Given below is the Balance Sheet of A and B, who axe carrying on partnership business on 31.12.2006. A and B share profits and losses in the ratio of 2 :1.
Balance Sheet of A and B
as on December 31, 2016
Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Bills payable10,000Cash in hand10,000Creditors58,000Cash at bank40,000Outstanding2,000Sundry Debtors60,000ExpensesStock40,000CapitalsPlant1,00,000-Building1,50,000A 1,80,000B 1,50,000––––––––––3,30,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯4,00,000––––––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯4,00,000––––––––––––––––––––
C is admitted as a partner on the date of the balance sheet on the following terms.
(i) C will bring Rs. 1,00,000 as his capital and Rs. 60, 000 as his share of goodwill for 14 share in the profits.
(ii) Plant is to be appreciated to Rs. 1,20,000 and the value of buildings is to be appreciated by 10%.
(iii) Stock is found over valued by Rs. 4,000.
(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.
(v) Creditors were unrecorded to the extent of Rs.1,000.
Pass the necessary, journal entries, prepare the Revaluation account, and Partners Capital account and show the balance sheet after the admission of C.
DateParticularsL.FAmt.(Cr)Amt.(Cr)(i)Revaluation A/cDr8,000 To Stock A/c4,000 To Provision for Doubtful Debts A/c3,000 To Creditor's A/c1,000(Decrease in stock provision for doubtful debts created and creditors increased) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(ii)Plant A/cDr20,000Building A/cDr15,000 To Revaluation A/c35,000(Plant and building increased in value) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(iii)Revaluation A/cDr27,000 To A's Capital A/c A/c18,000 To B's Capital A/c9,000(Gain on revaluation distributed among old partners in old ratio) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(iv)Cash A/cDr1,60,000 To C's Capital A/c1,60,000(New partner paid capital and his share of goodwill in cash) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––(v)C's Capital A/cDr60,000 To A's Capital A/c40,000 To B's Capital A/c20,000(Premium distributed among old partners is sacrificing ratio)
Dr Revaluation Account Cr
ParticularsAmt. (Rs)ParticularsAmt. (Rs)Stock A/c4,000Plant A/c20,000Provision for Doutful Debts A/c3,000Building A/c15,000Creditors A/c ( Unrecorded)1,000A's Capital A/c 18,000B's Capital A/c 9,000––––––27,000––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯35,000––––––––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯35,000––––––––––––––––
Dr Partner's Capital Account Cr
ParticularsABCParticularsABCA's Capital A/c40,000Balance b/d1,80,0001,50,000B's Capital A/c20,000Gain in Revaluation18,0009,000Cash A/c1,60,000C's Capital A/c40,00020,000Balance c/d2,38,0001,79,0001,00,000¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,38,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,79,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,60,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,38,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,79,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯1,60,000––––––––––
~ Balance Sheet .
Capital and LiabilitiesAmt. (Rs)AssetsAmt. (Rs)Bills payable10,000Cash in hand1,70,000Creditors 58,000Cash at bank40,000+ Unrecorded 1,000––––––59,000Sundry debtors 60,000Outstanding Expenses2,000(-) Provision for Doubtful Debts (3,000)––––––––57,000CapitalStock 40,000A 2,38,000(-)Depreciation (4,000)––––––––36,000B 1,79,000Plant 1,00,000C 1,00,000––––––––––5,17,000(+)Appreciation 20,000––––––––1,20,000Building 1,50,000(+)Appreciation 15,000––––––––1,65,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯5,88,000––––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯5,88,000––––––––––