Question 56: Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 5:3. They admit Kailash into the firm on 1st April, 2023, when their Balance Sheet was as follows:
|
Liabilities |
` |
Assets |
` |
|
Vimal's Capital |
32,000 |
Goodwill |
8,000 |
|
Nirmal's Capital |
34,000 |
Machinery |
38,000 |
|
General Reserve |
8,000 |
Furniture |
5,000 |
|
Bank Loan |
6,000 |
Debtors |
23,000 |
|
Creditors |
6,000 |
Stock |
7,000 |
|
|
|
Cash |
5,000 |
|
|
|
|
|
|
|
86,000 |
|
86,000 |
Terms of Kailash's admission were as follows:
(i) Kailash will bring ` 30,000 as his share of capital and will be entitled to 1/3rd share in the profits.
(ii) Kailash is not to bring goodwill in cash, Vimal and Nirmal raise the goodwill in the books.
(iii) Goodwill of the firm is valued on the basis of 2 years' purchase of the average profit of the last three years. Average profit of the last three years is ` 6,000.
(iv) Machinery and stock are revalued at ` 45,000 and ` 8,000 respectively.
Prepare a Revaluation Account and Partners' Capital Accounts incorporating the above adjustments.
Answer:
|
Revaluation Account |
|||
|
Particulars |
` |
Particulars |
` |
|
Gain |
8,000 |
Machinery |
7,000 |
|
Vimal’s cap-5,000 |
|
Stock |
1,000 |
|
Nirmal’s cap- 3,000 |
|
|
|
|
|
8,000 |
|
8,000 |
|
Capital account |
|||||||
|
Particulars |
Vimal |
Nirmal |
Kailash |
Particulars |
Vimal |
Nirmal |
Kailash |
|
To Goodwill A/c |
5,000 |
3,000 |
- |
By Balance b/d |
32,000 |
34,000 |
- |
|
To Goodwill A/c |
5,000 |
3,000 |
- |
By Cash A/c |
- |
- |
30,000 |
|
To Balance c/d |
39,500 |
38,500 |
30,000 |
By Goodwill A/c |
7,500 |
4,500 |
- |
|
|
|
|
|
By Revaluation A/c |
5,000 |
3,000 |
- |
|
|
|
|
|
By General reserve A/c |
5,000 |
3,000 |
|
|
|
49,500 |
44,500 |
30,000 |
|
49,500 |
44,500 |
30,000 |
|
|
|
|
|
|
|
|
|
Working note:
1.
Goodwill
valuation
Goodwill = 6,000×2=12,000
2. Goodwill 12,000 raised in 3:2 in sacrificing ratio
Vimal =12,000×3/5=7,500
Nirmal =12,000×2/5=4,500
|
Goodwill A/c |
Dr. |
12,000 |
|
|
To Vimal’s capital A/c |
|
|
7,500 |
|
To Nirmal’s capital A/c |
|
|
4,500 |
|
(Being goodwill raised) |
|
|
|
Goodwill 12,000 written off in 5:3:4 in sacrificing ratio
Vimal =12,000×5/12=5,000
Nirmal =12,000×3/12=3,000
Kailash = 12,000×4/12=4,000
|
Vimal’s capital A/c |
Dr. |
5,000 |
|
|
Nirmal’s capital A/c |
Dr. |
3,000 |
|
|
Kailash’s current A/c |
Dr. |
4,000 |
|
|
To Goodwill A/c |
|
|
12,000 |
|
(Being goodwill written off) |
|
|
|
1. Profit of Revaluation shared in old ratio (3:2)
Vimal =8,000×3/5=5,000
Nirmal =8,000×3/5=3,000
2. General reserve shared in old ratio (3:2)
Vimal =8,000×3/5=5,000
Nirmal =8,000×3/5=3,000
Note: Since, Kailash is not to
bring goodwill in cash, will be compensated through Kailash’s current account.
Question 57:
X, Y and Z are equal
partners with capitals of `15,000;
`17,500 and `20,000 respectively.
