Acc Vol 1 Chap 4 Sol

Solution
WORKSHEET CHAP 4 ADMISSION
Class 12 - Accountancy
1. Revaluation Account
Dr. Cr.
Particulars Amount (₹) Particulars Amount (₹)
To Creditors 2,000 By Revaluation Loss transferred to:
To Provision for Discount 1,520 A's Capital A/c 1,760
B's Capital A/c 1,760 3,520
3,520 3,520
Partner's Capital Accounts
Particulars A B C Particulars A B C
To Profit & Loss A/c 2,000 2,000 --- By Balance b/d 50,000 60,000 ---
To Revaluation 1,760 1,760 --- By Insurance Fund 3,500 3,500 ---
To Balance c/d 51,040 63,040 40,000 By Workmen Compensation Reserve 1,300 1,300 ---
By C's Current A/c --- 2,000 ---
By Cash --- --- 40,000
54,800 66,800 40,000 54,800 66,800 40,000

Balance Sheet
Liabilities Amount (₹) Amount (₹)
Capital account balances: Cash 50,000
A 51,040 Sundry Debtors 80,000
B 63,040 Stock 20,000
C 40,000 1,54,080 Fixed Assets 38,600
Creditors 17,000 C's Current A/c 2,000
Outstanding Expenses 3,000
Provident fund 1,000
Employee's Saving Fund 5,000
Workmen Profit Sharing Fund 2,000
Provision for Workmen Compensation claim 3,000
Provision for Doubtful Debts 4,000
Provision for Discount on Debtors 1,520
1,90,600 1,90,600
W.N:-
1. Provision for Discount will be 25% on ₹80,000 - Provision for Doubtful Debts = ₹4,000
1
2. C is admitted for 6
th share
Balance 5
6
th will be shared by A and B in the ratio of 1 1
2
: 1 OR 3 : 2
A's New Ratio = 5
6
×
3
5
=
3
B's New Ratio = 5
6
×
2
5
=
2
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C's New Ratio = 1
Calculation of Sacrificing Ratio:-

A's Share = − = 0 1
2
3
B's Share = 1
2
−
2
6
=
1
Hence, only B has sacrificed.

2. JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)
2023
March 31 Profit & Loss A/c Dr. 3,60,000
To Profit & Loss Appropriation A/c 3,60,000
(Being Transfer of profit to Profit & Loss Appropriation Account)
March 31 Profit & Loss Appropriation A/c Dr. 3,60,000
To Ankit’s Capital A/c 1,44,000
To Suresh’s Capital A/c 72,000
To Neha’s Capital A/c 72,000
To Kavita’s Capital A/c 72,000
(Being Distribution of profit in the ratio of 2 :1 :1 :1)

Working Notes :
Calculation of Surrendered Share by Ankit and Suresh:
i. Ankit’s old share = 3
5
; Ankit surrenders 1
3
rd of 3
5
in favour of Neha, i.e., 1
3
×
3
5
=
1
5
(It means Ankit has surrendered 1
5
out
of his share in favour of Neha.)
ii. Suresh’s old share = ; Suresh surrenders 2
5
1
2
of 2
5
in favour of Kavita, i.e., 1
2
of 2
5
=
1
5
(It means Suresh has surrendered 1
out of his share in favour of Kavita.)

Calculation of New Ratios after the admission of Neha and Kavita:
Ankit = − =3
5
1
5
2
Suresh = 2
5
−
1
5
=
1
Neha = 1
Kavita = 1
New Ratio = 2 : 1 : 1 : 1
3. First Case:-
Date Particulars L.F. Amount Dr. Amount Cr.
(i) Bank A/c Dr. 72,000
To Premium for Goodwill A/c 72,000
(Being goodwill brought in cash)
(ii) Premium for Goodwill A/c Dr. 72,000
To X's Capital A/c 43,200
To Y's Capital A/c 28,800
(Being Goodwill is distributed between old partners in the sacrificing ratio of 3 : 2)

Working Note:-
Old Ratio of X and Y = 3 : 2
1
Z's Share = 4
Remaining Share = 1 - 1
4
=
3
X's New Share = 3
5
of 3
4
=
9
20
Z's New Share = 1
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New Profit Sharing Ratio = 9
20
:
6
20
:
1
New Profit Sharing Ratio = 9:6:5
20
New Profit Sharing Ratio = 9 : 6 : 5

Sacrificing Ratio = 3 : 2
Second Case:-
(i) Bank A/c Dr. 72,000

Working Note:-
Z acquires of = from each of X and Y
1
2
1
4
1
8
24−5
X's New Ratio = 3
5
−
1
8
=
40
=
19
40
16−5
Y's New Ratio = 2
5
−
1
8
=
40
=
11
40
Z's New RAtio = 1
4
19
:
11
40
:
1
4
19:11:10
New Profit Sharing Ratio = 19 : 11 : 10

Third Case:-
(i) Bank A/c Dr. 72,000

4. IN THE BOOKS OF
JOURNAL ENTRIES
Amount Amount
Date Particulars L.F.
Dr. Cr.
General Reserve A/c Dr. 50,000
To A's Capital A/c 37,500
To B's Capital A/c 12,500
(Being General Reserve distributed between the old partners in their old ratio)
Revaluation A/c Dr. 11,200
To Plant A/c 1,200
To Outstanding Repairs A/c 10,000
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(Being decrease in the value of plant and provision for outstanding repairs recorded
through revaluation account)
Provision for Doubtful Debts A/c Dr. 1,000
Creditors A/c Dr. 2,000
To Revaluation A/c 3,000
(Being Value of doubtful debts and creditors decrease and recorded through revaluation
account)
A's Capital A/c Dr. 6,150
B's Capital A/c Dr. 2,050
(Being loss on revaluation transferred to the partners capital account of old partners)
Cash A/c Dr. 1,36,000
To C's Capital A/c 1,00,000
To Goodwill A/c 36,000
(Being capital and goodwill brought in cash by C)
Premium for Goodwill A/c Dr. 36,000
(Being goodwill credited to old partners in the sacrificing ratio)

Revaluation Account
Dr. Cr.
Liabilities Amount Assets Amount
To Plant A/c 10,000 By Provision for Doubtful Debts A/c 1,000
To Outstanding Repairs A/c 1,200 By Creditors A/c 2,000
By Revaluation Loss transferred to:
A's Capital A/c 6,150
11,200 11,200
Working Notes:-
C's Share = 1
A's Sacrifice = 2
3
of 1
4
=
2
12
B's Sacrifice = 2
3
of 1
4
=
1
12
9−2
A's New Share = 3
4
−
2
12
=
12
=
12
7
B's New Share = 1
4
−
1
12
=
3−1
12
=
12
2
New Ratio of A, B and C = 7
12
:
2
12
:
1
New Ratio of A, B and C = 7:2:3
12
New Ratio of A, B and C = 7 : 2 : 3

5. JOURNAL
Date Particulars L.F. Amt (Dr) Amt (Cr)
2015
April 1 General Reserve A/c Dr 1,20,000
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To Kapil's Capital A/c 90,000
To Sanjay's Capital A/c 30,000
(Being general reserve transfer in old ratio i.e., 3:1.)
Kapil's Capital A/c Dr 45,000
Sanjay's Capital A/c Dr 15,000
To Profit and Loss A/c 60,000
(Being profit and loss transfer in old ratio i.e., 3:1.)
Workmen Compensation Fund A/c Dr 1,50,000
Revaluation A/c Dr 20,000
To Workmen Compensation Claim A/c 1,70,000
(Being workmen compensation claim recorded.)
Kapil's Capital A/c Dr 15,000
Sanjay's Capital A/c Dr 5,000
(Being revaluation balance transfer in old ratio i.e., 3:1.)
Cash A/c Dr 1,98,000
To Yogesh's Capital A/c 1,50,000
To Premium for Goodwill A/c (see W.N. 1) 48,000
(Being cash brought in by Yogesh)
Premium for Goodwill A/c Dr 48,000
To Kapil's Capital A/c 36,000
To Sanjay's Capital A/c 12,000
(Being premium for goodwill transfer through sacrificing ratio i.e., 3:1. (see W.N.2))
Working Note:-
1. Calculation of premium for goodwill to be brought in by new partner:-
1
Premium for goodwill = (2,40,000 × 5
)
2. Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Share - New Share
15−12
Kapil = − =
3
4
3
5
=
20 20
3
5−4
Sanjay= 1
4
−
1
5
=
20
=
1
20
Sacrificing ratio between Kapil and Sanjay is 3 :1

6. REVALUATION ACCOUNT
Dr. Cr.
Particulars ₹ Particulars ₹
To Investments A/c 5,000 By Revaluation Loss transferred to:
5,000 5,000
CAPITAL ACCOUNTS
Dr. Cr.
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₹ ₹ ₹ ₹ ₹ ₹
To Revaluation A/c 3,750 1,250 By Balance b/d 90,000 30,000
To Goodwill A/c 7,500 2,500 By Workmen's Compensation Reserve A/c 7,500 2,500
To Balance c/d 1,01,250 33,750 80,000 By Bank A/c 80,000
By Premium for Goodwill A/c 15,000 5,000
1,12,500 37,500 80,000 1,12,500 37,500 80,000

BALANCE SHEET OF THE NEW FIRM
as at 31st March 2018
Liabilities ₹ Assets ₹
Creditors 20,000 Bank 1,10,000
Liability for Workmen's Compensation Claim 10,000 Debtors 60,000
Capital Accounts balance : Stock 30,000
A 1,01,250 Investments 45,000
B 33,750
C 80,000 2,15,000
2,45,000 2,45,000
Note:- Goodwill already appearing in the assets will be written off between the old partners in their ratio.
1. Workmen’s Compensation Reserve amounting to ₹10,000 will be distributed between the old partners in their old profit
sharing ratio and the balance ₹10,000 will be shown on the liabilities in the new balance sheet.
7. JOURNAL ENTRIES
2022 April
1
To Stock A/c 2,000
To Plant & Machinery A/c 3,500
To Provision for Doubtful Debts A/c 485
(Reduction in the value of assets and provision made for doubtful debts provided for)
Building A/c Dr. 10,000
Investments A/c Dr. 1,400
To Revaluation A/c
11,400
(Revaluation and reassessment of assets)
Revaluation A/c(1) Dr. 5,415
To Aman's Capital A/c 3,610
To Babli's Capital A/c 1,805
(The transfer of profit on revaluation to the capital accounts of old partners in old
ratio)
Cash A/c Dr. 21,000
To Meena's Capital A/c 15,000
(The amount of capital and premium for goodwill brought in cash by Meena)
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To Aman's Capital A/c 4,000
To Babli's Capital A/c 2,000
(Premium for goodwill credited to old partners in the sacrificing ratio 2 : 1 )
Aman's Capital A/c Dr. 4,000
Babli's Capital A/c Dr. 2,000
To Cash A/c 6,000
(Premium for goodwill withdrawn by old partners in cash)

REVALUATION ACCOUNT
Dr. Cr.
To Stock A/c 2,000 By Building A/c 10,000
To Plant & Machinery A/c 3,500 By Investments A/c 1,400
To Provision for Doubtful debts A/c 485
To Revaluation Profit Transferred to :
Aman’s Capital A/c 3,610
Babli's Capital A/c 1,805 5,415
11,400 11,400
CAPITAL ACCOUNTS
Dr. Cr.
Particulars Aman Babli Meena Particulars Aman Babli Meena
₹ ₹ ₹ ₹ ₹ ₹
To Cash A/c 4,000 2,000 ... By Balance b/d 30,000 20,000 ...
To Balance c/d 33,610 21,805 15,000 By Revaluation A/c 3,610 1,805 ...
By Cash A/c
By Premium for Goodwill A/c 4,000 2,000 ...
37,610 23,805 15,000 37,610 23,805 15,000

OPENING BALANCE SHEET
as at 1st April, 2022
Sundry Creditors 65,900 Cash in hand(2) 16,200
Capital Accounts : Sundry Debtors 9,700
Aman 33,610 Less : Provision 485 9,215
Babli 21,805 Stock 18,000
Meena 15,000 70,415 Investments 1,400
Plant & Machinery 31,500
Building 60,000
1,36,315 1,36,315
Notes
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1. Calculation of Cash Balance :- ₹
Opening Balance 1,200
(+) Amount of Goodwill brought in by the new partner in Cash 6,000
(+) Amount of Capital brought in by the new partner in Cash 15,000
22,200
(-) Amount of Goodwill withdrawn by the old partners in Cash 6,000
Cash Balance 16,200
Dr. Cr.
To Stock A/c (30,000 - 25,000) 5,000 By Plant a/c 20,000
To Creditors A/c (31,000 - 30,000) 1,000 By Building A/c 20,000
To Profit transferred to:
B's Capital A/c 13,600 34,000
40,000 40,000
CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Goodwill A/c (Written off) 6,750 4,500 By Balance b/d 2,00,000 1,50,000
By Revaluation A/c 20,400 13,600
To Balance c/d (Bal. Fig.) 2,22,931 1,60,131 40,000 By C's Current A/c (Goodwill) 9,281 1,031
By Cash A/c 40,000
2,29,681 1,64,631 40,000 2,29,681 1,64,631 40,000

BALANCE SHEET (After Admission)
at 1st April, 2018
Bills Payable 6,000 Cash 68,750
Creditors 31,000 Sundry Debtors 80,000
Outstanding Expenses 14,000 Stock 25,000
Capitals : Plant 1,20,000
A 2,22,931 Buildings 1,70,000
B 1,60,131 C’s Current A/c 10,312
C 40,000
4,23,062
4,74,062 4,74,062
Working Notes:
Valuation of Goodwill:
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17,000+14,000+15,000+20,000
Average Profits = 4
= ₹16,500
Goodwill on 2 1
2
year's purchase = 16,500 ×2 ,= ₹41,250
1
C's share of Goodwill = 41,250 × 1
4
= ₹10,312
Sacrificing Ratio = Old Ratio - New Ratio
3 3 24−15 9
A= 5
−
8
=
40
=
40
16−15
B= 2
5
−
3
8
=
40
=
1
40
or 9 : 1
Books of Ashish, Dutta, and Vimal

9. Journal
Date Particulars L.F. Amount ₹ Amount ₹
2015
Jan 1 Land and Building A/c Dr. 15,000
Plant A/c Dr. 10,000
(Increased in the value of assets)
To Ashish’s Capital A/c 15,000
To Dutta’s Capital A/c 10,000
(Profit on revaluation transferred to partners capital account)
Cash A/c Dr. 36,000
To Vimal Capital A/c 36,000
(Capital brought by Vimal)
Vimal’s Current A/c Dr. 4,000
To Ashish’s Capital A/c 2,400
To Dutta’s Capital A/c 1,600
(Vimal’s share goodwill adjusted through his current account)

Balance sheet
as on January 1, 2015
Liabilities Amount ₹ Assets Amount ₹
Creditors 15,000 Land and Building 50,000
Bills Payable 10,000 Plant 55,000
Ashish's Capital Account 97,400 Debtors 22,000
Dutta's Capital Account 46,600 Less: Provision 2,000 20,000
Vimal’s Capital Account 36,000 1,80,000 Stock 35,000
Cash 41,000
Vimal’s Current Account 4,000
2,05,000 2,05,000
Working Note:
Partner's Capital A/c
Ashish Dutta Vimal Ashish Dutta Vimal
Particulars Particulars
Amount ₹ Amount ₹ Amount ₹ Amount ₹ Amount ₹ Amount ₹
Balance b/d 80,000 35,000

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Revaluation 15,000 10,000
Balance c/d 97,400 46,600 36,000 Cash 36,000
Vimal
2,400 1,600
Current
97,400 46,600 36,000 97,400 46,600 36,000

Vimal's Current A/c
Particulars Amount ₹ Particulars Amount ₹
Ashish’s Capital A/c 2,400
Dutta’s Capital A/c 1,600 Balance c/d 4,000
4,000 4,000
According to Section 31 of Indian Partnership Act 1932 "A Partner can be admitted only consent of all the Existing Partners.
" Adjustments required when a New Partner is Admitted
a. Calculation of New Profit Sharing Ratio / Sacrificing Ratio.
b. Valuation and Treatment of Goodwill.
c. Revaluation of Assets and Liabilities.
d. Adjustment of accumulated Profits, Reserve and Losses.
e. Necessary Adjustment of Capital Accounts of Partners.
i. Calculation of New Profit Sharing Ratio
Vimal's share = 1
Remaining share = 1 - 1
5
= 4
Ashish's New share = 3
5
×
4
5
= 12
25
Dutta's new share = 2
5
×
4
5
= 8
25
New profit sharing ratio of Ashish, Dutta and Vimal = 12
25
:
8
25
:
1
5
=
12
25
:
8
25
:
5
25
= 12 : 8 : 5
ii. Sacrificing Ratio = Old Ratio – New Ratio
Ashish’s Sacrificing Share = - = 15 -
3
5
12
25
12
25
= 25
3
Dutta’s Sacrificing Share = 2
5
- 8
25
= 10 - 8
25
= 2
25
Sacrificing Ratio between Ashish and Dutta is 3 : 2

Note: Here, Goodwill has been adjusted through current account because Vimal has not brought his share of goodwill and he
is to bring capital in proportion to total capital of the new firm after adjustment.
iii. Capital of new firm on the basis of old partners adjusted capital:
Total adjusted capital of old partners
Ashish’s Capital 97,400
Dutta’s Capital 46,600
1,44,000
Remaining Share of Ashish and Dutta (old partners) in the new firm
Capital of the new firm = 1,44,000 × = 1,80,000 5
Vimal’s share in the capital of the new firm = 1,80,000 × 1
5
= 36,000
10. Journal Entries in the books of
Debit Amount Credit Amount
₹ ₹
Cash A/c Dr. 13,600
To C’s Capital A/c 10,000
To Premium for Goodwill A/c

3,600
(C brought capital and his share of goodwill)
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To A’s Capital A/c 900
To B’s Capital A/c

(C’s share of goodwill transferred to A and B in their sacrificing ratio i.e. 2,700
3:1)
Profit and Loss Appropriation A/c Dr. 24,000
To A’s Capital A/c 13,000
To B’s Capital A/c 7,000
To C’s Capital A/c

