Double Entry Book Keeping Ts Grewal Volume I 2021-2022 Solutions for Class 12

Commerce Accountancy Chapter 5 - Admission Of A Partner

Page No 5.95:

Question 61:

The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st March, 2016 is given below:


Liabilities	`	Assets		`
Madhu's Capital	5,20,000	Land and Building		3,00,000
Vidhi's Capital	3,00,000	Machinery		2,80,000
General Reserve	30,000	Stock		80,000
Bills Payable	1,50,000	Debtors	3,00,000
		Less: Provision	10,000	2,90,000

		Bank		50,000


	10,00,000			10,00 ,000

Madhu and Vidhi decided to admit Gayatri as a new partner from 1st April, 2016 and their new profit-sharing ratio will be 2 : 3 : 5. Gayatri brought   ` 4,00,000 as her capital and her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at   ` 3,00,000.
(b) Land and Building was found undervalued by   ` 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors.
(d) There was a claim of   ` 6,000 on account of workmen compensation.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer:

Revaluation Account
Dr.						Cr.
Particulars			Amount `	Particulars	Amount `
Provision for Doubtful Debts			5,000	Land &Building	26,000
Claim against Workmen Compensation			6,000
Revaluation Profit
	Madhu’s Capital	6,000
	Vidhi’s Capital	9,000	15,000
			26,000		26,000

Partners’ Capital Account
Dr.								Cr.
Particulars	Madhu	Vidhi	Gayatri	Particulars	Madhu	Vidhi	Gayatri
Balance c/d	5,98,000	4,17,000	4,00,000	Balance b/d	5,20,000	3,00,000
				Bank			4,00,000
				General Reserve	12,000	18,000
				Premium for Goodwill	60,000	90,000
				Revaluation	6,000	9,000

	5,98,000	4,17,000	4,00,000		5,98,000	4,17,000	4,00,000

Balance Sheet as on March 31, 2016
Liabilities		Amount `	Assets		Amount `
Bills Payable		1,50,000	Bank (50,000 + 4,00,000 + 1,50,000)		6,00,000
Claim for Workmen Compensation		6,000	Sundry Debtors	3,00,000
Capital:			Less: Provision for Doubtful Debt	15,000	2,85,000
Madhu	5,98,000		Stock		80,000
Vidhi	4,17,000		Machinery		2,80,000
Gayatri	4,00,000	14,15,000	Land &Building		3,26,000
		15,71,000			15,71,000

Working Notes:

WN1: Calculation of Gayatri’s Share of Goodwill

Gayatri's share=3,00,000×5/10=1,50,000 to be shared in 2:3

WN1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio – New Ratio
Madhu=2/5−2/10=2/10

Vidhi=3/5−3/10=−3/10

Page No 5.96:

Question 62:

Shyam and Sanjay were in partnership business sharing profits and losses in the ratio of 2 : 3 respectively. Their Balance Sheet as at 31st March, 2021 was:


Liabilities		`	Assets	`
Sundry Creditors		12,435	Cash in Hand	710
Capital A/cs:			Cash at Bank	11,925
Shyam	34,050		Sundry Debtors	5,500
Sanjay	34,050	68,100	Stock	18,000
			Furniture	4,400
			Building	40,000


		80,535		80,535

On 1st April, 2021, they admitted Shanker into partnership for 1/3rd share in future profits on the following terms:
(a) Shanker is to bring in   ` 30,000 as his capital and   ` 20,000 as goodwill which is to remain in the business.
(b) Stock and Furniture are to be reduced in value by 10%.
(c) Building is to be appreciated by   ` 15,000.
(d) Provision of 5% is to be made on Sundry Debtors for Doubtful Debts.
(e) Unaccounted Accrued Income of   ` 2,400 to be provided for. A debtor, whose dues of   ` 4,800 were written off as bad debts, paid 50% in full settlement.
(f) Outstanding Rent amounted to   ` 4,800.
Show Profit and Loss Adjustment Account (Revaluation Account), Capital Accounts of Partners and opening Balance Sheet of the new firm.

