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Question

Pradeep and Dhanraj were partners in a firm sharing profits in the ratio of 3 : 1. Their Balance Sheet on 31st March, 2019 was:
Liabilities Assets
Creditors 30,000 Cash 4,000
Bills Payable 1,000 Debtors 50,000
Reserve Fund 16,000 Less: Provision for Doubtful Debts 5,000 45,000
Outstanding Salary 3,000 Stock 30,000
Capital A/cs: Bills Receivable 10,000
Pradeep 60,000 Patents 1,000

Dhanraj

20,000 80,000 Machinery 40,000
1,30,000 1,30,000

​They admitted Leander as a new partner on this date. New profit-sharing ratio is agreed as 3 : 2 : 3. Leander brings in proportionate capital after the following adjustments:
(a) Leander brings ₹ 16,000 as his share of goodwill.
(b) Provisions for Doubtful Debts is to be reduced by ₹ 2,000.
(c) There is an old Printer valued at ₹ 2,400. It does not appear in the books of the firm. It is now to be recorded.
(d) Patents are valueless.
Prepare Revaluation Account, Capital Accounts and opening Balance Sheet of Pradeep, Dhanraj and Leander.

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Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Patents

1,000

Provision for Doubtful Debts

2,000

Profit on transferred to

Typewriter

2,400

Pradeep Capital

2,550

Dhanraj Capital

850

4,400

4,400

Partners’ Capital Accounts

Dr.

Cr.

Particulars

Pradeep

Dhanraj

Leander

Particulars

Pradeep

Dhanraj

Leander

Balance b/d

60,000

20,000

Balance c/d

90,550

24,850

Reserve Fund

12,000

4,000

(after adjustments)

Revaluation

2,550

850

Premium for Goodwill

16,000

90,550

24,850

90,550

24,850

Balance c/d

90,550

24,850

Cash

69,240

Balance c/d

90,550

24,850

69,240

90,550

24,850

69,240

90,550

24,850

69,240

Balance Sheet

as on March 31, 2019 after Leander’s admission

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

30,000

Debtors

50,000

Bills Receivable

1,000

Less: Prov. for D. Debts

3,000

47,000

Outstanding Salary

3,000

Stock

30,000

Capital A/cs:

Bills Receivable

10,000

Pradeep

90,550

Machinery

40,000

Dhanraj

24,850

Typewriter

2,400

Leander

69,240

1,84,640

Cash

89,240

2,18,640

2,18,640


Working Notes

WN1

Leander acquires his share of profit from Pradeep only. Therefore, amount for goodwill brought by Leander will be taken by Pradeep alone.

WN2
Distribution of Revaluation Profit


WN3
Distribution of Reserve Fund


WN4
Calculation of Leander’s Capital
Combined Capital of Pradeep and Dhanraj after all adjustments = 90,550 + 24,850 = 1, 15,400
Combined share of profit of Pradeep and Dhanraj = 1 − Leander share

Total Capital of the firm on the basis of combined capital of Pradeep and Dhanraj


WN5

Cash Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Balance b/d

4,000

Leander’s Capital

69,240

Premium for Goodwill

16,000

Balance c/d

89,240

89,240

89,240


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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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