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Class 12 Math Chapter 3 Admission of a Partner DK Goel Solutions
Get step-by-step DK Goel Solutions for Chapter 3 Admission of a Partner Class 12 Math below. All answers are updated for the 2026 school curriculum, offering step by step methods to help you solve textbook problems easily.
Chapter 3 Admission of a Partner DK Goel Class 12 Solved Exercises
Chapter 3: Admission of a Partner
Complete Step-by-Step Solutions | Q1 to Q112
💡 Quick Concept Summary
Numerical Questions and Solutions
A and B are partners sharing profits in the ratio of 5:3. C is admitted to the partnership for 1/4th share of future profits. Calculate the new profit sharing ratio.
C’s Share = 1/4
Remaining Share = 1 - 1/4 = 3/4
A’s New Share = 5/8 of 3/4 = 15/32
B’s New Share = 3/8 of 3/4 = 9/32
C’s Share = 1/4
Thus, the new profit sharing ratio = 15/32 : 9/32 : 1/4
New profit = 15 : 9 : 8/32
New profit = 15 : 9 : 8
A and B were partners sharing profits in the ratio of 21 : 9. C was admitted on 9/21 share in the profits. Calculate new profit sharing ratio of the partners.
C’s Share = 9/21
Remaining Share = 1 - 9/21 = 12/21
A’s New Share = 21/30 of 12/21 = 2/5
B’s New Share = 9/30 of 12/21 = 6/35
C’s Share = 9/21
Thus, the new profit sharing ratio = 2/5 : 6/35 : 9/21
New profit = 42 : 18 : 45/105
New profit = 42 : 18 : 45 or 14 : 6 : 15
P and Q are partners sharing profits and losses in the ratio of 4:3. They admit R as partner for a 1/7th share in profits which he acquires equally from P and Q. Calculate new profit sharing ratio of the partners.
R is acquires 1/7th share equally form P and Q.
R acquires form P = 1/2×1/7 = 1/14
R acquires form Q = 1/2×1/7 = 1/14
Calculation of New Share:-
P’s Share = 4/7-1/14=8 – 1/14= 7/14
Q’s Share = 3/7-1/14=6 - 1/14= 5/14
R’s Share = 1/7
Thus, the new profit sharing ratio = 7/14 : 5/14 : 1/7
New profit = 7 : 5 : 2/14
New profit = 7 : 5 : 2
R and S share profits in the ratio of 3 : 2. They admitted T as partner for 1/8th share which will be borne by R and S equally. Find out the new profit sharing ratio.
Profit Share give to T = 1/8
T acquires form R = 1/2×1/8 = 1/16
T acquires form S = 1/2×1/8 = 1/16
Calculation of New Share:-
R’s Share = 3/5-1/16=48 – 5/80= 43/80
S’s Share = 2/5-1/16=32 - 5/80= 27/80
T’s Share = 1/16+1/16=1 + 1/16=2/16
Thus, the new profit sharing ratio = 43/80 : 27/80 : 2/16
New profit = 43 : 27 : 10/80
New profit = 43 : 27 : 10
P, Q and R were partners in a firm sharing profits in the ratio of 3:2:1. They admitted S as a new partner for 1/8th share in the profits which he acquired /16th from P and 1/16th from Q. Calculate new profit sharing ratio of P, Q, R and S.
New Share = Old Share – Sacrificing Share
P’s new share = 3/6-1/16=24 - 3/48= 21/48
Q’s new share = 2/6-1/16=16 - 3/48= 13/48
R’s new share = 1/6
S’s new share = 1/8
Thus, the new profit sharing ratio = 21/48 : 13/48 : 1/16 : 1/8
New profit = 21 : 13 : 8 : 6/48
New profit = 21 : 13 : 8 : 6
X and Y are partners sharing profits in the ratio of 2 : 1. Z is admitted with 5/11th share which he takes 3/11th from X and 2/11th from Y. Calculate the new profit sharing ratio of the partners.
Z is acquire = 5/11 , X is surrender = 3/11 , Y is surrender = 2/11
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 2/3-3/11=22 - 9/33= 13/33
Y’s New Share = 1/3-2/11=11 - 6/33= 5/33
Z’s New Share = 5/11
New Profit Sharing Ratio = 13/33 : 5/33 : 5/11
New Profit Sharing Ratio = 13 : 5 : 15/33
New Profit Sharing Ratio = 13 : 5 : 15
A and B are partners sharing profits in the ratio of 5:3. They admit C on 1/4th share which he acquires 1/6th from A and 1/12th from B. Calculate the new profit sharing ratio of the partners.
C is acquire = 1/4 , A is surrender = 1/6 , B is surrender = 1/12
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 5/8-1/6=15 - 4/24= 11/24
B’s New Share = 3/8-1/12=9 - 2/24= 7/24
C’s New Share = 1/4
New Profit Sharing Ratio = 11/24 : 7/24 : 1/4
New Profit Sharing Ratio = 11 : 7 : 6/24
New Profit Sharing Ratio = 11 : 7 : 6
A, B and C were partners in a firm sharing profits in 1:2:3 ratio. They admitted D as a new partner for 1/6th share. D acquired his share 1/24 from A, 1/24 from B and 1/12 from C. Calculate new profit sharing ratio.
Calculation of New Profit Sharing Ratio:-
Old Ratio of A, B and C is 1:2:3.
A’s New Profit = 1/6-1/24=4-1/24=3/24
B’s New Profit = 2/6-1/24=8-1/24=7/24
C’s New Profit = 3/6-1/12=6-1/12=5/12 or 5×2/12×2=10/24
D’s Share = 1×4/6×4=4/24
Hence, the New Profit sharing ratio of the partners is 3:7:10:4.
A and B are partners sharing profits in the ratio of 3:2. They admit C into partnership giving him 1/2 share in profits which he acquires from A and B in the ratio of 3 : 1. Calculate the new profit ratio.
C is acquire = 1/2 from A and B in the ratio of 3:1.
A is surrender = 3/4 , B is surrender = 1/4
A’s share = 1/2 of 3/4 = 3/8
B’s share = 1/2 of 1/4 = 1/8
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 3/5-3/8=24 - 15/40= 9/40
B’s New Share = 2/5-1/8=16 - 5/40= 11/40
C’s New Share = 1/2
New Profit Sharing Ratio = 9/40 : 11/40 : 1/2
New Profit Sharing Ratio = 9 : 11 : 20/40
New Profit Sharing Ratio = 9 : 11 : 20
X and Y are partners sharing profits and losses in the ratio of 3: 2.They admit Z as a new partner who gets 1/5th share. Calculate the new profit sharing ratio in each of the following cases :
(i) If Z acquires his share from X and Y in their profit sharing ratio;
(ii) If he acquires 3/20th from X and 1/20th from Y;
(iii) If he acquires 1/10th from X and 1/10th from Y;
(iv) If he acquires 1/20th from X and 3/20th from y;
(v) If he acquires his share entirely from X;
(vi) If he acquires his share entirely from Y.
(i) If Z acquires his share from X and Y in their profit sharing ratio:-
Z is acquire = 1/5from X and Y in the ratio of 3:2.
X is surrender = 3/5 , Y is surrender = 2/5
X’s share = 1/5 of 3/5 = 3/25
Y’s share = 1/5 of 2/5 = 2/25
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5-3/25=15 - 3/25= 12/25
Y’s New Share = 2/5-2/25=10 - 2/25= 8/25
Z’s New Share = 1/5
New Profit Sharing Ratio = 12/25 : 8/25 : 1/5
New Profit Sharing Ratio = 12 : 8 : 5/25
New Profit Sharing Ratio = 12 :8 :5
(ii) If he acquires 3/20th from X and 1/20th from Y:-
X is surrender = 3/20 , Y is surrender = 1/20
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5-3/20=12 - 3/20= 9/20
Y’s New Share = 2/5-1/20=8 - 1/20= 7/20
Z’s New Share = 1/5
New Profit Sharing Ratio = 9/20 : 7/20 : 1/5
New Profit Sharing Ratio = 9 : 7 : 4/20
New Profit Sharing Ratio = 9 :7 :4
(iii) If he acquires 1/10th from X and 1/10th from Y;
X is surrender = 1/10 , Y is surrender = 1/10
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5-1/10=6 - 1/10= 5/10
Y’s New Share = 2/5-1/10=4 - 1/10= 3/10
Z’s New Share = 1/5
New Profit Sharing Ratio = 5/10 : 3/10 : 1/5
New Profit Sharing Ratio = 5 : 3 : 2/10
New Profit Sharing Ratio = 5 :3 :2
(iv) If he acquires 1/20th from X and 3/20thfrom y;
X is surrender = 1/20 , Y is surrender = 3/20
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5-1/20=12 - 1/20= 11/20
Y’s New Share = 2/5-3/20=8 - 3/20= 5/20
Z’s New Share = 1/5
New Profit Sharing Ratio = 11/20 : 5/20 : 1/5
New Profit Sharing Ratio = 11 : 5 : 4/20
New Profit Sharing Ratio = 11 :5 :4
(v) If he acquires his share entirely from X;
Z is given 1/5th share which he acquires entirely from X.
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5-1/5=3 - 1/5= 2/5
Y’s New Share = 2/5
Z’s New Share = 1/5
New Profit Sharing Ratio = 2/5 : 2/5 : 1/5
New Profit Sharing Ratio = 2 : 2 : 1/5
New Profit Sharing Ratio = 2 :2 :1
(vi) If he acquires his share entirely from Y.
Z is given 1/5th share which he acquires entirely from Y.
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 3/5
Y’s New Share = 2/5-1/5=2 - 1/5= 1/5
Z’s New Share = 1/5
New Profit Sharing Ratio = 3/5 : 1/5 : 1/5
New Profit Sharing Ratio = 3 : 1 : 1/5
New Profit Sharing Ratio = 3 :1 :1
A and B are partners sharing profits in the ratio of 3:2. C is admitted for 1/5th share of profits out of which half share was gifted by A and the remaining share was taken by C equally from A and B. Calculate new profit share ratio.
Calculation of New Profit Sharing Ratio:-
Old Profit Sharing Ratio = 3:2
C admitted for 1/5th Share of which 1/2 share gifted by A and B remaining equally from A and B.
C acquired from A = 1/5×1/2+1/5-1/101/2
C acquired from A = 1/10+1/20
C acquired from A =3/20
A’s New Share = 3/5-3/20
A’s New Share =12-3/20
A’s New Share =9/20
B’s New Share = 2/5-1/20
B’s New Share =8-1/20
B’s New Share =7/20
C’s Share = 1×4/5×4=4/20
Hence, the new profit sharing ratio of A, B and C is 9:7:4.
A and B are partners in a firm sharing profits in the ratio of 2:1. C joins the firm. A surrenders 1/4th of his share and B 1/5th of his share in favour of C. Find the new profit sharing ratio.
A is surrender = 1/4 , B is surrender = 1/5
A’s share = 1/4 of 2/3 = 2/12 = 1/6
B’s share = 1/5 of 1/3 = 1/15
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 2/3-1/6=4 - 1/6= 3/6
B’s New Share = 1/3-1/15=5 - 1/15= 4/15
C’s New Share = 1/6+1/15=5 + 2/30=7/30
New Profit Sharing Ratio = 3/6 : 4/15 : 7/30
New Profit Sharing Ratio = 15 : 8 : 7/30
New Profit Sharing Ratio = 15 :8 :7
A and B share profits in the ratio of 3:2. They agreed to admit C on the condition that A will sacrifice 3/20th of his share of profit in favour of C and B will sacrifice 1/20th of his profits in favour of C. Calculate new profit sharing ratio.
A is surrender = 3/20 , B is surrender = 1/20
A’s share = 3/20 of 3/5 = 9/100
B’s share = 1/20 of 2/5 = 2/100
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 3/5-9/100=60 - 9/100= 51/100
B’s New Share = 2/5-2/100=40 - 2/100= 38/100
C’s New Share = 9/100+2/100=9 + 2/100=11/100
New Profit Sharing Ratio = 3/6 : 4/15 : 11/100
New Profit Sharing Ratio = 51 : 38 : 11/100
New Profit Sharing Ratio = 51 :38 :11
X and Y are partners in a firm sharing profits and losses in the ratio of 9: 6. A new partner Z is admitted. X surrenders 3/15th share of his profit in favour of Z and Y 6/15th of his share in favour of Z. Calculate new profit sharing ratio.
X is surrender = 3/15 , Y is surrender = 6/15
X’s share = 3/15 of 9/15 = 27/225 = 3/25
Y’s share = 6/15 of 6/15 = 36/225 = 4/25
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
X’s New Share = 9/15-3/25=45 - 9/75= 36/75
Y’s New Share = 6/15-4/25=30 - 12/75= 18/75
Z’s New Share = 3/25+4/25=3 + 4/25=7/25
New Profit Sharing Ratio = 36/75 : 18/75 : 7/25
New Profit Sharing Ratio = 36 : 18 : 21/75
New Profit Sharing Ratio = 36 : 18 : 21 or 12 : 6 : 7
A, B and C are partners in a firm sharing profits in 4:3:3 ratio. They decided to admit their manager D into partnership. A surrendered 1/4 of his share in favour of D; B surrendered 1/5 of his share in favour of D and C surrendered 1/6 of his share in favour of D. Calculate new profit sharing ratio.
| A | B | C | |||
|---|---|---|---|---|---|
| Old Ratio | 4/10 | : | 3/10 | : | 3/10 |
| Surrender Share | 1/4 | 1/5 | 1/6 |
A’s share = 4/10 of 1/4 = 4/40= 1/10
B’s share = 3/10 of 1/5 = 3/50= 3/50
C’s share = 3/10 of 1/6 = 1/20
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 4/10-1/10=4 - 1/10= 3/10
B’s New Share = 3/10-3/50=15 - 3/50= 12/50
C’s New Share = 3/10-1/20=6 - 1/20=5/20
D’s New Share = 1/10+3/50+1/20= 10+6+5/100=21/100
New Profit Sharing Ratio = 3/10 : 12/50 : 5/20:21/100
New Profit Sharing Ratio = 30 : 24 : 25 :21/100
New Profit Sharing Ratio = 30 : 24 : 25 :21
A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit X and Y as new partners. A surrendered 1/3rd of his share in favour of X and B surrendered 1/4th of his share in favour of Y. Calculate the new profit sharing ratio A, B, X and Y.
| A | B | ||
|---|---|---|---|
| Old Ratio | 3/5 | : | 2/5 |
| Surrender Share | 1/3 | 1/4 |
A’s share = 3/5 of 1/3 = 3/15 = 1/5
B’s share = 2/5 of 1/4 = 2/20 = 1/10
Calculation of New Profit sharing ratio:-
New Ratio = Old Ratio – Surrender Share
A’s New Share = 3/5-1/5=3 - 1/5= 2/5
B’s New Share = 2/5-1/10=4 - 1/10= 3/10
X’s New Share = 1/5
Y’s New Share = 1/10
New Profit Sharing Ratio = 2/5 : 3/10 : 1/5:1/10
New Profit Sharing Ratio = 4 : 3 : 2 :1/10
New Profit Sharing Ratio = 4 : 3 : 2 :1
P and Q share profits in 3 : 2. On 1st April, 2016, they admit R and S with 1/4th and 1/5thshare respectively. The profit of the firm for the year ended 31st March 2017 amounted to Rs. 2,00,000. Prepare necessary journal entries for the distribution of profit.
Total Share of R and S = 1/4+1/5=5 + 4/20= 9/20
Remaining Share for P and Q = 1-9/20=11/20
P’s Share = 11/20× 3/5= 33/100
Q’s Share = 11/20× 2/5= 22/100
New Profit Sharing Ratio of P : Q : R : S = 33/100 : 22/100 : 1/4 : 1/5
New Profit Sharing Ratio = 33 : 22 : 25 : 20/100
New Profit Sharing Ratio = 33 : 22 : 25 : 20
Profit of the Firm Rs. 2,00,000 is distributed in new profit sharing ratio.
P’s Share in Profit = Rs. 2,00,000 ×33/100 = Rs. 66,000
Q’s Share in Profit = Rs. 2,00,000 ×22/100 = Rs. 44,000
R’s Share in Profit = Rs. 2,00,000 ×25/100 = Rs. 50,000
S’s Share in Profit = Rs. 2,00,000 ×20/100 = Rs. 40,000
Saurabh and Gaurav are equal partners. They admit Chunmun as a partner in their firm and the new ratio of all the three has been decided upon as 4:3:2. Find the sacrificing ratio.
Sacrifice Ratio = Old Ratio – New Ratio
Saurabh’s Sacrificing Ratio = 1/2-4/9=9 - 8/18=1/18
Gaurav’s Sacrificing Ratio = 1/2-3/9=9 - 6/18=3/18
Sacrificing Ratio = 1 : 3
A, B and C share profit and losses in the ratio of 3: 2: 1. Upon admission of D, they agreed to share as follows:
(i) 4 : 4 : 2 : 2
(ii)2 : 4 : 2 : 4
Calculate sacrificing ratios.
(i) 4 : 4 : 2 : 2
Sacrifice Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 3/6-4/12=6 - 4/12=2/12
B’s Sacrificing Ratio = 2/6-4/12=4 - 4/12=0
C’s Sacrificing Ratio = 1/6-2/12=2 - 2/12=0
Sacrificing Ratio = Only A Sacrifices = 2/12=1/6
(ii) 2 : 4 : 2 : 4
Sacrifice Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 3/6-2/12=6 - 2/12=4/12
B’s Sacrificing Ratio = 2/6-4/12=4 - 4/12=0
C’s Sacrificing Ratio = 1/6-2/12=2 - 2/12=0
Sacrificing Ratio = Only A Sacrifices = 4/12=1/3
A, B and C are partners sharing profits in the ratio of 2:2:1 respectively. They admit D for 1/6th share in the firm. Calculate the sacrificing ratio.
D’s Share = 1/6
Remaining Share = 1-1/6=5/6
A’s Share = 2/5of 5/6 = 2/6
B’s Share = 2/5of 5/6 = 2/6
C’s Share = 1/5of 5/6 = 1/6
D’s Share = 1/6
Calculation of Sacrificing Ratio:-
Sacrifice Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 2/5-2/6=12 - 10/30=2/30
B’s Sacrificing Ratio = 2/5-2/6=12 - 10/30=2/30
C’s Sacrificing Ratio = 1/5-1/6=6 - 5/30=1/20
Sacrificing Ratio = 2 : 2 : 1.
A and B are partners sharing profit in the ratio of 5:3. C is admitted to the partnership for 1/4th share of future profits. Calculate the new profit sharing ratio and the sacrificing ratio.
C’s Share = 1/4
Remaining Share = 1-1/4=3/4
A’s Share = 5/8of 3/4 = 15/32
B’s Share = 3/8of 3/4 = 9/32
C’s Share = 1/4
New Profit Sharing Ratio = 15/32 : 9/32 : 1/4
New Profit Sharing Ratio = 15 : 9 : 8/32
New Profit Sharing Ratio =15 : 9 : 8
Calculation of Sacrificing Ratio:-
Sacrifice Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 5/8-15/32=20 - 15/32=5/32
B’s Sacrificing Ratio = 3/8-9/32=12 - 9/32=2/32
Sacrificing Ratio = 5 : 3.
A and B are partners sharing profits in the ratio of 7 : 3. C was admitted. A surrendered 1/7th of his share and B 1/3rdof his share in favour of C. Calculate the sacrificing ratio and the new profit-sharing ratios of the partners.
A’s Surrendered = 1/7 of 7/10 = 1/10
B’s Surrendered = 1/3 of 3/10 = 1/10
Sacrificing Ratio = 1/10 : 1/10
Sacrificing Ratio = 1 : 1
Calculation of New Ratio :-
A’s New Share = 7/10-1/10=7 - 1/10= 6/10
B’s New Share = 3/10-1/10=3 - 1/10= 2/10
C’s New Share = 1/10+1/10=1+ 1/10= 2/10
New Ratio of A, B and C = 6/10:2/10:2/10
New Ratio of A, B and C = 6 : 2 : 2
New Ratio of A, B and C = 3 : 1 : 1
A and B are partners in a firm sharing profits and losses in the ratio of 3:2. C is admitted into partnership. A sacrifices 1/3 of his share and B 1/10 from his share in favour of C. Determine the sacrificing ratio and the new profit shearing ratio.
A’s Surrendered = 1/3 of 3/5 = 1/5
B’s Surrendered = 1/10
Sacrificing Ratio = 1/5 : 1/10
Sacrificing Ratio = 2 : 1/10
Sacrificing Ratio = 2 : 1
Calculation of New Ratio :-
A’s New Share = 3/5-1/5=3 - 1/5= 2/5
B’s New Share = 2/5-1/10=4 - 1/10= 3/10
C’s New Share = 1/5+1/10=2 + 1/10= 3/10
New Ratio of A, B and C = 2/5:3/10:3/10
New Ratio of A, B and C = 4 : 3 : 3/10
New Ratio of A, B and C = 4 : 3 : 3.
A and B are partners in a firm sharing profits and losses in the ratio of 5:3. They admit C and D as new partners. A sacrifices ½ of his share in favour of C and B sacrifices ¼ from his share in favour of D. Calculate their new profit sharing ratio.
A’s sacrifices 1/2 of 5/8 = 5/16
B’s sacrifices = 1/4
Calculation of New Ratio :-
A’s New Share = 5/8-5/16=10 - 5/16= 5/16
B’s New Share = 3/8-1/4=3 - 2/8= 1/8
New share of A, B, C and D = 5/16:1/8:5/16:1/4
New Ratio of A, B and C = 5 : 2 : 5 :4/16
New Ratio of A, B and C = 5 :2 : 5 :4.
Find out the sacrificing ratio and new ratio in the following Cases:
(i) A and B are partners sharing profits and losses in the ratio of 4:3. C is admitted for 1/5th share. A and B decided to share equally in future. Calculate the new ratio and sacrificing ratio.
(ii) A, B, C and D are in partnership sharing profits and losses in the ratio of 36 : 24 : 20 : 20 respectively. E joins the partnership for 20% share A, B, C, and D would in future share profits among themselves as 3/10 : 4/10: 2/10 and 1/10 . Calculate the new profit sharing ratio after E's admission.
(i) Calculation of new profit sharing ratio:-
C’s Share = 1/5
Remaining Share = 1-1/5 = 4/5
A’s New Share = 1/2 of 4/5 = 4/10 = 2/5
B’s New Share = 1/2 of 4/5 = 4/10 = 2/5
C’s New Share = 1/5
New Profit Sharing Ratio = 2/5 : 2/5 :1/5
New Profit Sharing Ratio = 2 : 2 : 1.
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 4/7-2/5=20 – 14/35= 6/35
B’s Sacrificing Ratio = 3/7-2/5=15 - 14/35= 1/35
Sacrificing Ratio = 6 : 1.
(ii) Calculation of Sacrificing Ratio:-
E’s Share = 20% or 20/100 or 1/5
Remaining Share = 1-1/5=4/5
Profit shared by A, B, C and D in the ratio of 3/10:4/10:2/10:1/10
A’s New Ratio = 4/5 of 3/10 = 12/50
B’s New Ratio = 4/5 of 4/10 = 16/50
C’s New Ratio = 4/5 of 2/10 = 8/50
D’s New Ratio = 4/5 of 1/10 = 4/50
E’s New Ratio = 1/5
New Profit Sharing Ratio = 12/50:16/50:8/50:4/50:1/5
New Profit Sharing Ratio = 12 : 16 : 8 : 4 : 5/50
New Profit Sharing Ratio = 12 : 16 : 8 : 4 : 5
A and B are partners in a firm sharing profits in the ratio of 3:1. They admit C and decide that the profit-sharing ratio between B and C shall be same as Existing between A and B. Calculate new profit-sharing ratio and the sacrificing ratio.
Old Ratio of A and B = 3:1
New Ratio of B and C = 3:1.
C’s share = 1/4
Remaining Share = 1-1/4 = 3/4
A’s New Ratio = 3/4× 3/4=9/16
B’s New Ratio = 3/4× 1/4=3/16
C’s New Ratio = 1/4
New Ratio of A, B and C = 9 : 3 : 1.
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 3/4-3/16=12 – 9/16= 3/16
B’s Sacrificing Ratio = 1/4-3/16=4 - 3/16= 1/16
Sacrificing Ratio = 3 : 1.
A, B and C are partners sharing in the ratio of 4 : 3: 2. They admit D for, 1/9thshare. It is agreed that A would retain his original share. Calculate the new and sacrificing ratios.
Old Ratio of A, B and C = 4 : 3 : 2
D’s Share = 1/9
Remaining Share = 1-1/9=8/9
A’s New share = 4/9
Remaining Share = 8/9-4/9=4/9
B’s New Share = 3/5 of 4/9 = 12/45
C’s New Share = 2/5 of 4/9 = 8/45
The New Ratio A, B, C and D = 4/9:12/45:8/45:1/9
The New Ratio A, B, C and D = 20 : 12 : 8 : 5/45
The New Ratio A, B, C and D = 20 : 12 : 8 : 5
Calculation of Sacrificing Ratio:-
B’s Sacrificing = 3/9-12/45=15 - 12/45=3/45
C’s Sacrificing = 2/9-8/45=10 - 8/45=2/45
Sacrificing Ratio among B and C = 3:2
P, Q and R are partners sharing profits and losses in the ratio of 5:3:2. S is admitted as a new partner for 1/5th share. P sacrifices 1/10thfrom his share in favour of S and remaining sacrifice was made by Q and R in the ratio of 2 : 1. Calculate sacrificing ratio and new profit sharing ratio.
Calculation of Sacrificing Ratio:-
S’s Share =1/5
P surrender for S = 1/10
Remaining Share of S = 1/5-1/10=2 - 1/10= 1/10
1/10 share of sacrificed by Q and R in the ratio of 2:1
Q’s Sacrifice = 1/10 of 2/3 = 2/30
R’s Sacrifice = 1/10 of 1/3 = 1/30
Sacrifice Ratio of P, Q and R = 1/10:2/30:1/30
Sacrifice Ratio of P, Q and R = 3 : 2 : 1/30
Sacrifice Ratio of P, Q and R = 3 : 2 : 1
Calculation of New Ratio:-
P’s New Share = 5/10- 3/30=15 - 3/30=12/30
Q’s New Share = 3/10- 2/30=9 – 2/30=7/30
R’s New Share = 2/10- 1/30=6 – 1/30=5/30
S’s New Share = 1/5
New Ratio of P, Q, R and S = 12/30:7/30:5/30:1/5
New Ratio of P, Q, R and S = 12 : 7 : 5 : 6/30
New Ratio of P, Q, R and S = 12 : 7 : 5 : 6
L, M and N are partners sharing profits in the ratio of 3:2:1. They admit O into partnership. O brings in cash Rs. 4,50,000 as capital and Rs. 1,50,000 as goodwill for 1/5th share of profits. Pass journal entries and find out new profit sharing ratios when: (a) Goodwill is retained in the firm; (b) goodwill is withdrawn by old partners.
