adissionofaPartner2023-2024

The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2023 is as follows:                      

Liabilities		`	Assets	`
Capital A/cs:			Y's Current Account	7,000
X	1,75,000		Land and Building	1,75,000
Y	1,50,000		Plant and Machinery	67,500
Z	1,25,000	4,50,000	Furniture	80,000
Current A/cs:			Investments	36,500
X	4,000		Bills Receivable	17,000
Z	6,000	10,000	Sundry Debtors	43,500
General Reserve		15,000	Stock	1,37,000
Profit and Loss A/c		7,000	Bank	43,500
Creditors		80,000
Bills Payable		45,000
		6,07,000		6,07,000

On the above date, W is admitted as a partner on the following terms:

(a) W will bring    ` 50,000 as his capital and get 1/6th share in the profits.
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at ` 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of    ` 7,004 will be created against bills receivable discounted earlier but now dishonored.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W's Capital through their Current Accounts.
Prepare Revaluation Account, Partners' Current Accounts and Capital Accounts.

 

Revaluation Account
Dr.						Cr.
Particulars		`	Particulars		`
Stock		27,400	Land and Building		35,000
Furniture		16,000	Plant and Machinery		6,750
Investments		7,300	Loss transferred to:
			X	4,475
			Y	2,983
			Z	1,492	8,950
		50,700			50,700

 

Partners’ Current Account
Dr.				Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
		7,000		Balance b/d	4,000	-	6,000
Revaluation (Loss)	4,475	2,983	1,492	General Reserve	7,500	5,000	2,500
				Profit and Loss A/c	3,500	2,333	1,167
Balance c/d	100,525	47,350	83,175	Premium for Goodwill	15,000	-	-
				Capital A/c	75,000	50,000	75,000
	1,05,000	57,333	84,667		1,05,000	57,333	84,667

 

Partners’ Capital Account
Dr.					Cr.
Particulars	X	Y	Z	W	Particulars	X	Y	Z	W
Current A/c	75,000	50,000	75,000	-	Balance b/d	1,75,000	1,50,000	1,25,000	-
Balance c/d	1,00,000	1,00,000	50,000	50,000	Cash A/c	-	-	-	50,000
	1,75,000	1,50,000	1,25,000	50,000		1,75,000	1,50,000	1,25,000	50,000

 

Working Notes:

 

WN1Calculation of Sacrificing Ratio

Old Ratio= 3 : 2 : 1

New Ratio= 2 : 2 : 1 : 1

Sacrificing Ratio = Old Ratio - New Ratio

X=3/6-2/6=1/6

Y=2/6-2/6=Nil

Z=1/6-1/6=Nil

Here, only X has sacrificed.
 

WN2 Distribution of Goodwill

W's Share of Goodwill=90,000×16=   ` 15,000

As only X has sacrificed his share, therefore, he will get    ` 15,000
 

WN3 Adjustment of Capital

Total Capital of the firm=W's Capital×Reciprocal of his share        

=50,000×6/1=   ` 3,00,000

 

New Profit Sharing Ratio=2 : 2 : 1 : 1

 

X's New Capital=3,00,000×2/6=   ` 1,00,000

Y's New Capital=3,00,000×2/6=   ` 1,00,000

Z's New Capital=3,00,000×1/6=   ` 50,000

W's New Capital=3,00,000×1/6=   ` 50,000

 

Raman and Rohit were partners in a firm sharing profits and losses in the ratio of 2: 1. On 31st March, 2018, their Balance Sheet was as follows:

BALANCE SHEET OF RAMAN AND ROHIT as at 31st March, 2018
Liabilities		`	Assets		`
Capitals: Raman Rohit	1,40,000 1,00,000	240,000 40,000 1,60,000	Plant and Machinery Furniture and Fixtures Stock		1,75,000 65,000 47,000     1,03,000 50,000
Workmen Compensation Fund Creditors			Debtors Less: Provision for Doubtful Debts	1,10,000 7,000
			Bank Balance
		4,40,000			4,40,000

On the above date, Saloni was admitted in the partnership firm. Raman surrendered 2/5th of his share and Rohit surrendered 1/5th of his share in favour of Saloni. It was agreed that:

(i) Plant and machinery will be reduced by `35,000 and furniture and fixtures will be reduced to `58,500.

(ii) Provision for bad and doubtful debts will be increased by `3,000.

(iii) A claim for `16,000 for workmen's compensation was admitted.

(iv) A liability of `2,500 included in creditors is not likely to arise.

