12th | Admission of a Partner | Question No.  51 To 55 | Ts Grewal Solution 2022-2023

Om and Shiv are partners in a firm sharing profits equally.

	BALANCE SHEET (Extract)
Liabilities		`	Assets		`
			Debtors Less: Provision for Doubtful Debts	1,50,000 15,000	1,35,000

 

An amount of `12,000 due from Mohan, a debtor, is to be written off as no longer receivable. Provision for Doubtful Debts on remaining debtors is to be maintained at the current rate.

What amount of Provision for Doubtful Debts should be credited to maintain its current rate?

 

 

Current rate Provision for Doubtful debts is 15,000×100/1,50,000=10%

Debtors	=	1,50,000
Less: Bad Debts	=	12,000
Debtors After Bad Debts	=	1,38,000
Provision for Doubtful Debts @10% is to be maintained	=	13,800
Firm already has Provision of 15,000
Provision for Doubtful Debts Before Adjustment of Bad Debts	=	15,000
Less: Bad Debts	=	12,000
Balance of Provision for Doubtful Debts after Adjustment of Bad Debts	=	3,000
Amount of Provision for Doubtful Debts should be credited to maintain its current rate =13,800-3,000= 10,800

 

Ram and Shyam were partners in a firm sharing profits and losses in the ratio of 2 : 1. Mohan was admitted for 1/3rd share in the profits. On the date of Mohan's admission, the Balance Sheet of Ram and Shyam showed General Reserve of    ` 2,50,000 and a credit balance of    ` 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Mohan's admission.

Journal
Date	Particulars		L.F.	Debit `	Credit `
	General Reserve A/c	Dr.		2,50,000
	Profit and Loss A/c	Dr.		50,000
	To Ram’s Capital A/c				2,00,000
	To Shyam’s Capital A/c				1,00,000
	(Adjustment of balance in General Reserve A/c and P&L A/c in old ratio)

Working Notes:

WN1 Calculation of Share of General Reserve & P&L A/c

Ram 's share=3,00,000×2/3=2,00,000

Shyam 's share=3,00,000×1/3=1,00,000

 

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2022, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of    ` 1,50,000 in General Reserve and a debit balance of    ` 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.

Journal
Date	Particulars		L.F.	Debit `	Credit `
2019 April 1	General Reserve A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Adjustment of balance in General Reserve A/c in old ratio)
	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		8,000
	To Profit and Loss A/c				20,000
	(Adjustment of debit balance in P&L A/c in old ratio)

 

Working Notes:

WN1 Calculation of Share of General Reserve

X's share=1,50,000×3/5=90,000 ,

Y's share=1,50,000×2/5=60,000

WN2 Calculation of Share of Debit Balance in P&L A/c

X's share=20,000×3/5=12,000,

Y's share=20,000×2/5=8,000

(a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for 1/6th share. Following is the extract of the Balance Sheet on the date of admission:

Liabilities	`	Assets	`
General Reserve Contingency Reserve Profit and Loss A/c	36,000     6,000   18,000	Advertisement Suspense A/c	24,000

  Pass necessary Journal entries.
(b) Give the Journal entry to distribute 'Workmen Compensation Reserve' of    ` 72,000 at the time of admission of Z, when there is no claim against it. The firm has two partners X and Y.
(c) Give the Journal entry to distribute 'Workmen Compensation Reserve' of    ` 72,000 at the time of admission of Z, when there is claim of    ` 48,000 against it. The firm has two partners X and Y .
(d) Give the Journal entry to distribute 'Investment Fluctuation Reserve' of    ` 24,000 at the time of admission of Z, when Investment (Market Value    ` 1,10,000) appears at    ` 1,20,000. The firm has two partners X and Y.
(e) Give the Journal entry to distribute 'General Reserve' of    ` 4,800 at the time of admission of Z, when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two partners X and Y .

 

 

(b) A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1. They decide to take D into partnership with effect from 1st April, 2022. The new profit-sharing ratio between A, B, C and D will be 3 : 3 : 3 : 1. They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:

	Book Values  `
General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
Advertisement Suspense A/c (Dr.)	1,20,000

Pass the necessary single adjustment entry through the Partner's Current Account. 

 

Journal
Date	Particulars		L.F.	Debit `	Credit `
(A)
(i)	General Reserve A/c	Dr.		36,000
	Contingency Reserve A/c	Dr.		6,000
	Profit & Loss A/c	Dr.		18,000
	To X’s Capital A/c				30,000
	To Y’s Capital A/c				18,000
	To Z’s Capital A/c				12,000
	(Reserves distributed)
(ii)	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		7,200
	Z’s Capital A/c	Dr.		4,800
	To Advertisement Suspense A/c				24,000
	(Advertisement Suspense distributed)
(B)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To X’s Capital A/c				36,000
	To Y’s Capital A/c				36,000
	(Workmen Compensation Reserve distributed)
(C)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To Workmen Compensation Claim A/c				48,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				12,000
	(Surplus Workmen Compensation Reserve distributed)
(D)
April 1	Investment Fluctuation Reserve A/c	Dr.		24,000
	To Investment A/c				10,000
	To X’s Capital A/c				7,000
	To Y’s Capital A/c				7,000
	(Surplus Investment Fluctuation Reserve distributed)
(E)
April 1	General  Reserve A/c	Dr.		4,800
	To Investment Fluctuation Reserve A/c				960
	To X’s Capital A/c				1,920
	To Y’s Capital A/c				1,920
	(Surplus General Reserve distributed)
(F)
April 1	C’s Current A/c	Dr.		36,000
	D’s Current A/c	Dr.		18,000
	To A’s Current A/c				54,000
	(Adjustment entry made)

 

Working Notes:

WN1: Calculation of Sacrifice or Gain

A :B :C=6:3:1 (Old Ratio)

A :B :C :D:=3:3:3:1 (New Ratio)

Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio

A's share=6/10−3/10=6−3/10=3/10 (Sacrifice)

B's share=3/10−3/10=0

C's share=1/10−3/10=1−3/10=−2/10 (Gain)

D's share=0−1/10=−1/10 (Gain)

WN2: Calculation of Net Effect

General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
	3,00,000
Less: Advertisement Suspense A/c (Dr.)	1,20,000
	1,80,000

 

WN 3: Adjustment of Net Effect
Amount credited in A's Current A/c = 1,80,000×3/10=​    ` 54,000

Amount debited in C's Current A/c = 1,80,000×2/10=​    ` 36,000

Amount debited in D's Current A/c = 1,80,000×1/10= ​   ` 18,000