They agree to admit W into equal partnership upon payment in cash `15,000 for 1/4th
share of the goodwill and `18,000
as his capital, both sums to remain in the business. The liabilities of the old
firm were `30,000
and the assets, apart from cash, consist of Motors `12,000, Furniture `4,000, Stock `26,500 and Debtors `37,800. The Motors
and Furniture were revalued at `9,500
and `3,800
respectively.
Pass Journal entries to give effect to the above arrangement and also show Balance Sheet of the new firm.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
3,3000 |
|
|
|
To W’s capital A/c To Premium for Goodwill A/c |
|
|
|
1,8000 1,5000 |
|
|
(Being C’s brought his share of goodwill and capital in cash) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
1,5000 |
|
|
|
To X’s Capital A/c To Y’s Capital A/c To Z’s Capital A/c |
|
|
|
5000 5000 5000 |
|
|
(Being w’s share of Goodwill transferred in their sacrificing Ratio) |
|
|
|
|
|
Revaluation A/c Dr. To Motor A/c To Furniture A/c (Being decrease in value assets transferred to Revaluation A/c) |
2700 |
2500 200 |
|||
|
X’s Capital A/c Dr. Y’s Capital A/c Dr. Z’s Capital A/c Dr. To Revaluation A/c (Being loss of Revaluation of transferred to old partners capital A/c) |
900 900 900 |
2700 |
|||
|
|
|
|
|
|
|
Balance sheet of new firm
|
||||
|
Liabilities |
` |
Assets |
` |
|
|
Liabilities
|
30,000 |
Cash balance (2,200+33,000) |
35,200 |
|
|
X's
Capital |
19,100 |
|
Motor |
9,500 |
|
Y's
Capital Z’s
Capital |
21,600 24,100 |
|
furniture
Stock |
3,800 26,500 |
|
Z’s
Capital |
18,000 |
82,800 |
Debtors |
37,800 |
|
|
1,12,800 |
1,12,800 |
||
|
|
|
|
|
|
Working notes;
WN-1
Memorandum balance sheet is prepared to find out Cash
balance.
|
Liabilities |
` |
Assets |
` |
|
|
Liabilities
|
30,000 |
Cash balance (Balancing figure) |
2200 |
|
|
X's
Capital |
15,000 |
|
Motor |
12,000 |
|
Y's
Capital Z’s
Capital |
17,500 20,000 |
52,500 |
furniture
Stock |
4,000 26,500 |
|
|
|
|
Debtors |
37,800 |
|
|
82,500 |
82,500 |
||
|
|
|
|
|
|
WN-2
Old ratio of X:Y:Z=1;1;1
W is admitted for ¼ share
Let total profit =1
Remaining profit after W’s admission= 1-1/4=3/4
X=3/4×1/3=3/12
Y=3/4×1/3=3/12
Z=3/4×1/3=3/12
W=1/4×3/3=3/12
Therefore share of X, Y , Z and W=3:3:3:3=1:1:1:1
Sacrificing ratio= old –new
X=1/3-1/4=1/12
Y=1/3-1/4=1/12
Z=1/3-1/4=1/12
Sacrificing ratio of X, Y , Z = 1:1:1
WN-4
|
Particulars |
` |
Particulars |
` |
|
To Motors A/c To Furniture A/c |
2500 200 |
By Loss Capital A/c (In old Ratio) X=2700×1/3=900 Y=2700×1/3=900 Z=2700×1/3=900 |
2700 |
|
|
2700 |
|
2700 |
WN-5
|
Partners’ Capital A/c |
||||||||||
|
Particulars |
X ` |
Y ` |
Z ` |
W ` |
Particulars |
X ` |
Y ` |
Z ` |
W ` |
|
|
To ravaluation A/c To balance c/d |
900 19,100 |
900 21,600 |
900 24,100 |
- 1,8000 |
By Balance b/d By Cash A/c By Premium A/c |
15,000 - 5000 |
17,500 - 5000 |
20,000 - 5000 |
- 18,000 - |
|
|
|
20,000 |
22,500 |
25,000 |
18,000 |
|
20,000 |
22,500 |
25,000 |
18,000 |
|
Question 58:
Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2023:
|
|
||||
|
Liabilities |
` |
Assets |
` |
|
|
Capital
A/c’s: |
|
Building |
25,000 |
|
|
A |
15,000 |
|
Plant
and Machinery |
17,500 |
|
B |
10,000 |
25,000 |
Stock |
10,000 |
|
Sundry
Creditors |
|
32,950 |
Sundry
Debtors |
4,850 |
|
|
|
|
Cash
in Hand |
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,950 |
|
57,950 |
|
|
|
|
|
|
They admit C into partnership on the following terms:
(a) C was to bring ` 7,500 as his capital
and `3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry
