Admission of Partners

CA FOUNDATION THE COMMERCE HUB
2 Admission of Partner
A person who has been admitted as a partner into the existing partnership firm is known as a new
partner or an incoming partner.
 A new partner may be admitted into the existing partnership firm due to one or more of the
following reasons :
a. Additional capital required.
b. Specialized skill of the incoming partner.
c. Expansion of Business.
d. Avoiding competition
e. Any other reason.
Accounting adjustment:
REVALUATION OF ASSETS & LIABILITIES
Since, it is reconstitution of the firm at the time of admission of partner, assets and liabilities of the firm
are revalued and recorded at their fair values in the books of new firm. Profit or loss on revaluation of
assets and liabilities is shared by old partners in their old profit sharing ratio.
A separate nominal account namely, Profit and Loss Adjustment A/c or Revaluation A/c is opened in
the books to calculate profit or loss on revaluation of assets and liabilities.
Revaluation of Assets
Increase Decrease
Asset A/c Dr. Revaluation A/c Dr.

To Revaluation A/c To Asset A/c
Unrecorded Assets: The old firm may have certain assets, whose book values are nil but they are in
use, or have realizable values, such assets are brought into books at the time of reconstitution of firm.
For recording them in the books the journal entry is,
Asset A/c Dr.
To Revaluation A/c
Revaluation of Liabilities
Increase Decrease
Revaluation A/c Dr. Liability A/c Dr.

To Liability A/c To Revaluation A/c
 Unrecorded Liabilities: In the books of old firm certain liabilities may not be recorded or
contingent liability would have been matured. To record such unrecorded liability following
journal entry is passed:
Revaluation A/c Dr.
To Liability A/c
After revaluation of all assets and liabilities, balance in P/L Adjustment A/c is, either profit or
loss due to revaluation which is transferred to old Partners Capital A/c in their old profit sharing
ratio.
All assets and liabilities appear in New Balance Sheet at their new values.
Undistributed / Accumulated Profits and Losses:

These are profits / losses of old firm which are kept aside with some specific purpose or not distributed
amongst the partners in past, due to any reason. They appear in the Old Balance Sheet by different
headings.
Old Balance Sheet
Liabilities Amt. ( ) Assets Amt. ( )
General Reserve
Reserve Fund
Workmen compensation fund
Profit & Loss A/c (Cr. Bal.) Profit & Loss A/c (Dr. Bal.)
Undistributed Profits: Undistributed Losses:

Journal Entry: Journal Entry:
Concern Profit A/c Dr. Old Partner’s Capital A/c (OPSR) Dr.
To Old Partner’s Capital A/c (OPSR) To Concern Loss A/c
Once, they are transferred, they will not appear in the new balance sheet.
Capital introduced by new partners:

Generally, new partner is admitted for additional requirement of capital. Thus, on admission he brings
capital into the business. Such capital may be brought in by him, in the form of money or in the form of
assets. Entry for the capital brought in by new partner is :
Cash / Bank A/c Dr.
Concerned Assets Ac Dr.
To New partners Capital A/c
Sometimes, new partner merge his business into the existing partnership business. In such case he may
bring his liabilities as well, at the time of admission, in such situation the entry is :
Cash / Bank A/c Dr.
Concerned Assets A/c Dr.
To Concerned Liabilities A/c
To New Partner's Capital A/c (Balancing Figure)
RATIO
1. Old Profit Sharing Ratio (Old PSR) : It is the ratio between old partners before admission. Old
PSR is always given in question, if not given to be assumed, as equal.
2. New Profit Sharing Ratio (New PSR) : It is the ratio between all partners (including new) after
admission. It may or not given in question, if not given we have to calculate it, if required.
3. Sacrificing Ratio (SR) : It is the ratio of sacrifice made by old partners in favour of new partner
to give him share in profit.
Thus, sacrifice share of old partner = old share – new share
(SR = Old PSR – New PSR)
New Profit Sharing Ratio
Case I Case II
Sacrifice ratio not given Sacrifice ratio given
S.R. = old profit sharing ratio S.R.  Old profit sharing ratio
Step - I Step - I
Remaining profit Sacrifice Made
1
= - new partner's share = New partner’s share x Sacrificed Share
1
Step - II Step - II
New share of old partner New share of Old partner
= Remaining Profit x Old Share = Old Share - Sacrifice made
 Calculate the following
Q.1. a) A and B are in partnership sharing profits and losses as 3:2. C is admitted for ¼ share.
Afterwards, D enters for 20 paise in the rupee. Compute the profit sharing ratio of A, B, C
and D after D’s admission.
b) A and B are partners sharing profits in the ratio of 5:3. C is admitted and A sacrifices ¼ of
his share of profit in favour of C. Calculate new profit sharing ratio of A, B and C.
c) A and B are partners sharing profits in the ratio of 7:3. They admit C for 2/10 share of
profit which he takes equally from A and B. Calculate sacrificing ratio and new profit
sharing ratio.
d) A and B are partners sharing profits in the ratio of 7:3. A surrenders 1/7 of his share and B
surrenders 1/3 of his share in favour of C, a new partner. Calculate new ratio and
sacrificing ratio.
e) A and B partners sharing profits in the ratio of 3:2. C is admitted as a partner. The new
profit sharing ratio of A, B and C is 5:3:2. Find out the sacrificing ratio.
f) A and B are partners sharing profits and losses in the ratio of 3:2. C is admitted for 1/4th
share. A and B decide to share equally in future. Find the sacrificing ratio and new profit
sharing ratio.
g) A and C were partners who shared profits in the ratio of 3:2 after transferring 1/5th of profits
to reserves. They admitted B in the firm and decided to give him the share of profit which
was earlier transferred to reserves. It was also decided that the shares of A and C in future
profits should be same. Find out new profit sharing ratio and sacrificing ratio.
h) P, Q and R are partners sharing profits in the ratio of 2:2:1. They admit S and decide to
share profits in the ratio of 2:4:3:1. Calculate change in profit sharing ratio.
TREATMENT OF GOODWILL (For SYJC)
Goodwill is an intangible asset thus; treatment of goodwill is different than the treatment of other
assets of firm.
Firstly, determine the value of goodwill of the firm. It is either given in question or required to be
valued as per the method specified in the question.
Three possibilities in treatment of Goodwill:
 When goodwill not given in Old Balance Sheet:
Case I :
New partner agreed to pay premium for his share of goodwill:
1. Cash / Bank A/c Dr.
To Goodwill A/c
2. Goodwill A/c Dr.
To Old Partners Capital A/c (in SR)
 If Cash for goodwill withdrawn by old partners:
Old Partner’s Capital A/c Dr. (in SR)
To Cash / Bank A/c
Case II:
When New partner unable to pay premium for goodwill:
Goodwill is raised at full value:
Goodwill A/c Dr.
To Old Partner’s Capital A/c (in Old PSR)
Note : When goodwill is raised only, goodwill will appear in New Balance Sheet.
 If such goodwill is written off :
All Partners Capital A/c Dr. (in New PSR)
To Goodwill A/c
Note : When goodwill is written off, it will not appear in New Balance Sheet.
 When goodwill given in Old Balance Sheet: (Revaluation of Goodwill)