4,000
(Profit after C’s admission distributed among partners)
WN1
Sacrificing ratio 1
24
:
1
8
=1:3
WN2
Distribution of C's share of Goodwill (in sacrifcing ratio)
A will be get = 3,600× = ₹900 1
B will be get = 3,600× 3
4
= ₹2,700
WN3
New Ratio = Old Ratio - Sacrifcing Ratio
7 1 13
A's = 12
−
24
=
24
B's = 5
12
−
1
8
=
7
24
24
:
7
24
:
1
6
= 13 : 7 : 4
WN4
Distribution of Profit earned after C's admission (in new ratio)
13
A will get = 24,000× 24
= ₹13,000
B will get = 24,000× 7
24
= ₹7,000
C will get = 24,000× 4
24
= ₹4,000
11. i. Calculation of Cookie's Share of Goodwill in the firm:
Calculation of Average Normal Profit:
Year ended Profit ₹
31st March 2014 ₹ 39,000 + ₹ 9,000 48,000
31st March 2015 ₹ 83,000 + ₹ 8,000 75,000
31st March 2016 72,000
1,95,000
₹1,95,000
Average Normal Profit = 3
= ₹ 65,000
Average Normal Profit
Capitalised Value of Average Profits = Normal Rate of Return
× 100
₹65,000
= 13
× 100 = ₹5, 00, 000
Capital Employed (Net Assets) = Total Assets - Outside Liabilities
= ₹ 8,00,000 - ₹ 3,60,000 = ₹ 4,40,000
Goodwill = Capitalised Value of Average Profits - Net Assets
= ₹ 5,00,000 - ₹ 4,40,000 = ₹ 60,000
Cookie's Share of Goodwill = 60, 000 × = ₹10, 000 1
ii. Date Particulars L.F Dr. Cr. (₹ )
2016 April
Bank A/c Dr. 2,00,000
1
To Cookie's Capital A/c 2,00,000
(Amount of capital brought in cash)
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Cookie's Current A/c Dr. 10,000
To Cake's Capital A/c 3,333
To Muffin's Capital A/c 6,667
(Cookie's share of goodwill credited to sacrificing partners in their sacrificing

ratio of 1 : 2)
Calculation of Sacrificing Ratio:
5 3 10−9 1
Cake's sacrifice = 9
−
6
=
18
=
18
8−6
Muffin's sacrifice = 4
9
−
2
6
=
18
=
18
2
Sacrificing Ratio of Cake and Muffin = 1
18
:
2
18
or 1 : 2
Dr. Cr.
To Patents A/c 2,000 By Provision for Doubtful Debts A/c 2,000
To Revaluation Profit transferred to : By Typewriter A/c 2,600
A’s Capital A/c 2,000 By Provision for Discount on Creditors A/c 400
B’s Capital A/c 1,000
5,000 5,000
PARTNER'S CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Balance c/d 60.000 35,000 By Balance b/d 40,000 30,000
By Reserve Fund A/c 8,000 4,000
By Premium for goodwill A/c 10,000
60,000 35,000 60,000 35,000
To Balance c/d 60,000 35,000 19,000 By Balance b/d 60,000 35,000
By Bank A/c 19,000(2)
60,000 35,000 19,000 60,000 35,000 19,000

Sundry Creditors 20,000 Bank 14,000
Less: Provision 400 19,600 Sundry Debtors 40,000
Capital Account balances : Less: Provision for doubtful debts 1,600 38,400
A 60,000 Stock 20,000
B 35,000 Building 25,000
C 19,000 Machinery 33,600
Typewriter 2,600
1,33,600 1,33,600
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Hints :
i. Sacrifice Ration = old Ratio - New Ratio
Sacrifice by A = Old - New =
2
3
3
6
1
Sacrifice by A = Old 1
3
- New 2
6
=0
Since B has not made any sacrifice, the entire amount of premium for goodwill brought in by C will be credited to A.
ii. C will bring in capital proportionate to his share of profits. C is given th share of profits, balance th share is shared by A
1
6
5
and B. Total capital of A and B after all adjustments is ₹60,000 + ₹35,000 = ₹95,000.
Thus for th share of profits the Capital = 95,000
5
Then the total Capital of the Firm = 95,000 × 6
5
= ₹1,14,000
∴ C's Capital for 1
6
th share of profits = 1,14,000 × 1
6
= ₹19,000
iii. Calculation of Balance at Bank :
₹
Amount of Cash brought in by C as goodwill 10,000
19,000
Amount of Cash brought in by C as capital 29,000
(-) Bank Overdraft 15,000
Balance at Bank 14,000
13. According to the Indian Partnership Act, a person can be admitted as a new partner either with the consent of all the existing
partners or in accordance with an agreement already entered into providing for the admission of a new partner. When a new
partner is admitted, sometimes it is agreed that the capital of all the partners should be proportionate to the new profit sharing
ratio.Sometimes, at the time of admission, the partners’ agree that their capitals be adjusted in proportion to their profit sharing
ratio. For this purpose, the capital accounts of the existing partners are prepared, making all adjustments, on account of goodwill,
general-reserve, revaluation of assets and resettlement of liabilities. The actual capital so adjust will be compared with the amount
of capital that should be kept in the business after the admission of the new partner. The excess if any, of adjusted actual capital
over the proportionate capital will either be withdrawn or transferred to current account and vice versa. The partners may decide
to calculate the capitals which are to be maintained in the new firm either on the basis of new Partner’s Capital and his profit
sharing ratio or on the basis of the existing partner’s capital account balances.
1. Adjustment of existing partner’s capital on the basis of the capital of the new partner:
If the capital of the new partner is given, the entire capital of the new firm will be determined on the basis of the new partner’s
capital and his profit sharing ratio. Therefore the capital of other partners is ascertained by dividing the total capital as per his
profit sharing ratio. If the existing capital of the partner after adjustment is in excess of his new capital, the excess amount is
withdrawn by partner or transferred to the credit of his current account. If the existing capital of the partner is less than his new
capital, the partner brings the short amount or makes transfer to the debit of his current account. The journal entries are made as
under:
(i) when excess amount is withdrawn by the partner or transferred to current account.
Existing Partner’s Capital A/c Dr.
To Bank A/c or Partner Current A/c
(Excess amount is withdrawn by the partner or transferred to current account]
(ii) For bringing in the Deficit amount or Balance transferred to current account.
Bank A/c or Partner Current A/c Dr.
To Existing Partner’s Capital A/c
(Bringing the Deficit amount or Balance transferred to current account)
2. When the capital of the new partner is calculated in proportion to the total capital of the new firm. Sometimes the capital of the
new partner is not given. He/she is required to bring an amount proportionate to his/her share of profit. In such a case, new
partner’s capital will be calculated on the basis of adjusted capital of the existing partners.
The calculation of the new capital of each partner depends on the following situations:
1. When the capital of the new partner is given
2. When the total capital of the firm is given.
1) When the capital of the new partner is given
In this situation, the calculation of the new capital of all the partners involves the following steps:
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Step 1: The total capital of the new firm is calculated on the basis of new partner’s share of capital.
Step 2: The new capital of each partner is calculated by dividing the total capital of the firm by their individual new profit share.
Step 3: After posting all adjustments and items in the Partners’ Capital Account, calculate credit minus debit side of the old
Partners’ Capital Account.
Step 4: The new capital ascertained in the Step 2 is written as ‘Balance c/d’ on the credit side of the Partner’s Capital Account.
Step 5: If the amount ascertained in Step 2 (New capital) exceeds the capital amount ascertained in Step 3 (Old Capital), then it is
termed as ‘Deficit’ and the difference amount is to be brought in by the old partners. On the contrast, if the amount ascertained in
the Step 2 (New Capital) is lesser than the capital amount ascertained in the Step 3 (old Capital), then it is termed as ‘Surplus’ and
the difference amount is returned to the old partners.
Let us understand the above steps with the help of an example.
A and B are partners sharing profit and loss equally. They agree to admit C for 1
3
rd share in profit. C brings Rs 50,000 as capital.
The old capitals of A and B are Rs 60,000 and Rs 40,000 respectively, at the time admission of C.
Step 1: The total capital of the new firm on the basis of C = 50, 000 × = Rs1, 50, 000
3
Step 2: A’s new capital = 1, 50, 000 × 1
3
= Rs50, 000
B’s share in new firm = 1, 50, 000 × 1
3
= Rs50, 000
Step 3:
A B
New Capital 50,000 50,000
Less: Existing Capital (60,000) (40,000)
Withdrawal (deposit) 10,000 (10,000)

2) When the total capital of the new firm is given:
When the capital of new partner is not mentioned then his/her capital is ascertained on the proportionate basis of total capital of
the firm. The amount ascertained is to be brought in by the new partner in the form of his/her portion of capital. In order to
ascertain the proportionate capital of the new partner, the following steps are to be followed:
Step 1: Ascertain the total old capital of the old partners (after making all adjustments)
Step 2: Ascertain the total capital of the new firm by multiplying the total of old capitals of the old partners (ascertained in the
Step 1) with reciprocal of total share of old partners. That is,
Total Capital of New Firm = Total Capital of the Old Partners × Reciprocal of the Combined New Share of the Old Partners
Step 3: Calculate New Capital of each partner on the basis of Total Capital ascertained in Step 2. That is, multiplying the Total
Capital by the new profit sharing ratio individually for all the partners (including the new partner).
Let us understand the above steps with the help of an example.
X and Y are partners in a firm sharing profit and loss equally. They agree to admit Z for rd share in profit and decided to share
1
future profit and loss equally. X’s capital is Rs 2,00,000 and Y’s capital is Rs 1,50,000. Z brings sufficient capital for his share in
profit.
Step 1: Calculation of Total Capital of Old Partners (after all adjustments)
The total capital of the old partners = Rs 2,00,000 + Rs 1,50,000 = Rs 3,50,000
Step 2: Calculation of Total Capital of New Firm
Total Capital of New Firm = Total Capital of the Old Partners × Reciprocal of the Combined New Share of the Old Partners
Total Capital of New Firm = 3, 50, 000 × = Rs5, 25, 000
3
Step 3: Calculation of New Capital of Each Partner

X's (New)Capital = 5, 25, 000 × = Rs1, 75, 000
1
Y's (New)Capital = 5, 25, 000 × 1
3
= Rs1, 75, 000
Z's (New)Capital = 5, 25, 000 × 1
3
= Rs1, 75, 000
14. IN THE BOOKS OF THE FIRM

REVALUATION ACCOUNT
Dr. Cr.
To Stock A/c 7,500 By Revaluation Loss transferred to:
To Furniture A/c 5,000 David's Capital A/c 8,100
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To Provision for Doubtful Debts A/c 1,000 Bimal's Capital A/c 5,400 13,500
13,500 13,500
Dr. Cr.
Particulars David Bimal Chander Particulars David Bimal Chander
₹ ₹ ₹ ₹ ₹ ₹
To Revaluation A/c 8,100 5,400 By Balance b/d 1,80,000 1,20,000
To Balance c/d 2,19,900 1,80,100 1,60,000 By General Reserve A/c 18,000 12,000
By Sundry Creditors A/c 23,500
By Chander's Current A/c 30,000 30,000
By Bank A/c 1,60,000
2,28,000 1,85,500 1,60,000 2,28,000 1,85,500 1,60,000

BALANCE SHEET
Liabilties ₹ Assets ₹
Sundry Creditors 7,96,500 Cash 3,20,000
Capital Account balances: Bank 1,60,000
David 2,19,900 Stock 1,42,500
Bimal 1,80,100 Debtors 94,000
Chander 1,60,000 5,60,000 Less: Provision for Doubtful Debts 5,000 89,000
Building 5,50,000
Furniture 35,000
Chander's Current A/c 60,000
13,56,500 13,56,500
W.N.:
₹ ₹
Based on Chander's share of profit, the total capital of the firm should be: ₹1,60,000 × 10
2
8,00,000
Less: Capital of David (₹1,80,000 + Gen. Res. ₹18,000) - Loss on Revaluation ₹8,100 1,89,900
Capital of Bimal: (₹1,20,000 + Gen. Res. 12,000 + Creditors 23,500 - Loss on Revaluation 5,400) 1,50,100
Capital of Chander 1,60,000 5,00,000
Value of Firm's Goodwill (Hidden goodwill) 3,00,000
Chander's share of Goodwill = 3,00,000 × 2
10
60,000
Chander's Current A/c will be debited by his share of goodwill i.e., ₹60,000 and David and Bimal will be credited in their
sacrificing ratio i.e., equally.
David = − 3
5
5
=
10
1
10
Bimal = 2
5
−
3
10
=
1
10
15. In the books of Divya, Yasmin, Fatima and Aditya

Revaluation A/c
Dr. Cr.
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To Sundry Creditors A/c 7,000 By Plant and Machinery A/c 20,000
To revaluation Profit Transferred to: By Outstanding Expenses A/c 1,000
Divya’s Capital A/c 7,700
Yasmin’s Capital A/c 4,900
Fatima’s Capital A/c 1,400 14,000
21,000 21,000
Partner’s Capital A/c
Dr. Cr.
Divya Yasmin Fatima Aditya Divya Yasmin Fatima Aditya

(₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹)
To Furniture
80,000 80,000 80,000 By balance b/d 5,10,000 3,00,000 5,00,000
A/c
To balance By Bank (further capital)

5,97,200 3,76,400 4,50,400 4,50,000 50,000 4,50,000
c/d A/c
By Premium for Goodwill

1,10,000 70,000 20,000
A/c
By Reserve Fund A/c 49,500 31,500 9,000
By Revaluation A/c 7,700 4,900 1,400
6,77,200 4,56,400 5,30,400 4,50,000 6,77,200 4,56,400 5,30,400 4,50,000

Note:
Calculation of Goodwill brought in by Aditya
Average Profits = ₹ (2,00,000 + 6,00,000)/2 = ₹ 4,00,000
Goodwill = ₹ (4,00,000 × 2.5) = ₹ 10,00,000
Goodwill brought in by Aditya = ₹ (10,00,000 × 1/5) = ₹ 2,00,000
Balance Sheet as at 31st March, 2019
Liabilities Amount (₹) Assets Amount (₹)
Capitals: Factory Building 7,35,000
Divya 5,97,200 Plant and Machinery 2,00,000
Yasmin 3,76,400 Furniture 20,000
Fatima 4,50,400 Stock 1,45,000
Aditya 4,50,000 18,74,000 Debtors 1,50,000
Sundry Creditors 77,000 Less: Provision for debtors (30,000) 1,20,000
Public Deposits 1,19,000 Cash at Bank (1,59,000 + 2,00,000 + 50,000 + 4,50,000) 8,59,000
Outstanding
9,000
Expenses
20,79,000 20,79,000
Particulars (Rs.) Particulars (Rs.)
To Furniture A/c 1,840
To Stock A/c (58800 less dep @10%) 5880
To Outstanding rent A/c 2640 By Land and Building A/c 29,400
To capital A/c s:
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A's capital a/c 8,160
B's capital a/c 6,800
C' capital a/c 4,080 19,040
29,400 29,400
Partners’ Capital Account
Particulars A(Rs.) B(Rs.) C(Rs.) D(Rs.) Particulars A(Rs.) B(Rs.) C(Rs.) D(Rs.)
To Goodwill A/c 4,500 3,750 2,250 By balance b/d 70,800 59,700 29,100 .
By General reserve 9,000 7,500 4,500 .
By revaluation A/c 8,160 6,800 4,080 .
By Premium for goodwill A/c 1,508 1,256 754 .31,882
95,646 79,705 47,823 31,882 By Cash A/c 8,199 11,639 .35,400
To bal.c/d 1,00,146 81,455 50,073 35,400 Balance b/d 10,678 83,455 .31,882
100,146 50,073
95,646 79,705 47,823

Balance Sheet of the New Firm
Liabilities (Rs.) Assets (Rs.)
Creditors 37,800 Cash 69,696
Bills Payable 12,600 52,920
Outstanding repairs 2,640 Debtors
Capital 2,55,056 52,920
A 95,646 Stock
B 79,705 Furniture 12,860
C 47,823 Land Building
D 31,882 3,08,096 1,19,700
3,08,096
Working Notes:
Calculation of New Profit Sharing Ratio :
1. Share given to D = 1/8, Balance of profit = 1 – 1/8 = 7/8
Hence, A’s Share = 7/8 ×6/4 = 42/112
B’s Share =7/8 ×5/14 = 35/112
C’s Share = 7/8×3/14 = 21/112
A:B:C:D
New Ratio : 42/112 : 35/112 : 21/112 : 1/8 = 42 : 35 : 21 : 14/112 or 6 : 5 : 3 : 2 =A:B:C:D
Capital of D = Rs 35,400 - 35/8 = Rs. 31,882
Total capital of Firm = Rs. 31882 × 16/2 = Rs. 255056
Capital of A = Rs. 255056 ×6/16 = Rs. 95646
Capital of B = Rs. 255056 ×5/16 = Rs. 79705
Capital of C = Rs. 255056×3/16 = Rs. 47823
2. Calculation of new capital of A, B, and C based on D’s Capital for 1/8 share is Rs. 31,882. Thus
Capital of whole firm = 31882× 8/1 =Rs. 255056
Therefore, capital will be same as calculated above. And D's capital will be Rs. 31882
3. Calculation of share of profit on revaluation profit on revaluation = 19040 share of A = 19040 ×6/14 = 8160 share of B =
19040 × 5/14 = 6800 share of C = 19040 × 3/14 = 4080
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Dr. Cr.
Particulars Amount Particulars Amount
To Plant & Machinery A/c 1,00,000 By Stock A/c 50,000
To Provision for Doubtful Debts A/c 8,000 By Investments A/c 20,000
By Debtors A/c 10,000
By revaluation Loss transferred to
B's Capital A/c 11,200 28,000
1,08,000 1,08,000
Partner's Capital Account
Dr. Cr.
To Revaluation A/c 16,800 11,200 By Balance b/d 10,00,000 8,00,000
By Investment A/c 30,000 20,000
By premium for goodwill A/c 1,00,000 50,000
To Balance c/d 11,13,200 8,58,800 4,93,000
11,30,000 8,70,000 4,93,000 11,30,000 8,70,000 4,93,000