(a) Goodwill is retained in the firm:-
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 6,00,000 | ||
| To O’s Capital A/c | 4,50,000 | ||||
| To Premium for Goodwill A/c | 1,50,000 | ||||
| (Being O admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 1,50,000 | ||
| To L’s Capital A/c | 75,000 | ||||
| To M’s Capital A/c | 50,000 | ||||
| To N’s Capital A/c | 25,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
(b) Goodwill is withdrawn by oldpartners:-
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 6,00,000 | ||
| To O’s Capital A/c | 4,50,000 | ||||
| To Premium for Goodwill A/c | 1,50,000 | ||||
| (Being O admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 1,50,000 | ||
| To L’s Capital A/c | 75,000 | ||||
| To M’s Capital A/c | 50,000 | ||||
| To N’s Capital A/c | 25,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
| (iii) | L’s Capital A/c | Dr. | 75,000 | ||
| M’s Capital A/c | Dr. | 50,000 | |||
| N’s Capital A/c | Dr. | 25,000 | |||
| To Bank A/c | 1,50,000 | ||||
| (Being old partners withdraws Goodwill) | |||||
O’s Share = 1/5
Remaining Share = 1-1/5=4/5
L’s New Ratio = 3/6 of 4/5 = 12/30=2/5
M’s New Ratio = 2/6 of 4/5 = 8/30=4/15
N’s New Ratio = 1/6 of 4/5 = 4/30=2/15
O’s New Ratio = 1/5
New Profit Sharing Ratio = 2/5:4/15:2/15:1/5
New Profit Sharing Ratio = 6 : 4 : 2 : 3/15
New Profit Sharing Ratio = 6 : 4 : 2 : 3
P and Q are partners sharing profits and losses in the ratio of 2:1. They admit R into from partnership for 4/9thshare in profit which he acquires equally from P and Q. R brings in cash Rs. 2,50,000 as a capital and Rs. 1,80,000 as goodwill. Pass journal entries and find new profit sharing ratio.
(a) Goodwill is retained in the firm:-
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 4,30,000 | ||
| To R’s Capital A/c | 2,50,000 | ||||
| To Premium for Goodwill A/c | 1,80,000 | ||||
| (Being R admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 1,80,000 | ||
| To L’s Capital A/c | 90,000 | ||||
| To M’s Capital A/c | 90,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
R’s Share = 4/9 which he acquires from P and Q.
P’s surrender = 1/2of 4/9 = 2/9
Q’s surrender =1/2of 4/9 = 2/9
Calculation of New Profit Sharing Ratio:-
P’s New Ratio = 2/3- 2/9 = 6 - 2/9=4/9
Q’s New Ratio = 1/3- 2/9 = 3 - 2/9=1/9
R’s New Ratio = 4/9
New Profit Sharing Ratio = 4/9:1/9:4/9
New Profit Sharing Ratio = 4 : 1 : 4/9
New Profit Sharing Ratio = 4 : 1 : 4
X and Y are partners Sharing profits in the ratio of 4:3. Z joins partnership for 2/7th share in the profits of which he acquires 3/4th from X and 1/4th from Y. Z brings in Rs. 3,00,000 for his capital and Rs.1,20,000 for goodwill. Half of the amount of goodwill is withdrawn by the old partners. Pass necessary Journal entries and find out new profit sharing ratio.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 4,20,000 | ||
| To Z’s Capital A/c | 3,00,000 | ||||
| To Premium for Goodwill A/c | 1,20,000 | ||||
| (Being Z admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 1,20,000 | ||
| To X’s Capital A/c | 90,000 | ||||
| To Y’s Capital A/c | 30,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
| (iii) | X’s Capital A/c | Dr. | 45,000 | ||
| Y’s Capital A/c | Dr. | 15,000 | |||
| To Bank A/c | 60,000 | ||||
| (Being Half of goodwill withdrawn by old partners) | |||||
Z’s Share = 4/9 which he acquires 3/4th from P and 1/4th from Q.
X’s surrender = 3/4of 2/7 = 3/14
Y’s surrender =1/4of 2/7 = 1/14
Calculation of New Profit Sharing Ratio:-
X’s New Ratio = 4/7 - 3/14 = 8 - 3/14=5/14
Y’s New Ratio = 3/7 - 1/14 = 6 - 1/14=5/14
Z’s New Ratio = 2/7
New Profit Sharing Ratio = 5/14:5/14:2/7
New Profit Sharing Ratio = 5 : 5 : 4/14
New Profit Sharing Ratio = 5 : 5 : 4
K and Y were partners in a firm sharing profits in 3 : 2 ratio. They admitted Z as a new partner for 1/3rd share in the profits of the firm. Z acquired his share from K and Y in 2:3 ratio. Z brought Rs. 80,000 for his capital and Rs. 30,000 for his 1/3rd share as premium. Calculate the new profit sharing ratio of K, Y and Z and pass necessary journal entries for the above transactions in the books of the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 1,10,000 | ||
| To Z’s Capital A/c | 80,000 | ||||
| To Premium for Goodwill A/c | 30,000 | ||||
| (Being Z admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 30,000 | ||
| To K’s Capital A/c | 12,000 | ||||
| To Y’s Capital A/c | 18,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
K’s surrender = 2/5of 1/3 = 2/15
Z’s surrender =3/5of 1/3 = 3/15
Calculation of New Profit Sharing Ratio:-
K’s New Ratio = 3/5 - 2/15 = 9 - 2/15=7/15
Y’s New Ratio = 2/5 - 3/15 = 6 - 3/15=3/15
Z’s New Ratio = 1/3
New Profit Sharing Ratio = 7/15:3/15:1/3
New Profit Sharing Ratio = 7 : 3 : 5/15
New Profit Sharing Ratio = 7 : 3 : 5
Anju and Manju are partners, sharing profits and losses in the proportion of 7:5. They agreed to admit Meenu, their manager, into partnership, who is to get one sixth share in the business. Meenu brings in Rs. 2,00,000 for her capital and Rs. 96,000 for 1/6th share of goodwill which she acquires 1/24th from Anju and 1/8th from Manju. The profit for the first year of the new partnership amount to Rs. 4,80,000.
Make the necessary Journal entries in connection with Meenu's admission and divide the profit between the partners.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 2,96,000 | ||
| To Meenu’s Capital A/c | 2,00,000 | ||||
| To Premium for Goodwill A/c | 96,000 | ||||
| (Being Meenu admitted into partnership amount of Capital and goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 96,000 | ||
| To Anju’s Capital A/c | 24,000 | ||||
| To Manju’s Capital A/c | 72,000 | ||||
| (Being Goodwill is distributed between old partners) | |||||
Calculation of New Profit Sharing Ratio:-
Anju’s New Ratio = 7/12 - 1/24 = 14 - 1/24=13/24
Manju’s New Ratio = 5/12 - 1/8 = 10 - 3/24=7/24
Meenu’s New Ratio = 1/6
New Profit Sharing Ratio = 13/24:7/24:1/6
New Profit Sharing Ratio = 13 : 7 : 1/24
New Profit Sharing Ratio = 13 : 7 : 4
Calculation of Profit:-
Anju’s Profit = Rs. 4,80,000 ×13/24 = Rs. 2,60,000
Manju’s Profit = Rs. 4,80,000 ×7/24 = Rs. 1,40,000
Meenu’s Profit = Rs. 4,80,000 ×4/24 = Rs. 80,000
X and Y share profits and losses in the ratio of 3:2. They admit Z as a partner who pays Rs. 72,000 as premium for goodwill for 1/4thshare in the future profits of the firm.
Pass Journal entries appropriating the premium money and show the new profit sharing ratio in each of the following cases :
(i) If he acquires his share of profits in the original ratio of existing partners.
(ii) If he acquires his share of profits in equal proportions from the existing partners.
(iii) If he acquires his share in the ratio of 2:3 from the existing partners
(iv) If he acquires his share of profits as 7/32th from X and 1/32th from Y.
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) | |||||
Old Ratio of X and Y = 3:2
Z’s Share = 1/4
Remaining Share = 1-1/4= 3/4
X’s New Share = 3/5of 3/4 = 9/20
Y’s New Share = 2/5of 3/4 = 6/20
Z’s New Share = 1/4
New Profit Sharing Ratio = 9/20:6/20:1/4
New Profit Sharing Ratio = 9 : 6 : 5/20
New Profit Sharing Ratio = 9 : 6 : 5
Sacrificing Ratio = 3:2
Second 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 | 36,000 | ||||
| To Y’s Capital A/c | 36,000 | ||||
| (Being Goodwill is distributed between old partners in the sacrificing ratio of 1:1) | |||||
Sacrificing Ratio = 1:1
Z acquires 1/2 of 1/4 = 1/8 from each of X and Y.
X’s New Ratio = 3/5- 1/8=24 - 5/40= 19/40
Y’s New Ratio = 2/5- 1/8=16 - 5/40= 11/40
Z’s New Ratio =1/4
New Profit Sharing Ratio = 19/40:11/40:1/4
New Profit Sharing Ratio = 19 : 11 : 10/40
New Profit Sharing Ratio = 19 : 11 : 10
Third 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 | 28,800 | ||||
| To Y’s Capital A/c | 43,200 | ||||
| (Being Goodwill is distributed between old partners in the sacrificing ratio of 1:1) | |||||
A, B and C are partners in a firm sharing profits and losses in the ratio of 5:3:2. They admitted D as a new partner, who brings Rs. 5,00,000 as capital and Rs. 2,10,000 as his share of goodwill in cash. A surrendered 1/5th of his share, B surrendered 1/6th of his share and C surrendered 1/8th of his share in favour of D.
Find out sacrifice ratio and Pass necessary journal entries for the above.
[Ans. Sacrificing Ratio 4:2:1]
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 7,10,000 | ||
| To D’s Capital A/c | 5,00,000 | ||||
| To Premium for Goodwill A/c | 2,10,000 | ||||
| (Being goodwill and Capital brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 2,10,000 | ||
| To A’s Capital A/c | 1,20,000 | ||||
| To B’s Capital A/c | 60,000 | ||||
| To C’s Capital A/c | 30,000 | ||||
| (Being Goodwill is distributed between old partners in the sacrificing ratio) | |||||
A’s Surrender = 5/10 of 1/5 = 1/10
B’s Surrender = 3/10 of 1/6 = 1/20
C’s Surrender = 2/10 of 1/8 = 1/40
Sacrificing Ratio = 1/10:1/20:1/40
Sacrificing Ratio = 4 : 2 : 1/40
Sacrificing Ratio =4 : 2 : 1
Partners A, B and C share the profit of a business in the ratio of 3: 2: 1 respectively. For one-sixth share they admit D who brings in Rs. 2,00,000 including Rs.60,000 for his share of goodwill. Show the journal entries if A, B, C and D decide to share the profits respectively in the ratio of (a) 15:10:5:6; (b) 5:3:2:2 and (c) 2:2:1:1. Assume that the entire cash brought in by D remains in the business. Give Journal entries.
| 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 | ||||
| To Premium for Goodwill A/c | 60,000 | ||||
| (Being goodwill brought in cash ) | |||||
| Case (a) | Premium for Goodwill A/c | Dr. | 60,000 | ||
| To A’s Capital A/c | 30,000 | ||||
| To B’s Capital A/c | 20,000 | ||||
| To C’s Capital A/c | 10,000 | ||||
| (Being goodwill is transferred to old partners in the sacrificing ratio 3:2:1) | |||||
| Case (b) | Premium for Goodwill A/c | Dr. | 60,000 | ||
| To A’s Capital A/c | 30,000 | ||||
| To B’s Capital A/c | 30,000 | ||||
| (Being goodwill is transferred to old partners in the sacrificing ratio 1:1) | |||||
| Case (c) | Premium for Goodwill A/c | Dr. | 60,000 | ||
| To A’s Capital A/c | 60,000 | ||||
| (Being goodwill is transferred to old partners in the sacrificing ratio 1:1) | |||||
Calculation of Sacrificing Ratios:-
Sacrificing Ratio = Old Ratio – New Ratio
Case (a)
A’s Sacrificing Ratio = 3/6-15/36=18-15/36=3/36
B’s Sacrificing Ratio = 2/6-10/36=12-10/36=2/36
C’s Sacrificing Ratio = 1/6-5/36=6 - 5/36=1/36
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)
A’s Sacrificing Ratio = 3/6-5/12=6 - 5/12=1/12
B’s Sacrificing Ratio = 2/6-3/12=4 - 3/36=1/12
C’s Sacrificing Ratio = 1/6-2/12=2 - 2/12=0
Sacrificing Ratio of A,B and C = 1/12:1/12
Sacrificing Ratio of A,B and C = 1 :1
Case (c)
A’s Sacrificing Ratio = 3/6-2/6=3 - 2/6=1/6
B’s Sacrificing Ratio = 2/6-2/6=2 - 2/6=0
C’s Sacrificing Ratio = 1/6-1/6=1 - 1/6=0
A alone has sacrificed.
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z into partnership, Z paying a premium of Rs. 1,00,000 for 1/4 share of the profits while X and Y as between themselves sharing profits and losses equally. Give journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (i) | Bank A/c | Dr. | 1,00,000 | ||
| To Premium for Goodwill A/c | 1,00,000 | ||||
| (Being goodwill brought in cash ) | |||||
| (ii) | Premium for Goodwill A/c | Dr. | 1,00,000 | ||
| To X’s Capital A/c | 90,000 | ||||
| To Y’s Capital A/c | 10,000 | ||||
| (Being Goodwill is distributed between old partners in the sacrificing ratio of 9:1) | |||||
Calculation of New Profit Sharing Ratio:-
Z’s Share = 1/4
Remaining Share = 1-1/4= 3/4
X’s New Profit Ratio = 3/4 of 1/2 = 3/8
Y’s New Profit Ratio = 3/4 of 1/2 = 3/8
Calculation of Sacrificing Ratio:-
X’s Sacrificing Ratio = 3/5 - 3/8 = 24 -15/40 = 9/40
Y’s Sacrificing Ratio = 2/5 - 3/8 = 16 -15/40 = 1/40
Sacrificing Ratio of X and Y is 9:1.
A, B and C are partners sharing profits and losses in the ratio of 3:2:1. They admit D for 1/4th share in the profits and he brought in Rs. 1,50,000 as his share of goodwill which was credited to the Capital Accounts of B and C respectively with Rs. 1,25,000 and Rs. 25,000.Calculate the new profit sharing ratio.
Sacrificing Ratio by B and C = 1,25,000 : 25,000, Which is 5 : 1.
B’s surrender = 1/4of 5/6 = 5/24
C’s surrender =1/4of 1/6 = 1/24
Calculation of New Profit Sharing Ratio:-
A’s New Ratio = 3/6
B’s New Ratio = 2/6 - 5/24 = 8 - 5/24=3/24
C’s New Ratio = 1/6 - 1/24 = 4 - 1/24=3/24
D’s New Ratio = 6/24
New Profit Sharing Ratio = 3/6:3/24:3/24:1/4
New Profit Sharing Ratio = 12 : 3 : 3 : 6/24
New Profit Sharing Ratio = 12 : 3 : 3 :6
New Profit Sharing Ratio = 4 : 1 : 1 :2
X and Y are partners sharing profits and losses in the ratio of 2 : 1. They agree to admit Z into partnership who gets 1/3rdshare in the profits. Z brings in Rs. 50,000 for his capital and the necessary amount for goodwill in cash. Goodwill of the firm is valued at Rs. 36,000. X, Y and Z agree to share future profits equally. The amount of goodwill is withdrawn from the business. Pass Journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 62,000 | |||
| To Z’s Capital A/c | 50,000 | ||||
| To Premium for Goodwill A/c | 12,000 | ||||
| (Being goodwill and Capital brought in cash ) | |||||
| Premium for Goodwill A/c | Dr. | 12,000 | |||
| To X’s Capital A/c | 12,000 | ||||
| (Being Goodwill is transferred to X’s capital account) | |||||
| X’s Capital A/c | Dr. | 12,000 | |||
| To Bank A/c | 12,000 | ||||
| (Being goodwill withdrawn by x) | |||||
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
X’s Ratio = 2/3-1/3=2 – 1/3=1/3
Y’s Ratio = 1/3-1/3=0
P and Q are partners sharing profits and losses as 2:3. R and S are admitted and profit sharing ratio becomes 3:4:3:2. Goodwill is valued at Rs. 3,00,000, R brings required goodwill and Rs. 2,00,000 cash for Capital. S brings in Rs.1,00,000 cash and Motor Vehicle for Rs. 80,000 as his capital in addition to the required amount of goodwill in cash. Show the necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 2,75,000 | |||
| To R’s Capital A/c | 2,00,000 | ||||
| To Premium for Goodwill A/c | 75,000 | ||||
| (Being goodwill and Capital brought in cash) | |||||
| Bank A/c | Dr. | 1,50,000 | |||
| Motor Vehicle A/c | Dr. | 80,000 | |||
| To S’s Capital A/c | 1,80,000 | ||||
| To Premium for Goodwill A/c | 50,000 | ||||
| (Being Goodwill and Capital brought in cash and Motor Vehicle) | |||||
| Premium for Goodwill A/c | Dr. | 1,25,000 | |||
| To P’s Capital A/c | 45,000 | ||||
| To Q’s Capital A/c | 80,000 | ||||
| (Being goodwill distributed to old partners) | |||||
1.) Calculation of goodwill of R’s Share and S’s Share:-
Total goodwill of the firm = Rs. 3,00,000
R’s Share of goodwill = Rs. 3,00,000 ×3/12 = Rs. 75,000
S’s Share of goodwill = Rs. 3,00,000 ×2/12 = Rs. 50,000
2.) Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
P’s Sacrificing Ratio = 2/5-3/12=24 – 15/60= 9/60
Q’s Sacrificing Ratio = 3/5-4/12=36 – 20/60= 16/60
Sacrificing Ratio = 9/60:16/60
Sacrificing Ratio = 9 : 16.
Champak and Raja were partners sharing profits and losses in the ratio of 3:7. Varun was admitted on 1st April, 2025 as a new partner for 1/3rd share in the profits of the firm. Half of Varun’s share was gifted by Raja and the remaining share was purchased by Varun in the ratio of 2:3 from Champak and Raja respectively.
Calculation of New Profit Sharing Ratio:-
Share Gifted by Raja = 1/2×1/3=1/6
Remaining Share to be purchased = 1/3-1/6=1/6
Varun Purchased this share from Champak and Raja in 2:3.
Purchased from Champak = 2/5×1/6=2/30
Purchased from Raja = 3/5×1/6=3/30
Champak’s New Profit Sharing Ratio = 3/10-2/30=9-2/30=7/30
Raja’s New Profit Sharing Ratio = 7/10-3/30-1/6=21-3-5/30=13/30
Varun’s Share = 1/3×10/10=10/30
The New Profit sharing ratio is 7:13:10.
Ram and Rahim are partners in a firm sharing profits in the ratio of 3 : 2. On April 1, 2023 they admit Raj as a new partner for 3/13th share in the profits. The new ratio will be 5:5:3. Raj contributed the following assets towards his capital and or his share of goodwill: Land Rs.2,50,000; Plant & Machinery Rs. 1,50,000; Stock Rs.80,000 and Debtors Rs. 70,000. On the date of admission of Raj, the goodwill of the firm was valued at Rs. 5,20,000. Record necessary journal entries in the book if the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Land A/c | Dr. | 2,50,000 | |||
| Plant & Machinery A/c | Dr. | 1,50,000 | |||
| Stock A/c | Dr. | 80,000 | |||
| Debtors A/c | Dr. | 70,000 | |||
| To Raj’s Capital A/c | 4,30,000 | ||||
| To Premium for Goodwill A/c | 1,20,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| Premium for Goodwill A/c | Dr. | 1,20,000 | |||
| To Ram’s Capital A/c | 1,12,000 | ||||
| To Rahim’s Capital A/c | 8,000 | ||||
| (Being goodwill distributed to old partners) | |||||
Calculation of Sacrificing Ratio:-
Ram’s Share = 3/5-5/13=39-25/65=14/65
Rahim’s Share = 2/5-5/13=26-25/65=1/65
Sacrificing Ratio = 14/65:1/65
Sacrificing Ratio = 14 : 1
Raj’s Share in Goodwill = Rs. 5,20,000 ×3/13 = Rs. 1,20,000
A and B are partners, sharing profit and losses in the ratio of 3:2. Goodwill appears in their Balance Sheet at Rs. 24,000, when C is admitted into partnership for 1/5th share in profit. He pays Rs. 50,000 for capital and Rs. 8,000 as goodwill. The ratio of the partners A, B and C in the new firm would be 2:2:1.
Pass journal entries in the books of the new firm to record above adjustments.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| A’s Capital A/c | Dr. | 14,400 | |||
| B’s Capital A/c | Dr. | 9,600 | |||
| To Goodwill A/c | 24,000 | ||||
| (Being goodwill appearing in the books now written off in old ratio) | |||||
| Bank A/c | Dr. | 58,000 | |||
| To C’s Capital A/c | 50,000 | ||||
| To Premium for Goodwill A/c | 8,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| Premium for Goodwill A/c | Dr. | 8,000 | |||
| To A’s Capital A/c | 8,000 | ||||
| (Being goodwill distributed to old partners) | |||||
Calculation of Sacrificing Ratio:-
A’s Share = 3/5-2/5=3-2/5=1/5
B’s Share = 2/5-2/5=2-2/5=0
A’s alone has sacrificed.
P and S are partners sharing profits in the ratio of 3:2. Their books showed goodwill at Rs. 20,000, R is admitted with 1/5th share which he acquires equally from P and S. R brings Rs. 20,000 as his capital and Rs. 10,000 as his share of goodwill. Profits at the end of the year were of the amount of Rs. 1,00,000. You are required to give journal entries to carry out the above arrangement.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| P’s Capital A/c | Dr. | 12,000 | |||
| S’s Capital A/c | Dr. | 8,000 | |||
| To Goodwill A/c | 20,000 | ||||
| (Being goodwill appearing in the books now written off in old ratio) | |||||
| Bank A/c | Dr. | 30,000 | |||
| To R’s Capital A/c | 20,000 | ||||
| To Premium for Goodwill A/c | 10,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| Premium for Goodwill A/c | Dr. | 10,000 | |||
| To P’s Capital A/c | 5,000 | ||||
| To S’ s Capital A/c | 5,000 | ||||
| (Being goodwill distributed to old partners) | |||||
Calculation of New Ratio:-
R’s Share = 1/5
P’s Sacrificing = 1/10
S’s Sacrificing = 1/10
P’s Share = 3/5-1/10=6-1/10=5/10
S’s Share = 2/5-1/10=4-1/10=3/10
R’s Share = 1/10+1/10=1+1/10=2/10
New Share = 5:3:2
Profit Division:-
P’s Share = Rs. 1,00,000 ×5/10 = Rs. 50,000
S’s Share = Rs. 1,00,000 ×3/10 = Rs. 30,000
R’s Share = Rs. 1,00,000 ×2/10 = Rs. 20,000
A and B carrying on business as partners used to share profits losses thus; A 4/7ths and B 3/7ths, and goodwill appeared in the books of the firm at Rs. 2,80,000 when C was admitted as a partner having 1/7th share in profits and losses. C was asked to pay a premium of Rs. 75,000 for goodwill, and the profit-sharing ratio as between A and B remained unchanged.
Show entries in the journal of the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| A’s Capital A/c | Dr. | 1,60,000 | |||
| B’s Capital A/c | Dr. | 1,20,000 | |||
| To Goodwill A/c | 2,80,000 | ||||
| (Being goodwill appearing in the books now written off in old ratio) | |||||
| Bank A/c | Dr. | 75,000 | |||
| To Premium for Goodwill A/c | 75,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| Premium for Goodwill A/c | Dr. | 75,000 | |||
| To A’s Capital A/c | 42,857 | ||||
| To B’ s Capital A/c | 32,143 | ||||
| (Being goodwill distributed to old partners) | |||||
A and B are partners sharing profits and losses in 3 : 2. They admit C into partnership for 1/5th share in the profits. C pays in cash Rs. 40,000 for his capital. Goodwill of the firm is valued at Rs. 25,000 but C is unable to bring his share of goodwill in cash. Pass the necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 40,000 | |||
| To C’s Capital A/c | 40,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| C’s Current A/c | Dr. | 5,000 | |||
| To A’s Capital A/c | 3,000 | ||||
| To B’ s Capital A/c | 2,000 | ||||
| (Being account of new partner debited for his share of goodwill and capital accounts of old partners credited in their sacrificing ratio) | |||||
Goodwill = Rs. 25,000
C’s Share of goodwill = Rs. 25,000 ×1/5 = Rs. 5,000
Aru and Beena are partners in a firm sharing profits in the ratio of 2:1. They admit Charu and Divya as two new partners. The new profit sharing ratio is agreed at 4:3:2:1. Charu introduced Rs. 5,00,000 and Divya Rs. 3,00,000 as their capitals.
Charu beings in Rs. 60,000 in cash for her share in goodwill but Diya is unable to bring her share of goodwill in cash. Pass necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 8,00,000 | |||
| To Charu’s Capital A/c | 5,00,000 | ||||
| To Divya’s Capital A/c | 3,00,000 | ||||
| (Being Amount of Capital received from Charu and Divya) | |||||
| Bank A/c | Dr. | 60,000 | |||
| To Premium for Goodwill A/c | 60,000 | ||||
| (Being Premium for goodwill brought by charu) | |||||
| Premium for Goodwill A/c | Dr. | 60,000 | |||
| Divya’s Current A/c | Dr. | 30,000 | |||
| To Aru’s Capital A/c | 80,000 | ||||
| To Beena’s Capital A/c | 10,000 | ||||
| (Being goodwill distributed between old partners in 8:1) | |||||
Amount paid by Charu Rs. 60,000 for her share 2/10.