Answer:

Profit and Loss Adjustment Account
Dr.				Cr.
Particulars		Amount `	Particulars	Amount `
Stock		1,800	Building	15,000
Furniture		440	Accrued Income	2,400
Provision for Doubtful Debts		275	Bad Debts Recovered	2,400
Outstanding Rent		4,800
Profit transferred to
Shyamlal Capital	4,994
Sanjay Capital	7,491	12,485
		19,800		19,800

Partners’ Capital Account
Dr.							Cr.
Particulars	Shyamlal	Sanjay	Shanker	Particulars	Shyamlal	Sanjay	Shanker
				Balance b/d	34,050	34,050
				Cash A/c			30,000
				Premium for Goodwill	8,000	12,000
Balance c/d	47,044	53,541	30,000	Revaluation	4,994	7,491
	47,044	53,541	30,000		47,044	53,541	30,000

Balance Sheet as on April 01, 2021 after Shanker’s admission
Liabilities		Amount `	Assets		Amount `
Sundry Creditors		12,435	Cash in Hand (710 + 50,000 + 2,400)		53,110
Capital A/cs:			Cash at Bank		11,925
Shyamlal	47,044		Sundry Debtors	5,500
Sanjay	53,541		Less: Provision for D. Debts	275	5,225
Shanker	30,000	1,30,585	Stock (18,000 – 1,800)		16,200
Outstanding Rent		4,800	Building (40,000 + 15,000)		55,000
			Furniture (4,400 – 440)		3,960
			Accrued Income		2,400
		1,47,820			1,47,820

Working Notes:

	Shyamlal		Sanjay
Sacrificing ratio =	2	:	3

WN1
Distribution of Premium for Goodwill (in sacrificing ratio)

Shyamlal will get=20,000×2/5= ` 8,000

Sanjay will get=20,000×3/5= ` 12,000

WN2
Distribution of Profit from Profit and Loss Adjustment Account (in old ratio)

Shyamlal will get =12,485×2/5=4,995

Sanjay will get =12,485×3/5=7,491

Page No 5.96:

Question 63:

A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as at 31st March, 2021 is as follows:


Liabilities		`	Assets	`
Capital A/cs:			Land and Building	50,000
A	60,000		Plant and Machinery	40,000
B	60,000		Furniture	30,000
C	40,000	1,60,000	Stock	20,000
Creditors		30,000	Debtors	30,000
Bills Payable		10,000	Bills Receivable	20,000
			Bank	10,000

		2,00,000		2,00,000

D is admitted as a partner on 1st April, 2021 for equal share. His capital is to be   ` 50,000.
Following adjustments are agreed on D's admission:
(a) Out of the Creditors, a sum of   ` 10,000 is due to D, it will be adjusted against his capital.
(b) Advertisement Expenses of   ` 1,200 are to be carried forward as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of   ` 2,000 paid for B's personal expenses.
(d) A Bill of Exchange of   ` 4,000, which was previously discounted with the bank, was dishonoured on 31st March, 2019 but entry was not passed for dishonour.
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation amounted to   ` 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.

Answer:

Revaluation Account
Dr.		Cr.
Particulars	Amount `	Particulars		Amount `
Provision for doubtful Debts	1,700	Prepaid Advt. Expense		1,200
A’s Capital (Rev. Exp.)	2,100	B’s Capital (Personal Exp.)		2,000

		Loss transferred to
		A Capital	300
		B Capital	200
		C Capital	100	600
	3,800			3,800

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Revaluation		2,000			Balance b/d	60,000	60,000	40,000
(Personal Exp.)					Creditors				10,000
Revaluation (Loss)	300	200	100		Cash				40,000
Balance c/d	61,800	57,800	39,900	50,000	Revaluation (Exp.)	2,100
	62,100	60,000	40,000	50,000		62,100	60,000	40,000	50,000