Balance Sheet
Dr. Cr.
Capital account balances: Sundry Debtors 7,60,000
Less: Provision for Debtors 38,000 7,22,000
A 11,13,200
B 8,58,800 Stock 5,00,000
C 4,93,000 24,65,000 Machinery 5,00,000
Investment 2,20,000
27,15,000 27,15,000
W.N:-
100
Actual value of Stock = ₹ 4,50,000 × 90
= ₹ 5,00,000
100
Actual value of Plant & Machinery = ₹ 6,00,000 × 120
= ₹ 5,00,000
A's Sacrifice = 2
15
B's Sacrifice = 2
5
×
1
6
=
1
15
Sacrifice Ratio = 2 : 1
Calculation of New Ratio:-
3 2 9−2 7
A's New Ratio = 5
−
15
=
15
=
15
6−1
B's New Ratio = 2
5
−
1
15
=
15
=
5
15
2+1
C's New Ratio = 2
15
+
1
15
=
15
=
3
15
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New Ratio = 7 : 5 : 3
Calculation of Capital:-
Capital of A and B = ₹ 11,13,200 + ₹ 8,58,500 = ₹ 19,72,000
5
Total Capital of the firm = ₹19,72,000 × 4
= ₹ 24,65,000
C's Capital = ₹24,65,000 × 1
5
= ₹ 4,93,000
18. JOURNAL
2023
March 1 X's Capital A/c Dr. 1,50,000
Y's Capital A/c 90,000
To Goodwill A/c 2,40,000
(Goodwill already existing in the books, now written off in old ratio i.e., 5 : 3)
March 1 Bank A/c Dr. 1,00,000
To Z's Capital A/c 1,00,000
(Amount brought in by Z as his capital)

2
March 1 Z's Current A/c ( 9
of 1,80,000) Dr. 40,000
(Z's share of goodwill credited to X and Y in their sacrificing ratio i.e., 13 : 3)

Working Note : Calculation of Sacrificing Ratio:
Old Ratio - New Ratio
X's Sacrifice = − =
5
8
4
9
=
45−32
72
13
72
27−24
Y's Sacrifice = 3
8
−
3
9
=
72
=
3
72
Thus, Sacrificing ratio between X and Y = 13 : 3

19. Books of A, B and C
Journal
Dr. Cr.
(Rs) (Rs)
1. Cash A/c Dr. 15,000
Stock A/c Dr. 24,000
Furniture A/c Dr. 30,000
Machinery A/c Dr. 36,000
To Sumit's Capital A/c 85,000
(Being the premium for goodwill and capital brought in by Sumit for his l/4th share)
2. Premium for Goodwill A/c Dr. 20,000
To Prasant's Capital A/c 12,000
To Nilesh's Capital A/c 8,000
(Being the premium for goodwill distributed between Prasant and Nilesh according to their
sacrificing ratio 3 : 2)
Working Notes :
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1. Calculation of Sumit’s share of goodwill: Total Goodwill of the firm = 80,000. Hence, Sumit’s share of Goodwill = 1/4 ×
80,000 = Rs 20,000.
2. Calculation of the new profit sharing ratio of the partners in the new firm :
Sumit’s share = 1/4th. Hence, the total share of Prasant and Nilesh in the new firm afer Sumit's share would be = 1 - 1/4 = 3/4
th.
3. Calculation of new profit Sharing ratio
4. Prasant’s new share = 3/5 of 3/4th = 3/5 × 3/4 = 9/20
5. Nilesh’s new share = 2/5 of 3/4th = 2/5 × 3/4 = 6/20
Therefore, the new profit sharing ratio of Prasant, Nilesh and Sumit would be as follows :
Prasant : Nilesh, Sumit = 9/20 : 6/20 : 1/4 = 9/20 : 6/20 : 5/20 = 9 : 6 : 5
20. (i) Calculation of New Profit Sharing Ratio of Sunil, Pummy and Preeti for the year 2022-23:-
Preeti's share = 1
5
th
Preeti acquired her share equally from Sunil and Pummy
Therefore, Preeti acquired th from Sunil and th form Pummy
10
1 1
10
New Share = Old Share - Sacrifice Share

Sunil's New share
40−7 33
= 4
7
−
1
10
=
70
=
70
Pummy's New Share

30−7
= − 3
7
=
1
10
=
70
23
70
Preeti's share
= 1
5
×
14
14
=
14
70
New profit sharing ratio = 33 : 23 : 14

(ii) Calculation of New Profit Sharing Ratio of Sunil, Pummy, Preeti and Yogesh on Punit's admission:-
Old ratio = 33 : 23 : 14
Yogesh is admitted for th share 1
Which he acquired from Sunil and Pummy in 7 : 3

1 7 7
Yogesh acquired share from Sunil = 7
×
10
=
70
1 3 3
Yogesh acquired share from Pummy = 7
×
10
=
70
33 7 26
Sunil's new share = 70
−
70
=
70
23 3 20
Pummy's new share = 70
−
70
=
70
26 20 26 20 10
New ratio = 70
:
70
:
14
70
:
1
7
⇒
70
:
70
:
14
70
:
70
= 26 : 20 : 14 : 10 or 13 : 10 : 7 : 5
21. JOURNAL ENTRIES
Cr.
Date Particulars L.F. Dr. (₹)
(₹)
2022
April
Freehold Premises A/c Dr. 5,000
1
(Increase in the value of Freehold Premises and decrease in provision for doubtful-debts
recorded in revaluation)
To Machinery and Plant A/c 500
To Stock A/c 1,250
To Investments A/c 1,050
(Decrease in the value of Assets recorded in revaluation)
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(The transfer of profit in revaluation to partner's account)
Cash A/c Dr. 10,800
To C’s Capital A/c 6,000
(The amount of capital and premium for goodwill introduced by C in the firm)
To A's Loan A/c 2,880
To B's Loan A/c 1,920
(Premium for goodwill transferred to the Loan Accounts of old partners)
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Balance c/d 25,920 10,280 6,000 By Balance b/d 24,000 9,000 -
By Revaluation 1,920 1,280 -
By Cash - - 6,000
25,920 10,280 6,000 25,920 10,280 6,000

Creditors 15,000 Freehold Premises 15,000
Bills Payable 4,310 Machinery and Plant 4,000
Provision for Doubtful Debts 3,000 Furniture 900
Loan Accounts: Stock 11,250
A 2,880 Debtors 22,500
B 1,920 Investments 3,200
Capital Accounts: Cash 12,460
A 25,920
B 10,280
C 6,000
69,310 69,310
2
C takes 7
th share out of 1.
2 5
Remaining share = 1 - 7
=
7
3 5 3
∴ A's share = 5
th of 7
=
7
2 5 2
B's Share = 5
th of 7
=
7
3
New ratio of A : B : C = 7
:
2
7
:
2
7
or 3 : 2 : 2.
22. JOURNAL
Date Particulars Dr. (₹) Cr. (₹)
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2022 April
1
Debtors A/c Dr. 80,000
Land A/c Dr. 2,00,000
Plant and Machinery A/c Dr. 1,20,000
To C's Capital A/c 3,35,000
To Premium for Goodwill 1,25,000
(Assets contributed by on his admission as his capital and his share of goodwill
premium)
April 1 Premium for Goodwill A/c Dr. 1,25,000
(Goodwill premium transferred to the capital accounts of A and B in sacrificing ratio of 1

: 3)
C' CAPITAL ACCOUNT
Dr. Cr.
Date Particulars ₹ Date Particulars ₹
2022 April 1 To Balance c/d 3,35,000 2022 April 1 By Sundry Assets A/c 3,35,000
Working Notes:-
i. C's share of Goodwill = 7,50,000 × 1
6
= ₹1,25,000
ii. Calculation of Sacrificing Ratio =
7 13 14−13 1
A= 12
−
24
= 24
= 24
10−7
B= 5
12
−
7
24
= 24
= 3
24
Thus Sacrificing Ratio = 1 : 3
23. Date Particulars L.F. Amount Dr. Amount Cr.
Bank A/c Dr. 50,000
To C's Capital A/c 50,000
(Being of Capital brought in cash)
Case (a) Bank A/c Dr. 16,000
Goodwill A/c Dr. 16,000
(Being goodwill credited to old partners in their sacrificing ratio)
Case (b) C's Capital A/c Dr. 16,000
(Being C's share of goodwill credited to old partners in their sacrificing ratio)
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Working Note:-
Valuation of Goodwill:-
30,000+35,000+43,000
Average Profit = 3
1,08,000
Average Profit = 3
Average Profit = ₹36,000

9−8
A's Sacrificing Ratio = − =
1
2
4
9
=
18
1
18
3 9−6 3
B's Sacrificing Ratio = 1
2
−
9
=
18
=
18
Dr. Cr.
To Revaluation Profit transferred to: By Building A/c 1,00,000
Mohan's Capital A/c 84,000 By Stock A/c 40,000
Mahesh's Capital A/c 56,000 1,40,000
1,40,000 1,40,000
Dr. Cr.
Particulars Mohan Mahesh Nusrat Particulars Mohan Mahesh Nusrat
To Balance c/d 3,92,000 2,08,000 1,20,000 By Balance b/d 1,00,000 80,000 ---
By Revaluation A/c 84,000 56,000 ---
By General Reserve A/c 96,000 64,000 ---
By Workmen Compensation Fund A/c 12,000 8,000 ---
By Goodwill A/c 1,00,000 --- ---
By Cash A/c --- --- 1,20,000
3,92,000 2,08,000 1,20,000 3,92,000 2,08,000 1,20,000

Balance Sheet
Dr. Cr.
Workmen Compensation Claim 2,30,000 Sundry Debtors 1,60,000
Stock 1,60,000
Capital account balances: Machinery 1,00,000
Mohan 3,92,000 Building 3,80,000
Mahesh 2,08,000
Nusrat 1,20,000 7,20,000
11,60,000 11,60,000
Working Notes:-
100
Actual value of stock = ₹ 1,20,000 × 75
= ₹ 1,60,000
Calculation of Nusrat's Capital:-
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Capital of Mohan and Mahesh = ₹ 3,92,000 + ₹ 2,08,000 = ₹ 6,00,000
Nusrat's Capital = ₹6,00,000 × = ₹ 1,20,000 20
100
25. Journal
Date Particulars L.F. Dr.(Rs) Cr.(Rs)
2012 Jan. 1 Bank A/c Dr. 1,60,000
To R's Capital A/c 1,60,000
(Being the cash brought in by R’s for his capital)
Jan. 1 R's Capital A/c Dr. 50,000
To P's Capital A/c 25,000
To Q's Capital A/c 25,000
(Being the credit given for goodwill to P and Q on R’s admission) (WN 2)
Working Notes :
i. In the absence of the old profit sharing ratio between P and Q, the profits are divided equally.
ii. Calculation of Hidden Goodwill : R’s capital = 1,60,000 for 1/4th share
a. Hence, Total capital of the new firm based of R's capital and his profit sharing ratio = Rs 1,60,000 × 4 = Rs 6,40,000
b. Total capital of P, Q and R = Rs 1,60,000 + Rs 1,20,000 + Rs 1,60,000 = Rs 4,40,000
∴ Goodwill of the firm = Toal capital (On the basis of R's capital ) - Acual capital = Rs.6,40,000 - Rs.4,40,000 = Rs
2,00,000.
R’s share = 1/4 × Rs 2,00,000 = Rs 50,000
26. JOURNAL
Debit Credit
Amount Amount
Ankur’s Capital A/c Dr. 4,80,000
Bobby’s Capital A/c Dr. 3,20,000
Rohit’s Capital A/c Dr. 2,00,000
To Profit and Loss A/c 10,00,000
(Loss debited to Partners’ Capital Accounts)(Refer WN 2)
Ankur’s Capital A/c Dr. 3,20,000
Bobby’s Capital A/c Dr. 80,000
To Rohit’s Capital A/c 4,00,000
(Deficiency borne by Ankur and Bobby in the ratio of 4:1)(Refer WN 3)

Working Notes:
WN 1: Calculation of New Ratio
Rohit's Share = 1
Let total share =1

Remaining Share =1 - 1
5
=
4
Ankur's New Share = 4
5
×
3
5
=
12
25
Bobby's New Share = 4
5
×
2
5
=
8
25
New Ratio of Ankur, Bobby and Rohit =12: 8: 5

WN 2: Calculation of Share of Loss
12
Ankur's Share of Loss = 10,00,000 × 25
= ₹ 4,80,000
8
Bobby's Share of Loss = 10,00,000 × 25
= ₹ 3,20,000
Rohit's Share of Loss =10,00,000 × 5
25
= ₹ 2,00,000
WN 3: Calculation of Deficiency
Amount payable to Rohit = Guaranteed Profit Amount + Loss transferred to Rohit’s Capital A/c
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Amount payable to Rohit = 2,00,000 + 2,00,000 = ₹4,00,000
Deficiency is to be borne by Ankur and Bobby in the ratio of 4 : 1
Deficiency to be borne by Ankur = 4,00,000 × = ₹ 3,20,000
4
Deficiency to be borne by Bobby = 4,00,000 × 1
5
= ₹ 80,000
The minimum guaranteed amount shall be paid to partner when his share of profit as per the profit-sharing ratio is less than the
guaranteed amount.
27. Revaluation A/c
Particulars (₹) Particulars (₹)
To Furniture 11,000 By Debtors 5,000
To Provision for Doubtful Debts 6,250 By Land and Building 62,000
To Claim for Damages 8,000
To Profit Transferred:
Chander 20,875
Damini 20,875
67,000 67,000
Partners' Capital A/c
Particulars Chander Damini Elina Particulars Chander Damini Elina
₹ ₹ ₹ ₹ ₹ ₹
To Bank A/c 12,500 12,500 .... By Balance b/d 2,50,000 2,16,000 ....
To Balance c/d 2,83,375 2,49,375 3,00,000 By Balance A/c .... .... 3,00,000
By Premium for Goodwill A/c 25,000 25,000 ....
By Revaluation A/c 20,875 20,875 ....
2,95,875 2,61,875 3,00,000 2,95,875 2,61,875 3,00,000

Working Notes
Provision for Doubtful Debts = (45,000 + 80,000) × 100
5
= ₹6,250
28. Date Particulars L.F. Amount Dr. Amount Cr.
(i) Bank A/c Dr. 2,00,000
To D's Capital A/c 1,40,000
Case (a) Premium for Goodwill A/c Dr. 60,000
(Being goodwill is transferred to old partners in the sacrificing ratio 3 : 2 : 1)
Case (b) Premium for Goodwill A/c Dr. 60,000
(Being goodwill is transferred to old partners in the sacrificing ratio 1 : 1)
Case (c) Premium for Goodwill A/c Dr. 60,000
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(Being goodwill is transferred to old partners in the sacrificing ratio 1 : 1)

Working Note:-
Case (a)
18−15
A's Sacrificing Ratio = − 3
6
=
15
36
=
36
3
36
10 12−10
6
−
36
=
36
=
2
36
6−5
C's Sacrificing Ratio = 1
6
−
5
36
=
36
=
36
1
Sacrificing Ratio of A, B and C = 3
36
:
2
36
:
1
36
Sacrificing Ratio of A, B and C = 3 : 2 : 1

Case (b)
3 5 6−5
A's Sacrificing Ratio = 6
−
12
=
12
=
12
1
4−3
6
−
3
12
=
12
=
12
1
2−2
6
−
2
12
=
12
=0
Sacrificing Ratio of A, B and C = 1
12
:
1
12
Sacrificing Ratio of A, B and C = 1 : 1

Case (c)
3−2
A's Sacrificing Ratio = 3
6
−
2
6
=
6
=
1
6
2 2 2−2
−
6
=
6
=0
1−1
6
−
1
6
=
6
=0
A alone has sacrificed.
29. JOURNAL ENTRIES
Ravi’s Current A/c (1/5th of 40,000) Dr. 8,000
To Hari’s Capital A/c (3/5 of 8,000) 4,800
To Kavi’s Capital A/c (2/5 of 8,000) 3,200
(Adjustment for Goodwill in sacrificing ratio)
To Hari’s Capital A/c 15,000
To Kavi’s Capital A/c 10,000
(Transfer of general reserve to old partners in old ratio)
Hari’s Capital A/c Dr. 2,400
Kavi’s Capital A/c Dr. 1,600
(Transfer of loss on revaluation to partners in old ratio)
Bank A/c Dr. 30,000
To Ravi’s Capital A/c 30,000
(Amount brought in by Ravi as capital)
Hari’s Capital A/c Dr. 4,400
To Hari’s Current A/c 4,400
(Surplus Capital Credited to Hari’s Current A/c)
Kavi’s Current A/c Dr. 1,400
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To Kavi’s Capital A/c 1,400
(Deficit capital debited to Kavi’s Current A/c)

W.N :
i. Hari’s Capital = 59,000 + 4,800 + 15,000 - 2,400 = ₹76,400
Kavi’s Capital = 35,000 + 3,200 + 10,000 - 1,600 = ₹46,600
ii. New Profit Sharing Ratios :
Ravi’s Share = ; Remaining Share = 1 -
1
5
1
5
=
4
5
3
Hari’s New Share = 4
5
×
5
=
12
25
4 2 8
Kavi’s New Share = 5
×
5
=
25
1 5
Ravi’s Share = 5
or 25
1
iii. Ravi brings in ₹30,000 for his 5
th share. Hence, total capital of the new firm
= 30,000 × 5
1
= ₹1,50,000
Hari’s Capital in the new firm = 1,50,000 × 12
25
= ₹72,000
Kavi’s Capital in the new firm = 1,50,000 × 8
25
= ₹48,000
Hari (₹) Kavi (₹)
Existing Capitals 76,400 46,600
Required Capitals in the new firm 72,000 48,000
Transferred to Current Accounts 4,400 Cr. 1,400 Dr.
Amount Amount
30. Dr. Cr.
To Stock A/c 3,000
To Furniture A/c 900
To Outstanding Repairs A/c 1,300
(Being decrease in the value of assets and liabilities created for damages recorded through
revaluation account)
Land and Building A/c Dr. 15,000
(Being increases in the value of land and building recorded through revaluation account)
To Ajay's Capital A/c 4,200
To Vijay's Capital A/c 3,500
To Kamal's Capital A/c 2,100
(Being profit on revaluation transfer to capital account of old partners in old profit sharing
ratio)
Cash A/c Dr. 14,000
To Subodh's Capital A/c 14,000
(Being capital introduced by the new partner)

Dr. Cr.
Particulars Ajay Vijay Kamal Subodh Particulars Ajay Vijay Kamal Subodh
By Balance b/d 40,000 33,500 25,000 ---