Total Goodwill = Rs. 60,000 × 10/2
Total Goodwill = Rs. 3,00,000
Divya’s Share of goodwill = Rs. 3,00,000 × 1/10
Divya’s Share of goodwill = Rs. 30,000
Calculation of Sacrificing Ratio:
Sacrificing Ratio = Old Ratio – New Ratio
Anu = 2/3- 4/10=20-12/30=8/30
Beena = 1/3- 3/10=10-9/30=1/30
Hence, the Sacrificing Ratio is 8:1.
Calculation of Goodwill:-
Aru’s Share:-
From Charu = Rs. 60,000 × 8/9 = Rs. 53,333
From Divya = Rs. 30,000 × 8/9 = Rs. 26,667
Total goodwill = Rs. 53,333 + Rs. 26,667 = Rs. 80,000
Beena’s Share:-
From Charu = Rs. 60,000 × 1/9 = Rs. 6,667
From Divya = Rs. 30,000 × 1/9 = Rs. 3,333
Total goodwill = Rs. 6,667 + Rs. 3,333 = Rs. 10,000
A and B are partners sharing profits in the ratio of 3 : 2. On 1st April, 2018 they admit C as a new partner for 1/4th share. C acquires 1/5th of his share from A.
Goodwill on C's admission is to be valued on the basis of capitalisation of average profits of the last five years. Profits were :
Year ended
31st March, 2018 Profit Rs. 50,000
31st March, 2019 Profit Rs. 1,20,000 (including gain of Rs. 40,000 from sale of fixed assets)
31st March, 2020 Loss Rs. 60,000 (after charging Loss by Fire Rs. 50,000)
31st March, 2021 Loss Rs. 1,00,000 (after charging voluntary retirement compensation paid Rs. 1,50,000)
31st March, 2022 Profit Rs. 1,90,000
On 1st April, 2022, the firm had assets of Rs. 7,00,000 and external liabilities of Rs. 2,20,000.
The normal rate of return on capital is 12%.
C brings in Rs. 1,25,000 for his capital but is unable to bring his share of goodwill in cash.
(i) You are required to calculate C’s share of goodwill,
(ii) Pass necessary journal entries, and
(iii) Calculate new profit sharing ratios.
(i) Calculation of C’s Share of Goodwill:-
| Years | Amount | |
|---|---|---|
| 31st March, 2018 | 50,000 | |
| 31st March, 2019 | (Rs. 1,20,000 – Rs. 40,000) | 80,000 |
| 31st March, 2020 | (Rs. 60,000 – Rs. 50,000) | (10,000) |
| 31st March, 2021 | (Rs. 1,00,000 – Rs. 1,50,000) | 50,000 |
| 31st March, 2022 | 1,90,000 | |
| Total Profit | 3,60,000 |
Average Normal Profit = Total Profit/Normal Year
Average Normal Profit = 3,60,000/5
Average Normal Profit = Rs. 72,000
Capitalised Value of Average Profits = Average Normal Profit/Normal Rate of Return
Capitalised Value of Average Profits = 72,000/12× 100 = Rs. 6,00,000
Capitalised Value of Average Profits = Rs. 6,00,000
Capital Employed = Total Assets – External Liabilities
Capital Employed = Rs. 7,00,000 – Rs. 2,20,000
Capital Employed = Rs. 4,80,000
Goodwill = Capitalised Value of Average Profits – Net Assets
Goodwill = Rs. 6,00,000 – Rs. 4,80,000
Goodwill = Rs. 1,20,000
C’s Share of Goodwill = Rs. 1,20,000 ×1/4 = Rs. 30,000
(ii)
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 1,25,000 | |||
| To C’s Capital A/c | 1,25,000 | ||||
| (Being goodwill and Capital brought by Raj) | |||||
| C’s Current A/c | Dr. | 30,000 | |||
| To A’s Capital A/c | 6,000 | ||||
| To B’ s Capital A/c | 24,000 | ||||
| (Being goodwill premium credited to old partners in their sacrificing ratio of 1:4) | |||||
(1) C’s Share = 1/5
A’s Sacrificed = 1/4×1/5= 1/20
A’s Sacrificed = 1/4×4/5= 4/20
Sacrificing Ratio of A and B = 1 : 4
(2) Calculation of New Profit Sharing Ratio:-
A’s New Ratio = 3/5-1/20=12-1/20=11/20
B’s New Ratio = 2/5-4/20=8-4/20=4/20
C’s New Ratio = 1/4
New Profit Sharing Ratio = 11/20:4/20:1/4
New Profit Sharing Ratio = 11 : 4 : 5 /20
New Profit Sharing Ratio = 11 : 4 : 5
P, Q and R share profits in the ratio of 5:3:2. S was admitted into partnership. S brings in Rs. 30,000 as his capital. S is entitled for 1/5th share in profits which he acquires equally from P, Q and R. Goodwill of the firm is to be valued at three years' purchase of last four years' average profits. The profits of the last four years’ are Rs.32,000, Rs. 38,000, Rs. 35,000 and Rs. 31,000 respectively. S cannot bring goodwill in cash. Goodwill already appears in the books at Rs. 50,000. Give Journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| P’s Capital A/c | Dr. | 25,000 | |||
| Q’s Capital A/c | Dr. | 15,000 | |||
| R’s Capital A/c | Dr. | 10,000 | |||
| To Goodwill A/c | 50,000 | ||||
| (Being goodwill appearing in the books now written off in old ratio) | |||||
| Bank A/c | Dr. | 30,000 | |||
| To S’s Capital A/c | 30,000 | ||||
| (Being amount of capital brought in cash) | |||||
| S’ Current A/c | Dr. | 20,400 | |||
| To P’s Capital A/c | 6,800 | ||||
| To Q’s Capital A/c | 6,800 | ||||
| To R’ s Capital A/c | 6,800 | ||||
| (Being Current account of new partner debited for his share of goodwill and capital accounts of old partners credited in their sacrificing ratio) | |||||
Total Profit = Rs. 32,000 + Rs. 38,000 + Rs. 35,000 + Rs. 31,000 = Rs. 1,36,000
Average Profit = 1,36,000/4
Average Profit = Rs. 34,000
Goodwill = Rs. 34,000 × 3 = Rs. 1,02,000
S’s Share = Rs. 1,02,000 ×1/5 = Rs. 20,400
X and Y are partners sharing profits in the ratio of 3: 2. Goodwill appears in their balance sheet at Rs. 60,000. Z is admitted as a partner for 1/4th share in the profits. The total goodwill of the firm is valued at Rs. 2,00,000.
Pass journal entries if :
1. Z cannot bring in cash his share of goodwill.
2. Z brings in cash his share of goodwill.
(i) When goodwill is not brought in cash:-
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| X’s Capital A/c | Dr. | 36,000 | |||
| Y’s Capital A/c | Dr. | 24,000 | |||
| To Goodwill A/c | 60,000 | ||||
| (Being goodwill already appearing now written off in old ratio in 3:2) | |||||
| C’s Current A/c | Dr. | 50,000 | |||
| To A’s Capital A/c | 30,000 | ||||
| To B’ s Capital A/c | 20,000 | ||||
| (Being C’s share of goodwill credited to A and B in sacrificing ratio of 3:2) | |||||
(ii) When goodwill is brought in Cash:-
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| X’s Capital A/c | Dr. | 36,000 | |||
| Y’s Capital A/c | Dr. | 24,000 | |||
| To Goodwill A/c | 60,000 | ||||
| (Being goodwill already appearing now written off in old ratio in 3:2) | |||||
| Bank A/c | Dr. | 50,000 | |||
| To Premium for goodwill A/c | 50,000 | ||||
| (Being Amount of goodwill brought in cash by new partner) | |||||
| C’s Current A/c | Dr. | 50,000 | |||
| To A’s Capital A/c | 30,000 | ||||
| To B’ s Capital A/c | 20,000 | ||||
| (Being C’s share of goodwill credited to A and B in sacrificing ratio of 3:2) | |||||
A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for 3/7th profits (which he takes 2/7th from A and 1/7th from B) and brings Rs. 6,00,000 as premium out of his share of Rs. 7,20,000. Goodwill account does not appear in the books of A and B.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 6,00,000 | |||
| To Premium of Goodwill A/c | 6,00,000 | ||||
| (Being goodwill brought in by C) | |||||
| Goodwill A/c | Dr. | 6,00,000 | |||
| C’s Current A/c | Dr. | 1,20,000 | |||
| To A’s Capital A/c | 4,80,000 | ||||
| To B’s Capital A/c | 2,40,000 | ||||
| (Being goodwill credited to X and Y in their sacrificing ratio 2:1) | |||||
A and B are partners sharing profits in the ratio 3:1. C is admitted as a partner with 2/9th share; A and B will in future get 4/9th and 3/9th share of profits. C pays Rs. 2,00,000 for goodwill. Pass the necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 2,00,000 | |||
| To Premium of Goodwill A/c | 2,00,000 | ||||
| (Being amount of goodwill brought in by C for his share ) | |||||
| Goodwill A/c | Dr. | 2,00,000 | |||
| B’s Current A/c | Dr. | 75,000 | |||
| To A’s Capital A/c | 2,75,000 | ||||
| (Being goodwill brought in by C credited to A with goodwill) | |||||
Old Ratio = 3 : 1
New Ratio = 4 : 3 : 2
Sacrificing or Gaining Ratio:-
A’s Share = 3/4-3/4=27-16/36=11/36 (Sacrifice)
B’s Share = 1/4-3/9=9-12/36=3/36 (Gain)
C’s Share = 2/9 (Gain)
Sacrificing Ratio = 11/36 :3/36 :2/9
Sacrificing Ratio = 11 : 3 :8/36
Sacrificing Ratio = 11 : 3 : 8
C’s Share in Goodwill = Rs. 2,00,000 ×9/2 = Rs. 9,00,000
The amount of goodwill to be contributed by B will be Rs. 9,00,000 ×3/36 = Rs. 75,000
Sonu and Monu are partners sharing profits in the ratio of 3:1. Tinku is admitted as a partner for which he pays Rs. 60,000 for goodwill in cash. Sonu, Monu and Tinku decide to share future profits in equal proportion. You are required to pass necessary journal entries to give effect to the above.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 60,000 | |||
| To Premium for Goodwill A/c | 60,000 | ||||
| (Being amount of goodwill brought by Tinku) | |||||
| Premium for Goodwill A/c | Dr. | 60,000 | |||
| Monu’s Capital A/c | Dr. | 15,000 | |||
| To Sonu’s Capital A/c | 75,000 | ||||
| (Being goodwill adjusted) | |||||
Calculation of Sacrificing Ratio:-
Sonu = 3/4-1/3=9-4/12=5/12 (Sacrifice)
Monu = 1/4-1/3=3-4/12=-1/12 (Gain)
Calculation of Goodwill:-
Tinku Paid Rs. 60,000 for 1/3rd Share of Profit.
Total Goodwill = Rs. 60,000 × 3/1 = Rs. 1,80,000
Monu’s Share in Goodwill = Rs. 1,80,000 × 1/12 = Rs. 15,000
A, B and C were partners in a firm sharing profits in the ratio of 2:2:1. They admitted D for 1/6th share in the profits. The new profit sharing ratio will be 13: 8:4:5 respectively. D brought Rs. 5,00,000 for his capital and Rs. 60,000 for his share of goodwill. Pass necessary entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Cash A/c | Dr. | 5,00,000 | |||
| To C’s Capital A/c | 5,00,000 | ||||
| (Being capital brought in by C ) | |||||
| Bank A/c | Dr. | 60,000 | |||
| To Premium of Goodwill A/c | 60,000 | ||||
| (Being C brought his share of goodwill in Cash) | |||||
| Goodwill A/c | Dr. | 60,000 | |||
| A’s Current A/c | Dr. | 12,000 | |||
| To B’s Capital A/c | 48,000 | ||||
| To C’s Capital A/c | 24,000 | ||||
| (Being Z’s Share and goodwill transferred to X’s Capital Account) | |||||
Old ratio = 2:2:1
New ratio = 13:8:4:5
Sacrificing Ratio = Old Ratio - New Ratio
A's Sacrificing Ratio = 2/5-13/30=12 - 13/30=-1/30(Gain)
B's Sacrificing Ratio = 2/5-8/30=12 - 8/30=4/30 (Sacrifice)
C's Sacrificing Ratio = 1/5-4/30=6 - 4/30=2/30 (Sacrifice)
A and B are partners in a firm and their profit sharing ratio is 2:1. C is admitted as a new partner for 1/4th Share in the profits. Following entry is passed when C brought Rs. 1,80,000 as his goodwill and credited to A and B:
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Premium for Goodwill A/c | Dr. | 1,80,000 | |||
| To A’s Capital A/c | 1,35,000 | ||||
| To B’s Capital A/c | 45,000 | ||||
| (Being C’s share of goodwill transferred to A and B) | |||||
Calculate the new profit sharing ratio.
Calculation of Sacrificing Ratio:-
Amount of Goodwill between A and B = 1,35,000 : 45,000
Sacrificing Ratio = 3 : 1
C is admitted for 1/4th Share.
A Sacrifice = 1/4×3/4=3/16
B Sacrifice = 1/4×1/4=1/16
Calculation of New Profit Sharing Ratio:-
A’s New Share = 2/3-3/16=32-9/48=23/48
B’s New Share = 1/3-1/16=16-3/48=13/48
C’s Share = 1×12/4×12=12/48
Hence, the new profit sharing ratio is 23:13:12.
X and Y are partners sharing profits in the ratio of 3:1. Z is admitted as a partner for 1/3rd share in future profits. Following journal entry is passed at the time of Z’s admission:
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 20,000 | |||
| To Premium for Goodwill A/c | 20,000 | ||||
| (Amount brought in by Z towards share of goodwill) | |||||
| Premium for Goodwill A/c | Dr. | 20,000 | |||
| Z’s Current A/c | Dr. | 10,000 | |||
| To X’s Capital A/c | 30,000 | ||||
| (Z’s share of goodwill transferred to X’s Capital Account) | |||||
| Y’s Capital A/c | Dr. | 7,500 | |||
| To X’s Capital A/c | 7,500 | ||||
| (Adjustment made due to change in profit sharing ratio) | |||||
Ascertain the following:
(i) Value of Firm’s Goodwill,
(ii) Sacrifice or Gain by X and Y and
(iii) New Profit Sharing Ratio of X, Y and Z.
Calculation of Goodwill:-
Z’s Share in Goodwill = Rs. 20,000 + Rs. 10,000 = Rs. 30,000
Total Firms Goodwill = Rs. 30,000 × 3/1 = Rs. 90,000
X’s Sacrifice = (From Z)Rs. 30,000 and (From Y) Rs. 7,500
X’s Sacrifice = Rs. 37,500
Sacrifice Share = 37,500/90,000=5/12 (Sacrifice)
Y’s Gain = Rs. 7,500
Sacrifice Share = 7,500/90,000=1/12 (Sacrifice)
New Profit Sharing Ratio:-
X’s New Share = Old Share – Sacrifice
X’s New Share = 3/4 – 5/12=9-5/12=4/12
Y’s New Share = Old Share + Gain
Y’s New Share = 1/4 + 1/12=3+1/12=4/12
Z’s New Share = 4/12
Hence, The New Profit Sharing Ratio of X:Y:Z is 4:4:4 or 1:1:1.
Pass journal entries to record the following transactions on the admission of a new partner:
(i) Land and Building is undervalued by Rs. 2,00,000
(ii) Stock is overvalued by 20% (Book Value of Stock Rs. 60,000)
(iii) Provision to be made for compensation of Rs. 20,000 to an ex-employee.
(iv) Sundry Debtors appeared in the books at Rs. 1,50,000. They are estimated to
produce not more than Rs. 1,30.000
(v) Creditors include an amount of Rs. 10,000 received as commission.
(vi) A bill of exchange of Rs. 40,000 which was previously discounted with the banker, was dishonoured on 31st March, 2018 but no entry has been passed for it.
(vii) Value of Machinery is to be decreased to Rs. 1,20,000 (Book Value Rs. 2,00,000). (viii) Value of Machinery is to be decreased by Rs. 1,20,000 (Book Value Rs. 2,00,000)
(ix) Expenses on revaluation amount to Rs. 8,000 have been paid by partner X.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Land and Building A/c | Dr. | 2,00,000 | |||
| To Revaluation A/c | 2,00,000 | ||||
| (Being value of Land and Building increased) | |||||
| Revaluation A/c | Dr. | 10,000 | |||
| To Stock A/c | 10,000 | ||||
| (Being Value of Stock decreased) | |||||
| Revaluation A/c | Dr. | 20,000 | |||
| To Provision for Compensation A/c | 20,000 | ||||
| (Being provision made for compensation to Ex-employee) | |||||
| Revaluation A/c | Dr. | 20,000 | |||
| To Provision for Doubtful Debts A/c | 20,000 | ||||
| (Being Provision made for doubtful debts) | |||||
| Creditors A/c | Dr. | 10,000 | |||
| To Revaluation A/c | 10,000 | ||||
| (Being commission received credited to revaluation a/c) | |||||
| Sundry Debtors A/c | Dr. | 40,000 | |||
| To Bank A/c | 40,000 | ||||
| (Being Dishonour of B/R discounted with the bank) | |||||
| Revaluation A/c | Dr. | 80,000 | |||
| To Machinery A/c | 80,000 | ||||
| (Being value of Machinery decreased) | |||||
| Revaluation A/c | Dr. | 1,20,000 | |||
| To Machinery A/c | 1,20,000 | ||||
| (Being Value of Machinery decreased) | |||||
| Revaluation A/c | Dr. | 8,000 | |||
| To X’s Capital A/c | 8,000 | ||||
| (Being Expenses on revaluation paid by X) | |||||
Ayushi and Shristhi are partners sharing profits in 3:2. Their Balance Sheet showed Stock at Rs. 3,10,000; Machinery at Rs. 4,95,000; Debtors at Rs. 6,00,000; Creditors at Rs. 3,47,000. They admit Tina as a partner and new profit sharing ratio is agreed at 4:3:2. Following terms were agreed:
(i) Machinery is overvalued by 10%.
(ii) Unrecorded debtors of Rs. 20,000 be brought into books and provision for doubtful debts be created at 10%.
(iii) Creditors of Rs. 27,000 are not likely to be paid.
Shristhi’s share in loss on revaluation amounted to Rs. 36,000. You are required to calculate the revalued value of stock.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Machinery A/c | 45,000 | By Unrecorded Debtors A/c | 20,000 | |
| To Stock A/c | 30,000 | By Creditors A/c | 27,000 | |
| To Provision for Doubtful Debts A/c | 62,000 | By loss on Revaluation A/c | ||
| Ayushi’s Capital A/c | 54,000 | |||
| Shrishthi’s Capital A/c | 36,000 | 90,000 | ||
| 1,37,000 | 1,37,000 | |||
Total Loss on Revaluation from Shrithi’s = Rs. 36,000 × 5/2 = Rs. 90,000
Machinery = Rs. 4,95,000 × 10/110 = Rs. 45,000
Total Debtors = Rs. 6,00,000 + Rs. 20,000
Provision for Doubtful Debts = Rs. 6,20,000 × 10/100 = Rs. 62,000
Creditors (Not likely to paid):- Rs. 27,000
Total Amount on Debit Side = Rs. 45,000 + Rs. 62,000 = Rs. 1,07,000
Total Amount on Credit Side = Rs. 20,000 + Rs. 27,000 = Rs. 47,000
Net Loss = Rs. 1,07,000 – Rs. 47,000
Net Loss = Rs. 60,000
Total Loss on Revaluation = Rs. 90,000
Loss on Stock = Rs. 90,000 – Rs. 60,000
Loss on Stock = Rs. 30,000
On the date of admission of a new partner, the Balance Sheet of a firm showed Debtors Rs. 5,00,000 and Provision for Doubtful Debts of Rs. 40,000.
You are required to pass necessary journal entries for treatment of Provision for Doubtful Debts on the date of admission in each of the following cases:
(i) Bad Debts amounted to Rs. 30,000.
(ii) Bad Debts amounted to Rs. 45,000.
Case (i) Bad Debts amounted to Rs. 30,000.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Provision for Doubtful Debts A/c | Dr. | 30,000 | |||
| To Bad Debts A/c | 30,000 | ||||
| (Being bad debts written off) | |||||
| Provision for Doubtful Debts A/c | Dr. | 10,000 | |||
| To Revaluation A/c | 10,000 | ||||
| (Being excess of provision transfer to revaluations Account) | |||||
Case (ii) Bad Debts amounted to Rs. 45,000.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Provision for Doubtful Debts A/c | Dr. | 40,000 | |||
| To Bad Debts A/c | 40,000 | ||||
| (Being bad debts written off) | |||||
| Revaluation A/c | Dr. | 5,000 | |||
| To Bad Debts A/c | 5,000 | ||||
| (Being excess to bad debts amount transfer to revaluation account) | |||||
A and B were in partnership sharing profits and losses in the ratio of 3 : 1. On 1st April, 2024 they admit C as a partner on the following terms :
(a) That C brings Rs. 1,00,000 as his capital and Rs. 50,000 for goodwill, half of which to be withdrawn by A and B.
(b) That the value of land and buildings to be appreciated by 15 per cent and that of stocks and machinery & fixtures to be reduced by 7 and 5 per cent respectively.
(c) That provision for doubtful debts be made at 5 percent
(d) That Rs.15,000 be provided for an unforeseen liability.
(e) That C to be given 1/5th share and the profit sharing ratio between A and B to remain the same.
(f) That Rs. 11,000 is to be received as commission, hence to be accounted for.
The Balance Sheet of the old partnership as at 31st March 2024 stood as:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Sundry Creditors | 3,50,000 | Cash in hand | 4,00,000 |
| Capital Accounts: A 4,00,000 B 2,00,000 | 6,00,000 | Book Debts Stock Machinery & Fixtures | 2,00,000 1,80,000 2,00,000 |
| Land & Building | 3,30,000 | ||
| 9,50,000 | 9,50,000 |
Give necessary Journal entries, ledger accounts and the balance sheet of the newly constituted firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Revaluation A/c | Dr. | 32,600 | |||
| To Stock A/c | 12,600 | ||||
| To Machinery and Fixtures A/c | 10,000 | ||||
| To Provision for Doubtful Debts A/c | 10,000 | ||||
| (Being value of assets and provision made for doubtful debts) | |||||
| Land and Building A/c | Dr. | 49,500 | |||
| To Revaluation A/c | 49,500 | ||||
| (Being value of land and building increased) | |||||
| Revaluation A/c | Dr. | 15,000 | |||
| To Unforeseen Liability A/c | 15,000 | ||||
| (Being provision of liability) | |||||
| Accrued Commission A/c | Dr. | 11,000 | |||
| To Revaluation A/c | 11,000 | ||||
| (Being Accrued income) | |||||
| Revaluation A/c | Dr. | 12,900 | |||
| To A’s Capital A/c | 9,675 | ||||
| To B’s Capital A/c | 3,225 | ||||
| (Being revaluation profit transfer to partner’s capital account ) | |||||
| Cash A/c | Dr. | 1,50,000 | |||
| To C’s Capital A/c | 1,00,000 | ||||
| To Premium for goodwill A/c | 50,000 | ||||
| (Being capital and premium for goodwill brought in cash by C) | |||||
| Premium for Goodwill A/c | Dr. | 50,000 | |||
| To A’s Capital A/c | 37,500 | ||||
| To B’s Capital A/c | 12,500 | ||||
| (Being premium for goodwill credited to old partner’s capital) | |||||
| A’s Capital A/c | Dr. | 18,750 | |||
| B’s Capital A/c | Dr. | 6,250 | |||
| To Cash A/c | 25,000 | ||||
| (Being half of premium for goodwill withdrawn by old partners) | |||||
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Stock A/c | 12,600 | By Land and building A/c | 49,500 | |
| To Machinery and Fixtures A/c | 10,000 | By Accrued Commission A/c | 11,000 | |
| To Provision for Doubtful Debts A/c | 10,000 | |||
| To Unforeseen Liability A/c | 15,000 | |||
| To Profit transferred to Capital A/c | ||||
| A | 9,675 | |||
| B | 3,225 | 12,900 | ||
| 60,500 | 60,500 | |||
Partner’s Capital Account
| Dr. | Cr. | |||||||
|---|---|---|---|---|---|---|---|---|
| Particulars | A | B | C | Particulars | A | B | C | |
| To Cash A/c | 18,750 | 6,250 | - | By Balance b/d | 4,00,000 | 2,00,000 | - | |
| To Balance C/d | 4,28,425 | 2,09,475 | 1,00,000 | By Revaluation A/c | 9,675 | 3,225 | ||
| By Cash A/c | - | - | 1,00,000 | |||||
| By Premium for Goodwill A/c | 37,500 | 12,500 | - | |||||
| 4,47,175 | 2,15,725 | 1,00,000 | 4,47,175 | 2,15,725 | 1,00,000 | |||
Balance Sheet
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 3,50,000 | Cash in hand | 1,65,000 | ||
| Unforeseen Liability | 15,000 | Book Debts | 2,00,000 | ||
| Capital | Lees: Provision for DD | 10,000 | 1,90,000 | ||
| A | 4,28,425 | Stock | 1,67,400 | ||
| B | 2,09,475 | Accrued Commission | 11,000 | ||
| C | 1,00,000 | 7,37,900 | Machinery & Fixtures | 1,90,000 | |
| Land and Building | 3,79,500 | ||||
| 11,02,900 | 11,02,900 | ||||
Calculation of Cash Balance:-
| Opening Balance | 40,000 |
|---|---|
| Add: Amount of Capital brought in by the new partner in cash | 1,00,000 |
| Add: Amount of Goodwill brought in by the new partner in cash | 50,000 |
| 1,90,000 | |
| Less: Amount of goodwill withdrawn by the old partners in cash | 25,000 |
| Closing Balance of Cash | 1,65,000 |
Khushi and Sukhi are partners in a firm sharing profits in the ratio of 5:4. On April 1, 2024, they admit Muskan as a new partner and the new ratio is agreed at 3:2:1. On that date there was a balance of Rs. 63,000 in the profit and loss account and a balance of Rs. 45,000 in general reserve. Record the necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Profit and Loss A/c | Dr. | 63,000 | |||
| To Khushi’s Capital A/c | 63,000 | ||||
| To Sukhi’s Capital A/c | |||||
| (Being profits transfer to old partner’s capital account) | |||||
| General Reserve A/c | Dr. | 45,000 | |||
| To Khushi’s Capital A/c | 25,000 | ||||
| To Sukhi’s Capital A/c | 20,000 | ||||
| (Being General Reserve transfer to old partners capital account) | |||||
A and B were partners in a firm sharing profits in the ratio of 7 : 3. On 1-3-2024, they admitted C as a new partner for 1/6th share in the profits of the firm. They fixed the new profit sharing ratio as 3:2 : 1. The P & L A/c on the date of admission showed a balance of Rs. 20,000 (Cr.). The firm also had a reserve of Rs. 1,50,000. C is to bring Rs. 40,000 as premium for his share of goodwill.
