The Indian High School Dubai

Department of commerce

Admission of a Partner - Capital adjustments.

Q1 Balance sheet of ABC on 31st March 2022 sharing the ratio of 5:3:2
Liabilities Amount Assets Amount
Capitals Cash 64,000
A 60,000 Buildings 10,000
B 40,000 Stock 5,000
C 20,000 Machinery 10,000
General Reserve 30,000 Furniture 7,000
Creditors 5,000 Debtors 16,000
Bills Payable 1,000 -RBD -1,000 15,000
Land 25,000
Goodwill 5,000
Profit and loss Debit 15,000
156,000 156,000
Adjustments:
1. Reserve for Bad Debts at 15 %
2. Bad debts Rs. 800 .
3. Land appreciated by Rs 15,000.
4. Stock revalued to Rs.9,000.
5. Machinery undervalued by Rs. 6,000.
6. Rs. 1000 Creditors written back .
7. Depreciate Building at 20%
8. D admitted for 1/12th share and brought Rs. 50,000 as Capital and Rs. 40,000
as his share of goodwill
9. Other partners decided to change their capitals according to the new capital
accounts . excess or shortage should be transferred to Cash a/c

Q2
3.
The following is the balance sheet of A and B as at 31t March 2022, who share profits in the
ratio of 2:1.
Liabilities Rs. Assets Rs.
Bank overdraft 15000 Sundry debtors. 40000
Reserve fund 12000 Less: PDD. 3600 36400
Sundry creditors 20000 Stock 20000
Capitals Building 25000
A 40000 Patents 2000
B 30000 Machinery 33600
117000 117000

They admitted C into partnership on 1 st April, 2022. New profit-sharing ratio is agreed as
3:2:1. C brings in proportionate capital after the following adjustments:
1) C brings in Rs.10,000 in cash as his share of Goodwill.
2) Provision for doubtful debts is to be reduced by Rs.2000.
3) There is an old typewriter valued Rs.2,600. It does not appear in the books of the firm. It
is now to be recorded.
4) Patents are valueless.
5) 2% discount is to be received from creditors.
Prepare Revaluation A/c, Capital A/c and the opening balance sheet.

4. A and B are partners in a firm sharing profits and losses in the ratio 3:1. On 1st April
2022, their positions were as given below:
Liabilities Rs Assets Rs.
Capital account Goodwill 20000
A. 200000 Plant 100000
B. 80000 280000 Patents 10000
Sundry creditors 70000 Stock 142000
Workmen Compensation Reserve 10000 Sundry debtors 50000
Cash 18000
Profit and loss A/c 20000
360000 360000

They admit C into partnership with 1/6th share in profits upon the following terms:
1) Goodwill is to be valued at one year’s purchase of the five year’s average profits which
were Rs.20,000, Rs.30,000; Rs.30,000; Rs.40,000 and Rs.60,000 respectively.
2) C agree to contribute ¼ of the combined capital of A and B in the new firm.
3) Plant in to be written down to Rs.80,000 and patents written up to Rs.12,000. A provision
of 2% on debtors is required. A liability of Rs.5000 included in sundry creditors is not
likely to arise.
Prepare Revaluation a/c, Partner’s capital a/c and the balance sheet after admission of C.

Change in Profit sharing ratio

1. A and B are partners in a firm sharing profits in the ratio of 2 : 1. It was decided by
them to share profits equally. Calculate the sacrificing and gaining ratio.

2. Amit and Kajal were partners in a firm sharing profits in the ratio of 3:2. With
effect from January 1, 2015 they agreed to share profits equally. For this purpose
the goodwill of the firm was valued at Rs. 60,000.
Pass the necessary journal entry.

3. A and B are sharing profits and losses equally. With effect from 1st April, 2018, they
agree to share profits in the ratio of 4 : 3.
Calculate individual partner's gain or sacrifice due to the change in ratio.
4. X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st
April, 2018, they decide to share profits and losses in the ratio of 5 : 2 : 3.
Calculate each Partner's gain or sacrifice due to the change in ratio.
5. X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st
April, 2018, they decide to share profits and losses equally.
Calculate each partner's gain or sacrifice due to the change in ratio.
6. A, B and C are partners sharing profits and losses in the ratio of 5 : 4 : 1.
Calculate new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the
following cases:
Case 1. C acquires 1/5th share from A.
Case 2. C acquires 1/5th share equally form A and B.
Case 3. A, B and C will share future profits and losses equally.
Case 4. C acquires 1/10th share of A and 1/2 share of B.
7. A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With effect from
1st April, 2018, they agreed to share profits equally. The goodwill of the firm was valued
at ₹18,000.
Pass necessary Journal entries when: (a) Goodwill Account is not opened; and
(b) Goodwill Account is opened
8. X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April,
2018, they decided to share profits and losses equally. The Partnership Deed provides
that in the event of any change in the profit-sharing ratio, the goodwill should be valued
at two years' purchase of the average profit of the preceding five years. The profits and
losses of the preceding years ended 31st March, are:
2013- 2014- 2015- 2016-
Year 2017-18
14 15 16 17
Profits
70,000 85,000 45,000 35,000 10,000 (Loss)
(₹)
You are required to calculate goodwill and pass journal entry.