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To Balance c/d 44,560 37,300 27,280 14,000 By Revaluation A/c 4,200 3,500 2,100 ---
By Subodh's Current A/c 360 300 180 ---
By Cash A/c --- --- --- 14,000
44,560 37,300 27,280 14,000 44,560 37,300 27,280 14,000

Balance Sheet
Dr. Cr.
Bills Payable 6,000 Cash 15,500
Creditors 11,000 Debtors 26,500
Outstanding Repairs 1,300 Stock 27,000
Capital Account balances: Furniture 6,600
Ajay 44,560 Land and Building 65,000
Vijay 37,300 Subodh's Current A/c 840
Kamal 27,280
Subodh 14,000 1,23,140
1,41,440 1,41,440
Particulars (₹) Particulars (₹)
To Provision for doubtful debts 2,000 By Stock 10,000
To Workmen's compensation claim 10,000 By Cash/ Bad Debts Recovered 15,000
To Profit transferred to: By Creditors 27,000
Manisha’s Capital A/c 30,000
Arun’s Capital A/c 10,000 40,000
52,000 52,000
Partners Capital Accounts
Manisha Arun Sanjana
Particulars Particulars Manisha (₹) Arun (₹) Sanjana (₹)
(₹) (₹) (₹)
To Investments
- 22,000 - By Balance b/d 3,00,000 2,00,000 -
A/c
To Balance c/d 3,60,000 1,98,000 1,86,000 By Cash A/c - - 1,86,000
By Premium for goodwill A/c 30,000 10,000 -
By Revaluation A/c 30,000 10,000 -
3,60,000 2,20,000 1,86,000 3,60,000 2,20,000 1,86,000

Balance Sheet of Manisha, Arun and Sanjana
as on 31st March 2022
Liabilities (₹) Assets (₹)
Capitals: Machinery 4,70,000
Manisha 3,60,000 Investments 88,000
Arun 1,98,000 Debtors 1,20,000
Sanjana 1,86,000 7,44,000 Less Provision for doubtful debts 12,000 1,08,000
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Workmen’s compensation claim 70,000 Stock 1,50,000
Creditors 1,63,000 Cash 2,71,000
Employees Provident Fund 1,10,000
10,87,000 10,87,000
Working Notes :
i. Entries for Bad Debts recovered :
Bank A/c Dr. 15,000
To Bad Debts recovered A/c 15,000
Bad Debts recovered A/c Dr. 15,000

There will be no effect of the bad debts recovered on the amount of debtors appearing in the balance sheet.
ii. T otal Capital of Manisha and Arun after adjustment = ₹3,60,000 + ₹1,98,000 + ₹5,58,000
Sanjana is given th share of profits.
1
Thus, for 3
4
th share of profits the Capital = ₹5,58,000
Total Capital of the Firm = 5,58,000 × 4
3
= ₹7,44,000
Sanajan's Capital for 1
4
th Share = 7,44,000 × 1
4
= ₹1,86,000
Cash & Cash Balance = 30,000 + 15,000 (Bad Debts Recovered)
+ 1,86,000 + 40,000 = ₹2,71,000
Dr. Cr.
To Plant and Machinery A/c 30,000 By Stock A/c 20,000
To Debtors A/c 15,000 By Creditors A/c 7,000
To Provision for Doubtful Debts A/c 12,000 By Revaluation Loss transferred to :
A’s Capital A/c 18,000
B’s Capital A/c 12,000 30,000
57,000 57,000
PARTNER’S CAPITAL ACCOUNTS
Dr. Cr.
Particulars A B C Particular A B C
₹ ₹ ₹ ₹ ₹ ₹
To Advertisement Expenditure A/c 6,000 4,000 By Balance b/d 3,18,000 2,00,000
To Revaluation A/c 18,000 12,000 By Reserve A/c 54,000 36,000
To Balance c/d 3,54,000 2,26,000 By C’s Current A/c 6,000 6,000
3,78,000 2,42,000 3,78,000 2,42,000
To Balance c/d 3,54,000 2,26,000 1,45,000 By Balance b/d 3,54,000 2,26,000
3,54,000 2,26,000 1,45,000 3,54,000 2,26,000 1,45,000

BALANCE SHEET
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Creditors 1,53,000 Cash at Bank 1,65,000
Outstanding Expenses 12,000 Debtors 2,20,000
Capital Account balances : Less: Bad Debts 15,000
A 3,54,000 2,05,000
B 2,26,000 Less: Provision for doubtful debts 12,000 1,93,000
C 1,45,000 7,25,000 Stock 2,00,000
Plant and Machinery 1,20,000
Buildings 2,00,000
C’s Current A/c 12,000
8,90,000 8,90,000
Full value of stock = 1,80,000 × 100
90
= ₹2,00,000
Value shown in Balance Sheet = 1,80,000
Stock to be increased by : 20,000
1. C’s share of Goodwill = 60,000 × 1
5
= ₹12,000
A’s share of Goodwill = 12,000 × 1
2
= ₹6,000
B’s share of Goodwill = 12,000 × 1
2
= ₹6,000
C’s Current A/c Dr. 12,000
To B’s Capital A/c 6,000
(Goodwill credited to A and B in sacrificing ratio)

2. C's share in profit = 1
For 4
5
the share, combined capital of A and B = 3,54,000 + 2,26,000 = 5,80,000
5
Total Capital of the new firm = 5,80,000 × 4
= 7,25,000
C’s Capital = 7,25,000 × 1
5
= ₹1,45,000
33. In the books of the firm
Journal Entries
Amount Amount
Dr. Cr.
2017
April
01
(Being general reserve transfer to old partner's capital account in old profit sharing ratio)
Plant A/c Dr. 2,000
Sundry Creditors A/c Dr. 1,400
(Being increase in value of plant and decrease in creditors recorded through revaluation
account)
To Stock A/c 2,000

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To Workmen Compensation A/c 2,000
(Being decrease in assets and provision for liability for workmen compensation recorded
through revaluation account)
A's Capital A/c Dr. 900
B's Capital A/c Dr. 600
(Being loss on revaluation transfer to old partner's capital account in old profit sharing
ratio)
Cash A/c Dr. 30,000
(Being amount of capital and goodwill brought in by C in cash)
Goodwill A/c Dr. 10,000
(Being goodwill credited to old partners in old profit sharing ratio)
To A's Current A/c 5,100
(Being A's excess capital credited to his current account)
To B's Current A/c 8,400
(Being B's excess capital credited to his current account)

Balance Sheet
Dr. Cr.
Liability for workmen compensation claim 2,000 Stock 18,000
Current A/c: Patents 10,000
A's 5,100 Debtors 18,000
B's 8,400 13,500 Less: Provision for Doubtful Debts 900 17,100
Capital Account balances: Plant 32,000
A 36,000
B 24,000
C 20,000 80,000
1,09,100 1,09,100
W.N:-
Calculation of New Profit Ratio:-
C's Share = 1
4
3
Balance of Profits = 1 - 1
4
=
4
3 3 9
A's = 4
×
5
=
20
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B's = 3
4
×
2
5
=
6
20
C's = 1
4
9 6
New Ratio of A, B and C = 20
:
20
:
1
New Ratio of A, B and C = 9 : 6 : 5

Total Capital of new firm = ₹20,000 × 4
1
= ₹80,000
9
A's Capital = ₹80,000 × 20
= ₹36,000
6
B's Capital = ₹80,000 × 20
= ₹24,000
34. Calculation of new profit sharing ratio :
Ashok’s sacrifice = × = ; Ramu’s sacrifice =
1
2
1
5 10
1 1
2
×
1
5
=
1
10
New share = Old Share - Sacrificed Share

Ashok's new share = − =
3
5
; Ramu’s new share =
1
10
5
10
2
5
−
1
10
=
3
10
Vijay’s New Share = 1×2
5×2
=
10
2
; New Ratio = 5 : 3 : 2
Valuation of Goodwill of the firm :
Hidden goodwill = Total capital of the new firm - exisiting capital of all the partners
60,000×5
Total capital of the new firm =C's capital X recerse of his share = 1
= Rs 3,00,000
Total capital of Ashok, Ramu and Vijay = Rs 80,000 + 60,000 + 60,000 = Rs 2,00,000
Goodwill of the firm = Rs 3,00,000 - 2,00,000 = Rs 1,00,000
C's share of goodwill = 1,00,000 x 1/5 = 20,000
i.e is to be distributed between the partners in their sacrificing ratio & i.e 1:1
Journal
Date Particulars L.F. Dr.(Rs) Cr.(Rs)
2011 Jan 1 Bank A/c Dr. 60,000
To Vijay's Capital A/c

60,000
(Being capital brought in by Vijay in cash)
Vijay's current A/c Dr. 20,000
To Ashok's Capital A/c (20,000 x 1/2) 10,000
To Ramu's Capital A/c (20,000 x 1/2)

10,000
(Being goodwill distributed between sacrificing partners)
Dr. Cr.
To Stock A/c 6,000 By Premises A/c 25,000
To Electric Charges Outstanding A/c 7,000
To Plant and Machinery A/c 20,000
To Prepaid Expenses A/c 12,000 By revaluation Loss transferred to:
P's Capital A/c 15,000
Q's Capital A/c 5,000 20,000
45,000 45,000
Dr. Cr.
Particulars P Q R Particulars P Q R
To Revaluation A/c 15,000 5,000 By Balance b/d 3,50,000 2,20,000 ---
To Balance c/d 4,00,000 2,30,000 By Profit & Loss A/c 45,000 15,000 ---
By R's Capital A/c 20,000 --- ---
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By Bank A/c --- --- 2,10,000
4,15,000 2,35,000 2,10,000 4,15,000 2,35,000 2,10,000

Balance Sheet
Dr. Cr.
Sundry Creditors 30,000 Bank 2,25,000
Electric Charges Outstanding 7,000 Debtors 60,000
Capital account balances: Stock 1,44,000
P 4,00,000 Prepaid Expenses 8,000
Q 2,30,000 Plant and Machinery 1,20,000
R 2,10,000 8,40,000 Premises 3,00,000
8,77,000 8,77,000
W.N:-
Calculation of Capital:-
Capital of P and Q = ₹4,00,000 + ₹2,30,000 = ₹6,30,000
4
Total Capital of the firm = ₹6,30,000 × 3
= ₹8,40,000
R's Capital = ₹8,40,000 × 1
4
= ₹2,10,000
Dr. Cr.
To Building A/c 15,000 By Revaluation Loss transferred to:
To Machinery A/c 2,000 A's Capital A/c 11,424
To Provision for Doubtful Debts A/c 2,040 B's Capital A/c 7,616 19,040
19,040 19,040
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
By Balance b/d 1,50,000 80,000
To Revaluation A/c 11,424 7,616 By General Reserve A/c 14,400 9,600
To Balance c/d 1,60,176 86,784 By Bank A/c 40,000
1,71,600 94,400 40,000 1,71,600 94,400 40,000
To Current A/c (B/f) 40,176 6,784 By Balance b/d 1,60,176 86,784 40,000
To Balance c/d 1,20,000 80,000 40,000
1,60,176 86,784 40,000 1,60,176 86,784 40,000

BALANCE SHEET OF NEW FIRM
as at 31st March, 2016
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Bills Payable 20,000 Bank 52,000
A's Current A/c 40,176 Debtors 34,000
B's Current A/c 6,784 Less: Provision for Doubtful Debts 2,040 31,960
Partner's Capital Account balances: Stock 24,000
A 1,20,000 Machinery 40,000
B 80,000 Building 1,85,000
C 40,000 2,40,000
3,42,960 3,42,960
W.N.:
5
1. Share give to C = 1
6
; Remaining Share = 1 - 1
6
=
6
5 3 3
A's new share = 6
×
5
=
6
5
B's new share = 6
×
2
5
=
2
C's share = 1
6
Thus, new profit sharing ratio is 3:2:1.
2. Based on C's Capital, the total Capital of the new firm will be:
6
40,000 × = ₹2,40,000
1
3
A's Capital in the new firm = 2,40,000 × 6
= ₹1,20,000
2
B's Capital in the new firm = 2,40,000 × 6
= ₹80,000
3. A B
Existing Capital 1,60,176 86,784
Capitals in the new firm 1,20,000 80,000
Excess Capital transferred to Current Accounts 40,176 6,784

Particulars Rs. Particulars Rs.
To Provision for Doubtful debts 9000 By Loss Transfer:
To Furniture 1200 A 10800
To Stock 6000 B 5400 16200
16200 16200
To Revaluation 10800 5400 - By Balance b/d 160000 120000 -
To Balance c/d 237200 158600 48000 By General Reserve 64000 32000 -
By Bank - - 48000
By Premium for goodwill 24000 12000 -
248000 164000 48000 248000 164000 48000

Balance Sheet after C's admission
Liabilities Rs. Assets Rs.
Capitals: Building 80000
A 237200 Furniture 22800
B 158600 Stock 42000
C 48000 209500 Debtors 240000
Less: Provision 9000 231000

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Bank 132000
507800 507800
38. Dr Revaluation Account Cr
Particulars Amt (₹) Particulars Amt(₹)
To Bad Debts 900 By Stock A/c 5,000
To Profit Transferred to Capital A/cs 2,050
Amit 2,050 4,100
Vidya 5,000 5,000
Dr Partners’ Capital Account Cr
Particulars Amit(₹) Vidya(₹) Chintan(₹) Particulars Amit(₹) Vidya(₹) Chintan(₹)
To Goodwill A/c 10,000 10,000 __ By Balance b/d 1,10,000 60,000 __
To Profit and By Revaluation
Loss A/c 5,000 5,000 __ A/c (Profit) 2,050 2,050 __
To Stock A/c __ 35,000 __ By Workmen's,
Compensation
To Cash A/c 42,500 __ __ Fund A/c 15,000 15,000 __
(Balancing figure) By Premium for
Goodwill A/c 5,000 5,000 __
To Balance c/d 74,550 74,550 49,700 By Cash A/c(Balancing figure) __ 42,500 __
By Cash A/c(Balancing figure) __ __ 49,700
1,32,050 1,24,550 49,700 1,32,050 1,24,550 49,700

Working Note
1. Calculation of New Profit Sharing Ratio
Let total profit be = 1
Chintan gets the share
1
4
1 3
Remaining share = 1 − 4
=
4
will be shared by Amit and Vidya in their old profit sharing ratio
Amit's share = 3
4
×
1
2
=
3
Vidya's share 3
4
×
1
2
=
3
Chintan’s share = 1
4
×
1
2
=
2
New profit sharing ratio = 3 : 3 : 2.

2. Calculation of Chintan’s Share of Goodwill
Firm’s goodwill = ₹40,000
Chintan’s share = 40,000 × = 10,000; to be credited to Amit and Vidya in sacrificing ratio, Amit share = 10,000 × 1/2 =
1
5,000; Vidya share = 10,000 × 1/2 = 5,000

3. Adjustment of capital
Amt(₹)
Amit’s capital after adjustment 1,17,050
Vidya’s capital after adjustment 32,050
Combined capital for 3/4 share 1,49,100

Total capital of new firm = 1,49,100 × 4
3
= ₹1,98,800
Amit's capital = 1,98,800 × 3
8
= ₹74,550
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Vidya's capital = 1,98,800 × 3
8
= ₹74,550
Chintan's capital = 1,98,800 × 1
4
= ₹49,700
4. Goodwill appearing in the balance sheet will be written off in old sharing ratio among old partners
Amit's share = 20,000 × 1/2 = 10,000
Vidya's share = 20,000 × 1/2 = 10,000
5. Profit and loss(Dr) appearing in the balance sheet will be written off in old sharing ratio among old partners
Amit's share = 10,000 × 1/2 = 5,000
Vidya's share = 10,000 × 1/2 = 5,000
39. Working Note :
1. Calculation of sacrificing ratio:
Sacrifice = Old Share - New Share
Old Ratio of B,C = 3 : 2
New Ratio of B,C and D = 2:2:1
B's Sacrifice = 3/5 - 2/5 = 1/10
C's Sacrifice = 2/5 - 2/5 = 0
Only B is sacrificing. hence Premium for Goodwill brought by D will be credited to B's capital A/C
2. Adjustment of capital :
For 1/5th share, D Brought capital = 30,000
Therefore, the total Capital of the Firm= 30,000× 5/1= 1,50,000
thus, B's Capital- 1,50,000× 2/5= 60,000
C's Capital - 1,50,000× 2/5= 60,000
D's Capital- 1,50,000× 1/5= 30,000
3. Cash A/c
Dr. Cr.
Particulars Amount Particulars amount
To balance b/d 16,000 By B's Capital (goodwill) 7,500
To D's Capital 30,000 By B's Capital (Capital ) 1,170
To Premium for goodwill 15,000 By balance c/d 76,550
To C's capital 24,220
85,220 85,220
Revaluation A/c
To Provision For Doubtful Debts 250 By Creditors 500
To Provision For Claim For Damages 800 By Revaluation Loss
B 330
C 220 550
1,050 1,050
Partners Capital A/c
Particulars B C D Particulars B C D
To revaluation (Loss) 330 220 ........ By Balance b/d 60,000 40,000 .......
To P&L A/c 6,000 4,000 ........ By Premium For Goodwill 15,000 ........ .......
To Cash(Goodwill) 7,500 By Cash ....... ....... 30,000
To Cash (Bal. Fig.) 1,170 By Cash(Bal. Fig.) 24,220
To Bal c/d 60,000 60,000 30,000
75,000 64,220 30,000 75,000 64,220 30,000

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Balance Sheet
as at 31.3.2019
Creditors 59,500 Land and building 80,000
Provision For Claim For damages 800 Machinery 20,000
Capital A/c's Furniture 10,000
B 60,000 Debtors 25,000
C 60,000 (-) Provision for Bad Debts (1250) 23,750
D 30,000 1,50,000 Cash 76,550
2,10,300 2,10,300
40. JOURNAL
Date Particulars L.F Dr. (₹) Cr. (₹)
2019 April
Cash/Bank A/c Dr. 24,000
1
To D's Capital A/c 15,000

9,000
(Being the amount brought in by D)
To C's Capital A/c

(Being the goodwill credited to sacrificing partners in their sacrificing ratio which is 1 3,000
:1 :1)
Memorandum Revaluation A/c Dr. 1,920
To Stock A/c 1,140
To Provision for Doubtful Debts A/c