Showing your calculations clearly, pass necessary journal entries to record the above transactions.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Profit and Loss A/c | Dr. | 20,000 | |||
| To A’s Capital A/c | 14,000 | ||||
| To B’s Capital A/c | 6,000 | ||||
| (Being profit transfer to old partner’s capital account) | |||||
| Reserve A/c | Dr. | 1,50,000 | |||
| To A’s Capital A/c | 1,05,000 | ||||
| To B’s Capital A/c | 45,000 | ||||
| (Being Reserve transferred to old partner’s capital account) | |||||
| Bank A/c | Dr. | 40,000 | |||
| To Premium for Goodwill A/c | 40,000 | ||||
| (Being premium for goodwill brought by C) | |||||
| Premium for Goodwill A/c | Dr. | 40,000 | |||
| B’s Capital A/c | 8,000 | ||||
| To A’s Capital A/c | 48,000 | ||||
| (Being premium for goodwill brought by C credited to A along with 1/30 of the goodwill to be contributed by B due to gain in his profit sharing ratio) | |||||
Old Ratio of A and B = 7 : 3
New Ratio of A, B and C = 3:2:1
Calculation of Sacrificing and Gaining Ratio:-
A’s Ratio = 7/10-3/6=21-15/30=6/30(Sacrifice)
B’s Ratio = 3/10-2/6=9-10/30=1/30(Gain)
B’s Ratio =1/6 (Gain)
Goodwill of the firm = Rs. 40,000 ×6/1 = Rs. 2,40,000
B’s Compensation in Goodwill = Rs. 2,40,000 ×1/30 = Rs. 8,000
X and Y are partners in a firm. On 1st April, 2023, they admitted Z as a partner and new profit sharing, ratio is agreed at 3:2:1. Their Balance Sheet disclosed ‘Workmen Compensation Reserve’ amounting to Rs. 1,00,000 on this date. Show the Accounting treatment, if
(i) Claim for Workmen Compensation is estimated at Rs. 1,20,000.
(ii) Claim for Workmen Compensation is estimated at Rs. 90,000.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| (Case 1) | Workmen Compensation Reserve A/c | Dr. | 1,00,000 | ||
| Revaluation A/c | Dr. | 20,000 | |||
| To Pro. for Workmen Compensation Claim A/c | 1,20,000 | ||||
| (Being provision made for workmen claim) | |||||
| X’s Capital A/c | Dr. | 10,000 | |||
| Y’s Capital A/c | Dr. | 10,000 | |||
| To Revaluation A/c | 20,000 | ||||
| (Being loss on revaluation transferred to capital account) | |||||
| (Case 2) | Workmen Compensation Reserve A/c | Dr. | 1,00,000 | ||
| To Pro. for Workmen Compensation Clam A/c | 90,000 | ||||
| To X’s Capital A/c | 5,000 | ||||
| To Y’s Capital A/c | 5,000 | ||||
| (Being Surplus workmen compensation reserve credited to old partner’s capital account) | |||||
A, B and C are partners sharing profits in 2:2:1. On 1st April, 2020, they admitted Z for 1/4th share. On the date of admission, the following items appeared in their Balance Sheet :
General Reserve Rs. 1,50,000
Workmen Compensation Reserve Rs. 40,000
Profit & Loss A/c (Cr.) Rs. 60,000
Advertisement Suspense A/c (Dr.) Rs. 25,000
Pass necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| General Reserve A/c | Dr. | 1,50,000 | |||
| Workmen Compensation Reserve A/c | Dr. | 40,000 | |||
| Profit and Loss A/c | Dr. | 60,000 | |||
| To A’s Capital A/c | 1,00,000 | ||||
| To B’s Capital A/c | 1,00,000 | ||||
| To C’s Capital A/c | 50,000 | ||||
| (Being Profit transfer to old partner’s capital account) | |||||
| A’s Capital A/c | Dr. | 10,000 | |||
| B’s Capital A/c | Dr. | 10,000 | |||
| C’s Capital A/c | Dr. | 5,000 | |||
| To Advertisement Suspense A/c | 25,000 | ||||
| (Being Advertisement Expenses transferred to capital account in old ratio) | |||||
A and B sharing profits and losses in the ratio of 3 : 2 decide to admit C for 1/3rd share. On this date, their Balance Sheet disclosed the following items :
Investments Fluctuation Reserve Rs.40,000
Investments (at cost) Rs. 3,00,000
Show the accounting treatment in the following cases :
Case (i) If the market value of investments is Rs. 2,90,000
Case (ii) If the market value of investments is Rs. 2,45,000
Case (iii) If the market value of investments is Rs. 3,00,000
Case (iv) If the market value of investments is Rs. 3,25,000
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Case (i) | Investment Fluctuation Reserve A/c | Dr. | 40,000 | ||
| To Investments A/c | 10,000 | ||||
| To A’s Capital A/c | 18,000 | ||||
| To B’s Capital A/c | 12,000 | ||||
| (Being investment fluctuation reserve credited to partner’s capital accounts in their old profit sharing ratio) | |||||
| Case (ii) | Investments Fluctuation Reserve A/c | Dr. | 40,000 | ||
| Revaluation A/c | 15,000 | ||||
| To Investments A/c | 55,000 | ||||
| (Being value of investments credited to investment account and excess fall changed to Revaluation account) | |||||
| A’s Capital A/c | Dr. | 40,000 | |||
| B’s Capital A/c | 24,000 | ||||
| To Revaluation A/c | 16,000 | ||||
| (Being loss on revaluation debited to partners’ capital account in their old profit ratio ) | |||||
| Case (iii) | Investments Fluctuation Reserve A/c | Dr. | 40,000 | ||
| To A’s Capital A/c | 24,000 | ||||
| To B’s Capital A/c | 16,000 | ||||
| (Being Investment fluctuation reserve credited to partners’ capital accounts) | |||||
| Case (iv) | Investments Fluctuation Reserve A/c | Dr. | 40,000 | ||
| To A’s Capital A/c | 24,000 | ||||
| To B’s Capital A/c | 16,000 | ||||
| (Being loss on revaluation debited to partners’ capital account in their old profit ratio) | |||||
| Investments A/c | Dr. | 25,000 | |||
| To Revaluation A/c | 25,000 | ||||
| (Being Value of investment brought up to market value) | |||||
| Revaluation A/c | Dr. | 25,000 | |||
| To A’s Capital A/c | 15,000 | ||||
| To B’s Capital A/c | 10,000 | ||||
| (Being profit on revaluation credited to partner’s capital accounts in their old profit sharing ratio) | |||||
Charu and Deepika were partners sharing profits in the ratio 3 : 2. They admitted Esha, as a new partner and the new ratio is agreed at 4 : 3 : 2. On the date of Esha's admission, the Balance Sheet of Charu and Deepika disclosed General Reserve Rs. 1,20,000; Dr. balance in Profit & Loss Account Rs. 40,000; Investments Rs. 2,00,000 and Investment Fluctuation Reserve Rs. 60,000.
The following was agreed upon Eshas' admission:
(i) Esha will bring Rs. 3,00,000 as her Capital and her share of goodwill premium in cash.
(ii) Goodwill of the firm be valued Rs. 1,80,000.
(iii) The market value of investments was Rs. 2,30,000.
Pass the necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| General Reserve A/c | Dr. | 1,20,000 | |||
| To Charu’s Capital A/c | 72,000 | ||||
| To Deepika’s Capital A/c | 48,000 | ||||
| (Being General Reserve distributed between the old partners in their old ratio of 3:2) | |||||
| Charu’s Capital A/c | Dr. | 24,000 | |||
| Deepika’s Capital A/c | Dr. | 16,000 | |||
| To Profit and Loss A/c | 40,00 | ||||
| (Being Loss is distributed between the old partners in their old ratio 3:2) | |||||
| Investment Fluctuation Reserve A/c | Dr. | 60,000 | |||
| To Charu’s Capital A/c | 36,000 | ||||
| To Deepika’s Capital A/c | 24,000 | ||||
| (Being Investment Fluctuation Reserve credited to old partners in old ratio 3:2) | |||||
| Investments A/c | Dr. | 30,000 | |||
| To Revaluation A/c | 30,000 | ||||
| (Being value of investments brought upto market value) | |||||
| Revaluation A/c | Dr. | 30,000 | |||
| To Charu’s Capital A/c | 18,000 | ||||
| To Deepika’s Capital A/c | 12,000 | ||||
| (Being profit on revaluation credited to old partners in old ratio) | |||||
| Bank A/c | Dr. | 3,40,000 | |||
| To Esha’s Capital A/c | 3,00,000 | ||||
| To Premium for Goodwill A/c | 40,000 | ||||
| (Being Capital and amount of premium for goodwill brought in cash by Esha) | |||||
| Premium for Goodwill A/c | Dr. | 40,000 | |||
| To Charu’s Capital A/c | 28,000 | ||||
| To Deepika’s Capital A/c | 12,000 | ||||
| (Being goodwill credited to sacrificed partners) | |||||
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
Charu’s Share = 3/5-4/9=27-20/45=7/45
Deepika’s Share = 2/5-3/9=18-15/45=3/45
Sacrificing Ratio = 7 : 3
A, B and C were partners in a firm sharing profits and losses in the ratio of 2:2:1. Their Balance Sheet as at 31st March, 2024 was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Creditors | 20,000 | Cash & Bank | 30,000 |
| Bills Payable | 5,000 | Debtors | 60,000 |
| General Reserve | 40,000 | Stock | 1,50,000 |
| Workmen Compensation Reserve | 35,000 | Investments (Market Value Rs. 32,000) | 40,000 |
| Investment Fluctuation Reserve | 10,000 | Plant & Machinery | 2,60,000 |
| Capital Accounts: A 2,00,000 B 1,50,000 C 1,00,000 | 4,50,000 | Profit & Loss Account | 20,000 |
| 5,60,000 | 5,60,000 |
They admit D into partnership for 1/4th share on 1st April, 2024. Give necessary journal entries to adjust the accumulated profits and losses.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 2024 | |||||
| April 1 | Investment Fluctuation Reserves A/c | Dr. | 8,000 | ||
| To investments A/c | 8,000 | ||||
| (Being Value of Investment brought down to market value) | |||||
| General Reserve A/c | Dr. | 40,000 | |||
| Workmen Compensation Reserve A/c | Dr. | 35,000 | |||
| Investment Fluctuation Reserve A/c | Dr. | 2,000 | |||
| To A’s Capital A/c | 30,800 | ||||
| To B’s Capital A/c | 30,800 | ||||
| To C’s Capital A/c | 15,400 | ||||
| (Being reserves transfer to partners’ capital account) | |||||
| A’s Capital A/c | Dr. | 8,000 | |||
| B’s Capital A/c | Dr. | 8,000 | |||
| C’s Capital A/c | Dr. | 4,000 | |||
| To Profit & Loss A/c | 20,000 | ||||
| (Being profit transfer to partners’ capital account) | |||||
Rani and Seeta were partners sharing profits in the ratio 3:1. They admitted Mona as a new partner from 1st April, 2024. New profit sharing ratio is agreed at 3:2:1. On this date, their Balance Sheet disclosed the following items:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| General Reserve | 5,00,000 | Profit and Loss (Dr.) Advertisement Suspense A/c | 1,10,000 30,000 |
Partners decided to record the effect of the above items without affecting their book values. Pass the necessary adjusting entry.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Seeta’s Capital A/c | Dr. | 30,000 | |||
| Mona’s Capital A/c | Dr. | 60,000 | |||
| To Rani’s Capital A/c | 90,000 | ||||
| (Being adjustment of general reserve and accumulated losses) | |||||
Calculate the Sacrificing and Gaining Ratio:-
Rani’s Sacrificing Ratio = 3/4-3/6=9-6/12=3/12 (Sacrificing)
Seeta’s Sacrificing Ratio = 1/4-2/6=3-4/12=-1/12 (Gain)
Mona’s Sacrificing Ratio = 1×2/6×2=2/12 (Gain)
Net Effect = General Reserve – Profit and Loss (Dr.) – Advertisement Suspense Account
Net Effect = Rs. 5,00,000 – Rs. 1,10,000 – Rs. 30,000
Net Effect = Rs. 3,60,000
Rani’s Share = Rs. 3,60,000 × 3/12 = Rs. 90,000
Seeta’s Share = Rs. 3,60,000 × 1/12 = Rs. 30,000
Mona’s Share = Rs. 3,60,000 × 1/12 = Rs. 60,000
Vimal and Nirmal are partners sharing profits in the ratio of 3: 2.Following was the position of their business as at 31st March, 2024:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Sundry Creditors | 20,000 | Cash | 14,000 |
| Capital Accounts: Vimal Nirmal | 60,000 32,000 | Debtors Plant & Machinery Stock | 18,000 50,000 40,000 |
| Profit & Loss A/c | 20,000 | Goodwill | 10,000 |
| 1,32,000 | 1,32,000 |
On 1st April, 2024 Kailash agrees to join the business on the following terms and conditions:
(i) He will introduce Rs. 40,000 as his capital and pay $20,000 to the existing partners for his share of goodwill.
(ii) The new profit sharing ratio will be 2:1: 1 respectively for Vimal, Nirmal and Kailash.
(iii) A revaluation of assets will be made by reducing plant and machinery of Rs. 35,000 and stock by 10%. Provision of Rs. 1,000 is to be created for bad and doubts debts.
Pass journal entries for the above arrangements and give the balance sheet of the newly constituted firm. Also specify the sacrificing ratio.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 2024 | |||||
| April 1 | Profit and Loss A/c | Dr. | 20,000 | ||
| To Vimal’s Capital A/c | 12,000 | ||||
| To Nirmal’s Capital A/c | 8,000 | ||||
| (Being profit and loss account transfer to partner’s capital account) | |||||
| Revaluation A/c | Dr. | 20,000 | |||
| To Plant & Machinery A/c | 15,000 | ||||
| To Stock A/c | 4,000 | ||||
| To Provision of Doubtful Debts A/c | 1,000 | ||||
| (Being value of assets and provision made for doubtful debts) | |||||
| Vimal’s Capital A/c | Dr. | 12,000 | |||
| Nirmal’s Capital A/c | Dr. | 8,000 | |||
| To Revaluation A/c | 20,000 | ||||
| (Being revaluation loss transfer to capital account) | |||||
| Vimal’s Capital A/c | Dr. | 6,000 | |||
| Nirmal’s Capital A/c | Dr. | 4,000 | |||
| To Goodwill A/c | 10,000 | ||||
| (Being goodwill transfer to capital account) | |||||
| Cash A/c | Dr. | 60,000 | |||
| To Kailash’s Capital A/c | 40,000 | ||||
| To Premium for Goodwill A/c | 20,000 | ||||
| (Being Amount capital and goodwill brought in cash by Kailash) | |||||
| Premium for Goodwill A/c | Dr. | 20,000 | |||
| To Vimal’s Capital A/c | 8,000 | ||||
| To Nirmal’s Capital A/c | 12,000 | ||||
| (Being premium for goodwill credited to old partners in the sacrificing ratio 2:3) | |||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Vimal | Nirmal | Kailash | Particulars | Vimal | Nirmal | Kailash |
| To Revaluation A/c | 12,000 | 8,000 | - | By Balance b/d | 60,000 | 32,000 | - |
| To Goodwill A/c | 6,000 | 4,000 | - | By Profit and Loss A/c | 12,000 | 8,000 | - |
| To Balance A/c | 62,000 | 40,000 | 40,000 | By Cash A/c | - | - | 40,000 |
| By Premium for Goodwill A/c | 8,000 | 12,000 | - | ||||
| 80,000 | 52,000 | 40,000 | 80,000 | 52,000 | 40,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 20,000 | Cash | 74,000 | ||
| Capital | Debtors | 18,000 | |||
| Vimal | 62,000 | Less: Provision for Debtors | 1,000 | 17,000 | |
| Niraml | 40,000 | Stock | 36,000 | ||
| Kailash | 40,000 | 1,42,000 | Plant & Machinery | 35,000 | |
| 1,62,000 | 1,62,000 | ||||
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
Charu’s Share = 3/5-2/4=12-10/20=2/20
Deepika’s Share = 2/5-1/4=8-5/20=3/20
Sacrificing Ratio = 2 : 3
A and B are partners sharing profits in the ratio of 3 : 1. They admitted C as a partner by giving him 1/4th share of profits which he acquired from A and B the ratio of 2 : 1. C brings in Rs. 1,00,000 as Capital and Rs. 36,000 as goodwill in cash. At the time of admission of C, general reserve appeared in their balance sheet at Rs. 50,000.
Following revaluations are also made:
Value of Plant is to be reduced by Rs. 10,000.
Bad Debts Provision is to be reduced from Rs. 4,000 to Rs. 3,000.
Rs. 2,000 Out of total Creditors of Rs. 20,000 are not to be paid.
There is an outstanding bill for repairs for Rs. 1,200.
Pass necessary journal entries and prepare a Revaluation Account. Also calculate the new profit sharing ratios.
| Date | Particulars | L.F. | Amount Dr. | Amount 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 | 10,000 | ||||
| To Outstanding Repairs A/c | 1,200 | ||||
| (Being decrease in the value of plant and provision for outstanding repairs) | |||||
| 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) | |||||
| A’s Capital A/c | Dr. | 6,150 | |||
| B’s Capital A/c | Dr. | 2,050 | |||
| To Revaluation A/c | 8,200 | ||||
| (Being loss on revaluation transferred to the 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 | |||
| To A’s Capital A/c | 24,000 | ||||
| To B’s Capital A/c | 12,000 | ||||
| (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 Loss transferred | |||||
| A’s Capital A/c | 6,150 | ||||
| B’s Capital A/c | 2,050 | 8,200 | |||
| 11,200 | 11,200 | ||||
C’s Share = 1/4
A’s Sacrifice = 2/3 of 1/4 = 2/12
B’s Sacrifice = 2/3 of 1/4 = 1/12
Calculation of New Share:-
A’s New Share =3/4-2/12=9-2/12=7/12
B’s New Share =1/4-1/12=3-1/12=2/12
New Ratio of A, B, and C = 7/12:2/12:1/4
New Ratio of A, B, and C = = 7 : 2 : 3/12
New Ratio of A, B, and C = = 7 : 2 : 3
X and Y share profits in the ratio of 5 : 3. Their balance sheet as at 31st March, 2024 was as follows:
| Liabilities | Rs. | Rs. | |
|---|---|---|---|
| Creditors | 15,000 | Cash at Bank | 5,000 |
| Provident Fund | 10,000 | Sundry Debtors 20,000 | |
| Workmen's Compensation Reserve | 5,800 | Less : Provision 600 Stock | 19,400 25,000 |
| Capitals : X Y | 70,000 31,000 | Fixed Assets Profit & Loss A/c | 80,000 2,400 |
| 1,31,800 | 1,31,800 |
They admit Z into partnership on 1st April, 2024 with 1/8th share in profits. Z brings Rs. 20,000 as his capital and Rs. 12,000 for goodwill in cash. Z acquires his share entirely from X.
Following revaluations are also made :
1. Provident fund is to be increased by Rs. 5,000.
2. Debtors are all good. Therefore, no provision is required on debtors
3. Stock includes Rs. 3,000 for obsolete items.
4. Creditors are to be paid Rs. 1,000 more.
5. Fixed Assets are to be revalued at Rs. 70,000.
Prepare Journal entries, necessary accounts and new balance sheet. Also calculate the new profit sharing ratio.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 2024 | |||||
| April 1 | X’s Capital A/c | Dr. | 1,500 | ||
| Y’s Capital A/c | Dr. | 900 | |||
| To Profit and Loss A/c | 2,400 | ||||
| (Being debit balance of profit and loss account transferred to partner’s capital account) | |||||
| Workmen Compensation Reserve A/c | Dr. | 13,000 | |||
| To X’s Capital A/c | 3,000 | ||||
| To Y’s Capital A/c | 10,000 | ||||
| (Being Workmen compensation reserve transfer to old partners capital account) | |||||
| Revaluation A/c | Dr. | 6,000 | |||
| To Stock A/c | 5,000 | ||||
| To Fixed Assets A/c | 1,000 | ||||
| (Being value of assets reduced) | |||||
| Provision for Doubtful Debts A/c | Dr. | 600 | |||
| To Revaluation A/c | 600 | ||||
| (Being omitting the provision for doubtful debts) | |||||
| X’s Capital A/c | Dr. | 11,500 | |||
| Y’s Capital A/c | Dr. | 6,900 | |||
| To Revaluation A/c | 18,400 | ||||
| (Being loss on revaluation transfer to old partner’s capital account) | |||||
| Bank A/c | Dr. | 32,000 | |||
| To Z’s Capital A/c | 20,000 | ||||
| To Premium for Goodwill A/c | 12,000 | ||||
| (Being amount of capital and goodwill brought in cash by Z) | |||||
| Premium for Goodwill A/c | Dr. | 12,000 | |||
| To X’s Capital A/c | 12,000 | ||||
| (Being goodwill credited to X’s Capital account) | |||||
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| To Stock A/c | 3,000 | By Provision for Doubtful Debts A/c | 600 | ||
| To Fixed Assets A/c | 10,000 | ||||
| To Provident Fund A/c | 5,000 | By Loss transferred to: | |||
| To Creditors A/c | 1,000 | X’s Capital A/c | 11,500 | ||
| Y’s Capital A/c | 6,900 | 18,400 | |||
| 19,000 | 19,000 | ||||
Partners Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | X | Y | Z | Particulars | X | Y | Z |
| To Profit and Loss A/c | 1,500 | 900 | - | By Balance b/d | 70,000 | 31,000 | - |
| To Revaluation A/c | 11,500 | 6,900 | - | By Workmen’s comp. fund A/c | 3,625 | 2,175 | - |
| To Balance c/d | 72,625 | 25,375 | 20,000 | By Bank A/c | - | - | 20,000 |
| By Goodwill A/c | 12,000 | - | - | ||||
| 85,625 | 33,175 | 20,000 | 85,625 | 33,175 | 20,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 16,000 | Cash at Bank | 37,000 | ||
| Provident Fund | 15,000 | Sundry Debtors | 20,000 | ||
| Capital | Stock | 22,000 | |||
| X | 72,625 | Fixed Assets | 70,000 | ||
| Y | 25,375 | ||||
| Z | 20,000 | 1,18,000 | |||
| 1,49,000 | 1,49,000 | ||||
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
X’s Share = 3/5-2/4=12-10/20=2/20
Y’s Share = 3/8
Z’s Share = 1/8
Sacrificing Ratio = 4 : 3 : 1
X and Y are partners. They admit Z as a partner and new profit sharing ratio is agreed at 3:2:1. Z brings in Capital of Rs.1,50,000 and Rs. 40,000 as premium for goodwill in Cash.
Their Balance Sheet was as follows:
| Liabilities | Rs. | Rs. | |||
|---|---|---|---|---|---|
| Creditors | 40,000 | Cash and Bank | 44,000 | ||
| Capital A/c | Debtors | 2,00,000 | |||
| X | 4,00,000 | Less: Provision | 14,000 | 1,86,000 | |
| Y | 2,50,000 | 6,50,000 | Stock | 2,50,000 | |
| Current A/c | Machinery | 1,20,000 | |||
| X | 30,000 | Building | 2,00,000 | ||
| Y | 10,000 | 40,000 | |||
| Workmen Compensation Reserve | 70,000 | ||||
| 8,00,000 | 8,00,000 | ||||
The assets and liabilities are revalue as under:
(i) Provision for Doubtful Debts is to maintained @5% debtors.
(ii) Building was found under-valued by 20% and Machinery overvalued by 20%.
(iii) Part of the stock which had been included at a cost of Rs. 10,000 had been badly damaged in storage and could only expect to realise Rs. 2,000.
(iv) Creditors were written of Rs. 6,000.
Pass necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 1. | Building A/c | Dr. | 50,000 | ||
| To Revaluation A/c | 50,000 | ||||
| (Being value of Building undervalued by 20%) | |||||
| 2. | Provision for Doubtful Debts A/c | Dr. | 4,000 | ||
| To Revaluation A/c | 4,000 | ||||
| (Being excess provision written back) | |||||
| 3. | Creditors A/c | Dr. | 6,000 | ||
| To Revaluation A/c | 6,000 | ||||
| (Being creditors written off) | |||||
| 4. | Revaluation A/c | Dr. | 20,000 | ||
| To Machinery A/c | 20,000 | ||||
| (Being value of Machinery overvalued) | |||||
| 5. | Revaluation A/c | Dr. | 8,000 | ||
| To Stock A/c | 8,000 | ||||
| (Being stock damaged) | |||||
| 6. | Revaluation A/c | Dr. | 32,000 | ||
| To X’s Capital A/c | 16,000 | ||||
| To Y’s Capital A/c | 16,000 | ||||
| (Being profit on revaluation distributed between X and Y equally) | |||||
| 7. | Bank A/c | Dr. | 1,90,000 | ||
| To Z’s Capital A/c | 1,50,000 | ||||
| To Provision For Goodwill A/c | 40,000 | ||||
| (Being Z bring his share of Capital and Goodwill in cash) | |||||
| 8. | Provision For Goodwill A/c | Dr. | 40,000 | ||
| To X’s Capital A/c | 40,000 | ||||
| (Being Premium for Goodwill credited to X) | |||||
| 9. | Workmen Compensation Reserve A/c | Dr. | 70,000 | ||
| To X’s Capital A/c | 35,000 | ||||
| To Y’s Capital A/c | 35,000 | ||||
| (Being workmen compensation reserve distributed to partners in old ratio) | |||||
A and B are in partnership sharing profits and losses in the ratio of 3 : 1. Their Balance Sheet as at 31st Jan., 2024 was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital Accounts: A 4,50,000 B 2,00,000 | 6,50,000 | Cash at Bank Sundry Debtors Stock | 34,000 1,66,000 2,60,000 |
| Sundry Creditors | 30,000 | Fixed Assets | 2,20,000 |
| 6,80,000 | 6,80,000 |
As from 1st February, 2024 they agree to admit C as a partner. Share of A, B and e new firm will be 3:2:1 respectively. C to contribute Rs. 1,20,000 as his capital and Rs. 30,000 as his share of goodwill. The value of the fixed assets of the firm will be increased by 10 % before the admission of C.