Case III:
 Increase in value of goodwill (New Goodwill > Old Goodwill)
a. Calculate difference in goodwill
b. Pass Entry for difference in goodwill
Goodwill A/c Dr.
To Old Partners Capital A/cs (in Old PSR)
 Decrease in value of goodwill (New Goodwill < Old Goodwill)
a. Calculate difference in goodwill
b. Pass Entry for difference in goodwill
Old Partners Capital A/c Dr. (in Old PSR)
To Goodwill A/c
 Goodwill will appear in new balance sheet at new value.
 If such goodwill is written off:
All Partners’ Capital A/c Dr. (in New PSR)
To Goodwill A/c
 If goodwill already appears in the Balance sheet and New partner brings goodwill in
cash
Write off the goodwill appearing in the books among old partners in their old profit
sharing ratio.
Old Partners Capital A/c Dr. (in Old PSR)
To Goodwill A/c
Case IV:
 When new Partner brings his share of Goodwill in cash and it is paid to old partners
privately. In this case no entry is required to be passed the books of the firm.
Q.2. Daksh and Yash were partners sharing profits and losses in the ratio of 2:3 respectively. Their
Balance Sheet as on 31st Mar. 2012 was as follows:
Balance Sheet as at 31st March, 2012
Liabilities ( ) Assets ( )
Creditors 35,000 Cash 2,500
Capitals : Land & Building 12,500
Daksh 25,000 Plant 15,000
Yash 25,000 Furniture 1,000
Stock 25,000
Debtors 29,000
85,000 85,000
They agreed to admit Payal as a partner on 1st April, 2012 on the following terms:
(1) Payal will have 1/4th share in future profits.
(2) She shall bring 12,500 as her capital and 10,000 as her share of goodwill.
(3) Land and Building are valued at 15,000 and Plant and Furniture depreciated by 10%.
(4) Provision for bad and doubtful debts is to be maintained at 5% of Debtors.
(5) Stock valued at 27,500.
Prepare : Profit and Loss Adjustment A/c, Partner’s Capital Accounts and Balance sheet of
new firm.
Q.3. Adam and Luke were partners sharing profits and losses in the proportion of 2/3rd and 1/3rd.
Their Balance sheet is as follows.
Balance sheet as on 31st March, 2011
Capital Accounts : Building 1,00,000
Adam 96,000 Furniture 20,000
Luke 64,000 1,60,000 Office Equipment 10,000
General Reserve 18,000 Sundry Debtors 63,000
Profit & Loss A/c 6,000 Less: R.D.D (3,000) 60,000
Sundry Creditors 80,000 Stock 84,000
Adam’s Loan A/c 26,000 Cash 16,000
2,90,000 2,90,000
On 1 April, 2011 Lewis is admitted in the partnership on the following terms :
st
(1) Lewis should bring in cash 48,000 as capital for 1/5th share in future profits.
(2) Goodwill was raised in the books of the firm for 18,000.
(3) Building is revalued at 1,12,000 and the value of stock to be reduced by 6,000.
(4) Reserve for doubtful debts be maintained at 1800.
(5) Adam's Loan is to be repaid.
Prepare Revaluation A/c, Capital A/c's of Partners and Balance Sheet of the new firm.
Q.4. David and Tyler were partners and shared the profits in the ratio of 3/5:2/5. On 31st March, 2011
their Balance Sheet was as follows:
Balance Sheet as at 31st March, 2011
Sundry Creditors 30,000 Cash at Bank 500
General Reserve 10,000 Sundry Debtors 45,000
Capital A/c: Less R.D.D. 500 44,500
David 72,000 Stock 17,000
Tyler 48,000 1,20,000 Investment 24,000
Plant 30,000
Building 44,000
1,60,000 1,60,000
On 1st April 2011 Mr. Louis was admitted for 1/4th share on the following terms:
(1) He should bring 15,900 as his capital.
(2) Valuation of the Goodwill of the firm was to be made at twice the average profit of the
last three years. The profits were as follows : 2010-11 24,000, 2009-10 26,000 and 2008-
09 40,000. Louis is unable to bring the goodwill in cash, therefore, goodwill account was
raised.
(3) Before admitting Louis R.D.D. was to be raised up to 1,000 only.
(4) Closing stock was to be valued at 16,000.
(5) Half of plant was taken by David at book value.
(6) Provide Depreciation on Building @ 5%.
(7) Goodwill is written off after the admission.
Prepare Profit and Loss Adjustment A/c., Capital A/c of the partners and Balance Sheet of
the New firm after admission.
Q.5. The Balance Sheet of Aditya and Abhishek who shared profits equally was as follows:
Dr. Balance Sheet as on 31st March 2018 Cr.
Capitals Land & Building 45,000
Aditya 75,000 Plant & Machinery 52,500
Abhishek 1,05,000 1,80,000 Furniture 18,000
Sundry Debtor 19,500
Creditors 25,500 Stock 30,000
Bills Payable 19,500 Cash 60,000
2,25,000 2,25,000
On 1 April 2018, Sanjay joins the firm as a third partner for 1/5 th share of future profits on the
st
following terms and condition :