Debtor `375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare
Profit and Loss Adjustment Account (or Revaluation Account), Partners' Capital
Accounts and Balance Sheet of the new firm.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
Dr. |
|
1,750 |
|
|
|
To Stock A/c |
|
|
500 |
|
|
|
To Plant and Machinery A/c |
|
|
875 |
|
|
|
To Reserve for Doubtful Debts A/c |
|
|
375 |
|
|
|
(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Building A/c |
Dr. |
|
2,500 |
|
|
|
To Profit and Loss Adjustment A/c |
|
|
2,500 |
|
|
|
(Increase in value of Building of transferred to Profit and loss Adjustment Accounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
|
750 |
|
|
|
|
To A’s Capital A/c |
|
|
500 |
|
|
|
To B’s Capital A/c |
|
|
250 |
|
|
|
(Profit on revaluation of asset
and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
10,500 |
|
|
|
To C’s Capital A/c |
|
|
7,500 |
|
|
|
To Premium for Goodwill A/c |
|
|
3,000 |
|
|
|
(C brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
3,000 |
|
|
|
To A’s Capital A/c |
|
|
2,000 |
|
|
|
To B’s Capital A/c |
|
|
1,000 |
|
|
|
(Premium for Goodwill distributed
between |
|
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment
Account |
|||
|
Dr. |
|
Cr. |
|
|
Particulars |
` |
Particulars |
` |
|
Stock |
500 |
|
|
|
Plant and Machinery |
875 |
Building |
2,500 |
|
Reserve for Doubtful Debts |
375 |
|
|
|
Profit transferred to |
|
|
|
|
A Capital |
500 |
|
|
|
B Capital |
250 |
|
|
|
|
2,500 |
|
2,500 |
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
|
Dr. |
|
Cr. |
|||||
|
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
|
Balance b/d |
15,000 |
10,000 |
|
|
|
|
|
|
Cash |
|
|
7,500 |
|
|
|
|
|
Premium for Goodwill |
2,000 |
1,000 |
|
|
Balance c/d |
17,500 |
11,250 |
7,500 |
Profit and Loss Adjustment (Profit) |
500 |
250 |
|
|
|
17,500 |
11,250 |
7,500 |
|
17,500 |
11,250 |
7,500 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2023 after admission of C |
|||||
|
Liabilities |
` |
Assets |
` |
||
|
|
|
|
|
||
|
Capital Accounts: |
|
Building (25,000 + 2,500) |
27,500 |
||
|
A |
17,500 |
|
Plant and Machinery (17,500 – 875) |
16,625 |
|
|
B |
11,250 |
|
Stock (10,000 – 500) |
9,500 |
|
|
C |
7,500 |
36,250 |
|
||
|
Sundry Creditors |
32,950 |
Sundry Debtors |
4,850 |
|
|
|
|
|
Less: Provision for D. Debts |
375 |
4,475 |
|
|
|
|
Cash in Hand (600 + 10,500) |
11,100 |
||
|
|
69,200 |
|
69,200 |
||
|
|
|
|
|
||
Working Notes:
WN1
|
|
A |
B |
|
Sacrificing ratio |
2 : |
1 |
WN2
Distribution of Premium for Goodwill (in sacrificing ratio)
A will get =3,000×2/3=2,000
B will get =3,000×1/3=1,000
WN3
Distribution of Profit from Profit and loss Adjustment Account (in old
ratio)
A will get =750×2/3=500
B will get =750×1/3=250
Question 59:
A and B are carrying on business in partnership and sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2023 stood as:
|
|
||||
|
Liabilities |
` |
Assets |
` |
|
|
Creditors |
11,800 |
Cash |
1,500 |
|
|
General
Reserve |
|
20,000 |
|
|
|
A's
Capital |
51,450 |
|
Stock |
28,000 |
|
B's
Capital |
36,750 |
88,200 |
Debtors |
19,500 |
|
|
|
|
Furniture |
2,500 |
|
|
|
|
Machinery |
48,500 |
|
|
|
|
Goodwill
|
20,000 |
|
|
|
|
|
|
|
|
|
1,20,000 |
|
1,20,000 |
|
|
|
|
|
|
They
admit C into partnership on 1st April, 2023 and give him 1/8th share
in future profits on the following terms:
(a) Goodwill of the firm be valued at twice the average of the last three years'
profits which amounted to ` 21,000; ` 24,000 and ` 25,560.