Pass entries and prepare the opening balance sheet of the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 2024 | |||||
| Feb. 1 | Fixed Assets A/c | Dr. | 22,000 | ||
| To Revaluation A/c | 22,000 | ||||
| (Being value of fixed assets increase) | |||||
| Feb. 1 | Revaluation A/c | Dr. | 22,000 | ||
| To A’s Capital A/c | 16,500 | ||||
| To B’s Capital A/c | 5,500 | ||||
| (Being value of revaluation transfer) | |||||
| Feb. 1 | Bank A/c | Dr. | 1,50,000 | ||
| To C’s Capital A/c | 1,20,000 | ||||
| To Premium for Goodwill A/c | 30,000 | ||||
| (Being amount brought in by C for his capital and goodwill) | |||||
| Feb. 1 | Premium for Goodwill A/c | Dr. | 30,000 | ||
| To A’s Capital A/c | 30,000 | ||||
| (Being goodwill credited to sacrificing partner A) | |||||
| Feb. 1 | B’s Capital A/c | Dr. | 15,000 | ||
| To A’s Capital A/c | 15,000 | ||||
| (Being adjustment for goodwill on acquiring 1/12th share by B from A) | |||||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 30,000 | Cash at Bank | 1,84,000 | ||
| Capital | Sundry Debtors | 1,66,000 | |||
| A | 5,11,500 | Stock | 2,60,000 | ||
| B | 1,90,500 | Fixed Assets | 2,42,000 | ||
| C | 1,20,000 | 8,22,000 | |||
| 8,52,000 | 8,52,000 | ||||
Old Ratio A and B = 3 : 1
New Ratio A, Band C = 3 : 2 : 1
Sacrificing and Gaining Ratio:-
A’s Share = 3/4-3/6=9-6/12=3/12 (Sacrifice)
B’s Share = 1/4-2/6=3-4/12=1/12 (Gain)
C’s Share = 1/6
Value of Goodwill of Firm = Rs. 30,000 × 6/1 = Rs. 1,80,000
Compensation paid by B = Rs. 1,80,000 × 1/12= Rs. 15,000
Gautam and Rahul are partners in a firm, sharing profits and losses in the ratio of 2:3. Their Balance Sheet as at 31st March, 2020, was as follows:
BALANCE SHEET
as at 31st March, 2023
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Sundry Creditors | 5,000 | Goodwill | 10,000 |
| Bills Payable | 15,000 | Furniture | 25,000 |
| General Reserve | 10,000 | Stock | 15,000 |
| Capital A/cs: Gautam 30,000 Rahul 40,000 | 70,000 | Sundry Debtors 12,000Less : Provision for Doubtful Debts 2,000 | 10,000 |
| Cash in hand | 40,000 | ||
| 1,00,000 | 1,00,000 |
Karim was to be taken as a partner with effect from 1st April. 2020, on the following terms:
(a) The new profit sharing ratio of Gautam, Rahul and Karim would be 5:3:2
(b) Provision for Doubtful Debts would be raised to 20% of debtors.
(c) Karim would bring in cash, his share of capital of Rs. 40,000 and his share of goodwill valued at Rs. 10,000.
(d) Gautam would take over the furniture at Rs. 22,000.
You are required to:
i) Pass journal entries at the time of Karim's admission.
ii) Prepare the Balance Sheet of the reconstituted firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 2023 | |||||
| April 1 | Revaluation A/c | Dr. | 3,400 | ||
| To Provision for doubtful debts A/c | 400 | ||||
| To Furniture A/c | 3,000 | ||||
| (Being assets and liabilities revalue) | |||||
| Gautam’s Capital A/c | Dr. | 1,360 | |||
| Rahul’s Capital A/c | Dr. | 2,040 | |||
| To Revaluation A/c | 3,400 | ||||
| (Being loss on revaluation distributed to old partners) | |||||
| Gautam’s Capital A/c | Dr. | 22,000 | |||
| To Furniture A/c | 22,000 | ||||
| (Being furniture taken by Gautam) | |||||
| General Reserve A/c | Dr. | 10,000 | |||
| To Gautam’s Capital A/c | 4,000 | ||||
| To Rahul’s Capital A/c | 6,000 | ||||
| (Being General Reserve transferred to old partner’s capital account) | |||||
| Gautam’s Capital A/c | Dr. | 4,000 | |||
| Rahul’s Capital A/c | Dr. | 6,000 | |||
| To Goodwill A/c | 10,000 | ||||
| (Being goodwill written off from the capital accounts of the old partners in the old ratio) | |||||
| Cash A/c | Dr. | 50,000 | |||
| To Karim’s Capital A/c | 40,000 | ||||
| To Goodwill A/c | 10,000 | ||||
| (Being capital and goodwill brought in cash) | |||||
| Gautam’s Capital A/c | Dr. | 5,000 | |||
| Goodwill A/c | Dr. | 10,000 | |||
| To Rahul’s Capital A/c | 15,000 | ||||
| (Being Rahul compensated for sacrifice of 3/10 share of profit) | |||||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 5,000 | Stock | 15,000 | ||
| Bills Payable | 15,000 | Cash in hand | 90,000 | ||
| Capital | Sundry Debtors | 12,000 | |||
| Gautam | 1,640 | Less: Provision for DD | 2,400 | 9,600 | |
| Rahul | 52,960 | ||||
| Kairm | 40,000 | 94,600 | |||
| 1,14,600 | 1,14,600 | ||||
Old Ratio Gautam and Rahul = 2 : 3
New Ratio Gautam, Rahul and Kabir = 5 : 3 : 2
Sacrificing and Gaining Ratio:-
Gautam’s Share = 2/5-5/10=4-5/10=1/12 (Gain)
Rahul’s Share = 3/5-3/10=6-3/10=3/10 (Sacrifice)
Kabir’s Share = 2/10
Value of Goodwill of Firm = Rs. 10,000 × 10/2 = Rs. 50,000
Compensation paid by B = Rs. 50,000 × 1/10= Rs. 5,000
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Gautam | Rahul | Karim | Particulars | Gautam | Rahul | Karim |
| To Revaluation A/c | 1,360 | 2,040 | - | By Balance b/d | 30,000 | 40,000 | - |
| To Furniture A/c | 22,000 | - | - | By General Res. A/c | 4,000 | 6,000 | - |
| To Goodwill A/c | 4,000 | 6,000 | - | By Cash A/c | - | - | 40,000 |
| To Balance c/d | 1,640 | 52,960 | 40,000 | By Gautam’s A/c | - | 5,000 | - |
| By Goodwill A/c | - | 10,000 | - | ||||
| 34,000 | 61,000 | 40,000 | 34,000 | 61,000 | 40,000 | ||
Aman and Biswas were partners sharing profits and losses in the ratio of 3:2. They admitted Chetan as a new partner for 25% share. Balance sheet of Aman and Biswas was as follows as at March 31, 2023.
| Liabilities | Rs. | Assets | Rs. | ||
|---|---|---|---|---|---|
| Creditors | 50,000 | Bank | 40,000 | ||
| Employees’ Provident Fund | 60,000 | Stock | 60,000 | ||
| General Reserve | 40,000 | Debtors | 1,00,000 | ||
| Investment Fluctuation Reserve | 50,000 | Less: Provision for DD | (10,000) | 90,000 | |
| Aman’s Capital | 2,00,000 | Furniture | 1,20,000 | ||
| Biswas’s Capital | 1,50,000 | 3,50,000 | Building | 1,60,000 | |
| Investment | 50,000 | ||||
| Goodwill | 30,000 | ||||
| 5,50,000 | 5,50,000 | ||||
Chetan was admitted on the following terms:
(i) Market value of Investment is Rs. 20,000.
(ii) There was a bad debts amounting to Rs. 6,000 and provision for Doubtful Debts is to be maintained at Rs. 9,000.
(iii) Building was undervalued by 20%.
(iv) Stock was overvalued by 20%.
(v) Goodwill of the firm was valued at Rs. 1,00,000 and Chetan brings his share of goodwill in cash.
(vi) Chetan was to bring Rs. 1,30,000 as Capital.
Prepare Revaluation Account and Partners Capital Accounts.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| To Stock A/c | 10,000 | By Building A/c | 40,000 | ||
| To Provision for Doubtful Debts A/c | 5,000 | ||||
| To Profit and revaluation A/c | |||||
| Aman | 15,000 | ||||
| Biswas | 10,000 | 25,000 | |||
| 40,000 | 40,000 | ||||
Partners Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Aman | Biswas | Chetan | Particulars | Aman | Biswas | Chetan |
| To Goodwill A/c | 18,000 | 12,000 | - | By Balance b/d | 2,00,000 | 1,50,000 | |
| To Balance c/d | 2,48,000 | 1,82,000 | 1,30,000 | By Revaluation A/c | 15,000 | 10,000 | |
| By Pre. For Goodwill | 15,000 | 10,000 | |||||
| By General Reserve | 24,000 | 16,000 | |||||
| By IFR A/c | 12,000 | 8,000 | |||||
| By Bank A.\/c | 1,30,000 | ||||||
| 2,66,000 | 1,94,000 | 1,30,000 | 2,66,000 | 1,94,000 | 1,30,000 | ||
X and Y are partners in a firm sharing profits and losses in the ratio of 5: 3. On 31st March, 2024, their Balance Sheet was as under:
| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
|---|---|---|---|
| Creditors | 50,000 | Bank | 29,000 |
| Provident Fund | 15,000 | Debtors | 1,80,000 |
| Workmen's Compensation Reserve | 40,000 | Stock | 1,25,000 |
| Capitals A/cs : X 2,60,000 Y 1,35,000 | 3,95,000 | Premises Advertisement Expenses | 1,50,000 16,000 |
| 5,00,000 | 5,00,000 |
On 1st April, 2024, Z is admitted as a partner. X surrenders 1/4th of his share and Y 1/3rd of his share in favour of Z. Goodwill is valued at Rs. 1,60,000. Z brings in only 2/5th of his share of goodwill in cash and Rs. 1,50,000 as his capital Following terms are agreed upon:
(i) Premises is to be increased to Rs. 2,00,000 and stock by Rs. 5,000.
(ii) Creditors proved at Rs. 60,000, one bill for goods purchased having been omitted from the books.
(iii) Outstanding rent amounted to Rs. 12,000 and prepaid salaries Rs. 2,000.
(iv) Liability on account of provident fund was only Rs. 10,000.
(v) Liability for Workmen's Compensation Claim was Rs. 16,000.
Prepare Revaluation A/c, Capital A/cs and the opening Balance sheet. Also calculate the new profit sharing ratios.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | ||
| To Creditors | 10,000 | By Premises | 50,000 | ||
| To Outstanding Rent | 12,000 | By Stock | 5,000 | ||
| To Profit transferred: | By Prepaid Salaries | 2,000 | |||
| X’s Capital A/c | 25,000 | By Provident Fund | 5,000 | ||
| Y’s Capital A/c | 15,000 | 40,000 | |||
| 62,000 | 62,000 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | X | Y | Z | Particulars | X | Y | Z |
| To Advertisement A/c | 10,000 | 6,000 | - | By Balance b/d | 2,60,000 | 1,35,000 | - |
| To Balance c/d | 3,15,000 | 1,73,000 | 1,50,000 | By Workmen Com. Res. A/c | 15,000 | 9,000 | - |
| By Revaluation A/c | 25,000 | 15,000 | - | ||||
| By Goodwill A/c | 10,000 | 8,000 | - | ||||
| By Z’s Current A/c | 15,000 | 12,000 | |||||
| By Bank A/c | - | - | 1,50,000 | ||||
| 3,25,000 | 1,79,000 | 1,50,000 | 3,25,000 | 1,79,000 | 1,50,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 60,000 | Bank (29,000 + 18,000 + 1,50,000) | 1,97,000 | ||
| Outstanding Rent | 12,000 | Debtors | 1,80,000 | ||
| Provident Fund | 10,000 | Stock | 1,30,000 | ||
| Workmen Compensation Claim | 16,000 | Premises | 2,00,000 | ||
| Capital | Prepaid Salaries | 2,000 | |||
| X | 3,15,000 | Z’s Current A/c | 27,000 | ||
| Y | 1,73,000 | ||||
| Z | 1,50,000 | 6,38,000 | |||
| 7,36,000 | 7,36,000 | ||||
Calculation of Sacrificing Ratio:-
X’s Surrenders = 1/4th of 5/8 in favour of Z
X’s Surrenders = 1/4×5/8=5/32
Y’s Surrenders = 1/3th of 5/8 in favour of Z
Y’s Surrenders = 1/3×3/8=3/32=1/8
Sacrificing Ratio = 5/32 : 1/8
Sacrificing Ratio = 5 : 4/32
Sacrificing Ratio = 5 : 4
Calculation of New Ratio:-
X’s New Ratio = 5/8-5/32=20 – 5/32=15/32
Y’s New Ratio = 3/8-1/8=3 – 1/8=2/8
Z’s Share = 5/32+1/8=5+ 4/32=9/32
New Ratio = 15/32:2/8:9/32
New Ratio = 15 : 8 : 9/32
New Ratio = 15 : 8 : 9
Calculation of Goodwill:-
Z’s Goodwill = Rs. 1,60,000 ×9/32 = Rs. 45,000
Hemant and Nishant were partners in the firm sharing profits in the ratio of 3:2. Their capitals were Rs 1,60,000 and Rs 1,00,000 respectively. They admitted Somesh on 1st April 2013 as a new partner for 1/5 share in the future profits. Somesh brought Rs 1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh's admission.
| Journal Entry | ||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Debit Rs | Credit Rs |
| Cash A/c Dr. To Somesh’s Capital A/c (Being Somesh brought his share of capital in cash) | 1,20,000 | 1,20,000 | ||
| Somesh’s Capital A/c Dr. To Hemant’s Capital A/c To Naresh’s Capital A/c (Being the share of goodwill brought by Somesh, distributed among sacrificing partners in sacrificing ratio 3:2) | 44,000 | 26,400 17,600 | ||
X and Y are partners with capital of Rs. 13,00,000 and Rs. 20,00.000 They share profits in the ratio of 1 : 2. They admit Z as a partner with 1/5th share in the profits of the firm. Z brings in Rs. 12,00,000 as his share of capital. The Profit and Loss Account showed a credit balance of Rs. 6,00,000 as on the date of admission of Z. Give the necessary Journal entries to record the goodwill.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 12,00,000 | |||
| ToZ’s Capital A/c | 12,00,000 | ||||
| (Being Cash brought in by Z as his capital) | |||||
| Z’s Capital A/c | Dr. | 1,80,000 | |||
| To X’s Capital A/c | 60,000 | ||||
| To Y’s Capital A/c | 1,20,000 | ||||
| (Being goodwill credited to X and Y on Z’s admission) | |||||
Calculation of Hidden Goodwill
Total Capital of the firm = Rs. 13,00,000 + Rs. 20,00,000 + Rs. 12,00,000 = Rs. 45,00,000
Total Capital of the firm based on Z’s Capital = 12,00,000 ×5/1 = Rs. 60,00,000
Goodwill of the firm = Rs. 60,00,000 – Rs. 45,00,000 = Rs. 15,00,000
Hidden Goodwill = Goodwill of the firm – Showing in P & L
Hidden Goodwill = Rs. 15,00,000 – Rs. 6,00,000
Hidden Goodwill = Rs. 9,00,000
Z’s Share of Goodwill = Rs. 9,00,000 ×1/5 = 1,80,000
A, B and C were partners in a firm sharing profits in the ratio of 2:1:1. Their respective capitals were A Rs. 3,00,000, B Rs. 2,00,000 and C Rs. 1,80,000. On 1st April 2018 they admitted D as a new partner. D brought Rs. 2,00,000 for his capital and necessary amount for his share of goodwill premium. The new profit sharing ratio between A, B, C and D will be 1:2:1:1.
Pass necessary journal entries for the above transactions in the books of the firm D's admission.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Goodwill A/c | Dr. | 24,000 | |||
| B’s Capital A/c | Dr. | 18,000 | |||
| To A’s Capital A/c | 36,000 | ||||
| To C’s Capital A/c | 6,000 | ||||
| (Being B’s share of goodwill credited to A and C in their sacrificing ratio) | |||||
Calculation of Hidden Goodwill
Net Worth = Rs. 3,00,000 + Rs. 2,00,000 + Rs. 1,80,000 + Rs. 2,00,000
Net Worth = Rs. 8,80,000
Total Capital of the firm based on D’s Capital = 2,00,000 ×5/1 = Rs. 10,00,000
Hidden Goodwill = Rs. 10,00,000 – Rs. 8,80,000 = Rs. 1,20,000
D’s Share of Goodwill = Rs. 1,20,000 ×1/5 = 24,000
Following is the Balance Sheet of X and Y who share profits and losses in the ratio of 3:2 as at 31st March, 2022:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Sundry Creditors | 80,000 | Cash at Bank | 20,000 |
| Reserve | 1,00,000 | Debtors | 70,000 |
| Profit & Loss Account | 40,000 | Stock | 1,80,000 |
| Capital Accounts: X 2,70,000 Y 1,60,000 | 4,30,000 | Machinery Goodwill | 3,50,000 30,000 |
| 6,50,000 | 6,50,000 |
On 1st April 2018, Z is admitted as a new partner. X surrenders 1/3rd of his share and Y surrenders1/4th of his share in favour of Z. Z brings in Rs. 3,60,000 for his share of Capital. Pass journal entries for recording goodwill.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| X’s Capital A/c | Dr. | 18,000 | |||
| Y’s Capital A/c | Dr. | 12,000 | |||
| To Goodwill A/c | 30,000 | ||||
| (Being goodwill written off in old ratio of 3:2) | |||||
| Z’s Capital A/c | Dr. | 90,000 | |||
| To X’s Capital A/c | 60,000 | ||||
| To Y’s Capital A/c | 30,000 | ||||
| (Being Z’s share of goodwill credited to sacrificing partners capital account) | |||||
Calculation of Hidden Goodwill
Net Worth = Rs. 2,70,000 + Rs. 1,60,000 + Rs. 1,00,000 + Rs. 40,000 – Rs. 30,000 + Rs. 3,60,000(Z’s Capital)
Net Worth = Rs. 9,00,000
Total Capital of the firm based on Z’s Capital = 3,60,000 ×10/3 = Rs. 12,00,000
Hidden Goodwill of the firm = Rs. 12,00,000 – Rs. 9,00,000 = Rs. 3,00,000
Z’s Share of Goodwill = Rs. 3,00,000 ×3/10 = 90,000
Calculation of Sacrificing Ratio:-
X’s Surrenders = 1/3of3/5=3/15=1/5
Y’s Surrenders = 1/4of2/5=2/20=1/10
Sacrificing Ratio = 1/5 : 1/10
Sacrificing Ratio = 2 : 1/10
Sacrificing Ratio = 2 : 1
A, B and C are partners sharing profits and losses in the ratio of 6:3:1. Their respective capitals are A Rs. 5,00,000; B Rs. 4,00,000 and C Rs. 2,00,000. They decide to admit D into partnership and the new profit sharing ratio is agreed at 3:3:3:1.
D brings Rs. 1,50,000 as his capital and his share of goodwill in cash. At the time of D’s admission:
(a) The firm had a Workmen Compensation Reserve of Rs. 1,00,000 against which there was a claim of Rs. 1,20,000.
(b) Advertisement Suspense A/c (Dr.) balance appeared in their books at Rs. 30,000.
(c) Contingency Reserve appeared at Rs. 60,000.
You are required to prepare necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 1,75,000 | |||
| To D’s Capital A/c | 1,50,000 | ||||
| To Premium for Goodwill A/c | 25,000 | ||||
| (Being Capital and Share of goodwill brought by D) | |||||
| Premium for Goodwill A/c | Dr. | 25,000 | |||
| C’s Capital A/c | 50,000 | ||||
| To A’s Capital A/c | 75,000 | ||||
| (Being share of goodwill credited to A and C’s Gaining share debited to his account) | |||||
| Workmen compensation Reserve A/c | Dr. | 1,00,000 | |||
| Revaluation A/c | Dr. | 20,000 | |||
| To Workmen Compensation Claim A/c | 1,20,000 | ||||
| (Being Claim on workmen compensation claim) | |||||
| A’s Capital A/c | Dr. | 18,000 | |||
| B’s Capital A/c | Dr. | 9,000 | |||
| C’s Capital A/c | Dr. | 3,000 | |||
| To Advertisement Suspense A/c | 30,000 | ||||
| (Being advertisement suspense account written off) | |||||
| Contingency Reserve A/c | Dr. | 60,000 | |||
| To A’s Capital A/c | 36,000 | ||||
| To B’s Capital A/c | 18,000 | ||||
| To C’s Capital A/c | 6,000 | ||||
| (Being contingency reserve distributed to old partners) | |||||
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrifice = 6/10-3/10= 3/10 (Sacrificing Ratio)
B’s Sacrifice = 3/10-3/10= 0
C’s Sacrifice = 1/10-3/10= -2/10 (Gaining Ratio)
D’s Gaining Ratio = 1/10
Calculation of Goodwill:-
Total capital of the firm according to new partner = Rs. 1,50,000 × 10/1
Total capital of the firm according to new partner = Rs. 15,00,000
Actual Capital of the firm = Rs. 5,00,000 + Rs. 4,00,000 + Rs. 2,00,000 + Rs. 1,50,000
Actual Capital of the firm = Rs. 12,50,000
Hidden Goodwill = Rs. 15,00,000 – Rs. 12,50,000
Hidden Goodwill = Rs. 2,50,000
Nem and Khem sharing profits in the ratio of 3 : 2 admit Prem as a Partner with 1/3 share in profits. He had to contribute proportionate capital. They had following financial position.
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Creditors | 40,000 | Cash at bank | 50,000 |
| Reserve Fund | 50,000 | Debtors | 60,000 |
| Capitals : Nem Khem | 50,000 40,000 | Stock Plant and Machinery | 35,000 80,000 |
| 1,80,000 | 1,80,000 |
They agreed to admit Prem as a partner on the following terms :
(1) Plant and Machinery to be reduced by 10%
(2) Stock to be increased by Rs. 3,000.
(3) Bad debts provision was to be created at 5%.
(4) Accrued incomes not appearing in the books Rs. 900.
(5) Prem was to introduce Rs. 20,000 as premium for goodwill for 1/3rd share of the future profits of the firm.
Prepare Profit and Loss Adjustment Account, Capital Accounts and Balance Sheet of the new firm. Also calculate new profit sharing ratio.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | ||
| To Plant and Machinery A/c | 8,000 | By Stock A/c | 3,000 | ||
| To Provision for Doubtful Debts A/c | 3,000 | By Accrued income A/c | 900 | ||
| By Loss transferred to: | |||||
| Nem’s Capital A/c | 4,260 | ||||
| Khem’s Capital A/c | 2,840 | 7,100 | |||
| 11,000 | 11,000 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Nem | Khem | Prem | Particulars | Nem | Khem | Prem |
| To Revaluation A/c | 4,260 | 2,840 | - | By Balance b/d | 50,000 | 40,000 | - |
| To Balance c/d | 87,740 | 65,160 | 76,450 | By Reserve Fund A/c | 30,000 | 20,000 | - |
| By Goodwill A/c | 12,000 | 8,000 | - | ||||
| By Bank A/c | - | - | 76,450 | ||||
| 92,000 | 68,000 | 76,450 | 92,000 | 68,000 | 76,450 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 40,000 | Cash | 1,01,450 | ||
| Capital | Sundry Debtors | 60,000 | |||
| Nem | 87,740 | Less: Provision | 3,000 | 57,000 | |
| Khem | 65,160 | Stock | 38,000 | ||
| Prem | 76,450 | 2,29,350 | Accrued Income | 900 | |
| Plant and Machinery | 72,000 | ||||
| 2,69,350 | 2,69,350 | ||||
Calculation of Capital:-
Capital of Nem and Khem = Rs. 87,740 + Rs. 65,160 = Rs. 1,52,900
Total Capital of the firm = Rs. 1,52,900×3/2 = Rs. 2,29,350
Prem’s Capital for 1/3rd share = Rs. 2,29,350 ×1/3 = Rs. 76,450
Calculation of New Ratio:-
Prem’s Ratio = 1/3
Remaining Ratio = 1-1/3 = 2/3
Nem’s New Share = 3/5 of 2/3 = 6/15
Khem’s New Share = 2/5 of 2/3 = 4/15
Prem’s Ratio = 1/3
New Ratio = 6/15 :4/15:1/3
New Ratio = 6 : 4 : 5/15
New Ratio = 6 : 4 : 5
Mohan and Sohan are in partnership sharing profits in the proportion of 3/5 and 2/5 respectively. The Balance Sheet is as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capitals : Mohan 2,00,000 Sohan 1,00,000 | 3,00,000 | Cash Debtors 1,00,000 Less : Provision 40,000 | 65,000 60,000 |
| Creditors | Stock | 1,50,000 | |
| Plant | 65,000 | ||
| 3,40,000 | 3,40,000 |
D They decide to admit Rohan to 1/3rd share on the terms that he is to pay into the business Rs. 1,00,000 as Goodwill and sufficient capital to give him 1/3rd share of the total capital of the new firm. It was agreed that Provision for bad debts be reduced to Rs. 10,000, that the stock be revalued at Rs. 2,00,000; and that the plant be reduced to Rs. 50,000.