(a) Goodwill is valued at 1,50,000, Sanjay is to bring his share of goodwill in cash.
(b) Sanjay is to bring in 75,000 as capital.
(c) A provision of 10% is to be created on sundry debtors
(d) Land and Building is to be valued at 60,000
(e) Stocks Plant and Machinery is to be reduced by 20%
Draft the journal entries to record the above arrangement and give the opening balance
sheet of the new firm.
Q.6. The Balances sheet of Raj and Rahul who share profits in the ratio of 2:1 as on 31st March, 2018
Balance Sheet As on 31st March 2018
Capitals: Land & Building 60,000
Raj 50,000 Investment 75,000
Rahul 30,000 Debtors 40,000
Investment Fluctuation Reserve 10,000 Goodwill 15,000
General Reserve 18,000 Profit and Loss A/c 6,000
Sundry Creditors 60,000 Advertisement Suspense 4,000
2,08,000 2,08,000
On 1.4.2018 Ravi was admitted into partnership on the following terms :
(1) Ravi pays 20,000 as his capital for 1/4th share.
(2) Ravi pays 12,000 for Goodwill. Half of the sum is to be withdrawn by Raj and Rahul.
(3) RDD is created @ 10%.
(4) The value of land and building is appreciated by 15,000.
(5) Investments were reduced by 15,000.
(6) Sundry creditors are to be valued at 58,000.
(7) Capitals of Raj and Rahul to be adjusted taking Ravi’s capital as the base. Adjustment of
capitals is to be made through cash.
Prepare Revaluation Account, Partner’s Capital Account and Balance Sheet of the New Firm
as on 1st April, 2018
Q.7. The following is the Balance Sheet of the firm Shridevi Traders as on 31st March 2019 Priti and
Priyanka are the partners of the firm who share profits and losses in the ratio of 3:2
respectively.
Creditors 30,600 Cash at bank 6,000
Capitals: Building 20,000
Priti 25,000 Machinery 15,000
Priyanka 25,000 Furniture 1,200
Stock 12,400
Debtors 26,000
80,600 80,600
They take Purva into partnership on 1.4.2019 the terms being:
(1) Purva shall pay 4,000 as her share of Goodwill, the amount to be retained in business.
(2) She shall bring in 12,000 as capital for 1/4 the share in the future profits.
(3) The firm’s assets were to be revalued as under:
Building 24,000, Machinery and Furniture to be reduced by 10%, a Provision of 5% on
Debtors is to be made for doubtful debts; Stock is to be taken at a value of 15,000.
(4) The excess of capital of Priti and Priyanka over their due proportion of sharing profits of
the new firm is to be transferred to their respective loan account.
Prepare Profit and Loss Adjustment Account, Capital Account of Partners and New Balance
sheet.
Q.8. The Balances sheet of Bhavin and Sachin who share profit and losses in the ratio of 3:1 as at 31st
March 2018 was as under :
Balance Sheet As on 31st March, 2018
Creditors 10,000 Bank 10,000
Workmen’s Compensation Reserve 15,000 Debtors 6,500
General Reserve 12,000 Less : Provision 500 6,000
Bhavin’s Capital 16,000 Bills Receivable 5,000
Sachin’s Capital 14,000 Stock 10,000
Land & Building 15,000
Goodwill 21,000
67,000 67,000
Rajesh was admitted on 1.4.2018 for 1/5th share on the following terms :
(1) Rajesh shall bring 10,000 for his share of goodwill and necessary amount for his share of
capital in cash.
(2) Anju, an old customer whose account was written off as bad, has paid 200 in cash in full
settlement of his dues.
(3) The market value of Land and Building be taken as 20,000.
(4) Workmen’s Compensation Reserve is to be increased by 5,000.
(5) Unaccounted Accrued Incomes of 100 to be accounted for.
(6) The capitals of all partners are to be in new profit sharing ratio taking old partners total
capital as base after adjustment. Actual cash is to be paid off or brought in by the partners
for adjusting their capital accounts.
Prepare Revaluation Account, Partner’s Capital Account and Balance Sheet after Rajesh’s
admission.
Q.9. A, B & C were in the partnership sharing profits and losses in the proportion of 2/8th, 3/8th & 3/8th
respectively. Their position on 31st March 2011 was as follows:
Balance Sheet as on 31st March 2011
Bank overdraft 55,000 Bills receivable 4,500
General reserve 16,000 Trade debtors 60,000
Capital Accounts : Stock 36,000