(v) Saloni will bring  `42,000 as her share of goodwill premium and proportionate capital.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm. (CBSE 2019)

 

	Revaluation Account
	Dr.								Cr.
	Particulars				`				Particulars							`
	To Plant and Machinery				35,000				By Creditors							2,500
	To Furniture and fixtures				6,500				By Loss transferred to;
	To Provision of doubtful debts				3,000				Raman’s Capital A/c(42,000×2/3)					28,000
									Rohit’s Capital A/c(42,000×1/3)					14,000		42,000
					44,500											44,500
	Partners’ Capital Accounts
	Dr.																Cr.
	Particulars			Abha		Binay		Chitra		Particulars		Abha			Binay		Chitra
	To Revaluation			28,000		14,000		-		By Balance b/d		140,000			1,00,000		-
	To Balance c/d			1,61,600		1,02,400		-
										By Premium		33,600			8,400		-
										By W.C.F.		16,000			8,000		-
				1,89,600		1,16,400		-				1,89,600			1,16,400		-
	To Balance c/d			1,61,600		1,02,400		1,32,000
										Bank A/c		-			-		1,32,000
				1,61,600		1,02,400		1,32,000				1,61,600			1,02,400		1,32,000
Balance Sheet as on April 31, 2018
Liabilities			`				Assets				`
Creditors			1,57,500				Plant and Machinery Furniture and fixture				1,40,000 58,500
							Stock				47,000
worker compensation liabilities			16,000				Debtors                      1,10,000 Less; Prov. For D.D.     10,000				1,00,000
Capital A/cs:							Cash at Bank				2,24,000
Raman		1,61,600					(50,000+1,32,000+42,000)
Rohit		1,02,400
Saloni		1,32,000	3,96,000
			5,69,500								5,69,500

Working note;

WN-1

Calculation of old and sacrificing ratio

Old ratio Raman: Rohit=2:1

Raman surrenders to Saloni=2/3×2/5=4/15

Rohit surrenders to Saloni=1/3×1/5=1/15

New share of -

Raman=2/3-4/15=10-4/15=6/15

Rohit=1/3-1/15=5-1/15=4/15

Saloni=4/15+1/15+5/15

 

Therefore new ratio of Raman, Rohit and Saloni =6:4:5

Sacrificing ratio= old – new

Raman=2/3-6/15=10-6/15=4/15

Rahit=1/3-4/15=5-4/15=1/15

WN-1

Calculation of Capital of Raman and Rohit=1,61,600+1,02,400=2,64,000

Share of Raman and Rohit=6/15+4/15=6+4/15=10/15

Therefore, Capital of Raman , Rohit and Saloni=2,64,000×15/10=3,96,000

Saloni’s capital=3,96,000×5/15=1,32,000

 

L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2015 was as follows:

Liabilities		`	Assets	`
Creditors		1,68,000	Bank	34,000
General Reserve		42,000	Debtors	46,000
Capital's A/cs: L	1,20,000		Stock	2,20,000
M	80,000		Investments	60,000
N	40,000	2,40,000	Furniture	20,000
			Machinery	70,000
		4,50,000		4,50,000

On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at    ` 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was    ` 36,000.
(iv) Machinery will be reduced to    ` 58,000.
(v) A creditor of    ` 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.

Revaluation Account
Dr.						Cr.
Particulars		`	Particulars		`
Investments		24,000	Creditors		6,000
Machinery		12,000	Loss on Revaluation
			L’s Capital A/c	15,000
			M’s Capital A/c	10,000
			N’s Capital A/c	5,000	30,000
		36,000			36,000

 

Partners’ Capital Account
Dr.									Cr.
Particulars	L	M	N	O	Particulars	L	M	N	O
Reval. A/c	15,000	10,000	5,000		Balance b/d	1,20,000	80,000	40,000
Balance c/d	1,56,000	84,000	42,000	56,400	Gen. Reserve	21,000	14,000	7,000
					Premium for G/w	30,000
					Cash A/c				56,400
	1,71,000	94,000	47,000	56,400		1,71,000	94,000	47,000	56,400

 

Balance Sheet as on March 31, 2016 after admission of new parnter
Liabilities		`	Assets	`
Creditors		1,62,000	Bank (34,000+56,400+30,000)	1,20,400
Capitals:			Debtors	46,000
L	1,56,000		Stock	2,20,000
M	84,000		Investments	36,000
N	42,000		Furniture	20,000
O	56,400	3,38,400	Machinery	58,000
		5,00,400		5,00,400

 

Working Notes:
 

WN1: Calculation of Sacrificing Ratio
Sacrificing Ratio =Old ratio- new ratio

L= 3/6-2/6=1/6

M=2/6-2/6=Nil

N=1/6-1/6=- Nil

 

WN2: Adjustment of Goodwill
O‘s of goodwill=1,80,000×1/6=30,000

30,000 will be credited to L’s capital because he is only sacrifice.