540
(Being the record of decrease in value of assets)
To Liability against Bill Discounted A/c

1,080
(Being the record of increase in liability)
To Memorandum Revaluation A/c

8,500
(Being the record of increase in value of asset)
To C's Capital A/c

1,834
(Being the transfer of gain (profit) on revaluation)
Stock A/c Dr. 1,140
Furniture A/c Dr. 240

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Provision for Doubtful Debts A/c Dr. 540

1,920
(Being the revalued item written back to their old values)
Liability against Bills Discounted A/c Dr. 1,080

1,080
(Being the revalued item written back to its original value)
To Building A/c
8,500
(Being the revalued item written back to its original value)
A's Capita! A/c Dr. 1,375
B's Capita! A/c Dr. 1,375
C's Capital A/c Dr. 1,375
D's Capital A/c Dr. 1,375

5,500
(Being the gain (profit) on revaluation already credited, eliminated)
BALANCE SHEET OF RECONSTITUTED FIRM as at 1st April, 2019
Bills Payable 3,300 Cash (₹600 + ₹24,000) 24,600
Creditors 6,000 Stock 11,400
Capital A/cs (Note): Debtors 10,800
A 20,258 Furniture 2,400
B 16,058 Building 19,500
C 9,459
D 13,625 59,400
68,700 68,700
Note: By preparing the Partners' Capital Accounts students can get balances of Capital Accounts.
Dr. Cr.
To Reserve for D. Debts A/c(27,500 × 2%) 550 By Freehold Premises A/c (22,400 - 20,000) 2,400
To Stock A/c 705 By Revaluation Loss transferred to:
To Plant and Machinery A/c (13,500 - 11,800) 1,700 Ram’s Current A/c 717
To Fixture and Fittings A/c 210 Shyam’s Current A/c 598
To Vehicles A/c 550
3,715 3,715
Partners’ Capital Accounts
Dr. Cr.
Particulars Ram Shyam Arjun Particulars Ram Shyam Arjun
To Revaluation A/c 717 598 By Balance b/d 2,000 1,800
To Balance c/d 4,883 4,202 By Premium for Goodwill A/c 3,600 3,000
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5,600 4,800 5,600 4,800
Balance Sheet as on 1st April, 2019
Creditors 19,000 Freehold Premises 22,400
Bills Payable 16,000 Plant and Machinery 11,800
Capital Account balances: Fixture and Fittings 1,540
Ram 30,000 Vehicles 800
Shyam 25,000 Stock (14,100 – 705) 13,395
Arjun 20,000 75,000 Bills Receivables 13,060
Current Account balances: Debtors 27,500
Ram 4,883 Less: 2% Reserve for Doubtful Debts 550 26,950
Bank 1,590
Shyam 4,202 9,085 Cash (950 + 20,000 + 6,600) 27,550
1,19,085 1,19,085
In the books of the firm
Journal Entries
Particulars L.F.
(₹) (₹)
Cash A/c Dr. 26,600
To Arjun’s Capital 20,000
To Premium for Goodwill

6,600
(Arjun brought Capital and his share of goodwill in cash)
To Ram’s Current A/c 3,600
To Shyam’s Current A/C

(Premium for Goodwill transferred to partners current account in sacrificing 3,000
ratio i.e. 6:5)
Capital 30,000 : 25,000
Ratio 6 : 5
Arjun admitted for share of profit
1
Combined share of Ram and Shyam after Arjun’s admission = 1 - Arjun's share
=1− 1
= 3
New Ratio = Old Ratio − Combined share of Ram and Shyam

Ram's = ×
6
11
=
3
4
18
44
Shyam's = 5
11
×
3
4
=
15
44
18 15 18:15:11
New Profit sharing Ratio 44
:
44
:
1
4
= 44
WN1 Distribution of Premium for Goodwill

6
Ram will get = 6600 × = ₹3,600 11
5
Shyam will get = 6, 600 × 11
= ₹3,000
WN2 Distribution of Loss on Revaluation
Ram's Capital Account will be debited by = 1, 315 × 6
11
= ₹717 (approx.)
Shyam's Capital Account will be debited by = 1, 315 × 5
11
= ₹598 (Approx.)
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Dr. Cr.
To Plant A/c (650 - 500) 150 By Reserve for Doubtful Debts A/c(400 - 100) 300
To Revaluation Profit transferred to:- By Stock A/c 500
Mohan Capital 390
Sohan Capital 260
800 800
Dr. Cr.
Particulars Mohan Sohan Rohan Particulars Mohan Sohan Rohan
To Balance c/d 2,990 1,660 By Balance b/d 2,000 1,000
By Revaluation A/c 390 260
By Premium for Goodwill A/c 600 400
2,990 1,660 2,990 1,660
By Cash A/c 2,325
2,990 1,660 2,325 2,990 1,660 2,325

Balance Sheet
as on March 31, 2019 after Rohan’s admission
Capital Account balances: Cash 3,975
Mohan 2,990 Debtors 1,000
Sohan 1,660 Less: Reserve for Doubtful Debts 100 900
Rohan 2,325 6,975 Stock 2,000
Creditors 400 Plant 500
7,375 7,375
WN1
WN2
Distribution of Premium for Goodwill
Mohan will get = 1, 000 × = ₹6003
Sohan will get = 1, 000 × 2
5
= ₹400
WN3
Distribution of Revaluation Profit
3
Mohan's share = 650 × 5
= ₹390
2
Sohan's share = 650 × 5
= ₹260
WN4
Combined Capital of Mohan and Sohan after all adjustments = 2,990 + 1,660 = ₹4,650
Total Capital of the firm on the basis of combined capital of Mohan and Sohan
= 4, 650 × = 6,975
3
Rohan's Capital = 6, 975 × 1
3
= ₹2,325
WN5
Cash Account
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Dr. Cr.
To Balance b/d 650
To Rohan’s Capital A/c 2,325
To Premium for Goodwill A/c 1,000 By Balance c/d 3,975
3,975 3,975
To Furniture 30,000 By Investments 40,000
To Profit transferred: By Stock 30,000
Sanjana 24,000
Alok 16,000 40,000
70,000 70,000
Partners' Capital A/c

Particulars Sanjana Alok Nidhi Particular Sanjana Alok Nidhi
Rs. Rs. Rs. Rs. Rs. Rs.
To Cash 30,000 20,000 .... By Balance b/d 5,00,000 4,00,000 ....
To Investment .... 3,00,000 .... By Cash .... .... 3,00,000
To Cash 50,000 .... .... By Premium for goodwill 60,60,000 40,000 ....
To Balance c/d 5,40,000 3,60,000 3,00,000 By Workmen Compensation Reserve 36,000 24,000 ....
By Revaluation 24,000 16,000 ....
By cash .... 2,00,000 ....
6,20,000 6,80,000 3,00,000 6,20,000 6,80,000 3,00,000

Balance Sheet
as at 31.03.2018
Creditors 60,000 Cash at bank 6,66,000
Capital Accounts: Debtors 1,46,000
Sanjana 5,40,000 Less Provision for doubtful debts 2,000 1,44,000
Alok 3,60,000 Furniture 2,70,000
Nidhi 3,00,000 12,60,000 Stock 1,80,000
12,60,000 12,60,000
Dr. Cr.
Reserve for D. Debts 4,000 Plant and Machinery (60,000 – 48,000) 12,000
Less: Old Reserve 800 3,200 Stock (40,000 – 32,000) 8,000
Furniture 10,000 × 10% 1,000 Land and Building (50,000 × 20%) 10,000
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Profit transferred to
Deepika Capital 10,680
Rajshree Capital 7,120
30,000 30,000
Dr. Cr.
Particulars Deepika Rajshree Anshu Particulars Deepika Rajshree Anshu
Balance c/d (before adjustment of

58,680 47,120 32,000 Balance b/d 48,000 40,000
Goodwill)
Revaluation 10,680 7,120
Cash 32,000
58,680 47,120 32,000 58,680 47,120 32,000
Deepika 2,220 Balance b/d 58,680 47,120 32,000
Anshu’s Capital
Rajshree 2,220 2,220 2,220
(Goodwill)
Balance c/d 60,900 49,340 27,560
60,900 49,340 32,000 60,900 49,340 32,000

Balance Sheet as on March 31, 2019 after Anshu’s admission
Outstanding Salaries 8,000 Cash in Hand 1,200
Sundry Creditors 16,000 Cash at Bank 28,800
Public Deposits 61,000 Stock 40,000
Outstanding Liabilities 2,000 Prepaid Insurance 1,000
Capital A/cs: Sundry Debtors 28,800
Deepika 60,900 Less: reserve for D. Debts 4,000 24,800
Rajshree 49,340 Plant and Machinery 60,000
Anshu 27,560 1,37,800 Land and Building 60,000
Furniture 9,000
2,24,800 2,24,800
Working Notes
WN1: Calculation of Sacrificing Ratio
Old Ratio Deepika : Rajshree = 3 : 2
New Ratio Deepika : Rajshree : Anshu = 5 : 3 : 2
Sacrificing Ratio = Old Ratio − New Ratio
3 5 1
Deepika = 5
−
10
=
10
2 3 1
Rajshree = 5
−
10
=
10
WN2: Valuation of Goodwill
Capitalised value on the basis of Anshu’s share = 32,000× 10
2
= ₹1,60,000
Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000 = ₹1,37,800
Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill
= 1,60,000 − 1,37,800
= ₹22,200
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Anshu’s share of Goodwill = 22,200× 2
10
= ₹4,440
Deepika and Rajshree each will entitle for Goodwill = 4,440× 1
2
= ₹2,220
To Land and Building 20000 By Creditors 1200
To Stock 3200 By Loss Transfer:
To Provision for Doubtful Debts 1000 A 13800
B 9200 23000
24200 24200
To A's Capital - - 4000 By Balance b/d 86000 64000 -
To B's Capital - - 4000 By General Reserve 12000 8000 -
To Revaluation 13800 9200 - By Cash - - 50000
To Goodwill 6000 4000 - By C's capital 4000 4000 -
To Balance c/d 82200 62800 42000
102000 76000 50000 102000 76000 50000

Balance Sheet
Capital A/cs: Land and building 40000
A 82200 Machinery 70000
B 62800 Debtors 20000
C 42000 187000 Less: Provision for Doubtful debts 1000 19000
Creditors 30000 Stock 32800
Bank 4000
Cash 51200
217000 217000
Working Notes: Calculation of C's share of goodwill:-
Firm's Goodwill = 40000
1
C's Share of Goodwill = 40000 × 5
= ₹ 8000
1
A will get = 8000 × 2
= ₹ 4000
B will get = 8000 × 1
2
= ₹ 4000.
46. In this question there is a need to make Revaluation Account which means An increase in an asset's value in order to reflect the
current market value of the asset.
It is debited with the decrease in the value of assets and the increase in the value of liabilities. The balance of this account shows a
gain or loss on revaluation which is transferred to the Existing partners' capital account in existing profit sharing ratio.
Revaluation of fixed assets is an action that may be required to accurately describe the true value of the capital goods a business
owns. ... The purpose of a revaluation is to bring into the books the fair market value of fixed assets.
Books of Pradip, Subal and Kuntal
Revaluation Account
Dr. Cr.
Particulars Amt(Rs) Particulars Amt(Rs)
To Building 2,80,000 By Loss transferred to:

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To Plant 60,000 A's Capital A/c 2,49,480
To Provision for Bad Debts 200 B's Capital A/c 90,720 3,40,200
3,40,200 3,40,200
Dr. Cr.
To Bank 55,000 20,000 --- By Balance b/d 20,00,000 5,50,000 ---
To Revaluation Loss 2,49,480 90,720 -- By Premium 1,10,000 40,000 ---
To Balance c/d 19,15,520 5,19,280 6,08,700 By Workmen Compensation Fund 1,10,000 40,000 --
By Bank 6,08,700
22,20,000 6,30,000 6,08,700 22,20,000 6,30,000 6,08,700

Balance Sheet
Liabilities (Rs) Assets (Rs)
Capitals: Building(14,00,000 - 2,80,000) 11,20,000
A 19,15,520 Plant 2,40,000
B 5,19,280 Debtors 30,000
C 6,08,700 30,43,500 (-) Provision for Bad Debts (1,200) 28,800
Workmen Compensation Fund 10,000 Stock 29,000
Creditors 15,000 Land 10,00,000
Bills Payable 30,000 Bank 7,00,700
Employees Provident Fund 20,000
31,18,500 31,18,500
Working Note:
Bank Account
Dr. Cr.
To Balance b/d 17,000 By A's Capital A/c 55,000
To Premium 1,50,000 By B's Capital A/c 20,000
To C's Capital A/c 6,08,700 By Balance c/d 7,00,700
7,75,700 7,75,700
Calculation for Adjustment of Capital
A’s Capital after adjustment = 19,15,520
B’s Capital after adjustment = 5,19,280
(+) = 24,34,800
C’s share = th 1
Remaining share to be shared by A and B = 1 − 1
5
=
4
5
th
5
th share capital = Rs 24,34,800
Total capital = Rs 24,34,800 × 5
4
= Rs 30,43,500
C’s share of capital = Rs 30,43,500 × 1
5
= Rs 6,08,700
47. Revaluation Account is debited with the decrease in the value of assets and the increase in the value of liabilities. The balance of
this account shows a gain or loss on revaluation which is transferred to the Existing partners' capital account in existing profit
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sharing ratio.
Revaluation Account
Dr. Cr.
Particulars Amt(₹) Particulars Amt(₹)
To Provision for Bad Debts A/c 300 By Plant and Machinery A/c 5,000
To Stock A/c 5,000 By Loss transferred to
W's Capital A/c 180
R's Capital A/c 120 300
5,300 5,300
The partnership capital account is an equity account in the accounting records of a partnership. It contains the following types of
transactions: ... Profits and losses earned by the business, and allocated to the partners based on the provisions of the partnership
agreement. Distributions to the partners.
Dr. Cr.
Particulars W R B Particulars W R B
To Revaluation A/c 180 120 -- By Balance b/d 40,000 80,000 ---
To Cash A/c(Bal. Fig.) 5,920 7,280 -- By Profit and Loss A/c 9,000 6,000 ---
To Balance c/d 49,500 33,000 30,000 By Cash A/c -- -- 30,000
By Premium for Goodwill A/c 6,600 4,400 --
55,600 40,400 30,000 55,600 40,400 30,000

The other accounts in the general ledger are the income statement accounts.Balance sheet accounts are used to sort and store
transactions involving a company's assets, liabilities, and owner's or stockholders' equity.
Balance Sheet
as at 31st March 2010
Capital Accounts: Sundry Debtors 20,000
W 49,500 Less: Provision for Bad Debt 1,000 19,000
R 33,000 Stock 20,000
B 30,000 1,12,500 Plant and Machinery 40,000
Patents 20,700
1,32,500 1,32,500
Working Note:
1. Average Profit = Total profit/No. of years = ₹66,000/4 = ₹16,500
2. Calculation of Goodwill = Average Profit × No. of Years’ of Purchase
= ₹16,500 × 2.5 = ₹ 41,250
3. B’s Share in Goodwill = ₹41,250 × 4/15 = ₹11,000
4. New Profit Ratio is calculated as under :
Let Total Profit = 1
B’ Share = 4/15th Share
Remaining Profit = 1 - 4/15 = 11/15W’s Share = 11/15 × 3/5 = 33/75
R’s Share = 11/15 × 2/5 = 22/75
New Ratio of W: R: B = 33/75 : 22/75: 4/15 or 33: 22: 20
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5. Adjustment of Capital :
For 4/15th share, B brought capital = ₹30,000
Therefore, total capital of the firm = ₹30,000× 15/4 = ₹1,12,500
W’s Capital = ₹1,12,500 × 33/75 = ₹49,500
R’s Capital = ₹1,12,500 × 22/75 = ₹33,000
B’s Capital = ₹1,12,500 × 20/75 = ₹30,000.
6. Bank Account
Dr. Cr.
To Balance b/d 5,000 By W's Capital A/c 5,920
To B's Capital A/c 30,000 By R's Capital A/c 7,280
To Premium for Goodwill A/c 11,000 By Balance c/d 32,800
46,000 46,000

JOURNAL ENTRIES
2018
April
Profit & Loss A/c Dr. 10,000
1
(Transfer of credit balance of P & L A/c among old partners in old profit sharing ratio)
(Increase in the value of Assets recorded through revaluation account)
To Damage Payable A/c 2,000
(Decrease in the value of Furniture and provision made dor damages recorded through
(Transfer of profit on revaluation among old partners capital account in old profit sharing
ratio)
Bank A/c Dr. 84,000
(Amount for Capital and Premium for Goodwill brought in cash by C)
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(Whole of Premium for Goodwill credited to B's Capital Account)
A's Current A/c Dr. 10,000
(Shortage of capital debited to Current A/c)
(Excess capital credited to Current A/c)

Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Balance c/d 1,10,000 1,44,000 60,000 By Balance b/d 1,00,000 1,05,000
By Profit & Loss A/c 4,000 6,000
By Bank A/c 60,000
By Premium for Goodwill A/c 24,000
1,10,000 1,44,000 60,000 1,10,000 1,44,000 60,000
To Current A/c 24,000 By Balance b/d 1,10,000 1,44,000 60,000
To Balance c/d 1,20,000 1,20,000 60,000 By Current A/c 10,000
1,20,000 1,44,000 60,000 1,20,000 1,44,000 60,000

NEW BALANCE SHEET OF THE FIRM
Creditors 25,000 Cash in Hand 3,000
Damages Payable 2,000 Cash at Bank 64,000
B's Current A/c 24,000 Debtors 40,000
Capital Account balances: Less: Provision for Doubtful Debts 3,000 37,000
A 1,20,000 Investments 2,000
B 1,20,000 Furniture 35,000
C 60,000 3,00,000 Machinery 1,00,000
Building 1,00,000
A's Current A/c 10,000
3,51,000 3,51,000
Notes:
1. Calculation of New Profit Sharing Ratios:
A= 2
5
3
B= 5
−
1
5
=
2
C= 1
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2. C brings in ₹60,000 as Capital for his 1
5
th share of profit
Hence, the total Capital of the new firm will be: 60,000 × 5
1
= ₹3,00,000
A's Capital in the new firm : 3,00,000 × 2
5
= ₹1,20,000
2
B's Capital in the new firm : 3,00,000 × 5
= ₹1,20,000
Shortage of Capital of A debtied to his Current Account: 1,20,000 - 1,10,000 = ₹10,000
Excess Capital of B Credited to his Current Account: 1,44,000 - 1,20,000 = ₹24,000
Journal Entries
Debit Credit
Amount (₹) Amount (₹)
2019
Apr-01
To Typewriter A/c 1,000
To Fixed Assets A/c