Prepare necessary ledger accounts and show the balance sheet of the new partnership.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | ||
| To Plant A/c | 15,000 | By Provision for Doubtful Debts A/c | 30,000 | ||
| To Profit transferred to: | By Stock A/c | 50,000 | |||
| Mohan’s Capital A/c | 39,000 | ||||
| Sohan’s Capital A/c | 26,000 | 65,000 | |||
| 80,000 | 80,000 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Mohan | Sohan | Rohan | Particulars | Mohan | Sohan | Rohan |
| By Balance b/d | 2,00,000 | 1,00,000 | - | ||||
| To Balance c/d | 2,99,000 | 1,66,000 | 2,32,500 | By Revaluation A/c | 39,000 | 26,000 | - |
| By Goodwill A/c | 60,000 | 40,000 | - | ||||
| By Cash A/c | - | - | 2,32,500 | ||||
| 2,99,000 | 1,66,000 | 2,32,500 | 2,99,000 | 1,66,000 | 2,32,500 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 40,000 | Cash | 3,97,500 | ||
| Capital | Sundry Debtors | 1,00,000 | |||
| Mohan | 2,99,000 | Less: Provision for DD | 10,000 | 90,000 | |
| Sohan | 1,66,000 | Stock | 2,00,000 | ||
| Rohan | 2,32,500 | 6,97,500 | Plant and Machinery | 50,000 | |
| 7,37,500 | 7,37,500 | ||||
Calculation of Rohan’s Capital:-
Capital of Mohan and Sohan = Rs. 2,99,000 + Rs. 1,66,000 = Rs. 4,65,000
Total Capital of the firm = Rs. 4,65,000×3/2 = Rs. 6,97,500
Rohan’s Capital for 1/3rd share = Rs. 6,97,500 ×1/3 = Rs. 2,32,500
Soma and Navya were partners sharing profits in the ratio of 2:1. Ananya was admitted as a partner for 1/5th share in profits. Following balance appeared in the books of the firm on that day.
| Debtors | 1,80,000 |
|---|---|
| Provision for Doubtful Debts | 12,000 |
Debtors worth Rs. 10,000 became bad. It was decide to create 4% provision on doubtful debts. Pass necessary journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 1. | Bad Debts A/c | Dr. | 10,000 | ||
| To Debtors A/c | 10,000 | ||||
| (Being debtors written off as bad debts) | |||||
| 2. | Provision for Doubtful Debts A/c | Dr. | 10,000 | ||
| To Bad Debts A/c | 10,000 | ||||
| (Being bad debts adjusted against provision) | |||||
| 3. | Revaluation A/c | Dr. | 4,800 | ||
| To Provision for Doubtful Debts A/c | 4,800 | ||||
| (Being 4% provision created against bad debts) | |||||
| 4. | Soma’s Capital A/c | Dr. | 3,200 | ||
| Navya’s Capital A/c | Dr. | 1,600 | |||
| To Revaluation A/c | 4,800 | ||||
| (Being loss on revaluation distributed in 2:1) | |||||
Remaining Debtors = Rs. 1,80,000- Rs. 10,000 = Rs. 1,70,000
Provision for Doubtful debts = Rs. 1,70,000 × 4% = Rs. 6,800
Remaining Provision Balance = Rs. 12,000- Rs. 10,000 = Rs. 2,000
Additional Provision = Rs. 6,800 – Rs. 2,000 = Rs. 4,800
On 31st March 2022, the Balance Sheet of A and B, who were sharing profits in the ratio of 3 : 2 was as follows:
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Sundry Creditors | 2,50,000 | Cash at Bank | 1,30,000 |
| Investment Fluctuation Reserve | 50,000 | Sundry Debtor 7,50,000 | |
| Capitals : A 10,00,000 B 8,00,000 | 18,00,000 | Less : Provision 30,000 Stock Investments | 7,20,000 4,50,000 2,00,000 |
| Plant & Machinery | 6,00,000 | ||
| 21,00,000 | 21,00,000 |
They decide to admit C as a partner. A Sacrifices 2/15 from his share while B sacrifices1/6 th of his share in favour of C.
The following adjustments were agreed upon :
C shall bring Rs. 1,50,000 as his share of goodwill premium and shall bring in proportionate capital.
Stock was undervalued by 10% and Plant and Machinery was overvalued by 20 %.
Market value of investments is Rs. 2,20,000.
Debtors to the extent of Rs. 10,000 were unrecorded.
5% provision for doubtful debts is required on sundry debtors.
Prepare Revaluation Account, Partner's Capital Accounts and the Balance Sheet of the reconstituted firm.
Revaluation Account
| 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 Loss transferred to | |||||
| A’s Capital A/c | 16,800 | ||||
| B’s Capital A/c | 11,200 | 28,000 | |||
| 1,08,000 | 1,08,000 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | A | B | C | Particulars | A | B | C |
| To Revaluation A/c | 16,800 | 11,200 | By Balance b/d | 10,00,000 | 8,00,000 | ||
| To Balance c/d | 11,13,200 | 8,58,800 | By Investment A/c | 30,000 | 20,000 | ||
| By Goodwill A/c | 1,00,000 | 50,000 | |||||
| 11,30,000 | 8,70,000 | 11,30,000 | 8,70,000 | ||||
| To Balance c/d | 11,13,200 | 8,58,800 | 4,93,000 | By Balance b/d | 11,13,200 | 8,58,800 | |
| By Bank A/c | 4,93,000 | ||||||
| 11,13,200 | 8,58,800 | 4,93,000 | 11,13,200 | 8,58,800 | 4,93,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 2,50,000 | Cash | 7,73,000 | ||
| Capital | Sundry Debtors | 7,60,000 | |||
| A | 11,13,200 | Less: Provision for Debtors | 38,000 | 7,22,000 | |
| 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 | ||||
Calculation of Value of Stock:-
Actual value of Stock = Rs. 4,50,000 ×100/90 = Rs. 5,00,000
Actual value of Plant & Machinery = Rs. 6,00,000 ×100/120 = Rs. 5,00,000
Calculation of Sacrificing Ratio:-
A’s Sacrifice = 2/15
B’s Sacrifice = 2/5×1/6=1/15
Sacrificing Ratio = 2 : 1
Calculation of New Ratio:-
A’s New Ratio = 3/5-2/15=9-2/15=7/15
B’s New Ratio = 2/5-1/15=6-1/15=5/15
C’s New Ratio = 2/15+1/15=2+1/15=3/15
New Ratio = 7 : 5 : 3
Calculation of Capital:-
Capital of A and B = Rs. 11,13,200 + Rs. 8,58,500 = Rs. 19,72,000
Total Capital of the firm = Rs. 19,72,000 ×5/4 = Rs. 24,65,000
C’s Capital = Rs. 24,65,000 ×1/5 = Rs. 4,93,000
A and B partners sharing profits in the proportion of 3: 2. Their Balance Sheet as at 31st March, 2024 was as follows:
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Sundry Creditors | 63,000 | Cash at Bank | 5,000 |
| Outstanding Salaries | 4,000 | Sundry Debtors 30,000 | |
| General Reserve | 10,000 | Less : Provision 1,000 | 29,000 |
| Capitals : A B | 50,000 30,000 | Stock Trade Marks Building | 40,000 8,000 75,000 |
| 1,57,000 | 1,57,000 |
They agree to admit C as a new partner on the following terms :
(1) C will be given 2/9th share of profit and he will bring Rs. 50,000 for his share of capital and goodwill.
(2) Goodwill of the firm will be calculated at 21/2 year’s purchase of the average super profits of last four years. Profits of the last four years are Rs. 40,000; Rs. 40,000; Rs. 55,000 and Rs. 65,000 respectively. Normal profits that can be earned with the capital employed are Rs. 14,000.
(3) Half the amount of goodwill is withdrawn by old partners.
(4) 15% of the general reserve is to remain as a provision against doubtful debts.
(5) Outstanding salaries be increased to Rs. 16,000, Stock is overvalued by 25% and
Building is undervalued by 25%. Trade Marks be written off by 50%.
(6) New profit sharing ratio of partners will be 4:3:2 and the capital accounts of A and B will be adjusted on the basis of C's capital by bringing in or withdrawing cash, as the case may be.
Prepare necessary accounts and the opening balance sheet of the firm.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Outstanding Salaries A/c | 12,000 | By Building A/c | 25,000 | |
| To Stock A/c | 8,000 | |||
| To Trade Marks A/c | 4,000 | |||
| To Profit trf. to capital a/c | ||||
| A | 600 | |||
| B | 400 | 1,000 | ||
| 25,000 | 25,000 | |||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | A | B | C | Particulars | A | B | C |
| To Bank | 7,000 | 3,000 | - | By Balance b/d | 50,000 | 30,000 | - |
| To Balance c/d | 62,700 | 36,800 | 30,000 | By General Reserve A/c | 5,100 | 3,400 | - |
| By Revaluation A/c | 600 | 400 | - | ||||
| By Bank A/c | - | - | 30,000 | ||||
| By Goodwill A/c | 14,000 | 6,000 | - | ||||
| 69,700 | 39,800 | 30,000 | 69,700 | 39,800 | 30,000 | ||
| To Bank A/c (B/f) | 2700 | - | - | By Balance b/d | 62,700 | 36,800 | 30,000 |
| To Balance c/d | 60,000 | 45,000 | 30,000 | By Bank A/c (B/f) | - | 8,200 | - |
| 62,700 | 45,000 | 30,000 | 62,700 | 45,000 | 30,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 63,000 | Cash at Bank | 50,500 | ||
| Outstanding Salaries | 16,000 | Sundry Debtors | 30,000 | ||
| Capital | Less: Provision for DD | 2,500 | 27,500 | ||
| A | 60,000 | Stock | 32,000 | ||
| B | 45,000 | Trade Marks | 4,000 | ||
| C | 30,000 | 1,35,000 | Building | 1,00,000 | |
| 2,14,000 | 2,14,000 | ||||
Actual value of Stock = Rs. 40,000 ×100/125 = Rs. 32,000
Actual value of Building = Rs. 75,000 ×100/75 = Rs. 1,00,000
Calculation of Goodwill:-
Total Profit = Rs. 40,000 + Rs. 40,000 + Rs. 55,000 + Rs. 65,000 = Rs. 2,00,000
Average Profit = 2,00,000/4= Rs. 50,000
Super Profit = Average Profit – Normal Profit
Super Profit = Rs. 50,000 – Rs. 14,000
Super Profit = Rs. 36,000
Goodwill = Rs. 36,000 ×5/2 = 90,000
Goodwill brought by C in Cash = Rs. 90,000 ×2/9 = Rs. 20,000
Calculation of Sacrificing Ratio:-
A’s Sacrifice = 3/5-4/9=27-20/45=7/45
B’s Sacrifice = 2/5-3/9=18-15/45=3/45
Sacrifice Ratio = 7:3
Ashok and Biju were partners sharing profits and losses in the ratio of 3:1 respectively. The following was their balance sheet as at 31st March, 2024:
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Creditors | 1,20,000 | Sundry Debtors | 2,00,000 |
| Bank Overdraft | 1,50,000 | Stock | 2,20,000 |
| Ashok's Capital | 1,50,000 | Furniture | 40,000 |
| Biju's Capital | 1,00,000 | Machinery | 60,000 |
| 5,20,000 | 5,20,000 |
On 1st April, 2024, Chandra was admitted to the firm on the following term:
Chandra would provide Rs. 1,00,000 as a capital and pay Rs. 20,000 as goodwill for his one-third share in future profits.
Ashok, Biju and Chandra would share profits equally.
Machinery would be reduced by 10% and Rs. 5,000 would be providing for debts. Stock would be valued at Rs. 2,49,400.
Capital accounts of old partners would be adjusted in the profit sharing ratio on the basis of Chandra's capital by bringing in or taking out cash.
Pass necessary journal entries and prepare partner's capital accounts and balance sheet of the new firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Revaluation A/c | Dr. | 11,000 | |||
| 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) | |||||
| Stock A/c | Dr. | 29,400 | |||
| To Revaluation A/c | 29,400 | ||||
| (Being the value of stock increased) | |||||
| Revaluation A/c | Dr. | 18,400 | |||
| To Ashok’s Capital A/c | 13,800 | ||||
| To Biju’s Capital A/c | 4,600 | ||||
| (Being profit on revaluation transferred to old partner’s capital account) | |||||
| Bank A/c | Dr. | 1,20,000 | |||
| To Chandra’s Capital A/c | 1,00,000 | ||||
| To Goodwill A/c | 20,000 | ||||
| (Being capital and goodwill brought in by Chandra) | |||||
| Goodwill A/c | Dr. | 20,000 | |||
| Biju’s Capital A/c | Dr. | 5,000 | |||
| To Ashok’s Capital A/c | 25,000 | ||||
| (Being goodwill brought in by Chandra credited to Ashok along with 1/12th of the goodwill to be contributed by Biju) | |||||
| Bank A/c | Dr. | 400 | |||
| To Biju’s Capital A/c | 400 | ||||
| (Being amount of proportionate capital brought in) | |||||
| Ashok’s Capital A/c | Dr. | 88,800 | |||
| To Bank A/c | 88,800 | ||||
| (Being excess amount withdrawn by Ashok) | |||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Ashok | Biju | Chandra | Particulars | Ashok | Biju | Chandra |
| To Ashok’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 Biju’s Capital A/c | 5,000 | - | - | ||||
| 1,88,800 | 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 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 1,20,000 | Stock | 2,49,000 | ||
| Bank overdraft | 1,18,400 | Sundry Debtors | 2,00,000 | ||
| Capital | Less: Provision for DD | 5,000 | 1,95,000 | ||
| Ashok | 1,00,000 | Furniture | 40,000 | ||
| Biju | 1,00,000 | Machinery | 54,000 | ||
| Chandra | 1,00,000 | 3,00,000 | |||
| 5,38,400 | 5,38,400 | ||||
Calculation of Sacrificing Ratio:-
Ashok’s Ratio = 3/4-1/3=9 -4/12=5/12 (Sacrifice)
Biju’s Ratio = 1/4-1/3=3 - 4/12=1/12 (Gain)
Calculation of Goodwill:-
Chandra’s share of goodwill 1/3= Rs. 20,000
Total Goodwill = Rs. 20,000 × 3 = Rs. 60,000
Biju’s gain = Rs. 60,000 ×1/12 = Rs. 5,000
A and B are partners sharing profits in the ratio of 5:3. C was admitted for 1/4th share in profits. C acquires this share as 3/16 from A and 1/4th of his share from B. C bring in Rs. 1,00,000 as his capital.
At the time of C’s admission:
(i) The firm’s share goodwill was valued at Rs. 2,40,000.
(ii) General Reserve was Rs. 40,000.
(iii) Profit on revaluation of assets and liabilities was Rs. 24,000.
Before any adjustments were made the Capitals of A and B were Rs. 1,20,000 and Rs. 70,000 respectively. It is decided that after C’s admission, the Capital of A and B be adjusted on the basis of C’s Capital, any excess or shortfall to be adjusted by opening current accounts. You are required to pass necessary journal entries on C’s admission.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| 1. | Bank A/c | Dr. | 1,00,000 | ||
| To C’s Capital A/c | 1,00,000 | ||||
| (Being C brings in Capital in cash) | |||||
| 2. | C’s Current A/c | Dr. | 60,000 | ||
| To A’s Capital A/c | 45,000 | ||||
| To B’s Capital A/c | 15,000 | ||||
| (Being premium for goodwill credited to partners in sacrificing ratio) | |||||
| 3. | General Reserve A/c | Dr. | 40,000 | ||
| To A’s Capital A/c | 25,000 | ||||
| To B’s Capital A/c | 15,000 | ||||
| (Being General distributed between old partners in old ratio) | |||||
| 4. | Revaluation A/c | Dr. | 24,000 | ||
| To A’s Capital A/c | 15,000 | ||||
| To B’s Capital A/c | 9,000 | ||||
| (Being profit on revaluation account credited to partners) | |||||
| 5. | A’s Capital A/c | Dr. | 30,000 | ||
| To Bank A/c | 30,000 | ||||
| (Being Capital withdraws by A) | |||||
| 6. | Bank A/c | Dr. | 16,000 | ||
| To B’ Capital A/c | 16,000 | ||||
| (Being B bring additional capital) | |||||
Calculation of Capital Bring/withdrawal by Partner A and B:-
| Particulars | A | B |
|---|---|---|
| Adjusted Capital of A and B | 2,05,000 | 1,09,000 |
| Capital in New Firm | 1,75,000 | 1,25,000 |
| A withdraws | 30,000 | - |
| B Brings | - | 16,000 |
Calculation of Adjusted Capital of Partners:-
Adjusted Capital of A = A’s Capital + Share in General Reserve + Profit on Revaluation + Share in Premium for Goodwill
Adjusted Capital of A = Rs. 1,20,000 + Rs. 25,000 + Rs. 15,000 + Rs. 45,000
Adjusted Capital of A = Rs. 2,05,000
Adjusted Capital of B = B’s Capital + Share in General Reserve + Profit on Revaluation + Share in Premium for Goodwill
Adjusted Capital of B = Rs. 70,000 + Rs. 15,000 + Rs. 9,000 + Rs. 15,000
Adjusted Capital of B = Rs. 1,09,000
Capital of Partners A and B in New Firm According to New Partners Capital:-
Total Capital of the new firm = Rs. 1,00,000 × 4/1
Total Capital of the new firm = Rs. 4,00,000
A’s Capital = Rs. 4,00,000 × 7/16 = Rs. 1,75,000
B’s Capital = Rs. 4,00,000 × 5/16 = Rs. 1,25,000
Om, Ram and Shanti were partners in a firm sharing profits in the ratio of 3:2:1. On 1st April, 2014 their Balance Sheet was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital Accounts: Om 3,58,000 Ram 3,00,000 Shanti 2,62,000 | 9,20,000 | Land and Building Plant and Machinery Furniture Bills Receivables | 3,64,000 2,95,000 2,33,000 38,000 |
| General Reserve | 48,000 | Sundry Debtors | 90,000 |
| Creditors | 1,60,000 | Stock | 1,11,000 |
| Bills Payable | 90,000 | Bank | 87,000 |
| 12,18,000 | 12,18,000 |
On the above date Hanuman was admitted on the following terms:
(i) He will bring Rs. 1,00,000 for his capital and will get 1/10th share in the profits.
(ii) He will bring necessary cash for his share of goodwill premium. The goodwill of the firm was valued at Rs. 3,00,000.
(iii) A liability of Rs. 18,000 will be created against bills receivables discounted.
(iv) The value of stock and furniture will be reduced by 20%.
(v) The value of land and building will be increased by 10%.
(vi) Capital accounts of the partners will be adjusted on the basis of Hanuman's capital in their profit sharing ratio by opening current accounts.
Prepare Revaluation Account and Partners' Capital Accounts.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | ||
| To Liabilities for BR Discounted A/c | 18,000 | By Land and Building | 36,400 | ||
| To Stock A/c | 22,200 | By Loss transferred to Partner capital | |||
| To Furniture A/c | 46,600 | Om | 25,200 | ||
| Ram | 16,800 | ||||
| Shanti | 8,400 | 50400 | |||
| 86,800 | 86,800 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Om | Ram | Shanti | Particulars | Om | Ram | Shanti |
| To Revaluation A/c | 25,200 | 16,800 | 8,400 | By Balance b/d | 3,58,000 | 3,00,000 | 2,62,000 |
| To Balance c/d | 3,71,800 | 3,09,200 | 2,66,600 | By General Reserve A/c | 24,000 | 16,000 | 8,000 |
| By Goodwill A/c | 15,000 | 10,000 | 5,000 | ||||
| 3,97,000 | 3,26,000 | 2,75,000 | 3,97,000 | 3,26,000 | 2,75,000 | ||
| To Current A/c | - | 9,200 | 1,16,600 | By Balance b/d | 3,71,800 | 3,09,200 | 2,66,600 |
| To Balance c/d | 4,50,000 | 3,00,000 | 1,50,000 | By Current A/c (B/f) | 78,200 | - | - |
| 4,50,000 | 3,09,200 | 2,66,600 | 4,50,000 | 3,09,200 | 2,66,600 | ||
Calculation of New Ratio:-
Share of Hanuman = 1/10
Remaining Share = 1- 1/10 = 9/10
Om’s New Share = 9/10×3/6=9/20
Ram’s New Share = 9/10×2/6=6/20
Shanti’s New Share = 9/10×1/6=3/20
Hanuman’s New Share = 1/10
New Profit = 9/20:6/20:3/20:1/10
New Profit = 9 : 6 : 3 : 2/20
New Profit =9 : 6 : 3 : 2
Following is the Balance Sheet of Amit and Vidya as at 31st March, 2024:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Creditors | 26,000 | Bank | 20,000 |
| Employees Provident Fund | 16,000 | Stock | 30,000 |
| Workmen's Compensation Reserve | 30,000 | Debtors 44,000 Less : Provision for Bad Debts 2,000 | 42,000 |
| Capital A/cs: Amit 1,10,000 Vidya 60,000 | 1,70,000 | Plant and Machinery Goodwill Profit and Loss Account | 1,20,000 20,000 10,000 |
| 2,42,000 | 2,42,000 |
On the above date, Chintan was admitted as a partner for 1/4th share in the profit of the firm with the following terms:
(a) Rs. 2,900 will be written off as Bad Debts.
(b) Stock was taken over by Vidya at Rs. 35,000.
(c) Goodwill of the firm was valued at Rs. 40,000. Chintan brought his share of goodwill premium in cash.
(d) Chintan brought proportionate capital and the capitals of the other partners were adjusted on the basis of Chintan's Capital. For this necessary cash was to be brought in or paid off to the partners as the case may be.
Prepare Revaluation Account and Partners' Capital Accounts.
Revaluation Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | ||
| To Bad Debts A/c | 900 | By Stock A/c | 5,000 | ||
| To Profit Transfer to capital account | |||||
| Amit’s Capital | 2,050 | ||||
| Vidhya’s Capital | 2,050 | 4,100 | |||
| 5,000 | 5,000 | ||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Amit | Vidhya | Chintan | Particulars | Amit | Vidhya | Chintan |
| To Goodwill A/c | 10,000 | 10,000 | - | By Balance b/d | 1,10,000 | 60,000 | - |
| To Profit and Loss A/c | 5,000 | 5,000 | - | By Revaluation A/c | 2,050 | 2,050 | - |
| To Stock A/c | - | 35,000 | - | By Workmen Comp. Reserve | 15,000 | 15,000 | - |
| To Balance c/d | 1,17,050 | 32,050 | - | By Goodwill | 5,000 | 5,000 | - |
| 1,32,050 | 82,050 | - | 1,32,050 | 82,050 | - | ||
| To Bank A/c | 42,500 | - | - | By Balance b/d | 1,17,050 | 32,050 | - |
| To Balance c/d | 74,550 | 74,550 | 49,700 | By Bank A/c (B/f) | - | 42,500 | 49,700 |
| 1,17,050 | 74,550 | 49,700 | 1,17,050 | 74,550 | 49,700 | ||
Calculation of New Ratio:-
Share of Hanuman = 1/4
Remaining Share = 1- 1/4 = 3/4
Amit’s New Share = 3/4×1/2=3/8
Vidhya’s New Share = 3/4×1/2=3/8
New Profit = 3/8:3/8:1/4
New Profit = 3 : 3 : 2/8
New Profit =3 : 3 : 2
Calculation of New Capital of the Firm:-
Combined Capital = Rs. 1,17,050 + Rs. 32,050 = Rs. 1,49,100
Total Capital of the New Firm = Rs. 1,49,100 ×4/3 = Rs. 1,98,800
Amit’s Capital = Rs. 1,98,800 ×3/8 = Rs. 74,550
Vidhya’s Capital = Rs. 1,98,800 ×3/8 = Rs. 74,550
Chintan’s Capital = Rs. 1,98,800 ×1/4 = Rs. 49,700
Rekha, Sunita and Teena are partners in a firm sharing profits in the ratio of 3:2:1. Samiksha joins the firm. Rekha surrenders 1/4th of her share. Sunita surrenders 1/3th of her share and Teena 1/5th of her share in favour of Samiksha. Find the new profit sharing ratio.
Calculation of Sacrificing Ratio:-
Rekha surrenders for Samiksha =1/4 x 3/6 =3/24
Sunita surrenders for Samiksha =1/3 x 2/6 =2/24
Teena surrenders for Samiksha =1/4 x 1/6 =1/30
Calculation of New Ratio:-
Rekha’s New Ratio = 3/6-3/24=12-3/24=9/24
Sunita’sNew Ratio= 2/6-2/18=6 - 2/18=4/18
Teena’s New Ratio = 1/6-1/30=5 - 1/30=4/30
Samiksha Ratio = 3/24+2/24+1/30= 97/360
New Ratio =9/24:4/18:4/30:97/360
New Ratio = 135 : 80 : 48 : 97
Calculate sacrificing ratios in the following cases :
(i) X and Y are sharing profits in the ratio of 4:3. Z joins and the new ratios are 7:4:3.
(ii) X and Y are sharing profits in the ratio of 7:5. Z joins and the new ratios are 13: 7:4.
(ii) A and B are sharing profits in the ratio of 5:3. C joins and the new ratios are 4:2:1.
(iv) A and B are sharing profits in the ratio of 3:2. C joins and the new ratios are 5:3:2.
Case (i) Calculation of Sacrificing Ratio:-
X’s Sacrificing Ratio = 4/7-7/14=8-7/14=1/14
Y’s Sacrificing Ratio = 3/7-4/14=6-4/14=2/14
Sacrificing Ratio = 1 : 2.
Case (ii) Calculation of Sacrificing Ratio:-
X’s Sacrificing Ratio = 7/12-13/24=14 - 13/24=1/24
Y’s Sacrificing Ratio = 5/12-7/24=10-7/24=3/24
Sacrificing Ratio = 1 : 3.
Case (iii) Calculation of Sacrificing Ratio:-
A’s Sacrificing Ratio = 5/8-4/7=35 - 32/56=3/56
B’s Sacrificing Ratio = 3/8-2/7=21-16/56=5/56
Sacrificing Ratio = 3 : 5.
Case (iv) Calculation of Sacrificing Ratio:-
A’s Sacrificing Ratio = 3/5-5/10=6 - 5/10=1/10
B’s Sacrificing Ratio = 2/5-3/10=4-3/10=1/10
Sacrificing Ratio = 1 : 1.
