000
Profit and loss a/c... Dr. 18000
To X's Capital a/c 30000
To Y's Capital a/c 18000
To Z's Capital a/c 12000
(Being undistributed reserves adjusted with the partners in the ratio of 5:3:2)

(ii) X's Capital a/c.... Dr. 12000
Y's Capital a/c... Dr. 7200
Z's Capital a/c... Dr. 4800
To Advertisement Suspense a/c 24000
(Being advertisement suspense distributed among the partners in the ratio of 5:3:2)

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Liabilities	(Rs.)	Assets	(Rs.)
General Reserve	36,000	Advertisement Suspense A/c	24,000
Contigency Reserve	6,000
Profit and Loss A/c	18,000