(b) C is to bring cash for the amount of his share of goodwill.
(c) C is to bring cash `15,000 as his capital.
Pass Journal entries recording these transactions, draw out the Balance Sheet
of the new firm and determine new profit-sharing ratio.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
(i) |
|
|
|
||
|
A’s Capital A/c |
Dr. |
|
12,000 |
|
|
|
B’s Capital A/c |
Dr. |
|
8,000 |
|
|
|
|
To Goodwill A/c |
|
|
|
20,000 |
|
|
(Being Goodwill written off) |
|
|
|
|
|
(ii) |
Cash A/c |
Dr. |
|
20,880 |
|
|
|
To C’s Capital A/c |
|
|
|
15,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
5,880 |
|
|
(Being capital and premium for goodwill received in cash) |
|
|
|
|
|
(iii) |
Premium for Goodwill A/c |
Dr. |
|
5,880 |
|
|
|
To A’s Capital A/c |
|
|
|
3,528 |
|
|
To B’s Capital A/c |
|
|
|
2,352 |
|
|
(Being premium for goodwill transferred to sacrificing partners) |
|
|
|
|
|
(iv) |
General reserves A/c |
Dr. |
|
20,000 |
|
|
|
To A’s Capital A/c |
|
|
|
12,000 |
|
|
To B’s Capital A/c |
|
|
|
8,000 |
|
|
(Being General reserves transferred to old partners) |
|
|
|
|
|
Capital account |
|||||||
|
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
To Goodwill A/c |
12,000 |
8,000 |
- |
By Balance B/d |
51450 |
36750 |
- |
|
To Balance c/d |
54,978 |
39,102 |
15,000 |
By Cash A/c |
- |
- |
15,000 |
|
|
|
|
|
By Premium A/c |
3,528 |
2,352 |
- |
|
|
|
|
|
By Reserve A/c |
12,000 |
8,000 |
- |
|
|
|
|
|
|
|
|
|
|
|
66,978 |
47,102 |
15,000 |
|
66,978 |
47,102 |
15,000 |
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET as at 31st
March, 2023 |
|||
|
Liabilities |
` |
Assets |
` |
|
Creditors |
11,800 |
Cash |
22,380 |
|
|
|
Stock |
28,000 |
|
Capital A/cs: |
|
Debtors |
19,500 |
|
A - 54,978 |
|
Furniture |
2,500 |
|
B - 39,102 |
|
Machinery |
48,500 |
|
C - 15,000 |
1,09,080 |
|
|
|
|
|
|
|
|
|
1,20,880 |
|
1,20,880 |
Calculation of New Profit Sharing Ratio
|
|
A |
|
B |
|
Old ratio= |
3 |
: |
2 |
C is admitted for 1/8 share of profit
Let combined share of all partners after admission of C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
=1-1/8
=7/8
New
ratio= old ratio × combined share of X and Y
|
A’s |
=3/5×7/8 |
|
|
=21/40 |
|
B’s |
=2/5×7/8 |
|
|
=14/40 |
|
|
X |
|
Y |
|
Z |
|
New profit sharing ratio= |
21/40 |
: |
14/40 |
: |
1/8 |
|
= |
21/40 |
: |
14/40 |
: |
5/40 |
|
= |
21 |
: |
14 |
: |
5 |
Working Note-
WN1
Calculation of goodwill
Average
profit =21,000+25,000+25,560/3=23,520
Goodwill=
Average profit × no. of purchases years’
Goodwill= 23,520×2 =47,040
C‘s of goodwill=47,040×1/8 =5,880
WN2
Distribution
of premium of goodwill
A will get =5,880×3/5=3528
B will get =5,880×2/5=2352
Question 60:
Balance Sheet of J and K who share profits in the ratio of 3 : 2 is as follows:
|
BALANCE SHEET as at 31st March, 2023 |
||||
|
Liabilities |
` |
Assets |
` |
|
|
Reserve |
1,00,000 |
Cash |
2,00,000 |
|
|
J's
Capital |
1,50,000 |
|
Other
Assets |
1,50,000 |
|
K's
Capital |
1,00,000 |
2,50,000 |
|
|
|
|
3,50,000 |
|
3,50,000 |
|
|
|
|
|
|
|
M joins the firm from 1st April, 2023 for a half share in the future
profits. He is to pay ` 1,00,000 for goodwill and `3,00,000 for capital. Draft
the Journal entries and prepare Balance Sheet in each of the following cases:
(a) If M acquires his share of profit from the firm in the
profit-sharing ratios of the partners.
