wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

X and Y are partners sharing profits and losses in the ratio of 3/4 and 1/4. Their Balance Sheet as at 31st March, 2019 is:
Liabilities Assets
Capital A/cs: Land and Building 1,25,000
X 1,50,000 Furniture 5,000
Y 80,000 2,30,000 Stock 1,00,000
Workmen Compensation Reserve 20,000 Sundry Debtors 80,000
Sundry Creditors 1,50,000 Bills Receivable 15,000
Bills Payable 37,500 Cash at Bank 1,00,000
Cash in Hand 12,500
4,37,500 4,37,500

They admit Z into partnership on 1st April, 2019 on the following terms:
(a) Goodwill is to be valued at ₹ 1,00,000.
(b) Stock and Furniture to be reduced by 10%.
(c) A Provision for Doubtful Debts is to be created @ 5% on Sundry Debtors.
(d) The value of Land and Building is to be appreciated by 20%.
(e) Z pays ₹ 50,000 as his capital for 1/5th share in the future profits.
You are required to show Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Open in App
Solution

Revaluation Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Stock

10,000

Land and Building

25,000

Furniture

500

(1,25,000 × 20%)

Provision for D. Debts

4,000

Profit transferred to

X Capital

7,875

Y Capital

2,625

25,000

25,000

Partners’ Capital Accounts

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

X’s Capital

15,000

Balance b/d

1,50,000

80,000

Y’s Capital

5,000

Workmen’s Compensation Fund

15,000

5,000

Revaluation (Profit)

7,875

2,625

Balance c/d

1,87,875

92,625

30,000

Cash

50,000

Z’s Capital

15,000

5,000

1,87,875

92,625

50,000

1,87,875

92,625

50,000

Balance Sheet

as on April 01, 2019 after Z’s admission

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Capital A/cs:

Land and Building (1,25,000 + 25,000)

1,50,000

X

1,87,875

Y

92,625

Office Furniture (5,000 – 500)

4,500

Z

30,000

3,10,500

Stock (1,00,000 – 10,000)

90,000

Sundry Creditors

1,50,000

Sundry Debtors

80,000

Bills Payable

37,500

Less: 5% Provision for D. Debts

4,000

76,000

Cash at Bank

1,00,000

Cash in Hand (12,500 + 50,000)

62,500

Bills Receivable

15,000

4,98,000

4,98,000


Working Notes:

WN1: Sacrificing Ratio


WN2: Calculation of Partners' Share of Goodwill
Goodwill of the firm = 1, 00,000

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

Z’s Capital A/c

Dr.

20,000

To X’s Capital A/c

15,000

To Y’s Capital A/c

5,000

(Z’s share of goodwill changed from his
Capital Account)

Workmen’s Compensation Fund A/c

20,000

To X’s Capital A/c

15,000

To Y’s Capital

5,000

(Workmen’s Compensation Fund distributed)


flag
Suggest Corrections
thumbs-up
1
similar_icon
Similar questions
View More
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Accounting Treatment
ACCOUNTANCY
Watch in App
Join BYJU'S Learning Program
CrossIcon