A 20,000 Furniture 2,000
B 27,000 Buildings 33,000
C 30,000 77,000 Goodwill 60,000
2,18,000 2,18,000
On 1st April 2011; they admitted D into partnership on the following terms:
a. D to bring in 30,000 as her capital for 1/4th share in the future profits.
b. A goodwill valued at 80,000.
c. The stock is undervalued by 10%.
d. Buildings is overvalued by 10%.
e. A provision of 4,000 to be made for bad debts.
f. There being a claim for damages against the firm, a provision to the extent of 1,000 to be
made.
g. An item of 500 due to Mr. X included in the creditors to be written off.
Prepare a Profit & Loss Adjustment A/c, Capital A/c’s of the partners and the Balance Sheet
of the firm after D’s admission.
Q.10. Tanvi And Bhavya were in partnership sharing profits & losses in proportion of 3:2
respectively. Their Balance Sheet as on 31st March 2019 stood as follows.
Capital A/cs : Premises 70,000
Tanvi 50,000 Furniture and Fixture 5,700
Bhavya 30,000 80,000 Stock 13,500
Current A/cs. : Debtors 4,550
Tanvi 600 Cash at bank 550
Bhavya 700 1,300
Loan from Ajit 10,000
Creditors 3,000
94,300 94,300
On 1st April 2019 Prem was admitted to the firm on the following terms.
1 Premises were to be valued at 85,000 and Furniture and Fixtures at 5,200.
A provision for bad debts of 500 was to be made. Stock should be revalued at 14,500.
2. Prem Should bring in 20,000 as Capital and 5,000 as his share of goodwill and it was
retained in the business and he should be given one-fourth share in the future profits.
3 The loan from Ajit was repaid through NEFT.
Prepare Profit and Loss Adjustment Account, Partners Current Accounts and Balance sheet
of the New firm.
CAF
Treatment of Goodwill ( for CAF ):
Goodwill is the monetary value of the reputation earned by the business.
Such reputation is earned due to hard work, commitment to customers, quality product, reasonable
price etc.
Goodwill
When new partner brings cash for When new partner does not pay cash
his share of goodwill. for goodwill.
(New partner pays premium in cash (New partner does not pay premium
for goodwill) for goodwill)
Cash/Bank A/c Dr. New Partner’s Capital A/c Dr.

To Old Partner’s Capital A/c’s To Old Partner’s Capital A/c’s
(Sacrificing Ratio) (Sacrificing Ratio)
If goodwill amount is withdrawn by old partners partly or fully :

Old partner’s capital A/cs Dr. (in Sacrificing Ratio)
To Cash A/c or Bank A/c
(with the actual amount withdrawn)
When new partner pays premium for goodwill privately / secretly :