WN3 Calculation of O’s Proportionate Capital

Adjusted old capital of L =

Adjusted old capital of M =

Adjusted old capital of N =

O’s proportion capital=Total adjusted capital×O’s profit share × reciprocal combined new share of old partners

=2,82,000×1/6×6/5=56,400

 

Leena and Rohit are partners in a firm sharing profits in the ratio of 3: 2. On 31st March, 2018, their Balance Sheet was as follows:

BALANCE SHEET OF LEENA AND ROHIT as at 31st March, 2018
Liabilities		`	Assets		`
Sundry Creditors Bills Payable General Reserve Capitals:		80,000 38,000 50,000	Cash		42,000
			Debtors Less: Provision for Doubtful Debts	1,32,000 2,000	1,30,000
			Stock Plant and Machinery		1,46,000 1,50,000
Leena Rohit	1,60,000 1,40,000	3,00,000
		4,68,000			4,68,000

On the above date Manoj was admitted as a new partner for 1/5th share in the profits of the firm on the following terms:

(i) Manoj brought proportionate capital. He also brought his share of goodwill premium of ` 80,000 in cash.

(ii) 10% of the general reserve was to be transferred to provision for doubtful debts.

(iii) Claim on account of workmen's compensation amounted to `40,000.

(iv) Stock was overvalued by `16,000.

(v)Leena, Rohit and Manoj will share future profits in the ratio of 5:3:2.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm. (CBSE 2019)

 

Revaluation Account
Dr.			Cr.
Particulars	`	Particulars	`
To workers’ compensation Liabilities To Stock	40,000 16,000	By loss transferred to ; Rohit×3/5=33,600 Leena×2/5=22,400	56,000
	56,000		56,000

 

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Leena	Rohit	Manoj	Particulars	Leena	Rohit	Manoj
To Revaluation A/c	32,600	22,400		By Balance b/d	160,000	140,000
To Balance c/d	1,93,400	1,75,600	92,250	By Premium A/c	40,000	40,000
				By General reserve A/c By Cash A/c	27,000	18,000	92,250
	2,27,000	1,98,000	92,250		2,27,000	1,98,000	92,250

 

Balance Sheet as on March 31, 2018 after Leander’s admission
Liabilities		`	Assets		`
Creditors Bills payables Workers’ compensation liabilities		80,000 38,000 40,000	Cash (42,000+80,000+92,250) Debtors Less; prov. For doubtful debts	1,32,000 7,000	2,14,250     1,25,000
Capital A/c; Leena  1,93,400 Rohit   1,75,600 Manoj     92,250		4,61,250	Stock Plant and machinery		1,30,000 1,50,000
		6,19,250			6,19,250

Working Notes;

WN 1:                                     
Calculation of old ratio and sacrificing ratio

	Leena	Rohit	Manoj
OLD RATION	3  :	2
NEW RATIO	5 :	3  :	2

Sacrificing ratio= Old ratio – New Ratio

Leena =3/5-5/10=6-5/10=1/10

Rohit =2/5-3/10=4-3/10=1/10

Sacrificing ratio of Leena : Rohit=1:1

WN 2:

Calculation of Manoj’s capital

Capital of Leena and Rohit = 1,93,400+1,75,600=3,69,000

Share of Leena and Rohit = 8/10

Hence Capital of Leena ,Rohit and Manoj=3,69,000×10/8=4,61,250

Accordingly capital of Manoj=4,61,250-3,69,000=92,250

 

On 31st March, 2023 the Balance Sheet of Ram and Shyam who share profits and losses in the ratio of 3:2 was as follows:

BALANCE SHEET OF RAM AND SHYAM as at 31st March, 2023
Liabilities		`	Assets		`
Creditors General Reserve Employees' Provident Fund		70,000 25,000 55,000	Cash at Bank		25,000   1,50,000   82,500 142,500
			Debtors Less: Provision for Doubtful debts	1,62,500 12,500
			Stock Machinery
Capitals: Ram Shyam	1,50,000 1,00,000	2,50,000
		4,00,000			4,00,000

They decided to admit Mahesh on 1st April, 2023 for 1/5th share which Mahesh acquired wholly from Shyam on the following terms:

(i) Mahesh shall bring `25,000 as his share of premium for Goodwill.

(ii) A debtor whose dues of `7,500 were written off as bad debt paid `5,000 in settlement.

(iii) A claim of `12,500 on account of workmen's compensation was to be provided for.

(iv) Machinery were undervalued by `5,000. Stock was valued 10% more than its market value.