Calculate new ratios and sacrificing ratios in the following cases:
(i) A, B and C are partners Sharing profits in the ratio of 4:3:2. D is admitted for 1/3rd share.
(ii) A, B and C are partners sharing profits in the ratio of 1/2, 1/3 and 1/6. D is admitted for 1/6th share of profit
(iii) A, B and Care partners sharing profits in the ratio of 6/14, 5/14 and 3/14. D is admitted for 1/8th share of profits.
(i) Calculation of New Profit Share Ratios:-
D’s Share = 1/3
Remaining Share = 1-1/3 = 2/3
A’s New Share = 4/9×2/3=8/27
B’s New Share = 3/9×2/3=6/27
C’s New Share = 2/9×2/3=4/27
D’s New Share = 1/3
New Profit Ratio of A, B, C and D = 8/27:6/27:4/27:1/3
New Profit Ratio of A, B, C and D = 8 : 6 : 4 : 9/27
New Profit Ratio of A, B, C and D = 8 : 6 : 4 : 9.
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 4/9-8/27=12 - 8/27=4/27
B’s Sacrificing Ratio = 3/9-6/27=9 - 6/27=3/27
C’s Sacrificing Ratio = 2/9-4/27=6 -4/27=2/27
Sacrificing Ratio = 4:3:2
(ii) Calculation of New Profit Share Ratios:-
D’s Share = 1/6
Remaining Share = 1-1/6 = 5/6
A’s New Share = 1/2×5/6=5/12
B’s New Share = 1/3×5/6=5/18
C’s New Share = 1/6×5/6=5/36
D’s New Share = 1/6
New Profit Ratio of A, B, C and D = 5/12:5/18:5/36:1/6
New Profit Ratio of A, B, C and D = 15 : 10 : 5 : 6/36
New Profit Ratio of A, B, C and D = 15 : 10 : 5 : 6.
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 1/2-15/36=18 - 15/36=3/36
B’s Sacrificing Ratio = 1/3-10/36=12 - 10/36=2/36
C’s Sacrificing Ratio = 1/6-5/36=6 - 5/36=1/36
Sacrificing Ratio = 3:2:1
(iii) Calculation of New Profit Share Ratios:-
D’s Share = 1/8
Remaining Share = 1-1/8 = 7/8
A’s New Share = 6/14×7/8=6/16
B’s New Share = 5/14×7/8=5/16
C’s New Share = 3/14×7/8=3/16
D’s New Share = 1/8
New Profit Ratio of A, B, C and D = 6/16:5/16:3/16:1/8
New Profit Ratio of A, B, C and D = 6 : 5 : 3 : 2/16
New Profit Ratio of A, B, C and D = 6 :5 : 3 : 2.
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 6/14-6/16=48 - 42/112=6/112
B’s Sacrificing Ratio = 5/14-5/16=40 - 35/112=5/112
C’s Sacrificing Ratio = 3/14-3/36=24 - 21/112=3/112
Sacrificing Ratio = 6:5:3.
(a) Rohan and Mohan are partners in a firm sharing profits in the ratio of 5:3 respectively. They admit Bhim as a partner for 1/7th share in the profit. The new profit sharing ratio will be 4 : 2:1. Calculate the sacrificing ratio of Rohan and Mohan.
(b) Amla and Kamla are partners in a firm sharing profits in the ratio of 4 : 1 respectively. They admitted Bimla as a new partner for 1/4th share in the profits, which she acquired wholly from Amla. Determine the new profit sharing ratio of the partners.
(a) Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
Rohan’s Sacrificing Ratio = 5/8-4/7=35 - 32/56=3/56
Mohan’s Sacrificing Ratio = 3/8-2/7=21 - 16/56=5/56
Sacrificing Ratio = 3 : 5
(b) Calculation of New Share ofAmla:-
New Profit Sharing Ratio of Amla = Old Ratio – Share sacrifice in favour of Bimla
Amla’s Sacrificing Ratio = 4/5-1/4=16 - 5/20=11/20
New Ratio of Amla, Kamla and Bimla = 11/20:1/5:1/4
New Ratio of Amla, Kamla and Bimla = 11 : 4 : 5/20
New Ratio of Amla, Kamla and Bimla = 11 : 4 : 5
Anita and Tina are partners sharing profits as 9 : 5. They agree to admit Chetan their manager into partnership, who is to get 1/8 share in the profits. He acquires this share as 1/12 from Anita and 1/24 from Tina. Calculate new profit sharing ratio.
Chetan is giving 1/8th share which he aquires 1/12 from Anita and 1/24 from Tina.
Anita’s New Share = 9/14-1/12=54 - 7/84= 47/84
Tina’s New Share = 5/14-1/24=60 - 7/168= 53/168
Chetan’s Share = 1/8
New Profit Sharing Ratio = 47/84:53/168:1/8
New Profit Sharing Ratio = 94 : 53 : 21/168
New Profit Sharing Ratio = 94 : 53 : 21
Anil and Sunil are partners sharing profits in the ratio of 4 : 1. They admit Vijay into partnership with 1/3 share in profits which he acquires wholly from Anil. Calculate the new profit sharing ratio.
Vijay is given 1/3rd share which he acquires wholly from Anil.
Anil’s New Share = 4/5-1/3=12-5/15=7/15
Sunil’s New Share = 1/5
Vijay’s New Profit = 1/3
New Profit Sharing Ratio = 7/15:1/5:1/3
New Profit Sharing Ratio =7 : 3 : 5/15
New Profit Sharing Ratio =7 : 3 : 5
J & K are partners in a firm sharing profits in the ratio of 2 : 3. L joins the firm. J surrenders 1/5th of his share and K, 1/3rdof his share in favour of L. Find the new profit sharing ratio.
J’s old Share = 2/5
J’s surrenders 1/5th of 2/5 in favour of L = 1/5×2/5=2/25
K’s old Share = 3/5
K’s surrenders 1/3rd of 3/5 in favour of L = 1/3×3/5=1/5
Calculation of New Ratio:-
J’s New Profit Sharing Ratio = 2/5-2/25=10 - 2/25=8/25
K’s New Profit Sharing Ratio = 3/5-1/5=3 - 1/5=2/25
L’s New Profit Sharing Ratio = 2/25+1/5=2+5/25=7/25
The new ratio of J, K and L = 8/25:2/5:7/25
The new ratio of J, K and L = 8 : 10 : 7/25
New ratio of J, K and L = 8 : 10 : 7
R and S are partners sharing profits in the ratio of 5:3. T was admitted. R surrenders 1/4 of his share and S 2/5 of his share in favour of T. Calculate the sacrificing ratio and the new ratios.
R’s surrenders 1/4th of 5/8 in favour of T = 1/4×5/8=5/32
S’s surrenders 2/5th of 3/8 in favour of T = 2/5×3/8=3/20
Sacrificing Ratio = 5/32:3/20
Sacrificing Ratio = 25 : 24/160
Sacrificing Ratio = 25 : 24
Calculation of New Ratio:-
R’s New Profit Sharing Ratio = 5/8-5/32=20 - 5/32=15/32
S’s New Profit Sharing Ratio = 3/8-3/20=15 - 6/40=9/40
T’s New Profit Sharing Ratio = 5/32+3/20=25+24/160=49/160
The new ratio of R, S and T = 15/32:9/40:49/160
The new ratio of R, S and T = 75 : 36 : 49/25
New ratio of R, S and T = 75 : 36 : 49
A and B are partners sharing profits and losses in the ratio of 5 : 3. They admit C into partnership giving him 1/4 share in profits which he acquires from A and B in the ratio of 3 : 1. Calculate the new profit sharing ratio.
C is given 1/4th share which he acquires from A and B in the ratio of 3:1.
C acquires from A = 5/8 of 1/4 = 3/16
C acquires from B = 1/4 of 1/4 = 1/16
Calculation of New Ratio:-
A’s New Profit Sharing Ratio = 5/8-3/16=10 - 3/16=7/16
B’s New Profit Sharing Ratio = 3/8-1/16=6 - 1/16=5/16
C’s New Profit Sharing Ratio = 1/4
The new ratio of A, B and C = 7/16:5/16:1/4
The new ratio of A, B and C = 7 : 5 : 4/16
New ratio of A, B and C = 7 : 5 : 4
Mohan and Sohan are partners sharing profits and losses in the ratio of 9: 6. They admit Gopal with 1/8 share in the profits. The new profit sharing ratio between Mohan and Sohan is agreed to be 4:3. Calculate the sacrificing ratio.
Calculation of New Profit Sharing Ratio:-
Gopal’s Share = 1/8
Remaining share = 1-1/8=7/8
New Ratio of Mohan = 4/7 of 4/7= 4/8
New Ratio of Sohan = 3/7 of 7/8= 3/8
New Ratio of Gopal = 1/8
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
Mohan’s Sacrifice = 9/15-4/8=72-60/120=12/120
Sohan’s Sacrifice = 6/15-3/8=48-45/120=3/120
Sacrificing Ratio of Mohan and Sohan = 4 : 1
Kabir and Farid are partners in a firm sharing profits in the ratio of 3:1. On 1-4-2019 they admitted Manik brought his share of goodwill premium in cash. Goodwill of the firm was valued on the basis of 2 years purchase of last three years average profits. The profits of last three years were:
| Rs. | |
|---|---|
| 2016-17 | 90,000 |
| 2017-18 | 1,30,000 |
| 2018-19 | 86,000 |
During the year 2018-19 there was a loss of Rs. 20,000 due to fire which was not accounted for while calculating the profit.
Calculate the value of goodwill and pass the necessary journal entries for the treatment of goodwill.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| April 1 | Premium for Goodwill A/c | Dr. | 51,000 | ||
| To Kabir’s Capital A/c | 38,250 | ||||
| To Farid’s Capital A/c | 12,750 | ||||
| (Being premium for goodwill credited to partners in sacrificing ratio) | |||||
Average Profit = Rs. 90,000+Rs.1,30,000+Rs. 86,000/3
Average Profit = Rs.3,06,000/3
Average Profit = Rs. 1,02,000
Firms Goodwill = Rs. 1,02,000 × 2
Firms Goodwill = Rs. 2,04,000
Malik’s Share in Goodwill = Rs. 2,04,000 × 1/4
Malik’s Share in Goodwill = Rs. 51,000
On 1st April, 2025, A and B, sharing profits 2/3 and 1/3 respectively, agree to admit C into partnership on condition that he pays Rs. 3,00,000 as capital and Rs. 90,000 for 1/6 share of goodwill which he acquires equally from A and B. Subsequently, half amount of goodwill is withdrawn by the old partners.
Give Journal entries necessary to record these transactions.
| Date | Particulars | L.F. | mount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 3,90,000 | |||
| To C’s Capital A/c | 3,00,000 | ||||
| To Goodwill A/c | 90,000 | ||||
| (Being amount of capital and premium of goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 90,000 | |||
| To A’s Capital A/c | 45,000 | ||||
| To B’s Capital A/c | 45,000 | ||||
| (Being goodwill transferred to old partner’s capital) | |||||
| A’s Capital A/c | Dr. | 22,500 | |||
| B’s Capital A/c | Dr. | 22,500 | |||
| To Bank A/c | 45,000 | ||||
| (Being half of goodwill withdrawn by old partner) | |||||
Kumar and Rao were partners in a firm sharing profits equally. They admitted Ghosh as a new partner for 1/4th share in profits. Ghosh acquired his 1/4th share from Kumar and Rao in the ratio of 3:2 respectively. Ghosh brought Rs. 2,70,000 for his capital and Rs. 39,000 for 1/4th share of goodwill. Calculate new profit sharing ratio of Kumar, Rao and Ghosh and pass necessary journal entries for the above transactions in the books of the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 3,09,000 | |||
| To Ghosh’s Capital A/c | 2,70,000 | ||||
| To Goodwill A/c | 39,000 | ||||
| (Being amount of capital and premium of goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 39,000 | |||
| To Kumar’s Capital A/c | 23,400 | ||||
| To Rao’s Capital A/c | 15,600 | ||||
| (Being goodwill transferred to old partner’s capital account in sacrificing ratio) | |||||
Calculation of New profit sharing ratio:-
Ghosh share from Kumar = 3/5 of 1/4 = 3/20
Ghosh share from Rao = 2/5 of 1/4 = 2/20
Kumar’s New Share = 1/2-3/20=10-3/20=7/20
Rao’s New Share = 1/2-3/20=10 - 2/20=8/20
Ghosh’s New Share = 1/4
New Share of Kumar, Rao and Ghose = 7/20:8/20:1/4
New Share of Kumar, Rao and Ghose = 7 : 8 : 5/20
New Share of Kumar, Rao and Ghose = 7 : 8 : 5
Piyush and Deepika are partners sharing profits in the ratio 7:3. They admit Seema as a new partner, paying Rs. 40,000 as premium for 1/5 share. The new ratio being 5: 3:2. Pass journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 40,000 | |||
| To Goodwill A/c | 40,000 | ||||
| (Being amount of premium of goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 40,000 | |||
| To Piyush’s Capital A/c | 40,000 | ||||
| (Being goodwill transferred to old partner’s capital account) | |||||
Calculation of Sacrificing Ratio:-
Piyush’s Sacrificing Ratio = 7/10-5/10=7-5/10=2/10
Deepika’s Sacrificing Ratio = 3/10-3/10=0
P and Q are in partnership sharing profits in the ratio of 5:3. They admit R into the firm, R paying a premium of Rs. 1,00,000 for 1/4 share of the profits. As between themselves, P and Q agree to share future profits and losses equally. Pass entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 1,00,000 | |||
| To Goodwill A/c | 1,00,000 | ||||
| (Being amount of premium of goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 1,00,000 | |||
| To P’s Capital A/c | 1,00,000 | ||||
| (Being goodwill transferred to old partner’s capital account) | |||||
R’s New Profit Share = 1/4
Remaining Profit = 1-1/4 = 3/4
P’s New Share = 3/4×1/2=3/8
Q’s New Share = 3/4×1/2=3/8
R’s New Share = 1/4
New Share of P, Q and R = 3/8:3/8:1/4
New Share of P, Q and R = 3 : 3 : 2/8
New Share of P, Q and R = 3 : 3 : 2
Calculation of Sacrificing Ratio:-
P’s Sacrificing Ratio = 5/8-3/8=5-3/8=2/8
Q’s Sacrificing Ratio = 3/8-3/8=0
X and Y are partners sharing profits and losses in the ratio of 6: 9. They agree to admit Z into partnership who brings Rs. 1,00,000 in cash for his capital and goodwill. Goodwill is valued at 11/2 year's purchase of the last 4 years average profits, which were Rs. 30,000; Rs. 8,000 (loss); Rs. 20,000 and Rs. 38,000 respectively. X, Y and Z will share future profits in equal proportion. Pass entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 1,00,000 | |||
| To Z’s Capital A/c | 90,000 | ||||
| To Goodwill A/c | 10,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 10,000 | |||
| To X’s Capital A/c | 2,000 | ||||
| To Y’s Capital A/c | 8,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Average Profit = Rs. 30,000 - Rs. 8,000 + Rs. 20,000 + Rs. 38,000/4
Average Profit = Rs. 80,000/4
Average Profit = Rs. 20,000
Goodwill = Rs. 20,000 ×3/2 = Rs. 30,000
Z’s Share = Rs. 30,000 ×1/3 = Rs. 10,000
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
X’s Sacrificing Ratio = 6/15-1/3=6-5/15=1/15
Y’s Sacrificing Ratio = 9/15-1/3=9-5/15=4/15
Sacrificing Ratio = 1 : 4
Arun and Varun are partners sharing profits in the ratio of 3:2. Bhushan is admitted paying a premium of Rs. 84,000 for 1/4th share of profits which he acquires 1/6th from Arun 1/12th from Varun. Calculate new ratios and pass entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 84,000 | |||
| To Goodwill A/c | 84,000 | ||||
| (Being amount of goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 84,000 | |||
| To Arun’s Capital A/c | 56,000 | ||||
| To Varun’s Capital A/c | 28,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Sacrificing Ratio = 1/6:1/12=2 : 5/15=2 :1
Calculation of New Profit Sharing Ratio:-
Arun’s New Ratio =3/5-1/6=18-5/30=13/30
Varun’s New Ratio =2/5-1/12=24-5/60=19/60
Bhushan’s New Ratio =1/6+1/12=2+1/12=3/12
New Ratio of Arun, Varun and Bhushan = 13/30:19/60:3/12
New Ratio of Arun, Varun and Bhushan = 26 : 19 : 15/60
New Ratio of Arun, Varun and Bhushan = 26 : 19 : 15
L and M were partners in a firm sharing profits in 4:3 ratio. They admitted O as a new partner. The new profit sharing ratio of L, M and O will be 3:3:4. O Brought Rs. 2,00,000 for his capital. The goodwill of the firm on O's admission was Rs. 70,000. O brought his share of goodwill in cash. Calculate sacrificing ratio of L and M and pass necessary journal entries for the above transactions on O'S admission.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 2,28,000 | |||
| To O’s Capital A/c | 2,00,000 | ||||
| To Goodwill A/c | 28,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 28,000 | |||
| To L’s Capital A/c | 19,000 | ||||
| To M’s Capital A/c | 9,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Calculation of Sacrificing Ratio:-
Sacrifice Ratio = Old Ratio – New Ratio
L’s Sacrifice Ratio = 4/7-3/10=40-21/70=19/70
M’s Sacrifice Ratio = 3/7-3/10=30-21/70=9/70
Sacrificing Ratio = 19 : 9
A and B are partners sharing profits and losses in the proportion of 3:2. They agree to admit C into partnership who is to get 1/5th share in the business. C bring in Rs. 1,00,000 for his capital and Rs. 40,000 for 1/5th share of goodwill which he Acquires 3/20 from A and 1/20 from B. The profit for the first year of the new partnership amounted to Rs. 2,00,000.
Make the necessary Journal entries in connection with C's admission and apportion the profit between the partners.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 1,00,000 | |||
| To C’s Capital A/c | 1,00,000 | ||||
| To oodwill A/c | 40,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 40,000 | |||
| To A’s Capital A/c | 30,000 | ||||
| To B’s Capital A/c | 10,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Calculation of New Profit Sharing Ratio:-
A’s Ratio = 3/5-3/20=12-3/20=9/20
B’s Ratio = 3/5-1/20=8-1/20=7/20
C’s Ratio = 3/20+1/20=3-1/20=4/20
New Ratio of A, B and C = 9 : 7 : 4
P and Q share profits in the ratio of P, 5/8 and Q, 3/8. R is admitted as a partner who brings in Rs. 60,000 as his capital and Rs. 20,000 for goodwill. The new profit-sharing ratio is agreed at 7:5:4. Draft Journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 80,000 | |||
| To R’s Capital A/c | 60,000 | ||||
| To Goodwill A/c | 20,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 20,000 | |||
| To P’s Capital A/c | 15,000 | ||||
| To Q’s Capital A/c | 5,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Calculation of Sacrificing Ratio:-
Sacrifice Ratio = Old Ratio – New Ratio
P’s Sacrifice Ratio = 5/8-7/16=10-7/16=3/16
Q’s Sacrifice Ratio = 3/8-5/16=6-5/16=1/16
Sacrificing Ratio = 3 : 1
A and B are partners sharing profits in the ratio of 3 : 2. They admit C into partnership, C pays a premium of Rs. 60,000 for 1/4th share of profit. The new ratio is 3:3:2. Goodwill account appears in the books at Rs. 2,00,000. Give the necessary Journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| A’s Capital A/c | Dr. | 1,20,000 | |||
| B’s Capital A/c | Dr. | 80,000 | |||
| To Goodwill A/c | 2,00,000 | ||||
| (Being goodwill already appearing in the books, now written off in old ratio) | |||||
| Bank A/c | Dr. | 60,000 | |||
| To Goodwill A/c | 60,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 60,000 | |||
| To A’s Capital A/c | 54,000 | ||||
| To B’s Capital A/c | 6,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Calculation of Sacrificing Ratio:-
Sacrifice Ratio = Old Ratio – New Ratio
P’s Sacrifice Ratio = 3/5-3/8=24-15/40=9/40
Q’s Sacrifice Ratio = 2/5-3/8=16-15/40=1/40
Sacrificing Ratio = 9 : 1
A and B are partners sharing profits and losses in the ratio of 3 : 2 respectively. Goodwill appears in their books at 3,00,000. They admit C into partnership. C paying a premium of Rs. 1,00,000 for one-fourth share of the profits while A and B as between themselves sharing profits and losses as before.
Give Journal entries to record the above arrangement in the books of the firm.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| A’s Capital A/c | Dr. | 1,80,000 | |||
| B’s Capital A/c | Dr. | 1,20,000 | |||
| To Goodwill A/c | 3,00,000 | ||||
| (Being goodwill already appearing in the books, now written off in old ratio) | |||||
| Bank A/c | Dr. | 1,00,000 | |||
| To Goodwill A/c | 1,00,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 1,00,000 | |||
| To A’s Capital A/c | 60,000 | ||||
| To B’s Capital A/c | 40,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
Calculation of New Ratio:-
C‘s share = 1/4th
Remaining Share = 1-1/4=3/4
A’s New Ratio = 3/5×3/4 = 9/20
B’s New Ratio = 2/5×3/4 = 6/20
C’s New Ratio = 1/4
New Profit sharing ratio of A, B and C = 9/20: 6/20:1/4
New Profit sharing ratio of A, B and C = 9 : 6 : 5/20
New Profit sharing ratio of A, B and C = 9 : 6 : 5
Calculation of Sacrificing Ratio:-
Sacrificing Ratio = Old Ratio – New Ratio
A’s Sacrificing Ratio = 3/5-9/20= 12-9/20=3/20
B’s Sacrificing Ratio = 2/5-6/20= 8-6/20=2/20
Sacrificing Ratio = 3 : 2
Asha and Aditi are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Raghav as a partner for 1/4th share in the profits of the firm, Raghav bring Rs. 6,00,000 as his capital and his share of goodwill in cash. Goodwill of the firm is to be valued at two year’s purchase of average profit of the last four years.
The profits of the firm during the last four years are given below:
| Year | Profit (Rs.) |
|---|---|
| 2013-14 | 3,50,000 |
| 2014-15 | 4,75,000 |
| 2015-16 | 6,70,000 |
| 2016-17 | 7,45,000 |
The following additional information is given:
(i) To cover management cost an annual charge of Rs. 56,250 should be made for the purpose of valuation of goodwill.
(ii) The closing stock for the year ended 31st March, 2017 was overvalued by Rs. 15,000.
Pass necessary Journal Entries on Raghav’s admission showing the working notes clearly.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | 8,50,000 | |||
| To Raghav’s Capital A/c | 6,00,000 | ||||
| To Premium for Goodwill A/c | 2,50,000 | ||||
| (Being amount of goodwill and premium for goodwill brought in cash) | |||||
| Premium for Goodwill A/c | Dr. | 2,50,000 | |||
| To Asha’s Capital A/c | 1,50,000 | ||||
| To Aditi’s Capital A/c | 1,00,000 | ||||
| (Being Premium for goodwill credited to old partners in their sacrificing ratio) | |||||
Average Profit = Rs.2,93,000+Rs.4,18,000+Rs. 6,13,750+Rs.6,73,750/4
Average Profit = Rs.20,00,00/4
Average Profit = Rs. 5,00,000
Goodwill = Average Profit × No. of year purchases
Goodwill = Rs. 5,00,000 × 2
Goodwill = Rs. 10,00,000
Raghav’s Share in Goodwill = Rs. 10,00,000 × 1/4
Raghav’s Share in Goodwill = Rs. 2,50,000
X and Y are partners sharing profits in the ratio of 2:1. Their books showed goodwill at Rs. 50,000. Z is admitted with 1/5th share of profit which he acquires equally from X and Y. He brings Rs. Rs. 7,50,000 as his capital but is not able to bring in cash his share of goodwill Rs. 40,000. Give Journal entries.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| X’s Capital A/c | Dr. | 33,333 | |||
| Y’s Capital A/c | Dr. | 16,667 | |||
| To Goodwill A/c | 50,000 | ||||
| (Being goodwill already appearing in the books, now written off in old ratio) | |||||
| Bank A/c | Dr. | 7,50,000 | |||
| To Z’s Capital A/c | 7,50,000 | ||||
| (Being amount of goodwill and Capital brought in cash) | |||||
| Goodwill A/c | Dr. | 40,000 | |||
| To X’s Capital A/c | 20,000 | ||||
| To Y’s Capital A/c | 20,000 | ||||
| (Being goodwill transfer to partner’s capital account) | |||||
A and B are partners sharing profits in the ratio of 5 : 3. They admit C as a partner for 1/3rd share. His share of Goodwill is Rs. 32,000. Give journal entries in the following cases :
(a) When the amount of goodwill is paid privately.
(b) When the goodwill is received in cash and retained in the business.
(c) When the goodwill is received in cash and withdrawn by old partners.
(d) When C is unable to bring the goodwill in cash.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Case (a) | No Entry | ||||
| Case (b) | Bank A/c | Dr. | 32,000 | ||
| To Goodwill A/c | 32,000 | ||||
| (Being goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 32,000 | |||
| To A’s Capital A/c | 20,000 | ||||
| To B’s Capital A/c | 12,000 | ||||
| (Being goodwill credited to old partners in sacrificing ratio) | |||||
| Cash (c) | Bank A/c | Dr. | 32,000 | ||
| To Goodwill A/c | 32,000 | ||||
| (Being goodwill brought in cash) | |||||
| Goodwill A/c | Dr. | 32,000 | |||
| To A’s Capital A/c | 20,000 | ||||
| To B’s Capital A/c | 12,000 | ||||
| (Being goodwill credited to old partners in sacrificing ratio) | |||||
| A’s Capital A/c | Dr. | 20,000 | |||
| B’s Capital A/c | Dr. | 12,000 | |||
| To Bank A/c | 32,000 | ||||
| (Being goodwill withdrawn by old partners) | |||||
| Case (d) | C’s Current A/c | Dr. | 32,000 | ||
| To A’s Capital A/c | 20,000 | ||||
| To B’s Capital A/c | 12,000 | ||||
| (Being C’s share of goodwill credited to A and B in sacrificing ratio) | |||||
Sharan and Angad are partners in a firm sharing profits and losses in the ratio of 3:2. On 1st April, 2022, they admit Akhil as a partner for 1/5th share in the profit. Akhil aquires 1/5 of his share from Sharan and the balance from Angad. On the date of Akhil’s admission the goodwill of the firm was valued at Rs. 90,000. Akhil contributed the following assets towards his capital and his share of goodwill:
| Particulars | Amount |
|---|---|
| Cash | 60,000 |
| Debtors | 20,000 |
| Land and Building | 1,00,000 |
| Plant and Machinery | 80,000 |
You are required to:
(i) Calculate the sacrificing ratio of the partners.