Balance Sheet as on April 01,2021 after D’s admission
Liabilities		Amount `	Assets		Amount `
Capital Accounts:			Land and Building		50,000
A	61,800		Plant and Machinery		40,000
B	57,800		Furniture		30,000
C	39,900		Prepaid Advt. Expenses		1,200
D	50,000	2,09,500	Stock		20,000
			Debtors	30,000
Creditors	30,000		Add: B/R dishonor	4,000
Less: D’s Capital	10,000	20,000	Less: 5% Provision for D Debts	(1,700)	32,300
Bill Payable		10,000
			Bills Receivable		20,000
			Bank (10,000 + 40,000 - 4,000)		46,000
		2,39,500			2,39,500

WN1: Distribution of Loss on Revaluation

A's Capital will be debited by=600×3/6= ` 300

B's Capital will be debited by=600×2/6= ` 200

C's Capital will be debited by=600×1/6= ` 100

Page No 5.97:

Question 64:

On 31st March, 2017, the Balance Sheet of Abhir and Divya, who were sharing profits in the ratio of 3 : 1 was as follows:

BALANCE SHEET OF ABHIR AND DIVYA as on 31st March, 2017
Liabilities		Amount `	Assets		Amount `
Creditors		2,20,000	Cash at Bank		1,40,000
Employees' Provident Fund		1,00,000	Debtors	6,50,000
Investment Fluctuation Fund		1,00,000	Less: Provision for Bad Debts	50,000	6.00,000
General Reserve		1,20,000	Stock		3,00,000
Capitals:			Investments (Market value ` 4,40,000)		5,00,000
Abhir	6,00,000
Divya	4,00,000	10,00,000
		15,40,000			15,40,000

They decided to admit Vibhor on 1st April, 2017 for 1/5th share.
(a) Vibhor shall bring   ` 80,000 as his share of goodwill premium.
(b) Stock was overvalued by   ` 20,000.
(c) A debtor whose dues of   ` 5,000 were written off as bad debts, paid   ` 4,000 in full settlement.
(d) Two months' salary @   ` 6,000 per month was outstanding.
(e) Vibhor was to bring in Capital to the extent of 1/5th of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.

Answer:

In the books of Abhir, Divya and Vibhor
Dr.	Revaluation A/c					Cr.
Particulars		Amount `	Particulars		Amount `
To Stock A/c		20,000	By Cash A/c		4,000
To Outstanding Salary A/c (6,000 × 2)		12,000	By Loss on Revaluation transferred to:		28,000
			Abhir’s Capital A/c	21,000
			Divya’s Capital A/c	7,000

		32,000			32,000

Dr.	Partner’s Capital A/c								Cr.
Particulars		Abhir `	Divya `	Vibhor `	Particulars	Abhir `	Divya `	Vibhor `
To Revaluation A/c (Loss)		21,000	7,000		By balance b/d	6,00,000	4,00,000
					By Bank A/c (WN2)			3,03,000
To balance c/d		7,59,000	4,53,000	3,03,000	By Premium for Goodwill A/c	60,000	20,000
					By Investment Fluctuation	30,000	10,000
					Fund A/c (1,00,000 – 40,000)
					By General Reserve A/c	90,000	30,000

		7,80,000	4,60,000	3,03,000		7,80,000	4,60,000	3,03,000

Working Notes:
1. Calculation of New profit-sharing ratio

Vibhor’s Share of Profits	=	1/5
Remaining Profits	=	(1 – 1/5) = 4/5
Abhir’s New Share of Profits	=	(3/5 × 4/5) = 12/25
Divya’s New Share of Profits	=	(2/5 × 4/5) = 8/25
Abhir : Divya : Vibhor	=	12 : 8 : 5

