Question

Given below is the Balance Sheet of $A$ and $B$, who are carrying on partnership business on ${31}^{st}$March,2018. $A$ and $B$ share profits and losses in the ratio of $2:1$.
Balance Sheet Of $A$ and $B$ as at ${31}^{st}$March,2018.

Liabilities	(Rs.)	Assets	(Rs.)
Bills Payable Creditors Outstanding Expenses Capital A/cs: A 1,80,000 B 1,50,000	10,000 58,000 2,000 3,30,000	Cash in Hand Cash at Bank Sundry Debtors Stock Plant Building	10,000 40,000 60,000 40,000 1,00,000 1,50,000
	4,00,000		4,00,000

$C$ is admitted as a partner on the date of the Balance sheet on the following terms:
(a) $C$ will bring in $Rs.1,00,000$ as his capital and $Rs.60,000$ as his share of goodwill for $1/4^{th}$ share in the profits.
(b) Plant is to be appreciated to $Rs.1,20,000$ and the value of building is to be appreciated by $10\%$ .
(c) Stock is found overvalued by $Rs.4,000$.
(d) A provision for doubtful debts is to be created at $5\%$ of sundry debtors.
(e) Creditors were unrecorded to the extent of $Rs.1,000$.
Pass the necessary Journal entries, prepare the Revaluation Account and Partner's Capital Accounts, and show the Balance Sheet after the admission of $C$.

Answer 1

(i) JOURNAL

1. Cash a/c... Dr. 160000

To C's Capital a/c 100000

To Premium for Goodwill a/c 60000

(Being capital and premium for goodwill brought in by C)

2. Premium for Goodwill a/c... Dr. 60000

To A's Capital a/c 40000

To B's Capital a/c 20000

(Being premium for goodwill distributed among the partners in the ratio of 2:1)

3. Revaluation a/c.... Dr. 8000

To Stock a/c 4000

To Provision for doubtful debts a/c 3000

To Creditors a/c 1000

(Being decrease in assets and increase in liabilities transferred to revaluation account)

4. Plant a/c.... Dr. 20000

Building a/c... Dr. 15000

To Revaluation a/c 35000

(Being increase in assets transferred to revaluation account)

5. Revaluation a/c... Dr. 27000

To A's Capital a/c 18000

To B's Capital a/c 9000

(Being profit on revaluation transferred to the partner's capital account)

(ii) REVALUATION A/C

Dr. Cr.

Particulars	Amount (in Rs.)	Particulars	Amount (in Rs.)
To Stock a/c	4000	By Plant a/c	20000
To Provision for doubtful debts a/c	3000	By Building a/c	15000
To Creditors a/c	1000
To Profit on Revaluation - A's Capital a/c - B's Capital a/c	18000 9000
TOTAL	35000	TOTAL	35000

(iii) PARTNER'S CAPITAL A/C
Dr. Cr.

Particulars	A	B	C	Particulars	A	B	C
				By Balance b/d	180000	150000
				By Cash a/c			100000
				By Premium for Goodwill a/c	40000	20000
To Balance c/d	238000	179000	100000	By Profit on revaluation a/c	18000	9000
TOTAL	238000	179000	100000	TOTAL	238000	179000	100000

(iv) BALANCE SHEET

(After admission of C)

Liabilities	Amount (in Rs.)	Assets	Amount (in Rs.)
Bills Payable	10000	Cash in Hand (10000+160000)	170000
Creditors (58000+1000)	59000	Cash at Bank	40000
Outstanding Expenses	2000	Sundry Debtors (60000-3000)	57000
Capital - A - B - C	238000 179000 100000	Stock (40000-4000)	36000
		Plant (100000+20000)	120000
		Building (150000+15000)	165000
TOTAL	588000	TOTAL	588000