(Decrease in value of typewriter and fixed assets transferred to Revaluation 13,700
Account)
Apr-01 Stationery A/c Dr. 1,000
Investment A/c Dr. 2,000
To Revaluation A/c
3,000
(Increase in stationery and investment transferred to Revaluation Account)
Apr-01 X’s Capital A/c Dr. 7,800
Y’s Capital A/c Dr. 3,900
To Revaluation A/c
(Revaluation loss transferred to old partners X and Y’s Capital Account in 11,700
their old profit sharing ratio)
Apr-01 Reserve Fund A/c Dr. 18,000
To X’s Capital A/c 12,000
To Y’s Capital A/c

6,000
(Reserve Fund distributed among old partners in old profit sharing ratio)
Apr-01 Cash A/c Dr. 55,000
To Z’s Capital A/c 40,000

15,000
(Z brought capital and share of goodwill)
Apr-01 Premium for Goodwill A/c Dr. 15,000

(Premium for Goodwill distributed between X and Y in their sacrificing ratio 5,000
i.e 2:1)
To Cash
7,500
(Half of the Premium for Goodwill withdrawn by X and Y)
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(X took over the Investment)
Apr-01 Cash A/c Dr. 4,800
To X’s Capital A/c

4,800
(X’ brought cash to make up deficiency in capital)
Apr-01 Y’s Capital A/c Dr. 26,600
To Cash A/c
26,600
(Y withdrew excess capital after all adjustments)
Cash/Bank Account
Dr. Cr.
To Balance b/d 5,000 By X’s Capital A/c 5,000
To Z’s Capital A/c 40,000 By Y’s Capital A/c 2,500
To Premium for Goodwill A/c 15,000 By Y’s Capital A/c 26,600
To X’s Capital A/c 5,800 By Balance c/d 31,700
65,800 65,800
Revaluation Account
Dr. Cr.
To Typewriter A/c (5,000 × 20%) 1,000 By Investment A/c 2,000
To Fixed Assets A/c (1,37,000 × 10%) 13,700 By Stationery A/c 1,000
By Revaluation Loss transferred to
X Capital A/c 7,800
Y Capital A/c 3,900
14,700 14,700
Dr. Cr.
Particulars X Y Z Particulars X Y Z
To Revaluation A/c 7,800 3,900 By Balance b/d 75,000 62,000
To Investment A/c 10,000 By Reserve Fund A/c 12,000 6,000
To Cash A/c 5,000 2,500 By Cash A/c 40,000
To Balance c/d 74,200 66,600 40,000 By Premium for Goodwill A/c 10,000 5,000
97,000 73,000 40,000 97,000 73,000 40,000
To Cash A/c 26,600 By Balance b/d 74,200 66,600 40,000
To Balance c/d 80,000 40,000 40,000 By Cash A/c 5,800
80,000 66,600 40,000 80,000 66,600 40,000

Balance Sheet
as on March 31, 2019 after Z’s admission
Sundry Creditors 25,000 Cash 31,700
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Capital Account balances: Sundry Debtors 15,000
X 80,000 Stock 10,000
Y 40,000 Typewriter (5,000 – 1,000) 4,000
Z 40,000 1,60,000 Fixed Assets (1,37,000 - 13,700) 1,23,300
Stationery 1,000
1,85,000 1,85,000
WN1: Sacrificing Ratio
Old ratio X : Y = 2 : 1
WN2: Distribution of Revaluation Loss
2
Revaluation loss transferred to X's Capital = 11, 700 × 3
= ₹7,800
1
Revaluation loss transferred to Y's Capital = 11, 700 × 3
= ₹3,900
WN3: Distribution of Premium for Goodwill
X will get = 15, 000 × = ₹10,000
2
Y will get = 15, 000 × 1
3
= ₹5,000
W.N.4
Total Capital of the firm on the basis of Z's share = 40, 000 × 4
1
= ₹1,60,000
Total Capital of the firm 1,60,000
Less: Z’s Capital 40,000
Combined Capital of X and Y 1,20,000

2
X's share of Capital = 1, 20, 000 × 3
= ₹80,000
1
Y's share of Capital = 1, 20, 000 × 3
= ₹40,000
To Provision 1700 By Prepaid Advertisement 1200
To P's Capital 2100 By Q's Capital 2000
By Loss Transfer:
P 300
Q 200
R 100 600
3800 3800
Particulars P Q R S Particulars P Q R S
To Revaluation - 2000 - - By Balance b/d 60000 60000 40000 -
To Revaluation 300 200 100 - By Creditors - - - 10000
To Balance c/d 61800 57800 39900 50000 By Revaluation 2100 - - -
By Cash - - - 40000
62100 60000 40000 50000 62100 60000 40000 50000

Balance Sheet after the admission of S
P's Capital 61800 Bank 46000
Q's Capital 57800 Machinery 40000

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R's Capital 39900 Debtors 34000
S's Capital 50000 Less : Provision 1700 32300
B/P 10000 Furniture 30000
Creditors 20000 Building 50000
B/R 20000
Stock 20000
Prepaid Advertisement 1200
239500 239500
Dr. Cr.
Particulars Amount (₹)
Particular Amount (₹) Particular Amount (₹)
To Stock A/c 2,000 By Land and Building A/c 50,000
To Provision for Doubtful Debts A/c 5,000
To Profit Transferred to
Deepak's Capital A/c 13,500
Vineet's Capital A/c 13,500 27,000
50,000 50,000
Partner's Capital A/c
Deepak Vineet Atul Deepak Vineet Atul
Amount (₹) Amount (₹) Amount (₹) Amount (₹) Amount (₹) Amount (₹)
By Premium for
Goodwill A/c 45,000 45,000
By Revaluation A/c (Profit) 13,500 13,500
1,78,500 2,18,500 2,00,000 1,78,500 2,18,500 2,00,000

Balance Sheet
as on 1st April, 2022
Creditors 60,000 Stock (10,000-2,000) 8,000
Bank Overdraft 15,000 Plant and Machinery 64,000
(80,000 -16,000)
Capital A/cs Debtors 40,000
Deepak 1,78,500 (-) Provision for DoubtfulDebts 5,000 35,000
Vineet 2,12,500 Land and Building (2,00,000 + 50,000) 2,50,000
Atul 2,00,000 5,97,000 Cash 3,15,000
6,72,000 6,72,000
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Working Note:
In order to ascertain the book value of the Sundry assets, Memorandum Balance Sheet is prepared. In order to ascertain the book
value of the Sundry assets, Memorandum Balance Sheet is prepared. In order to ascertain the book value of the Sundry assets,
Memorandum Balance Sheet is prepared.
Memorandum Balance Sheet
Creditors 60,000 Stock 10,000
Bank Overdraft 15,000 Debtors 40,000
Capital A/cs Plant and Machinery 80,000
Deepak 1,20,000 Land and Building 2,00,000
Vineet 1,60,000 2,80,000 Cash (Balancing figure) 25,000
3,55,000 3,55,000
Cash A/c
To Balance b/d 25,000 By Balance c/d 3,15,000
To Atul's Capital A/c 2,00,000
3,15,000 3,15,000
JOURNAL ENTRIES
2018
April
Reserve A/c Dr. 30,000
1
(Transfer of Reserve among old partners capital account in old profit sharing ratio)
To Plant A/c 15,000
To Stock A/c 15,000
To Debtors A/c 10,000
(Decrease in the value of assets recorded through revaluation account)
(Transfer of loss on revaluation account among old partners capital account in old profit
sharing ratio)
(Goodwill written off in old ratio i.e., 4 : 1 among old partners capital account)
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Cash A/c Dr. 20,000
(Premium for goodwill brought in cash by C)
(Premium for goodwill brought in by C credited to old partners in sacrifice ratio i.e., equally)
Cash A/c Dr. 70,000
(Capital introduced by new partner)

PARTNERS CAPITAL ACCOUNTS
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
To Revaluation A/c 32,000 8,000 By Balance b/d 1,15,000 35,000
To Goodwill A/c 16,000 4,000 By Reserve A/c 24,000 6,000
To Balance c/d 1,01,000 39,000 70,000 By Premium for Goodwill A/c 10,000 10,000
By Cash A/c 70,000
1,49,000 51,000 70,000 1,49,000 51,000 70,000

Bills Payable 15,000 Cash 1,15,000
Sundry Creditors 65,000 Debtors 50,000
Capital Accounts balances: Stock 65,000
A 1,01,000 Plant 60,000
B 39,000
C 70,000 2,10,000
2,90,000 2,90,000
Calculation of New Profit Sharing Ratio:-
C is allowed th share which he acquires equally i.e.,
1
5
1
10
th from A and 1
10
th from B.
A's new share = 4
5
−
1
10
=
7
10
B's new share = 1
5
−
1
10
=
1
10
C's share = 1
5
or 10
2
Thus the new profit sharing ratio will be 7 : 1 : 2

Combined capital of A and B after all adjustments: ₹1,01,000 + ₹39,000 = ₹1,40,000
Hence, C's Capital = 1,40,000 × = ₹70,000 50
100

Dr. Cr.
Stock 10,000 Land and Building (1,25,000 × 20%) 25,000

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Furniture 500
Provision for D. Debts 4,000
Profit transferred to
X Capital 7,875
Y Capital 2,625
25,000 25,000
Dr. Cr.
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
Balance c/d 1,87,875 92,625 30,000 Revaluation (Profit) 7,875 2,625
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
Capital A/cs: Land and Building (1,25,000 + 25,000) 1,50,000
X 1,87,875 Office Furniture (5,000 – 500) 4,500
Y 92,625 Stock (1,00,000 – 10,000) 90,000
Z 30,000 3,10,500 Sundry Debtors 80,000
Sundry Creditors 1,50,000 Less: 5% Provision for D. Debts 4,000 76,000
Bills Payable 37,500 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
Old Ratio X : Y = 3 : 1
Sacrifing Ratio = 3 : 1
WN2: Calculation of Partners' Share of Goodwill
Goodwill of the firm = 1, 00,000
Z's share of Goodwill = 1,00,000× = ₹20,000
1
X will entitled to = 20,000× 3
4
= ₹15,000
Y will entitled to = 20,000× 1
4
= ₹5,000
Journal
Date Particulars L.F. Debit Amount (₹) Credit Amount (₹)
Z’s Capital A/c Dr. 20,000

5,000
(Z’s share of goodwill changed from his Capital Account)
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Workmen’s Compensation Fund A/c 20,000
To Y’s Capital
5,000
(Workmen’s Compensation Fund distributed)
54. Working Note :
1. Sacrificing Will Be Same As Old Ratio Among Old Partners Since Nothing Else Specifically Mentioned Except The Share oF
New Partner. Thus, Sacrificing Ratio Of Sarthak And Vansh Is Same As Old Ratio i.e. 2:1.
Mansi Has Brought 60,000 For Goodwill That Will Be Distributed Between Sarthak And Vansh In 2:1 ( Sacrifice Ratio)
2. Existing Capitals of Partners after Adjustments
Sarthak = 1,10,000
Vansh = 90,000
Total Capital of Old Partners = 2,00,000
Total Capital of New Firm As Per Old Partners Capital And Share = 2,00,000 × 3/2 = 3,00,000
Mansi's Capital In The Firm = 3,00,000 × 1/3 = 1,00,000
Revaluation A/c
To Stock 10,000 By Plant 14,000
To Revaluation Profit By Creditors 3,000
Sarthak 8,000 By Investment 5,000
Vansh 4,000 12,000
22,000 22,000
Partners capital Account
Particulars Sarthak Vansh Mansi Particulars Sarthak Vansh Mansi
To Investment 20,000 By Balance b/d 70,000 60,000 .........
To Bal. c/d 1,10,000 90,000 1,00,000 By General Reserve 12,000 6,000 .........
By Revaluation Account 8,000 4,000 ........
By Premium For Goodwill 40,000 20,000
By Cash 1,00,000
1,30,000 90,000 1,00,000 1,30,000 90,000 1,00,000

Balance Sheet
Bank Loan 18,000 Plant 80,000
Creditors 69,000 Furniture 30,000
Capital A/c's Stock 36,000
Sarthak 1,10,000 Debtors 38,000
Vansh 90,000 (-) Provisions For Doubtful Debts (4,000) 34,000
Mansi 1,00,000 3,00,000 Investment 25,000
Cash 1,82,000
3,87,000 3,87,000
Values conveyed in Question:- Friendship, and Sympathy for specially-abled.
Journal Entries
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Date Particulars L.F. Debit Amount Credit Amount
(₹) (₹)
2019
Cash A/c Dr. 4,00,000
Apr.1
To M’s Capital A/c 3,00,000

1,00,000
(M brought his share of capital and his share 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

(Premium for Goodwill distributed between J and K in their 40,000
Sacrificing Ratio)
Apr.1 Reserve A/c Dr. 1,00,000

40,000
(Reserve transferred between M and J in their old profit sharing ratio)
Dr. Cr.
Particulars J K M Particulars J K M
By Cash A/c 3,00,000
By Reserve A/c 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, 2019 after M’s admission
J’s Capital A/c 2,70,000 Cash (2,00,000 + 4,00,000) 6,00,000
K’s Capital A/c 1,80,000 Other Assets 1,50,000
M’s Capital A/c 3,00,000
7,50,000 7,50,000
Calculation of New Profit Sharing Ratio :-
Old Ratio M: J = 3 : 2
M is admitted for share of profit
1
2
1 1
Combined share of J and K after M’s admission = 1 − M’s share = 1 − 2
=
2
New Ratio = Old Ratio × Combined share of J and K

J's = × =
3
5
1
2
3
10
K's = 2
5
×
1
2
=
2
10
10
:
2
10
:
1
2
= 3:2:5
10
J's = 3
5
×
1
2
=
3
10
K's = 2
5
×
1
2
=
2
10
10
:
2
10
:
1
2
= 3:2:5
10
W.N.:-
Distribution of Premium for Goodwill (in sacrificing ratio)
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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 Entries in the books of the firm
(₹) (₹)
2019 Apr-
Reserve A/c Dr. 1,00,000
01

(Reserve distributed between old partners J and K in old profit 40,000
sharing ratio)
Apr-01 Cash A/c Dr. 4,00,000
To J’s Premium for Goodwill A/c

1,00,000
(M brought capital and his share of goodwill)
Apr-01 Premium for Goodwill A/c Dr. 1,00,000

(Premium for Goodwill distributed between J and K in sacrificing 50,000
Raito i.e 1:1)
Dr. Cr.
By Reserve A/c 60,000 40,000
2,60,000 1,90,000 3,00,000 2,60,000 1,90,000 3,00,000

Calculation of new profit sharing ratio:-
Old Ratio J : K = 3 : 2
J and K each will sacrifice in favour of M = 1
2
×
1
2
=
1
New Ratio = Old Ratio - Sacrificing Ratio

J's = − =
3
5
1
4
7
20
3
K's = 2
5
−
1
4
=
20
7 3 7:3:10
:
20
:
1
2
= 20
Sacrificing Ratio = 1
4
:
1
4
=1:1
WN1
Distribution of Premium for Goodwill (in Sacrificing ratio)
J and K each will get = 1, 00, 000 × = ₹50,000 1
WN2
Distribution of General Reserve (in old ratio)
J will get = 1, 00, 000 × = ₹60,000 3
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 partners
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Journal Entries in the books of the firm
Debit Credit
2019
Reserve A/c Dr. 1,00,000
Apr.1
To J’s Capital A/c

(Reserve distributed between old partners J and K in old profit sharing ratio at 60,000
the time of M’s admission)
Apr-01 Cash A/c Dr. 4,00,000

1,00,000
(M brought Capital and his share of Goodwill in cash)
Apr-01 Premium for Goodwill A/c Dr. 1,00,000

(Premium for Goodwill distributed between J and K in their sacrificing ratio i.e 25,000
3:1)
Dr. Cr.
By Reserve A/c 60,000 40,000
2,85,000 1,65,000 3,00,000 2,85,000 1,65,000 3,00,000

Balance Sheet
as on April 01, 2019 after M’s admission
J’s Capital A/c 2,85,000 Cash (2,00,000 + 4,00,000) 6,00,000
K’s Capital A/c 1,65,000 Other Assets 1,50,000
M’s Capital A/c 3,00,000
7,50,000 7,50,000
Calculation of New Profit Sharing Ratio
Old Ratio 3 : 2
J's sacrificing ratio = × = 1
2
3
4
3
K's sacrificing ratio = 1
2
×
1
4
=
1
New Ratio = Old Ratio − Sacrificing Ratio

J's = − =
3
5
3
8
9
40
K's = 2
5
−
1
8
=
11
40

9
:
11
40
:
1
2
= 9:11:20
40
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
3
J will get = 1, 00, 000 × = ₹75,000 4
1
K will get = 1, 00, 000 × 4
= ₹25,000
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56. Journal
Date Particulars L.F. Debit Amount (₹) Credit Amount (₹)
2019 April 1 General Reserve A/c Dr. 36,000
Contingency Reserve A/c Dr. 6,000
To Y’s Capital A/c 18,000
To Z’s Capital A/c

12,000
(Reserves distributed)
X’s Capital A/c Dr. 12,000
Z’s Capital A/c Dr. 4,800
To Advertisement Suspense A/c

24,000
(Advertisement Suspense distributed)
April 1 General Reserve A/c Dr. 84,000
To B’s Capital A/c

36,000
General Reserve distributed)
A’s Capital A/c Dr 4,800
B’s Capital A/c Dr. 3,600
To Profit & Loss A/c

8,400
(Profit & Loss A/c distributed)
April 1 Workmen Compensation Reserve A/c Dr. 72,000

36,000
Workmen Compensation Reserve distributed)
April 1 Workmen Compensation Reserve A/c Dr. 72,000
To Workmen Compensation Claim A/c 48,000

12,000
(Surplus Workmen Compensation Reserve distributed)
April 1 Investment Fluctuation Reserve A/c Dr. 24,000
To Investment A/c 10,000