9. Mandeep, Vinod and Abbas are partners sharing profits and losses in the ratio of 3 : 2 : 1 .
From 1st April, 2018, they decided to share profits and losses equally. The Partnership
Deed provides that in the event of any change in the profit-sharing ratio, the goodwill shall
be valued at three years' purchase of the average profit of last five years . The profits and
losses of the past five years are: Profit——Year ended 31st March, 2014——₹
1,00,000; 2015——₹ 1,50,000; 2017——₹ 2,00,000; 2018——₹ 2,00,000; Loss——
Year ended 31st March, 2016——₹50,000.

Pass the journal entries showing the working.

10. X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 , decided to share
future profits and losses equally with effect from 1st April, 2018. On that date, the goodwill
appeared in the books at ₹ 12,000. But it was revalued at ₹ 30,000.

Pass journal entries assuming that goodwill will not appear in the books of account.
11. Nisha and Anand are partners in a firm sharing profits and losses in the ratio of 3 : 2.
With effect from 1st April, 2022, they decided to share future profits equally. On the date
of change in the profit-sharing ratio, the Profit and Loss Account showed a credit balance
of Rs 6,00,000.
Record the necessary Journal entry for the distribution of the balance in the Profit and
Loss Account immediately before the change in the profit-sharing ratio.

12. Om and Shiv are partners in a firm sharing profits in the ratio of 4 : 1. They decided to
share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2022. On that day, Profit and Loss
Account showed a debit balance of Rs 4,00,000.
Pass Journal entry to give effect to the above.

13. A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to
share future profits and losses in the ratio of 2 : 3 : 5.
Give the Journal entry to distribute 'Workmen Compensation Reserve' of
Rs 4,80,000 at the time of change in profit-sharing ratio, when there is no claim against
it.
14. X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to
share future profits and losses in the ratio of 2 : 3 : 5.
Give the journal entry to distribute 'Workmen Compensation Reserve' of Rs 2,40,000 at
the time of change in profit-sharing ratio, when there is a claim of Rs 1,60,000 against
it.

15. Ashok, Bhim and Chetan who are sharing profits in the ratio of 5 : 3 : 2, decide to share
profits in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. Workmen Compensation
Reserve appears at Rs 2,40,000 in the Balance Sheet as at 31st March, 2019 and
Workmen Compensation Claim is estimated at Rs 3,00,000.

Pass Journal entries for the accounting treatment of Workmen Compensation

Reserve.
16. Amar and Akhar are partners sharing profits in the ratio of 2 : 1. On 31st March, 2019,
their Balance Sheet showed General Reserve of Rs 1,20,000. It was decided that in
future they will share profits and losses in the ratio of 3 : 2.
Pass necessary Journal entry in each of the following alternative cases:
(i) When General Reserve is not to be shown in the new Balance Sheet.
(ii) When General Reserve is to be shown in the new Balance Sheet.

17. X, Y and Z are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to share
future profits and losses in the ratio of 2 : 3 : 5 with effect from 1st April, 2019. They also
decide to record the effect of the following accumulated profits, losses and reserves
without affecting their book values by passing a single entry .
Book Values
( Rs )
 General Reserve 12,000

Profit and Loss A/c (Credit) 48,000

Advertisement Suspense A/c 24,000
Pass an Adjustment Entry.

18. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance
Sheet as on 31st March, 2021 was as follows:

Amount Amount
Liabilities ( Rs ) Assets ( Rs )
Creditors 50,000 Land 50,000
Bills Payable 20,000 Building 50,000
General Reserve 30,000 Plant 1,00,000
Capital A/cs: Stock 40,000
A 1,00,000 Debtors 30,000
B 50,000 Bank 5,000
C 25,000 1,75,000
2,75,000 2,75,000

From 1st April, 2021, A, B and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at ` 1,50,000.
(ii) Land will be revalued at ` 80,000 and building be depreciated by 6%.
(iii) Creditors of ` 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account.