2. Calculation of Vibhor’s Capital
Total Adjusted Capital of the Old Partners = Abhir’s Capital + Divya’s Capital= ` (7,59,000 + 4,53,000) = ` 12,12,000

Combined New Share of the Old Partners = (12/25 + 8/25) = 20/25

Total Capital of the firm		=	(Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners)
		=	(12,12,000 × 25/20) = ` 15,15,000
Vibhor’s Capital		=	Total Capital of the firm × His Profit share
		=	` (15,15,000 × 1/5) = ` 3,03,000
Balance Sheet
as at 31^st March, 2018
Liabilities				Amount `	Assets		Amount `
Capitals:					Cash at Bank		5,27,000
Abhir	7,59,000				(1,40,000 + 4,000 + 3,03,000 + 80,000)
Divya	4,53,000				Debtors	6,50,000
Vibhor	3,03,000			15,15,000	Less: Provision for Bad Debts	50,00	6,00,000
Employee’s Provident Fund				1,00,000	Stock		2,80,000
Creditors				2,20,000	Investments		4,40,000
Outstanding Salary				12,000

				18,47,000			18,47,000

Page No 5.97:

Question 65:

X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2021 was:

Liabilities		Amount `	Assets		Amount `
Creditors		15,000	Cash at Bank		5,000
Employees' Provident Fund		10,000	Sundry Debtors	20,000
Workmen Compensation Reserve		5,800	Less: Provision for Doubtful Debts	600	19,400
Capital A/cs:			Stock		25,000
X	70,000		Fixed Assets		80,000
Y	31,000	1,01,000	Profit and Loss A/c		2,400

		1,31,800			1,31,800

They admit Z into partnership with 1/8th share in profits on 1st April, 2019. Z brings   ` 20,000 as his capital and   ` 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employees' Provident Fund liability is to be increased by   ` 5,000.
(b) All Debtors are good.
(c) Stock includes   ` 3,000 for obsolete items.
(d) Creditors are to be paid   ` 1,000 more.
(e) Fixed Assets are to be revalued at   ` 70,000.
Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount `	Particulars	Amount `
Stock	3,000	Provision for D. Debts	600
Creditors	1,000
Fixed Assets	10,000	Loss transferred to
Provident Fund	5,000	X Capital	11,500
		Y Capital	6,900
	19,000		19,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation (Loss)	11,500	6,900		Balance b/d	70,000	31,000
Profit and Loss	1,500	900		Workmen’s Comp. Fund	3,625	2,175
Balance c/d	72,625	25,375	20,000	Cash			20,000
				Premium for Goodwill	12,000
	85,625	33,175	20,000		85,625	33,175	20,000

Balance Sheet as on March 31, 2021 after Z’s admission
Particulars		Amount `	Assets	Amount `
Creditors (15,000 + 1,000)		16,000	Land and Building	5,000
Provident Fund (10,000 + 5,000)		15,000	Sundry Debtors	20,000
Capital A/cs:			Stock (25,000 – 3,000)	22,000
X	72,625		Fixed Assets (80,000 – 10,000)	70,000
Y	25,375		Cash	32,000
Z	20,000	1,18,000
		1,49,000		1,49,000

Working Notes

WN1: Distribution of Revaluation Loss

X’s capital will be debited =18,400×5/8=11,500

Y’s capital will be debited =18,400×3/8=6,900

WN2: Distribution Accumulated Loss

X’s capital will be debited =2,400×5/8=1,500

Y’s capital will be Credited =2,400×3/8=900

WN3: Distribution of Workmen’s Compensation Fund

X’s capital will be credited =5,800×5/8=3,625

Y’s capital will be Credited =5,800×3/8=2,175

WN4: Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X.

WN5: Calculation of New Profit Sharing Ratio

Z acquired 1/8^th share from X

New share of X=5/8-1/8=4/8

New share of Y=3/8

New share of Z=1/8

New profit sharing ratio= 4;3:1

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