7,000
(Surplus Investment Fluctuation Reserve distributed)
April 1 General Reserve A/c Dr. 4,800
To Investment Fluctuation Reserve A/c 960
To Y’s Capital A/c 1,920

(Surplus General Reserve distributed)
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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
6 3 6−3 3
A's share = 10
−
10
=
10
=
10
(Sacrifice)
3 3
B's share = 10
−
10
= 0
1−3
C's share = 1
10
−
10
3
=
10
= −
2
10
(Gain)
D's share = 0 − 10
1
= −
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
WN3: 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
Particulars (Rs.) Particulars (Rs.)
To Furniture and Fixture A/c 6,500 By Creditors 25,00
To Provision for doubtful debts 3,000 By Loss Transfer:
To Plant and Machinery 35,000 Raman 28000
Rohit 14000 42,000
44,500 44,500
Particulars Raman Rohit Saloni Particulars Raman Rohit Saloni
Rs. Rs. Rs. Rs. Rs. Rs.
To Revaluation A/c 28,000 14,000 - By Balance b/d 1,40,000 1,00,000 -
To Balance c/d 1,61,600 1,02,400 1,32,000 By Workmen Compensation Fund 16,000 8,000 -
By Premium for Goodwill A/c 33,600 8,400 -
By Bank A/c - - 1,32,000
1,89,600 1,16,400 1,32,000 1,89,600 1,16,400 1,32,000

BALANCE SHEET
AS AT 31 MARCH, 2018
Liabilities (Rs.) Assets (Rs.)
Capital A/cs: Plant and machinery 1,40,000

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Raman 161600 Furniture and fittings 58,500
Rohit 102400 Stock 47,000
Saloni 132000 3,96,000 Debtors 1,10,000
Workmen Claim 16,000 Less Provision (10,000) 1,00,000
Creditors 1,57,500 Bank 2,24,000
5,69,500 5,69,500
58. Dr Revaluation Account Cr
To Investment A/c 5,000 By Accrued Income A/c 1,000
To Patents A/c 2,000 By Bad Debts Recovered A/c 4,000
By Loss on revaluation Transferred to
Madan's Capital A/c (2,000×3/5) 1,200
Mohan's Capital A/c (2,000×2/5) 800 2,000
7,000 7,000
Dr Partners’ Capital Account Cr
Madan Mohan Gopal Madan Mohan Gopal

(Rs) (Rs) (Rs) (Rs) (Rs) (Rs)
To Revaluation A/c (Loss) 1,200 800 __ By Balance b/d 60,000 40,000 __
To Balance c/d 88,200 58,800 49,000 By Premium for Goodwill A/c 12,000 8,000 __
By Workmen Compensation Fund A/c 5,400 3,600
By General Reserve A/c 12,000 8,000 __
By Bank A/c __ __ 49,000
89,400 59,600 49,000

Balance Sheet
Liabilities Amt(Rs) Assets Amt(Rs)
Workmen Compensation Fund 3,000 Accrued Income 1,000
Creditors 28,000 Investment (50,000- 5,000) 45,000
Capital A/cs Patents (10,000-2,000) 8,000
Madan 88,200 Debtors 65,000
Mohan 58,800 (-) Provision for Doubtful Debts (5,000) 60,000
Gopal 49,000 1,96,000 Stock 30,000
Bank 83,000
2,27,000 2,27,000
Working Note:
Dr Bank Account Cr
To Balance b/d 10.000 By Balance c/d 83,000
To Premium for Goodwill A/c 20.000

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To Bad Debts Recovered A/c 4,000
To Gopal's Capital A/c 49,000
83.000 83,000
Calculation of Gopal’s Capital
Madan’s capital after all adjustment = 88, 200
Mohan’s capital after all adjustment = 58,800
Total capital of mohan and madan = 88,200+58,800 = 1,47,000
Gopal’s share in new firm = th ; 1
Remaining share to be shared between Madan and Mohan =1 − 1
4
=
3
4
th
3
For 4
th share, capital = Rs 1,47,000; Total capital = 1, 47, 000 × 4
3
= Rs1, 96, 000
Gopal’s capital = 1, 96, 000 × 1
4
= Rs49, 000

Dr. Cr.
To Provision for Doubtful Debts A/c 10,000 By Stock A/c (12,000 - 10,000) 2,000
To Fixtures A/c 6,000 By Loss transferred to
A's Capital A/c(14,000 × 1
2
) 7,000
B's Capital A/c(14,000 × 1
2
) 7,000 14,000
16,000 16,000
To Revaluation A/c(Loss) 7,000 7,000 -- By Balance b/d 1,50,000 1,30,000 ---
-- By Reserve A/c 20,000 20,000 ---
By Cash A/c -- -- 1,20,000
To Balance c/d 1,88,000 1,68,000 1,20,000 By Premium for Goodwill A/c 25,000 25,000 --
1,95,000 1,75,000 1,20,000 1,95,000 1,20,000 1,20,000
To Cash a/c (balance fig.) 68,000 48,000 ........ BY Balance b/d 1,88,000 1,68,000 1,20,000
To Balance c/d 1,20,000 1,20,000 1,20,000
1,88,000 1,68,000 1,20,000 1,88,000 1,68,000 1,20,000

Cash Account
To Balance b/d 30,000 By A's Capital A/c 68,000
To C's Capital A/c 1,20,000 By B's Capital A/c 48,000
To Premium A/c (Goodwill) 50,000 By Balance c/d 84,000
2,00,000 2,00,000
Balance Sheet
as on 31st March 2007
Capitals: Debtors 2,30,000
A 1,20,000 Less: Provision 10,000 2,20,000

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B 1,20,000 Stock (10000 + 2000) 12,000
C 1,20,000 3,60,000 Fixtures 24,000
Land 1,00,000
4,40,000 4,40,000
Working Note:- Calculation of New Profit sharing Ratio.
let the whole share be 1
c's share = 1
left share = 1 - 1
3
= 2
A's share= 2
3
×
1
2
= 1
B's share= 2
3
×
1
2
= 1
C's share= 1
New share = 1:1:1

C’s Capital = ₹1,20,000 for 1
3
share
Total Capital of the firm should be = ₹1,20,000 × 3 = 3,60,000
A’s Capital = ₹1,20,000 (i.e., ₹3,60,000 × ) 1
B's Capital = 1,20,000 (i.e, ₹3,60,000 × 1
3
)
sacrifice ratio = old ratio - new ratio
A's sacrifice ratio = - = - = 1
2
1
3
3
6
2
6
1
B's sacrifice ratio = 1
2
- 1
3
= 3
6
- 2
6
= 1
i.e sacrifice ratio is 1:1 goodwill will be distributed in this ratio

1. Treatment of Goodwill:
Date Particulars L.F. Dr (₹) Cr (₹)
31.3.2007 Cash Account Dr. 1,70,000
To C’s Capital Account 1,20,000
To Premium Account
50,000
(Being cash brought in by C for his share of capital and goodwill)
31.3.2007 Premium Account Dr. 50,000
To A's Capital Account 25,000
To B’s Capital Account

25,000
(Being amount of goodwill distributed among A and B in sacrificing ratio)
60. An existing partnership firm may take up expansion/diversification of the business. In that case it may need managerial help or
additional capital. An option before the partnership firm is to admit partner/partners, when a partner is admitted to the existing
partnership firm, it is called admission of a partner On the admission of a new partner, the following adjustments become
necessary:
i. Adjustment in profit sharing ratio;
ii. Adjustment of Goodwill;
iii. Adjustment for revaluation of assets and reassessment of liabilities;
iv. Distribution of accumulated profits and reserves; and
v. Adjustment of partners’ capitals.
JOURNAL
Amount Amount
Date particulars L/F
(Dr) (Cr)
2016
March
Cash A/c Dr 40,000
31

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(Being cash and premium for goodwill brought in by C)
Premium for Goodwill A/c Dr 10,000
To W's Capital A/c 6,000
To R's Capital A/c

4,000
(Being premium for goodwill shared by old partners in sacrificing ratio)
W's Capital A/c Dr 3,000
R's Capital A/c Dr 2,000
To Cash A/c
5,000
(Being half goodwill withdrawn by W and R in old ratio)
General Reserve A/c Dr 5,000
To W's Capital A/c 3,000
To R's Capital A/c

2,000
(Being general reserve distributed among old partners in old ratio)
Outstanding Salary A/c Dr 3,000
To Cash A/c
3,000
(Being outstanding salary paid)
Revaluation A/c Dr 8,125
To Stock A/c 2,000
To Creditors A/c
(Being the decrease in the value of assets and increase in value of liabilities and 2,100
unrecorded liability recorded)
Investment A/c Dr 2,500
To Revaluation A/c
2,500
(Being increase in the value of asset recorded)
W's Capital A/c (5, 625 × 3/5) Dr 3,375
R's Capital A/c(5, 625 × 2/5) 2,250
To Revaluation A/c
5,625
Being loss on revaluation transferred to partners' capital accounts
Working Notes
i. Distribution of Goodwill in Sacrificing Ratio
3
W’s share = 10,000 × 5
= ₹6,000
2
R’s share = 10,000 × 5
= ₹4,000
NOTE It has been assumed that W and R sacrifice in ratio 3 .2 [equal to old profit sharing ratio].
ii. Provision for Bad and Doubtful Debts
Amount
Particulars
(₹)
Debtors 18,000
(-) Bad debts, to be adjusted against provision for bad debts (1,500)
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16,500
Provision for doubtful debts @ 5% on 16,500 825
(-) Existing provision after adjusting bad debts (2,000 -1,500) (500)
Amount to be debited to revaluation account 325

iii. Loss on revaluation
Loss on revaluation can be ascertained by preparing revaluation account in the following manner
Revaluation A/c
Dr. Cr.
To Provision for Doubtful Debts A/c 325 By Investment A/c 2,500
To Stock A/c 2,000 By Loss on Revaluation Transferred to
To Furniture A/c 500 W 3,375
To Plant and Machinery A/c 3,200 R 2,250 5,625
To Creditors A/c 2,100
8,125 8,125
61. In the books of the Yogesh, Naresh and Ramesh
Journal Entries
Debit Credit
2019
Cash A/c Dr. 5,00,000
April 01
To Ramesh’s Capital A/c

5,00,000
(Being Capital brought in by the new partner Ramesh)
Ramesh’s Current A/c Dr. 1,00,000
To Yogesh’s Current A/c (1,00,000 × 4/5) 80,000
To Naresh’s Current A/c (1,00,000 × 1/5)

20,000
(Being premium for goodwill adjusted in 4 : 1)
To Provision for Doubtful Debts A/c 11,000
To Liability for damages A/c 10,000
To Furniture A/c
(Being assets revalued and liabilities reassessed and recorded through 10,000
Land A/c Dr. 40,000
To Revaluation A/c
(Being appreciation in land and building provided for and recorded in 80,000
Revaluation A/c (WN2) Dr. 49,000
To Yogesh’s Current A/c 29,400
To Naresh’s Current A/c

19,600
(Being revaluation profit transferred to partner’s current A/c)
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Workmen Compensation Reserve A/c Dr. 1,00,000
To Yogesh’s Current A/c 60,000
To Naresh’s Current A/c

(Being workmen compensation reserve distributed among old partners in 40,000
old profit sharing ratio)
Yogesh’s Current A/c Dr. 18,000
Naresh’s Current A/c Dr. 12,000
To Advertisement Suspense A/c

(Being accumulated loss written off from old partner's capital account in 30,000
old profit sharing ratio)
W.N.:
1. Calculation of new profit-sharing ratio:
Particulars Yogesh Gopal
Old Ratio 3/5 2/5
New Ratio 1/3 1/3
Gain/Sacrifice (3/5 - 1/3)= 4/15 (Sacrifice) (2/5 - 1/3)= 1/15 (Sacrifice)
Sacrificing Ratio 4:1

2. Calculation of Revaluation Profit/Loss:
Debit side total= ₹ (11,000 + 10,000 + 10,000) = ₹ 31,000
Credit side total = ₹ 80,000
Gain on Revaluation= ₹ (80,000 – 31,000) = ₹ 49,000
Revaluation A/c
Dr. Cr.
To Provision for Doubtful debt A/c 11,000 By Land A/c 40,000
To Liability for Damages A/c 10,000 By Building A/c 40,000
To Revaluation Profit transferred to:
Yogesh’s Current A/c 29,400
Naresh’s Current A/c 19,600 49,000
80,000 80,000
Dr. Cr.
To Provision for Doubtful Debts A/c 1,000 By Accrued Income A/c 7,500
To Outstanding Bill for Repairs A/c 25,000 By Stock A/c 5,000
To Investments A/c 10,000 By Loss transferred to:
To As Current A/c (Revaluation Expenses) 5,000 B's Current A/c 17,100
As Current A/c 11,400 28,500
41,000 41,000
PARTNERS' CAPITAL ACCOUNTS
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Dr. Cr.
A B C A B C
₹ ₹ ₹ ₹ ₹ ₹
To Balance c/d 3,00,000 1,50,000 1,00,000 By Balance b/d 3,00,000 1,50,000 ...
By Bank A/c ... ... 1,00,000
3,00,000 1,50,000 1,00,000 3,00,000 1,50,000 1,00,000

PARTNERS'CURRENT ACCOUNTS
Dr. Cr.
A B A B
₹ ₹ ₹ ₹
To Investments A/c 30,000 ... By Balance b/d 50,000 10,000
To Revaluation A/c (Loss) 17,100 11,400 By General Reserve A/c 36,000 24,000
To Goodwill A/c 30,000 20,000 By Premium for Goodwill A/c 42,000 18,000
To Bank A/c 21,000 9,000 By Revaluation A/c (Expenses) 5,000 ...
To Balance c/d 34,900 11,600
1,33,000 52,000 1,33,000 52,000

BALANCE SHEET OF THE NEW FIRM as at 1st April, 2019
Creditors 75,000 Cash at Bank (WN 5) 1,55,000
Outstanding Bill for Repairs 25,000 Debtors 1,00,000
Capital A/cs: Less: Provision for Doubtful Debts 5,000 95,000
A 3,00,000 Accrued Income 7,500
B 1,50,000 Stock 79,000
C 1,00,000 5,50,000 Fixed Assets (Tangible) 3,60,000
Current A/cs:
A 34,900
B 11,600 46,500
6,96,500 6,96,500
Working Notes:
i. Partners Current Account balances appearing in the Balance Sheet means that the Capital Accounts are fixed. Hence, all
transactions relating to partners are passed through the Current Accounts.
ii. The existing value of goodwill is written off among the old partners in their old ratio.
₹1,50,000+ ₹1,30,000+ ₹1,25,000
iii. Value of Firm's Goodwill = ( 3
) × 2 = ₹2,70,000
C's share in Goodwill = ₹2,70,000 × 2/9 = ₹60,000.
iv. Calculation of Sacrificing Ratio (Sacrifice Old Share - New Share):
3 4 27−20 7 2 3 18−15 3
A's Sacrifice = 5
−
9
=
45
=
45
; B's Sacrifice = 5
−
9
=
45
=
45
7 3
Thus, Sacrificing Ratio of A and B = 45
:
45
or 7 : 3
v. Cash at Bank = ₹25,000 (Opening Balance) + ₹1,00,000 (C's Capital) + ₹60,000 (Cs Share of Goodwill) - ₹21.000 - ₹9,000 =
₹1,55,000
63. Books of Pradip, Subal and Kuntal
Revaluation Account
Dr. Cr.
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Particulars (Rs) Particulars (Rs)
To Machinery 1,900 By Provision for Doubtful Debts 1,000
To Furniture 1,500 By Loss on Revaluation:
To Outstanding Rent 4,000 Pradip (6,400 x 5/8) 4,000
Subal (6,400 x 3/8) 2,400 6,400
7,400 7,400
Capital Accounts
Dr. Cr.
Particulars Pradip(Rs) Subal(Rs) Kuntal(Rs) Particulars Pradip(Rs) Subal(Rs) Kuntal(Rs)
To Loss on Revaluation
4,000 2,400 --- By Balance b/d 60,000 40,000 ---
(5:3)
By Profit and loss

12,500 7,500 ---
(5:3)
By Bank --- --- 48,000
By Goodwill A/c (13 :

To Balance c/d 76,625 46,975 48,000 8,125 1,875 --
3)
80,625 49,375 48,000 80,625 49,375 48,000

Balance Sheet
as at 1st Jan, 1990
Liabilities (Rs) Assets (Rs)
Capital Accounts: Machinery (38,000 - 1,900) 36,100
Pradip 76,625 Furniture (15,000 -1,500) 13,500
Subal 46,975 Investments 21,000
Kuntal 48,000 1,61,000 Stock 19,000
Sundry Creditors 18,000 Sundry debtors 27,000
Outstanding Rent 4,000 Less: Provision for Doubtful Debts 2,000 25,000
Cash at Bank (21,000 + 48,000 + 10,000) 79,000
1,93,600 1,93,600
Working Notes:
Calculation of Sacrificing Ratio of Pradip and Subal :
Sacrificing ratio = Old profit sharing Ratio - New profit Sharing Ratio
Pradip's sacrificing Ratio = 5/8 - 4/9 = 45/72 - 32/72 = 13/72.
Subal's sacrificing Ratio = 3/8 - 3/9 = 27/72 - 24/72 = 3/72
Therefore, sacrificing ratio = 13 : 3.
Kuntal's share of Premium for Goodwill :
Kuntal’s share of profit is 2/9 Hence, his share of Premium for Goodwill = Rs 45,000 × 2/9 = Rs 10,000.
Pradip's share in goodwill = 10,000 x 13/16 = 8,125.
Subal's share in goodwill = 10,000 x 3,16 = 1,875.
JOURNAL ENTRIES
Amount Amount
Dr. Cr.
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To Machinery A/c 6,000
To Provision for bad debts A/c 5,000
(Being value of machinery decreased and provision created for bad debts recorded through
(Being the value of stock increased and recorded through revaluation account)
To Jay's Capital A/c 13,800
To Sanjay's Capital a/c 4,600
(Being profit on revaluation transferred to old partner's capital account in old profit
sharing ratio)
Bank A/c Dr. 1,20,000
To Rajkumar's Capital A/c 1,00,000
(Being capital and goodwill brought in by Rajkumar through bank)
Sanjay's Capital A/c Dr. 5,000
To Jay's Captial A/c 25,000
(Being goodwill brought in by Rajkumar credited to Jay along with 1
12
of the goodwill to
be contributed by Sanjay)
Bank A/c Dr. 400
To Sanjay's Capital A/c 400
(Being amount of proportionate capital brought in by Sanjay)
Jay's Capital A/c Dr. 88,800
To Bank A/c 88,800
(Being excess amount withdrawn by Jay through bank)

