Question

$X$ and $Y$ are partners sharing profits in the ratio of $3:2$. They admitted $Z$ as new partner for $1/4^{th}$ share of profits. At the time of admission of $Z$, investment appeared at $Rs.80,000$. Half of the investments to be taken over by $X$ and $Y$ in their profit-sharing ratio at book value. Remaining investment were valued at $Rs.50,000$. Pass the necessary Journal entries.

Answer 1

(i) X's Capital a/c... Dr. 24000

Y's Capital a/c... Dr. 16000

To Investment a/c 40000

(Being half of the investment taken over by the partners in the ratio of 3:2)

(ii) Investment a/c... Dr. 10000

To Revaluation a/c 10000

(Being revaluation of investment recorded)

(iii) Revaluation a/c.... Dr. 10000

To X's Capital a/c 6000

To Y's Capital a/c 4000

(Being profit on revaluation distributed among the partners in the ratio of 3:2)