SAMPLE QUESTIONS

X and Y were partners in a business sharing profits and losses in the ratio 3:2. They
admitted Z for1/4th share. On the date of Zs admission the Balance Sheet was as given
below.
Balance Sheet
Amount
Rs

Liabilities
Sundry Creditors

Assets

Amount
Rs

15,000 Cash

Outstanding Expenses

2,000 Sundry Debtors

Capital :

Stock

2,000
6,000
8,000

40,000

Investment

12,000

33,000

73,000 Machinery

20,000

Building

40,000

Goodwill

2,000

90,000

C brought Rs 30,000 as his share of capital but unable to brought Rs 10,000 as his share of
goodwill.
On Cs admission, Creditors were increased by Rs 2,000, Debtors Rs 200 proved bad, Building
appreciated by 10%.
In the new firm, capital of the all partners was to be kept in proportion of their profit sharing
ratio and any surplus or deficiency in the capital is to be adjusted by opening partners current
account.
Cs share of capital was taken as base for determining the capital of the new firm.
Pass necessary Journal entries and prepare Revaluation Account, Partners Capital Account and
Balance Sheet.

90,000

Solution:
Journal
Date

Particulars

L.F.

Debit
Amount
Rs

Xs Capital A/c

Dr.

1,200

Ys Capital A/c

Dr.

800

To Goodwill A/c

Credit
Amount
Rs

2,000

(Goodwill written off)

Cash A/c

Dr.

30,000

To Cs Capital A/c

30,000

(C brought his capital)

Cs Current A/c

Dr.

10,000

To Xs Capital A/c

6,000

To Ys Capital A/c

4,000

(Cs share goodwill adjusted between A and B)

Revaluation A/c

Dr.

2,200

To Creditors

2,000

To Debtors

200

(Asset and Liabilities revalued)

Building A/c

Dr.

4,000

To Revaluation A/c

4,000

(Building appreciated)
Revaluation A/c
To Xs Capital A/c

Dr.

1,800
1,080

To Ys Capital A/c

720

(Revaluation profit transferred to Capital A/c in old ratio)

Revaluation Account

Dr.

Cr.

Amount
Rs

Particulars
Creditors

Amount
Rs

Particulars

2,000 Building

Debtors

4,000

200

Profit transferred to Capital Account:

X

1,080

720

1,800
4,000

4,000

Partners Capital Account

Dr.

Cr.

Particulars
Goodwill

X
1,200

800

Particulars
Balance b/d

40,000 33,000

Cash
Balance c/d

Balance c/d
(Proportionate)

30,000

Cs Current

6,000

4,000

45,880

36,920 30,000 Revaluation

1,080

720

47,080

37,720 30,000

Ys Current

920
54,000

Balance b/d

36,000 30,000 Xs Current

47,080 37,720

30,000

45,880 36,920

30,000

8,120

54,000

36,920 30,000

54,000 36,920

30,000

Balance Sheet
Amount
Rs

Liabilities
Sundry Creditors
Add: Revaluation

15,000
2,000

Outstanding Expenses

Amount
Rs

Assets
Cash (2,000 + 30,000)

17,000 Sundry Debtors

2,000 Less: Revaluation

Capital

32,000
6,000
200

Stock

5,800
8,000

54,000

Investment

12,000

36,000

Machinery

20,000

30,000

1,20,000 Building

Y's Current

920 Add: Revaluation

4,000

44,000

C's Current

10,000

X's Current

8,120

1,39,920

1,39,920

Working Note: Calculation of Capital Balances of the Old Partners-A and B

Capital of the new firm on the basis of Cs Capital = 30,000 4/1= Rs 1,20,000
New firms Capital

1,20,000

Less: Cs Capital

(30,000)

Combined capital of X and Y in the new firm

40,000

90,000

 P and Q are partners sharing profits and losses in the ratio 3:2. On December 31, 2010, they
admitted S for 1/5th share in the firm. On the date of S admission the Balance Sheet of the
firm was as given below.
Balance Sheet
Amount
Rs