Dr. Cr.
Particulars Jay Sanjay Rajkumar Particulars Jay Sanjay Rajkumar
To Jay's Capital A/c 5,000 By Balance b/d 1,50,000 1,00,000 ---
To Balance c/d 1,88,800 99,600 1,00,000 By Revaluation A/c 13,800 4,600 ---
By Bank A/c --- --- 1,00,000
By Goodwill A/c 20,000 --- ---
By Sanjay's Capital A/c 5,000 --- ---
1,88,8000 1,04,600 1,00,000 1,88,800 1,04,600 1,00,000
To Bank A/c 88,800 --- --- By Balance b/d 1,88,800 99,600 1,00,000
To Balance c/d 1,00,000 1,00,000 1,00,000 By Bank A/c --- 400 ---
1,88,800 1,00,000 1,00,000 1,88,800 1,00,000 1,00,000
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Balance Sheet
Dr. Cr.
Creditors 1,20,000 Stock 2,49,400
Bank overdraft 1,18,400 Sundry Debtors 2,00,000
Capital Account balances: Less: Provision for Doubtful Debts 5,000 1,95,000
Jay 1,00,000 Furniture 40,000
Sanjay 1,00,000 Machinery 54,000
Rajkumar 1,00,000 3,00,000
5,38,400 5,38,400
9−4
Jay's Ratio = 3
4
−
1
3
=
12
=
5
12
(Sacrifice)
3−4
Sanjay's Ratio = 1
4
−
1
3
=
12
=
1
12
(Gain)
Calculation of Goodwill:-
1
Rajkumar's share of goodwill 3
= ₹ 20,000
Total Goodwill = ₹ 20,000 × 3 = ₹ 60,000
Sanjay's gain = ₹ 60,000 × 1
12
= ₹ 5,000
Dr. Cr.
To Revaluation Profit transferred to :- By Land and Building A/c 42,000
Kalpana’s Capital A/c 61,200 By Plant A/c 60,000
Kanika’s Capital A/c 40,800 1,02,000
1,02,000 1,02,000
Dr. Cr.
Particulars Kalpana Kanika Karuna Particulars Kalpana Kanika Karuna
By General Reserve A/c 36,000 24,000
By Workmen Compensation Fund A/c 24,000 16,000
6,49,200 3,22,800 2,43,000 6,49,200 3,22,800 2,43,000

Balance Sheet
as on April 01, 2019 after Karuna’s admission
Creditors 90,000 Cash in Hand 4,53,000
Capital Account balances: Debtors 1,32,000
Kalpana 6,49,200 Less: Provision for debtors 12,000 1,20,000
Kanika 3,22,800 Stock 2,10,000

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Karuna 2,43,000 12,15,000 Land and Building 2,52,000
Liability for Workmen Compensation claim 60,000 Plant 3,30,000
13,65,000 13,65,000
WN1
Karuna is admitted for 1/5th share
1 4
Remaining share = 1 − 5
=
5
This remaining share will be shared among old partners in their old ratio i.e. 3 : 2
3
Kalpana's Share = 4
5
×
5
=
12
25
4 2 8
Kanika's Share = 5
×
5
=
25
New Ratio = 12 : 8 : 5
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio
Kalpana = − 3
5
12
=
25 25
3
Kanika = 2
5
−
8
25
=
2
25
WN2
Adjusted Capital of Kalpana = 6.49,200
Adjusted Capital of Kanika = 3,22,800
Total Adjusted Capital = 9,72,000 (6,49,200 + 3,22,800)
Karuna's Capital = Adjusted Capital of Kalpana and Kanika × Karuna's Share × Reciprocol of the firm's share
Karuna's Capital = 9, 72, 000 × × = ₹2,43,000 1
5
5

Dr. Cr.
To Plant and Machinery A/c (70,000 – 60,000) 10,000 By Land and Building A/c (65,000 - 40,000) 25,000
To Revaluation Profit transferred to:- By Provision for Doubtful Debts A/c 400
A's Capital A/c 12,450 By Creditors A/c 1,200
B's Capital A/c 4,150
26,600 26,600
Dr. Cr.
By General Reserve A/c 7,500 2,500
By Cash A/c 60,000
By C's Current A/c 4,500 1,500
74,450 88,150 60,000 74,450 88,150 60,000
To B’s Current A/c 43,150 By Balance b/d 74,450 88,150 60,000
To Balance c/d 1,35,000 45,000 60,000 By A’s Current A/c 60,550
1,35,000 88,150 60,000 1,35,000 88,150 60,000

Balance Sheet
as on April 01, 2019 after C’s admission
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Creditors (70,000 – 1,200) 68,800 Land and Building 65,000
Capital Account balances: Plant and Machinery 60,000
A 1,35,000 Stock 30,000
B 45,000 Debtors 35,000
C 60,000 2,40,000 Less: Provision for Doubtful Debts 600 34,400
B’s Current A/c 43,150 Investments 26,000
Cash 70,000
A’s Current A/c 60,550
C's Current A/c 6,000
3,51,950 3,51,950
WN 1
C's share of Goodwill = 24, 000 × 1
4
= ₹6,000
A will get = 6, 000 × 3
4
= ₹4,500
B will get = 6, 000 × 1
4
= ₹1,500
As C has not brought his share of goodwill in cash, hence, his share shall be debited to his current account.
WN2 Distribution of Revaluation Profit
A will get = 16, 600 × = ₹12,450
3
B will get = 16, 600 × 1
4
= ₹4,150
WN3 Adjustment of Capital
Total Capital of the firm after C’s admission 60,000 × 4 2,40,000
Less: C’s Capital 60,000
Combined Capital of A and B 1,80,000

WN4
Cash Account
Dr. Cr.
To Balance b/d 10,000 By Balance c/d 70,000
To C’s Capital A/c 60,000 (B/F)
70,000 70,000
To Provision for doubtful debts 1000 By Machinery 3000
To Outstanding Salaries 2000 By Stock 2000
To Profit Transferred:
M 1250
N 750 2000
5000 5000
Particulars M N R Particulars M N R
To Cash 1500 500 - By Balance b/d 12000 10000 -
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To Balance c/d 14750 11250 8000 By Cash - - 8000
By Premium for goodwill 3000 1000 -
By Revaluation 1250 750 -
16250 11750 8000 16250 11750 8000

Balance Sheet
Outstanding Salaries 2000 Machinery 15000
Creditors 4000 Stock 10000
B/P 2000 Debtors 7200
Capital A/cs: Less: Provision 1000 6200
M 14750 Bank 500
N 11250 Cash 10300
R 8000 34000
42000 42000
Working Notes: Calculating Sacrificing Ratio:-
Old Ratio of M and N = 5:3
New Ratio of M, N and R = 7:5:4
M = 5/8 - 7/16 = 3/16
N = 3/8 - 5/16 = 1/16
Therefore, the Sacrificing Ratio = 3:1.
JOURNAL ENTRIES
2018
April
1
To X's Current A/c 7,200
To Y's Current A/c 4,800
(The transfer of General Reserve to old partners current accounts in old profit sharing ratio)
To Outstanding Salaries A/c 5,000
(Provision for doubtful debts and outstanding salaries recorded through revaluation Account)
Accured Income A/c Dr. 1,500
(Accrued income recorded through revaluation account)
X's Current A/c Dr. 6,000
(Investments taken over by X at revised value recorded through revaluation account)
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Y's Current A/c Dr. 2,280
(Loss on revaluation transferred to old partners capital account in old profit sharing ratio)
(Goodwill already existing in the books written off in the old profit sharing ratio among old
partners)
Cash A/c Dr. 32,000
To Z's Capital A/c 20,000
(Z brings in ₹20,000 for his capital and ₹12,000 as premium for goodwill)
To X's Current A/c 8,400
To Y's Current A/c 3,600
(Premium for goodwill shared by old partners in their sacrificing ratio i.e., 7 : 3)
To Cash A/c 6,000
(Half the amount of premium for goodwill withdrawn by partners in cash)

REVALUATION ACCOUNT
Dr. Cr.
To Provision for Doubtful debts A/c 200 By Accrued Income A/c
To Outstanding Salaries A/c 5,000 By Revaluation Loss transferred to :
To Investments A/c 2,000 X's Current A/c 3,420
Y's Current A/c 2,280 5,700
7,200 7,200
Dr. Cr.
₹ ₹ ₹ ₹ ₹ ₹
By Cash A/c 20,000
60,000 30,000 20,000 60,000 30,000 20,000

PARTNER'S CURRENT ACCOUNTS
Dr. Cr.
Particulars X Y Particulars X Y
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₹ ₹ ₹ ₹
To Investments A/c 6,000 By Balance b/d 10,000 2,000
To Revaluation A/c 3,420 2,280 By General Reserve A/c 7,200 4,800
To Goodwill A/c 6,000 4,000 By Premium for Goodwill A/c 8,400 3,600
To Cash A/c 4,200 1,800
To balance c/d 5,980 2,320
25,600 10,400 25,600 10,400

BALANCE SHEET
Outstanding Salaries 5,000 Debtors 20,000
Capital Account balances: Less: Provision for doubtful debts 1,000 19,000
X 60,000 Patents 14,800
Y 30,000 Fixed Assets 72,000
Z 20,000 Accrued Income 1,500
Current Account balances:
X 5,980
Y 2,320
1,38,300 1,38,300
Notes :
30,000+26,000+25,000
1. Calculation of Goodwill: 3
= ₹27,000
Goodwill = 27,000 × 2= ₹54,000
Z brings in his share of goodwill in cash. Therefore, the amount of goodwill brought in by Z = 54,000 × 2
9
= ₹12,000
2. Sacrificing Ratios :
X − =
3
5
4
9
7
45
Y 2
5
−
3
9
=
3
45
OR 7 : 3
JOURNAL ENTRIES
2019
April
Stock A/c Dr. 5,000
1
(Increase in the value of stock recorded through revaluation account)
To Land & Buildings A/c 5,000
(Decrease in the value of land and building recorded through revaluation account)
Revaluation A/c Dr. 300
To Sundry Debtors A/c 1,800

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(Bad debts written off)
Sundry Creditors A/c Dr. 5,000
(Commission received wrongly included in creditors recorded through revaluation account)
To Dhruv's Capital A/c 3,525
To Ansh's Capital A/c 1,175
(Profit on Revaluation distributed among old partners in old profit sharing ratio)
Workmen Compensation Reserve A/c Dr. 5,000
To Liability for Workmen Compensation Claim A/c 3,000
To Ansh's Capital A/c 500
(Liability for Workmen Compensation claim recorded and surplus distributed among old
partners in old profit sharing ratio)
(Profit distributed among old partners capital account in old profit sharing ratio)
Dhruv's Capital A/c Dr. 7,500
Ansh's Capital A/c Dr. 2,500
To Goodwill A/c
10,000
(Goodwill recorded)
Bank A/c Dr. 15,000
(Goodwill brought in cash by the new partner)
(Goodwill distributed between old partners in old profit sharing ratio)
Bank A/c Dr. 17,925
To Kavi's Capital A/c 17,925
(Capital introduced by Kavi through bank)

BALANCE SHEET
Sundry Creditors 34,000 Cash & Bank 42,925
Liability for Workmen's Compensation Claim 3,000 Sundry Debtors 16,700
Capital Account balances: Stock 42,000
Dhruv 46,275 Furniture 5,000
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Ansh 25,425 Land and building 20,000
Kavi 17,925 89,625
1,26,625 1,26,625
W.N.:
REVALUATION ACCOUNT
Dr. Cr.
To Land & Buildings A/c 5,000 By Stock A/c 5,000
To Sundry Debtors A/c 300 By Sundry Creditors A/c 5,000
To Revaluation Profit transferred to:
Dhruv's Capital A/c 3,525
Ansh's Capital A/c 1,175 4,700
10,000 10,000
PARTNERS CAPITAL ACCOUNTS
Dr. Cr.
Particulars Dhruv Ansh Kavi Particulars Dhruv Ansh Kavi
₹ ₹ ₹ ₹ ₹ ₹
To Goodwill A/c 7,500 2,500 By Balance b/d 30,000 20,000
To Balance c/d 46,275 25,425 By Revaluation A/c 3,525 1,175
By Workmen Compensation Reserve A/c 1,500 500
By Profit & Loss A/c 7,500 2,500
53,775 27,925 53,775 27,925
By Bank A/c 17,925
46,275 25,425 17,925 46,275 25,425 17,925

Dr. Cr.
Particulars Amt(₹) Particulars ₹
To Provision for Bad Debts A/c 300 By Plant and Machinery A/c 5,000
To Stock A/c 5,000 By Loss Transferred to
W's Capital A/c (300×3/5) 180
R's Capital A/c (300×2/5) 120 300
5,300 5,300
Partners’ Capital Account
Dr. Cr.
Particulars W (₹) R (₹) B (₹) Particulars W (₹) R (₹) B (₹)
To Revaluation A/c (Loss) 180 120 __ By Balance b/d 40,000 30,000 __
To Cash A/c 5,920 7,280 __ By Cash A/c __ __ 30,000
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(Balancing figure) By Premium for Goodwill A/c 6,600 4,400
To Balance c/d 49,500 33,000 30,000 By Profit and Loss A/c 9,000 6,000
55,600 40,400 30,000

Balance Sheet
Liabilities Amt(₹) Assets Amt(₹)
Creditors 20,000 Debtors 20,000
Capital A/cs (-) Provision for Doubtful Debts (1,000) 19,000
W 49,500 Stock (25,000- 5,000) 20,000
R 33,000 Plant and Machinery (35,000+ 5,000) 40,000
B 30,000 1,12,500 Patents 20,700
Cash 32,800
1,32,500 1,32,500
Working Note
Calculation of New Profit Sharing Ratio
Let total profit be 1
15−4
B ’s share of profit = 4
15
Remaining share= 1 − 4
15
=
15
=
11
15
W's new share = 11
15
×
3
5
=
33
75
; R's new share = = 11
15
×
2
5
=
22
75
B's new share = 4
15
×
5
5
=
20
75
New profit sharing ratio = 33:22:20

Calculation of Goodwill
20,000+14,000+17,000+15,000
4years average profit = 4
= ₹16, 500
Value of Firm's Goodw = Average Profit× Number of Year's Purchase
= 16, 500 × 2.5 = ₹41, 250
B ’s share of goodwill =41, 250 × = ₹11, 000 to be credited to W and R in Sacrificing ratio i.e., 3:2
4
15
Cash Account
Dr Cr
To Balance b/d 5,000 By W's Capital A/c 5,920
To B's Capital A/c 30,000 By R's Capital A/c 7,280
To Premium for Goodwill A/c 11,000 By Balance c/d (Balancing figure) 32,800
46,000 46,000
Calculation of Adjustment of Capital
B’s share = 15
4
B ’s capital = ₹30,000
For 4
15
th share, capital = ₹30,000
15
Total capital = 30, 000 × 4
= ₹12, 500
33
W’s new capital = 1, 12, 500 × 75
= ₹49, 500
R’s new capital = 1, 12, 500 × 22
75
= ₹33, 000
20
B’s new capital = 1, 12, 500 × 75
= ₹30, 000
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Solution

WORKSHEET CHAP 4 ADMISSION

Particulars Amount (₹) Particulars Amount (₹)

To Creditors 2,000 By Revaluation Loss transferred to:

To Provision for Discount 1,520 A's Capital A/c 1,760

B's Capital A/c 1,760 3,520

To Revaluation 1,760 1,760 --- By Insurance Fund 3,500 3,500 ---

By C's Current A/c --- 2,000 ---

By Cash --- --- 40,000

54,800 66,800 40,000 54,800 66,800 40,000

Capital account balances: Cash 50,000

A 51,040 Sundry Debtors 80,000

B 63,040 Stock 20,000

C 40,000 1,54,080 Fixed Assets 38,600

Creditors 17,000 C's Current A/c 2,000

Outstanding Expenses 3,000

Provident fund 1,000

Employee's Saving Fund 5,000

Workmen Profit Sharing Fund 2,000

Provision for Workmen Compensation claim 3,000

Provision for Doubtful Debts 4,000

Provision for Discount on Debtors 1,520

B's New Ratio = 5

Calculation of Sacrificing Ratio:-

Hence, only B has sacrificed.

March 31 Profit & Loss A/c Dr. 3,60,000

To Profit & Loss Appropriation A/c 3,60,000

(Being Transfer of profit to Profit & Loss Appropriation Account)

March 31 Profit & Loss Appropriation A/c Dr. 3,60,000

To Ankit’s Capital A/c 1,44,000

To Suresh’s Capital A/c 72,000

To Neha’s Capital A/c 72,000

To Kavita’s Capital A/c 72,000

(Being Distribution of profit in the ratio of 2 :1 :1 :1)

out of his share in favour of Kavita.)

(i) Bank A/c Dr. 72,000

To Premium for Goodwill A/c 72,000

(Being goodwill brought in cash)

(ii) Premium for Goodwill A/c Dr. 72,000

To X's Capital A/c 43,200

To Y's Capital A/c 28,800

(Being Goodwill is distributed between old partners in the sacrificing ratio of 3 : 2)

X's New Share = 3

Z's New Share = 1

New Profit Sharing Ratio = 9:6:5

New Profit Sharing Ratio = 9 : 6 : 5

(i) Bank A/c Dr. 72,000

To Premium for Goodwill A/c 72,000

(Being goodwill brought in cash)

(ii) Premium for Goodwill A/c Dr. 72,000

To X's Capital A/c 36,000

To Y's Capital A/c 36,000

(Being Goodwill is distributed between old partners in the sacrificing ratio of 1 : 1)

Z's New RAtio = 1

New Profit Sharing Ratio = 19 : 11 : 10

(i) Bank A/c Dr. 72,000

To Premium for Goodwill A/c 72,000

(Being goodwill brought in cash)

(ii) Premium for Goodwill A/c Dr. 72,000

To X's Capital A/c 28,800