(b) If M acquires his share of profits from the firm in equal
proportions from the original partners.
(c) If M acquires his share of profit in the ratio of 3 : 1 from the original partners, ascertain the future
profit-sharing ratio of the partners in each case.
Answer:
(a) If M acquires his share of profit from the firm in the original
ratios of the partners.
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
2023 Apr.1 |
|
|
|
|
|
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
|
To Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
|
(M brought capital and his of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
|
Apr.1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
|
(Premium for Goodwill distributed
between |
|
|
|
|
|
|
|
|
|
|
|
|
Apr.1 |
Reserve A/c |
Dr. |
|
1,00,000 |
|
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
|
(Reserve distribution between M and J in their old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
|
Dr. |
|
|
|
|
|
|
Cr. |
|
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
|
Premium for |
60,000 |
40,000 |
|
|
Balance c/d |
2,70,000 |
1,80,000 |
3,00,000 |
Reserve |
60,000 |
40,000 |
|
|
|
2,70,000 |
1,80,000 |
3,00,000 |
|
2,70,000 |
1,80,000 |
3,00,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2023 after M’s admission |
|||
|
Liabilities |
` |
Assets |
` |
|
|
|
Cash (2,00,000 + 4,00,000) |
6,00,000 |
|
J’s Capital |
2,70,000 |
Other Assets |
1,50,000 |
|
K’s Capital |
1,80,000 |
|
|
|
M’s Capital |
3,00,000 |
|
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
|
Calculation of Future (New) Profit Sharing Ratio
|
|
M |
J |
|
OLD RATION |
3 : |
2 : |
M is admitted for ½ share of profit
Let the combined share of all partners after admission of M be = 1
Combined share of J and K after M’s admission = 1 − M’s share
=1-1/2
=1/2
New
ratio= old ratio –Combined share of B and C
J=
3/5×1/2=3/10
k=2/5×1/2=2/10
|
|
J |
|
K |
|
M |
|
New profit sharing ratio= |
3/10 |
: |
2/10 |
: |
1/2 |
|
= |
3/10 |
: |
2/10 |
: |
5/10 |
|
= |
3 |
: |
2 |
: |
5 |
Working Notes-
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
J will get =1,00,000×3/5=60,000
K will get =1,00,000×2/5=40,000
WN2
Distribution of General Reserve (in old ratio)
J will get =1,00,000×3/5=60,000
K will get =1,00,000×2/5=40,000
(b) If M acquires his share of profit from the
firm in equal proportions from the original partners.