(v) Mahesh was to bring in capital equal to 20% of the combined capitals of Ram and Shyam after all adjustments.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

 

Revaluation Account
Dr.
Particulars		`			Particulars	`
To Worker compensation liabilities		12,500			By Bad debts Recovered	5,000
To Stock (82,500×10/110)		7,500			By Machinery	5,000
					By Loss transferred to-
					Ram=10,000×3/5=6,000
					Shyam=10,000×2/5=4,000 (In old Ratio: 3:2)	10,000
		20,000				20,000

                    

Partners’ Capital Accounts
Dr.									Cr.
Particulars		Ram	Shyam	Mahesh	Particulars	Ram	Shyam	Mahesh
To Revaluation A/c		6,000	4,000		By Balance b/d	1,50,000	1,00,000
					By Premium A/c		25,000
To Balance c/d		1,59,000	1,31,000		By General Reserve	15,000	10,000
		1,65,000	1,35,000			1,65,000	1,35,000
To Balance c/d		1,59,000	1,31,000	58,000	Balance b/d	1,59,000	1,31,000
					Bank A/c			58,000
		1,59,000	1,31,000	58,000		1,59,000	1,31,000	58,000

  

Balance Sheet as on 1st April, 2023
Liabilities		`	Assets		`
Workmen Compensation Reserve		12,500	Bank A/c		1,13,000
Employees Provident Fund		5,500	(25,000+25,000+58,000+5,000)
Creditors		70,000	machinery		1,47,500
Capital			Stock		75,000
Ram	1,59,000
Shyam	1,31,000		Debtors	1,62,500
Mahesh	58,000	3,48,000	Less : Provision for Doubtful Debts	12,500	1,50,000
		4,85,500			4,85,500

 

Working notes;

WN-1

Calculation of Old and sacrificing ratio

Old ratio of Ram and shyam= 3:2

New ratio of ;

Ram=3/5

Shyam=2/5-1/5=2-1/5=1/5

Mahesh= 1/5

New ratio of Ram, shyam and Mahesh=3:1:1

 

Sacrificing ratio of –

Ram =3/5-3/5=3-3/5=0/5

Shyam=2/5-1/5=2-1/5=1/5

Sacrificing ratio of Ram and Shyam = 0:1

 

WN-2

Adjusted Capital of Ram and shyam= 1,59,000+1,31,000=2,90,000

Mahesh’s capital= 2,90,000×20/100=58,000

 

Aan and Shaan were partners sharing profits in the ratio of 3: 2. Their Balance Sheet as at 31st March, 2023 was as under:

Liabilities	`	Assets	`
Creditors	2,00,000	Cash	148,000
Employees' Provident Fund	30,000	Debtors  2,05,000
Bank Overdraft	1,70,000	Less: Provision for Doubtful Debts 3,000	2,02,000
Reserve	1,50,000	Stock	2,00,000
Capital A/cs:		Plant and Machinery	6,00,000
Aan's 7,00,000		Building	7,00,000
Shaan's 6,00,000	13,00,000
	18,50,000		18,50,000

They agreed to admit Mohan for 1/4th share on the above date subject to the following terms:

(i) Mohan to bring in capital equal to 1/4th of the total capital of Aan and Shaan after all adjustments including premium for goodwill.

(ii) Building to be appreciated by 20% and stock to be depreciated to 70%.

(iii) Provision for Doubtful Debts on Debtors to be raised to ` 10,000.

(iv) A provision be made for ` 18,000 for outstanding legal charges.

(v) Mohan's share of goodwill premium was calculated as ` 1,00,000.

Prepare the Revaluation Account, Partners Capital Accounts and the Balance Sheet of the new firm.

 

 

Revaluation Account
Particulars	`	Particulars	`
Stock	60,000	Building	1,40,000
Provision for Doubtful Debts	7,000
Legal Charges	18,000
Gain	55,000
	1,40,000		1,40,000

 

Capital account
Particulars	Amit	Anil	Ankit	Particulars	Amit	Anil	Ankit
To Balance c/d	8,83,000	7,22,000	4,01,250	By Balance B/d	7,00,000	6,00,000	-
				By Cash A/c			4,01,250
				By Premium A/c	60,000	40,000
				By Revaluation A/c	33,000	22,000
				By Reserve A/c	90,000	60,000
	8,83,000	7,22,000	4,01,250		8,83,000	7,22,000	4,01,250

 

	BALANCE SHEET as at 31st March, 2023
Liabilities		`	Assets		`
Creditors		2,00,000	Cash		6,49,250
Bank Overdraft		1,70,000
Employees' Provident Fund		30,000	Debtors	2,05,000
O/s Legal charges		18,000	Less: Provision for Doubtful Debts	10,000	1,95,000
Capital A/cs:			Stock		1,40,000
Aan - 8,83,000			Plant and Machinery		6,00,000
Shaan - 7,22,000			Building		8,40,000
Mohan - 4,01,250		20,06,250
		24,24,250			24,24,250