Liabilities
Capital

Sundry Debtors

50,000

30,000

Amount
Rs

Assets
30,000

Less: Provision for

80,000

Doubtful Debt

1,500

28,500

Bills Receivable

6,000

General Reserve

10,000 Cash in hand

12,000

Workmen Compensation Reserve

10,000 Stock

30,000

Sundry Creditors

30,000 Investment

10,000

Bank Overdraft

10,000 Patents

10% Bank Loan

50,000 Land and Building

40,000

Machinery

30,000

Goodwill

20,000

Profit and Loss

11,500

1,60,000

2,000

1,60,000

S brings Rs 40,000 as capital and required amount of his share of goodwill in cash. As per the
deed, goodwill of the new firm will be equal to the difference between new firms capital on the
basis the basis of Ss share and the capital of all partners after making adjustments of
undistributed items and revaluation profit and loss.
The following adjustments are to be made at the time Ss admission.
(i) Interest on loan outstanding for three months.
(ii) A worker being injured on-duty, has to be paid Rs 7,000 as compensation.
(iii) Provision for Doubtful Debt is no more required.
(iv) Patents not to be shown in the books of the new firm.
(v) Creditors of Rs 2,000 remained unclaimed.

Pass necessary Journal entries and prepare Revaluation Account, Partners Capital Accounts and
the Balance Sheet after admission of S.

Solution:
Journal
Date

Particulars

L.F.

Debit
Amount
Rs

2010

Ps Capital A/c

Dr.

18,900

Dec.31

Qs Capital A/c

Dr.

12,600

Credit
Amount
Rs

To Goodwill A/c

20,000

To Profit and Loss A/c

11,500

(Goodwill and Profit and Loss written off)

General Reserve A/c

Dr.

10,000

To Ps Capital A/c

6,000

To Qs Capital A/c

4,000

(General Reserve distributed)

Workmen Compensation Fund A/c

Dr.

10,000

To Outstanding Workmen Compensation Claim A/c

7,000

To Ps Capital A/c

1,800

To Qs Capital A/c

1,200

(Workmen compensation claim adjusted and Remaining workmen

compensation fund distributed)
Revaluation A/c

Dr.

3,250

To Patents A/c

2,000

To Outstanding Interest on Loan A/c

1,250

(Patents written off and interest on loan due)

Provision for Doubtful Debt A/c

Dr.

1,500

Creditors A/c

Dr.

2,000

To Revaluation A/c

3,500

(Creditors revalued and Provision for Doubtful Debt written

off)
Revaluation A/c

Dr.

250

To Ps Capital A/c

150

To Qs Capital A/c

100

(Profit on revaluation transferred to Partners Capital Account the in

old ratio)
Cash A/c

Dr.

59,650

To Ss Capital A/c

40,000

To Premium for Goodwill A/c

19,650

(S brought capital and his share of goodwill)

Premium for Goodwill A/c

Dr.

19,650

To Ps Capital A/c

11,790

To Qs Capital A/c

7,860

(Goodwill brought by S distributed between P and Q in sacrificing

ratio)
Ledger
Revaluation Account
Dr.

Cr.
Amount
Rs

Particulars

Particulars

Amount
Rs

Outstanding Interest on Loan

1,250 Provision for Doubtful Debt

1,500

Patents

2,000 Creditors

2,000

Profit transferred to:

Ps Capital

150

Qs Capital

100

250
3,500

3,500

Partners Capital Account

Dr.

Cr.
Particulars

Goodwill

Particulars

12,000

8,000

Balance b/d

6,900

4,600

Cash

Profit and Loss

50,000 30,000
40,000

Premium for Goodwill

Balance c/d

11,790

7,860

General Reserve

6,000

4,000

Workmen
Compensation
Reserve

1,800

1,200

150

100

50,840

30,560 40,000 Revaluation

69,740

43,160 40,000

69,740 43,160 40,000

Balance Sheet
Amount
Rs

Liabilities
Capital:

Assets
Sundry Debtors

30,000
6,000

50,840

Bills Receivable

30,560

Cash in hand (12,000 + 59,650)

40,000

Outstanding Workmen
Compensation Claim
30,000

Less: Unclaimed

(2,000)

Bank Overdraft
10% Bank Loan
Add: Outstanding Interest

1,21,400 Stock
7,000 Investment

Sundry Creditors

Amount
Rs

Land and Building

28,000 Machinery

71,650
30,000
10,000
40,000
30,000

10,000
50,000
1,250

51,250
2,17,650

2,17,650

Working Note:
1. Ascertaining Ss Share of Goodwill
P
Capital before adjustments

Total

50,000

30,000

(12,000)

(8,000)

(6,900)

(4,600)

(11,500)

Add: Workmen Compensation Claim

1,800

1,200

3,000

Add: General Reserve

6,000

4,000

10,000

150

100

250

39,050

22,700

Less: Old Goodwill (written off)

Less: Profit and Loss (Loss)

Add: Revaluation (Profit)

Capital after Adjustments

40,000 = 1,20,000
=

40,000

(20,000)

1,01,750