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
2022 |
|
|
|
|
|
|
April 1 |
Reserve A/c |
Dr. |
|
1,00,000 |
|
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
|
(Reserve distributed between J and K in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
4,00,000 |
|
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
|
To J’s Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
|
(M brought capital and his share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
|
To J’s Capital A/c |
|
|
50,000 |
|
|
|
To K’s Capital A/c |
|
|
50,000 |
|
|
|
(Premium for Goodwill distributed between J and K in sacrificing Raito i.e 1:1) |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
|
Dr. |
|
Cr. |
|||||
|
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
|
Premium for |
50,000 |
50,000 |
|
|
Balance c/d |
2,60,000 |
1,90,000 |
3,00,000 |
Reserve |
60,000 |
40,000 |
|
|
|
2,60,000 |
1,90,000 |
3,00,000 |
|
2,60,000 |
1,90,000 |
3,00,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2022 after M’s admission |
|||
|
Liabilities |
` |
Assets |
` |
|
J’s Capital |
2,60,000 |
Cash (2,00,000 + 4,00,000) |
6,00,000 |
|
K’s Capital |
1,90,000 |
Others Assets |
1,50,000 |
|
M’s Capital |
3,00,000 |
|
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
|
Calculation of future (new) profit sharing ratio
|
|
J |
K |
|
Old ratio |
3 : |
2 |
M is admitted for ½ share of profit
J and K each will sacrifice in favour of M=1/2×1/2=1/4
New
ratio= old ratio – Sacrificing Ratio
|
J’s |
=3/5-1/4 |
|
|||||
|
|
=7/20 |
|
|||||
|
k’s |
=2/5-1/4 |
|
|||||
|
|
=3/20 |
|
|||||
|
|
J |
|
K |
|
M |
|||
|
New profit sharing ratio= |
7/20 |
: |
3/20 |
: |
1/2 |
|||
|
= |
7/20 |
: |
3/20 |
: |
10/20 |
|||
|
= |
7 |
: |
3 |
: |
10 |
|||
|
|
J |
|
K |
|
|
Sacrificing ratio= |
1/4 |
: |
1/4 |
=1:1 |
Working Notes:
WN1
Distribution of Premium for Goodwill (in Sacrificing ratio)
J and K each will get =1,00,000×1/2=50,000
WN2
Distribution of General Reserve (in old ratio)
J will get =1,00,000×3/5=60,000
K will get =1,00,000×2/5=40,000
(c) If M acquires his
share of profit in the ratio of 3:1 from the original partner
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
|
|
2022 Apr.1 |
|
|
|
|
|
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
|
(Reserve distributed between J and K at the time of M’s admission) |
|
|
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
4,00,000 |
|
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
|
To Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
|
(M brought Capital his share of Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
|
To J’s Capital A/c |
|
|
75,000 |
|
|
|
To K’s Capital A/c |
|
|
25,000 |
|
|
|
(Premium for Goodwill distributed
between |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
|
Dr. |
|
Cr. |
|||||
|
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
|
Premium for |
75,000 |
25,000 |
|
|
|
|
|
|
Reserve |
60,000 |
40,000 |
|
|
Balance c/d |
2,85,000 |
1,65,000 |
3,00,000 |
|
|
|
|
|
|
2,85,000 |
1,65,000 |
3,00,000 |
|
2,85,000 |
1,65,000 |
3,00,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2022 after M’s admission |
|||
|
Liabilities |
` |
Assets |
` |
|
J’s Capital |
2,85,000 |
Cash (2,00,000 + 4,00,000) |
6,00,000 |
|
K’s Capital |
1,65,000 |
Other Assets |
1,50,000 |
|
M’s Capital |
3,00,000 |
|
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
|
Calculation of Future (New) Profit Sharing Ratio
|
|
J |
K |
|
Old ratio |
3 : |
2 |
M is
admitted for ½ share of profit
|
J’s sacrificing rato |
=1/2×3/4 |
|
|
=2/8 |
|
K’s sacrificing rato |
=1/2×1/4 |
|
|
=1/8 |
New
Ratio = Old Ratio − Sacrificing Ratio
|
J’s |
=3/5-3/8 |
|
|||||
|
|
=9/40 |
|
|||||
|
K’s |
=2/5-1//8 |
|
|||||
|
|
=11/40 |
|
|||||
|
|
J |
|
K |
|
M |
||
|
New profit sharing ratio= |
9/40 |
: |
11/40 |
: |
1/2 |
||
|
= |
9/40 |
: |
11/40 |
: |
20/40 |
||
|
= |
9 |
: |
11 |
: |
20 |
||
Working
Notes:
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
J will get =1,00,000×3/4=75,000
K will get =1,00,000×1/4=25,000
WN2
Distribution of Reserve (in old ratio)
J will get =1,00,000×3/5=60,000
K will get =1,00,000×2/5=40,000
Ts Grewal Solution 2023-2024
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Class 12 / Volume – I