(ii) Pass the necessary journal entries on Akhil’s admission, ascertaining Akhil’s Capital contribution and assuming that he brings into the firm his share of goodwill is cash/kind.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Cash A/c | Dr. | 60,000 | |||
| Debtors A/c | Dr. | 20,000 | |||
| Land and Building A/c | Dr. | 1,00,000 | |||
| Plant and Machinery A/c | Dr. | 80,000 | |||
| To Akhil’s Capital A/c | 2,42,000 | ||||
| To Premium for Goodwill A/c | 18,000 | ||||
| (Being Akhil brought Capital and goodwill) | |||||
| Premium for Goodwill A/c | Dr. | 18,000 | |||
| To Sharan’s Capital A/c | 3,600 | ||||
| To Angad’s Capital A/c | 14,400 | ||||
| (Being good will distributed among partners) | |||||
A and B are partners sharing profits in the ratio of 2:1. They admit C for 1/4th share in profits. C brings Rs. 30,000 for his capital and Rs. 8,000 out of his share of Rs. 10,000 for goodwill. Before admission goodwill appeared in books at Rs. 18,000. Give Journal entries to give effect to above arrangement.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| A’s Capital A/c | Dr. | 12,000 | |||
| B’s Capital A/c | Dr. | 6,000 | |||
| To Goodwill A/c | 18,000 | ||||
| (Being goodwill distributed to partners) | |||||
| Bank A/c | Dr. | 38,000 | |||
| To C’s Capital A/c | 30,000 | ||||
| To Goodwill A/c | 8,000 | ||||
| (Being Amount of capital and goodwill brought in cash by C) | |||||
| Goodwill A/c | Dr. | 8,000 | |||
| C’s Current A/c | Dr. | 2,000 | |||
| To A’s Capital A/c | 6,667 | ||||
| To B’s Capital A/c | 3,333 | ||||
| (Being goodwill credited to old partners in sacrificing ratio) | |||||
J and R are partners. V is admitted as a partner for 1/4share of profit but is unable to contribute premium for goodwill in cash amounting to Rs. 80,000 and so it is decided to raise a loan account in the name of V. You are required to pass a single journal entry in order to give effect to the above problem.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| V’s Loan A/c | Dr. | 80,000 | |||
| To J’s Capital A/c | 40,000 | ||||
| To R’s Capital A/c | 40,000 | ||||
| (Being V’s share of goodwill debited to his Loan A/c due to deny to pay goodwill in cash and credited to the capital account of J and R) | |||||
Arjun and Vinod are partners sharing profits in the ratio of 3:1. They admitted a new partner Prabhakar. Arjun sacrificed 1/3rd of his share to Prabhakar and Vinod gifted 1/5th of his share to Prabhakar. Firm’s goodwill on the date of Prabhakar’s admission was valued at Rs. 3,60,000.
Ascertain the new profit sharing ratio of the partners and pass the journal entry for premium for goodwill, if Prabhakar is unable to bring his share of goodwill in cash.
Sacrificing Ratio:-
Sacrificed Share by Arjun for Prabhakar = 1/3of3/4=3/12
Sacrificed Share by Vinod for Prabhakar = 1/5of1/4=1/20
New Profit Sharing Ratio:-
Arjun = 3/4-3/12=9-3/12 =6/12
Vinod = 1/4-1/20=5-1/20 =4/20
Prabhakar = 3/12+1/20 = 15+3/60 = 18/60
New Profit Sharing ratio = 6/12:4/20:18/60
New Profit Sharing ratio = 30:12:18/60
New Profit Sharing ratio = 30:12:18 or 5:2:3
Prabhakar’s Share of goodwill = Rs. 3,60,000 × 3/12 = Rs. 90,000
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Prabhakar’s Current A/c | Dr. | 90,000 | |||
| To Arjun’s Capital A/c | 90,000 | ||||
| (Being amount of goodwill credited to Arjun’s Account) | |||||
Note to Account:-
Vinod had gifted 1/20th share of goodwill. Hence, no amount of goodwill given to Vinod.
A and B share profit in the proportions of ¾ and ¼. Their Balance Sheet as at March 31, 2025 was as follows:
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Sundry Creditors | 4,15,000 | Cash at Bank | 2,65,000 |
| Reserve Fund | 40,000 | Bills Receivable | 30,000 |
| Capital Accounts: A B | 3,00,000 1,60,000 | Debtors Stock Fixtures | 1,60,000 2,00,000 10,000 |
| Land and Buildings | 2,50,000 | ||
| 9,15,000 | 9,15,000 |
On April 1, 2020, C was admitted into partnership for 1/4th share on the following terms:
(a) That C pays 1,00,000 as his capital.
(b) That C pays Rs. 50,000 for goodwill. Half of this sum is to be withdrawn by A and B.
(c) That stock and fixtures be reduced by 10% and a 5% provision for doubtful debts be created on Sundry Debtors and Bills Receivable.
(d) That the value of land and buildings be appreciated by 20%.
(e) There being a claim against the firm for damages, a liability to the extent of Rs. 10,000 should be created.
(f) An item of Rs. 6,500 included in sundry creditors is not likely to be claimed and hence should be written back.
Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of Mr. C.
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| General Reserve A/c | Dr. | 40,000 | |||
| To A’s Capital A/c | 30,000 | ||||
| To B’s Capital A/c | 10,000 | ||||
| (Being general reserve transfer to capital account) | |||||
| Revaluation A/c | Dr. | 5,180 | |||
| To Fixtures A/c | 20,000 | ||||
| To Stock A/c | 1,000 | ||||
| To Provision for Doubtful Debts on BR A/c | 1,500 | ||||
| To Provision for Doubtful Debts on Debtors A/c | 8,000 | ||||
| To Damages Payable A/c | 10,000 | ||||
| (Being decrease in the value of assets and liabilities created for damages) | |||||
| Land and Building A/c | Dr. | 50,000 | |||
| Sundry Creditors A/c | Dr. | 6,500 | |||
| To Revaluation A/c | 56,500 | ||||
| (Being increases in the value of land and building and decrease in creditors) | |||||
| Revaluation A/c | Dr. | 16,000 | |||
| To A’s Capital A/c | 12,000 | ||||
| To B’s Capital A/c | 4,000 | ||||
| (Being profit on revaluation transfer to capital account) | |||||
| Bank A/c | Dr. | 1,50,000 | |||
| To C’s Capital A/c | 1,00,000 | ||||
| To Goodwill A/c | 50,000 | ||||
| (Being capital and goodwill introduced by C) | |||||
| Goodwill A/c | Dr. | 50,000 | |||
| To A’s Capital A/c | 37,500 | ||||
| To B’s Capital A/c | 12,500 | ||||
| (Being goodwill credited to partner’s capital account) | |||||
| A’s Capital A/c | Dr. | 18,750 | |||
| B’s Capital A/c | Dr. | 6,250 | |||
| To Bank A/c | 25,000 | ||||
| (Being excess capital credited to current account) | |||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | A | B | C | Particulars | A | B | C |
| To Bank A/c | 18,750 | 6,250 | By Balance b/d | 3,00,000 | 1,60,000 | ||
| To Balance c/d | 3,60,750 | 1,80,250 | 1,00,000 | By Reserve Fund A/c | 30,000 | 10,000 | |
| By Revaluation A/c | 12,000 | 4,000 | |||||
| By Bank A/c | 1,00,000 | ||||||
| By Goodwill A/c | 37,500 | 12,500 | |||||
| 3,97,500 | 1,86,500 | 1,00,000 | 3,97,500 | 1,86,500 | 1,00,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 4,08,500 | Cash at Bank | 3,90,000 | ||
| Damages Payable | 10,000 | Bills Receivable | 30,000 | ||
| Capital | Less: Provision for BR | 1,500 | 28,500 | ||
| A | 3,60,750 | Debtors | 1,60,000 | ||
| B | 1,80,250 | Less: Provision for DD | 8,000 | 1,52,000 | |
| C | 1,00,000 | 6,41,000 | Stock | 1,80,000 | |
| Fixtures | 9,000 | ||||
| Land and Building | 3,00,000 | ||||
| 10,59,500 | 10,59,500 | ||||
Following is the Balance Sheet of Shashi and Ashu sharing profits as 3:2.
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Creditors General Reserve Workmen's Compensation Reserve | 1,80,000 2,50,000 1,50,000 | Debtors 2,20,000 Less : Provision for Doubtful Debt 10,000 | 2,10,000 |
| Capital : Shashi | 1,50,000 | Land & Building | 1,80,000 |
| Ashu | 1,00,000 | Plants & Machinery | 1,20,000 |
| Stock | 1,10,000 | ||
| Bank | 2,10,000 | ||
| 8,30,000 | 8,30,000 |
On admission of Tanya for 1/6th share in the profits it was decided that :
Provision for doubtful debts to be increased by Rs. 15,000.
Value of land and building to be increased to Rs. 2,10,000.
Value of stock to be increased by Rs. 25,000.
The liability of workmen's compensation claim was determined to be Rs. 1,20,000.
Tanya brought in as her share of goodwill Rs. 1,00,000 in cash.
Tanya was to bring further cash of Rs. 1,50,000 for her capital.
Prepare Revaluation A/c, Capital A/cs and Balance Sheet of the new firm.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Provision for Doubtful Debts A/c | 15,000 | By Land and Building A/c | 30,000 | |
| By Stock A/c | 25,000 | |||
| To Profit trf. to capital a/c | ||||
| Shashi | 24,000 | |||
| Ashu | 16,000 | 40,000 | ||
| 55,000 | 55,000 | |||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Shashi | Ashu | Tanya | Particulars | Shashi | Ashu | Tanya |
| To Balance c/d | 4,02,000 | 2,68,000 | 1,50,000 | By Balance b/d | 1,50,000 | 1,00,000 | - |
| By General Reserve A/c | 1,50,000 | 1,00,000 | - | ||||
| By Revaluation A/c | 24,000 | 16,000 | - | ||||
| By Workmen’s Comp. Fund A/c | 18,000 | 12,000 | - | ||||
| By Bank A/c | - | - | 1,50,000 | ||||
| By Goodwill A/c | 60,000 | 40,000 | - | ||||
| 4,02,000 | 2,68,000 | 1,50,000 | 4,02,000 | 2,68,000 | 1,50,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 1,80,000 | Bank | 4,60,000 | ||
| Workmen’s Compensation Fund | 1,20,000 | Stock | 1,35,000 | ||
| Current A/c | Plant & Machinery | 1,20,000 | |||
| Shashi | 4,02,000 | Debtors | 2,20,000 | ||
| Ashu | 2,68,000 | Less: Provision for DD | 25,000 | 1,95,000 | |
| Tanya | 1,50,000 | 8,20,000 | Land and Building | 2,10,000 | |
| 11,20,000 | 11,20,000 | ||||
P and S were partners in a firm sharing profits in the ratio of 3:2. Their Balance Sheet as at 31-3-2025 was as follows:
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Bank Overdraft | 20,000 | Cash | 8,000 |
| Creditors | 30,000 | Debtors | 30,000 |
| Provision for bad debts | 1,000 | Bills Receivable | 40,000 |
| General Reserve | 15,000 | Stock | 50,000 |
| V's Loan | 20,000 | Building | 90,000 |
| Capitals : P 1,00,000 S 1,80,000 | 2,80,000 | Land | 1,48,000 |
| 3,66,000 | 3,66,000 |
On 1-4-2025 they admitted V as a new partner on the following conditions :
V will get 1/8th share in the profits of the firm.
V's loan will be converted into his capital.
The goodwill of the firm was valued at Rs. 80,000 and V brought his share of goodwill premium in cash.
Provision for bad debts was to be made equal to 5% of the debtors.
Stock was to be depreciated by 5%.
Land was be appreciated by 10%.
Prepare Revaluation Account, Capital Accounts of P, S and V and the Balance Sheet of the new firm as on 1-4-2026.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Provision for Bad Debts A/c | 500 | By Land and Building A/c | 14,800 | |
| To Stock A/c | 2,500 | |||
| To Profit trf. to capital a/c | ||||
| P | 7,080 | |||
| S | 4,720 | 11,800 | ||
| 14,800 | 14,800 | |||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | P | S | V | Particulars | P | S | V |
| To Balance c/d | 1,22,080 | 1,94,720 | 20,000 | By Balance b/d | 1,00,000 | 1,80,000 | - |
| By General Reserve A/c | 9,000 | 6,000 | - | ||||
| By Revaluation A/c | 7,080 | 4,720 | - | ||||
| By Goodwill A/c | 6,000 | 4,000 | - | ||||
| By V’s Loan A/c | - | - | 20,000 | ||||
| 1,22,080 | 1,94,720 | 20,000 | 1,22,080 | 1,94,720 | 20,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Bank Overdraft | 20,000 | Cash | 18,000 | ||
| Creditors | 30,000 | Bills Receivable | 40,000 | ||
| Provision for Bad Debts | 1,500 | Debtors | 30,000 | ||
| Current A/c | Stock | 47,500 | |||
| P | 1,22,080 | Building | 90,000 | ||
| S | 1,94,000 | Land | 1,62,800 | ||
| V | 20,000 | 3,36,800 | |||
| 3,88,300 | 3,88,300 | ||||
A and B share the profits of a business in the ratio of 5:3. They admit C into the firm for a 1/4th share in the profits to be contributed equally by A and B. On the date of admission of C, the Balance Sheet of the firm was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| A's Capital | 3,00,000 | Machinery | 2,60,000 |
| B's Capital | 2,00,000 | Furniture | 1,60,000 |
| Workmen's Compensation Reserve | 40,000 | Stock | 1,20,000 |
| Bank Loan | 1,20,000 | Debtors | 80,000 |
| Creditors | 20,000 | Bank | 60,000 |
| 6,80,000 | 6,80,000 |
Terms of C's admission were as follows:
C will bring Rs. 3,30,000 for his share of capital and goodwill.
Goodwill of the firm has been valued at 4 year's purchase of the average super profits of last three years. Average profits of the last three years are Rs. 2,20,000 while the normal profits that can be earned with the capital employed are 1,40,000.
Furniture is to be appreciated by Rs. 60,000 and the value of stock is to be reduced by Rs. 20,000.
Prepare Revaluation Account, Partner's Capital Accounts and the new Balance Sheet of A, B and C.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount | Particulars | Amount | |
| To Stock A/c | 20,000 | By Furniture A/c | 60,000 | |
| To Profit trf. to capital a/c | ||||
| A | 25,000 | |||
| B | 15,000 | 40,000 | ||
| 60,000 | 60,000 | |||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | P | S | V | Particulars | P | S | V |
| To Balance c/d | 3,90,000 | 2,70,000 | 2,50,000 | By Balance b/d | 3,00,000 | 2,00,000 | - |
| By Workmen Comp. Reserve A/c | 25,000 | 15,000 | - | ||||
| By Revaluation A/c | 25,000 | 15,000 | - | ||||
| By Goodwill A/c | 40,000 | 40,000 | - | ||||
| By Bank A/c | - | - | 2,50,000 | ||||
| 3,90,000 | 2,70,000 | 2,50,000 | 3,90,000 | 2,70,000 | 2,50,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 20,000 | Bank | 3,90,000 | ||
| Bank Loan | 1,20,000 | Debtors | 80,000 | ||
| Capital A/c | Stock | 1,00,000 | |||
| A | 3,90,000 | Furniture | 2,20,000 | ||
| B | 2,70,000 | Machinery | 2,60,000 | ||
| C | 2,50,000 | 9,10,000 | |||
| 10,50,000 | 10,50,000 | ||||
Calculation of Goodwill :-
Super Profit = Average Profit – Normal Profit
Super Profit = Rs. 2,20,000 – Rs. 1,40,000
Super Profit = Rs. 80,000
Goodwill = Super profit × No. of Year Purchases
Goodwill = Rs. 80,000 × 4
Goodwill = Rs. 3,20,000
C’s Share = Rs. 3,20,000 ×1/4 = Rs. 80,000
A and B are partners in a firm sharing profits and losses as 5: 3. The position of the firm as at 31st March, 2022 was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital Accounts: A 30,000 B 20,000 | 50,000 | Plant and Machinery Stock Sundry Debtors | 40,000 30,000 20,000 |
| Sundry Creditors | 15,000 | Bills Receivable | 10,000 |
| Bank Overdraft | 42,500 | Cash at Bank | 7,500 |
| 1,07,500 | 1,07,500 |
On 1st April, 2022, C joins them on condition that he will share 3/4th of the future profits, the balance of profits being shared by A and B as 5:3. He introduces Rs. 40,000 by way of capital and further Rs. 4,000 by way of premium for goodwill. He also provides loan to the firm to pay off bank overdraft. A and B to depreciate Plant by 10% and to raise a reserve against Sundry Debtors @ 5%.
You are asked to journalize the entries in the books of the firm and show the resultant Balance Sheet. How will the partners share future profits?
| Date | Particulars | L.F. | Amount Dr. | Amount Cr. | |
|---|---|---|---|---|---|
| Revaluation A/c | Dr. | 5,000 | |||
| To Provision for Doubtful Debts on Debtors A/c | 4,000 | ||||
| To Plant and Machinery A/c | 1,000 | ||||
| (Being decrease in the value of assets and liabilities created for damages) | |||||
| A’s Capital A/c | Dr. | 3,125 | |||
| B’s Capital A/c | Dr. | 1,875 | |||
| To Revaluation A/c | 5,000 | ||||
| (Being loss on revaluation transfer to capital account) | |||||
| Bank A/c | Dr. | 44,000 | |||
| To C’s Capital A/c | 40,000 | ||||
| To Goodwill A/c | 4,000 | ||||
| (Being capital and goodwill introduced by C) | |||||
| Goodwill A/c | Dr. | 4,000 | |||
| To A’s Capital A/c | 2,500 | ||||
| To B’s Capital A/c | 1,500 | ||||
| (Being goodwill credited to partner’s capital account) | |||||
| Bank Overdraft A/c | Dr. | 42,500 | |||
| To C’s Loan A/c | 42,500 | ||||
| (Being loan provided by C to pay off bank overdraft) | |||||
| (Being excess capital credited to current account) | |||||
Partner’s Capital Account
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | A | B | C | Particulars | A | B | C |
| By Revaluation A/c | 3,125 | 1,875 | - | By Balance b/d | 30,000 | 20,000 | - |
| To Balance c/d | 3,90,000 | 2,70,000 | 2,50,000 | By Goodwill A/c | 2,500 | 1,500 | - |
| By Bank A/c | - | - | 40,000 | ||||
| 32,500 | 21,500 | 40,000 | 32,500 | 21,500 | 40,000 | ||
Balance Account
| Dr. | Cr. | ||||
|---|---|---|---|---|---|
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 15,000 | Bank | 51,500 | ||
| C’s Loan | 42,500 | Bills Receivable | 10,000 | ||
| Capital A/c | Sundry Debtors | 20,000 | |||
| A | 29,375 | Less: Provision for DD | 1,000 | 19,000 | |
| B | 19,625 | Stock | 30,000 | ||
| C | 40,000 | 89,000 | Plant and Machinery | 36,000 | |
| 1,46,500 | 1,46,500 | ||||
Calculation of New Profit Sharing Ratio:-
C’s Share = 3/4
Remaining Share = 1-3/4=1/4
A’s New Share = 1/4×5/8=5/32
B’s New Share = 1/4×3/8=3/32
C’s New Share = 3/4
New ratio of A, B and C = 5/32:3/32:3/4
New ratio of A, B and C = 5:3:24/32
New ratio of A, B and C = 5 : 3 : 24
A and B are partners in a firm. Their Balance Sheet as at 31st March, 2025 was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| A B | 50,000 60,000 | Cash Sundry Debtors Stock | 10,000 80,000 20,000 |
| Creditors | 15,000 | Fixed Assets | 38,600 |
| Outstanding Exp. | 3,000 | P & L A/C | 4,000 |
| Insurance Fund | 7,000 | ||
| Provident Fund | 1,000 | ||
| Employees Saving Fund | 5,000 | ||
| Workmen Profit Sharing Fund | 2,000 | ||
| Workmen Compensation Reserve | 5,600 | ||
| Provision for Doubtful Debts | 4,000 | ||
| 1,52,600 | 1,52,600 |
C was taken into partnership as from 1-4-2025 on following terms for 1/6 share :
1. C will bring Rs. 40,000 as his capital.
2. Goodwill is valued at Rs. 12,000 and admitting partner is unable to bring his share of goodwill in cash.
3. Claim an account of Workmen's Compensation is Rs. 3,000
4. Creditors are to be paid Rs. 2,000 more.
5. 2% Provision for Discount on Debtors is required.
6. The share of A in new firm will be 11/2 times of B.
Prepare Revaluation A/c, Capital Accounts and Balance Sheet
Revaluation Account
| Dr. | Cr. | ||
|---|---|---|---|
| Particulars | Amount Rs. | Particulars | Amount Rs. |
| To Creditors | 2,000 | By 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 P & L 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 Comp. Res. | 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 Rs. | Assets | Amount Rs. |
|---|---|---|---|
| Capital: A 51,040 B 63,040 C 40,000 | 1,54,080 | Cash Sundry Debtors Stock Fixed Assets | 50,000 80,000 20,000 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 Comp. claim | 3,000 | ||
| Provision for Doubtful Debts | 4,000 | ||
| Provision for Discount on Debtors | 1,520 | ||
| 1,90,600 | 1,90,600 |
1.) Provision for Discount will be 2% on (Rs. 80,000 - Provision for Doubtful Debts = Rs. 4,000
2.) New Profit Sharing Ratio:-
C is admitted for 1/6th share.
Balance 5/6th will be shared by A and B in the ratio of 11/2 : 1 OR 3 : 2
A's New Ratio = 5/6 ×3/5 = 3/6
B's New Ratio5/6 ×2/5 =2/6
C's New Ratio= 1/6
Calculation of Sacrificing Ratio:-
A’s Share = 1/2 -3/6 =0
B’s Share = 1/2 -2/6 =1/6
Hence, only B has sacrificed.
The Balance Sheet of A and B as at 31st March, 2025 is given below:
Balance Sheet
| Liabilities | Amount Rs. | Assets | Amount Rs. |
|---|---|---|---|
| A’s Capital | 60,000 | Freehold Property | 20,000 |
| B’s Capital | 30,000 | Furniture | 6,000 |
| General Reserve | 24,000 | Stock | 12,000 |
| Creditors | 16,000 | Debtors | 80,000 |
| Cash | 12,000 | ||
| 1,30,000 | 1,30,000 |
A and B share profits and losses in the ratio of 2:1. They agree to admit P into the firm subject to the following terms and conditions:
(a) P will bring in Rs. 21,000 of which Rs. 9,000 will be treated as his share of Goodwill to be retained in the business.
(b) P will be entitled to 1/4th Share of profit of the firm.
(c) 50% of the General Reserve is to remain as a provision for bad and doubtful debts.
(d) Furniture is to be depreciated by 5%.
(e) Stock is to be revalued at Rs. 10,500.
Prepare Revaluation Account, Capital Accounts and Opening Balance Sheet of the new firm.
Revaluation Account
| Dr. | Cr. | |||
|---|---|---|---|---|
| Particulars | Amount Rs. | Particulars | Amount Rs. | |
| To Furniture A/c | 300 | By Loss Trf. to Capital A/c | ||
| To Stock A/c | 1,500 | A’s Capital A/c (1,800 × 2/3) | 1,200 | |
| B’s Capital A/c (1,800 × 1/3) | 600 | 1,800 | ||
| 1,800 | 1,800 | |||
Partner’s Capital Accounts
| Particulars | A | B | C | Particulars | A | B | C |
|---|---|---|---|---|---|---|---|
| To Revaluation A/c | 1,200 | 600 | By Balance b/d | 60,000 | 30,000 | ||
| To Balance c/d | 72,800 | 36,400 | 12,000 | By Cash A/c | 12,000 | ||
| By General Reserve A/c | 8,000 | 4,000 | |||||
| By Pre. For goodwill A/c | 6,000 | 3,000 | |||||
| 74,000 | 37,000 | 12,000 | 74,000 | 37,000 | 12,000 |
Balance Sheet
| Liabilities | Amount Rs. | Assets | Amount Rs. | ||
|---|---|---|---|---|---|
| Creditors | 16,000 | Freehold Property | 20,000 | ||
| Furniture | 5,700 | ||||
| Capital A/cs | Stock | 10,500 | |||
| A’s Capital A/c | 72,800 | Debtors | 80,000 | ||
| B’s Capital A/c | 36,400 | Less: Pro. For DD | 12,000 | 68,000 | |
| C’s Capital A/c | 12,000 | 1,21,200 | Cash | 33,000 | |
| 1,37,200 | 1,37,200 | ||||
✗ Common Mistakes Students Make
❓ Frequently Asked Questions
How is the new profit-sharing ratio calculated on admission of a partner?
Subtract the new partner's share from 1 (the whole), then divide the remainder among the old partners according to their agreed sacrifice — usually in their old ratio unless the question states otherwise.
What happens if the new partner cannot bring in goodwill in cash?
The value of goodwill is adjusted through the partners' capital accounts instead: the new (or gaining) partner's capital account is debited, and the sacrificing partners' capital accounts are credited, in the sacrificing ratio.
Who gets the profit or loss on revaluation of assets and liabilities?
Only the OLD partners, in their OLD profit-sharing ratio — because the revaluation relates to the firm's position before the new partner was admitted.
Why are reserves and accumulated losses distributed before admission?
Because they were built up while only the old partners were sharing profits, so it would be unfair for the incoming partner to receive a share of profits/losses earned before they joined.
Is this DK Goel Solutions Chapter 3 useful for CBSE 2026-27 board exams?
Yes, based on the latest DK Goel Double Entry Book Keeping textbook (2026-27 edition) and the CBSE Accountancy syllabus for Reconstitution of Partnership — Admission of a Partner.