No entries are recorded in books.
Q.11. A and B are in partnership sharing profits and losses in the ratio of 3 : 1. They admit C for one
third share of the profits. As between themselves, A and B agree to share future profits and
losses equally. Pass the necessary journal entries in each of the following alternative cases:
Case (a) If C brings in 15,000 in cash towards his share of firm’s goodwill.
Case (b) If C brings in 5,000 in cash & machinery worth 10,000 toward his share of firm’s
goodwill.
Case (c) If C is unable to bring his share ( 15,000) of firm’s goodwill in cash.
Cash (d) If C brings in 9,000 out of his share of 15,000 for goodwill in Cash.
Q.12. The Balance Sheet of X and Y sharing profits and losses in the ratio of 3 : 2, at 31st March, 2020
was as follows:
Creditors 18,000 Cash at Bank 10,000
Workmen’s Compensation Fund 12,000 Debtors 65,000
Employees’ Provident Fund 10,000 Less: provision 5,000 60,000
General Reserve 20,000 Stock 30,000
X’s Capital 84,000 Investments 50,000
Y’s Capital 56,000 Patents 10,000
Goodwill 40,000
2,00,000 2,00,000
They decided to admit Z on that Date for ¼ share on the following terms:
(a) New Profit Sharing Ratio will be 6 : 9 : 5. Z brings in 41,500 as his capital.
(b) Goodwill of the firm is to be valued at 4 years’ purchase of the Average Super Profits of
the last three years. Average profits of the last three years are 35,000, while the normal
profits that can be earned with the capital employed are 15,000. No goodwill is to
appear in the books.
(c) Patents to be written down to 1,500 and Stock is undervalued by 1,000. All Debtors are
good. There is a liability of 500 included in Sundry creditors that is not likely to arise.
(d) Unaccounted Accrued Income of 1,000 to be provided for. A debtor whose dues of
5,000 were written off as bad debts paid 80% in full settlement. A claim of 3,000 on
account of workmen’s compensation to be provided for.
(e) The market value of investments was 45,000.Half of the investments were to be taken
over by old partner in their profit sharing ratio.
Prepare the Revaluation Account, Capital Accounts, of the Partners and the Balance sheet of the
new Firm.
Q.13. A and B are partners sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st
March, 2020 was as follows:
Capital Ac/s: Fixed Assets 96,000
A 70,000 Investments 40,000
B 60,000 Stock 46,000
Workmen Compensation Fund 22,000 Debtors 38,000
Bank Loan 18,000 Less: Provision 4,000 34,000
2,40,000 2,40,000
On 1st April, 2020, they admitted C for 25% share in profits on the following terms:
(a) C brings in capital proportionate to his share after all adjustments and 8,000 for
goodwill out of his share of 14,000.
(b) Fixed Assets are overvalued by 3,000.
(c) Half of Investments was to be taken over by A and B in their profit-sharing ratio and
remaining valued at 25,800.
(d) New Ratio will be 3 : 3 : 2.
(e) A claim of 2,000 on account of workmen compensation to be provided for
(f) A Provision for Doubtful Debts is to be maintained at 10% on Debtors.
Required: Prepare the Revaluation Account, Partners’ Capital Account and the Balance Sheet
and C’s admission.
Q.14. The following is the Balance Sheet of A and B who had been sharing profits in proportion of
three- fourths and one-fourth, on 31st March, 2020.
Creditors 30,000 Goodwill 4,000
Employees’ Provident Fund 7,500 Cash at Bank 22,500
Workmen’s Compensation Reserve 4,000 Bills Receivable 4,000
Investment Fluctuation Reserve 2,000 Debtors 16,000
A’s Capital 33,000 Stock 20,000
B’s Capital 17,000 Office Furniture 1,000
Provision for Doubtful Debts 1,000 Land & Building 25,000
Advertisement Expenditure 2,000
94,500 94,500
They agreed to take C into partnership on 1st April, 2020 on the following terms:
(a) That C pays 10,000 as his capital for one-fifth share in the future profits.
(b) That a Goodwill of the firm is valued at 20,000 but no goodwill is to appear in the
books.
(c) That Stock and Furniture be reduced by 15% and 10% respectively and 5% provision of
doubtful debts be created on debtors.
(d) That the Value of Land and Building be appreciated by 20%.
(e) That the Capital Accounts of the partners be re-adjusted on the basis of their profit
sharing arrangement and any excess or deficiency be transferred to their Current
Accounts. Prepare Revaluation Account, Partner’s Capital Accounts and the Balance
Sheet of the new firm.
Q.15. The Balance Sheet of Amit, bhushan and Charan, who share profits and losses as 3 : 2 : 1
respectively, as on 01.04.2020 is as follows:
Capital Accounts: Amit 1,80,000 Machinery 1,50,000
Bhushan 1,60,000 Furniture 1,50,000
Charan 1,40,000 Debtors Less: 80,000
Current Accounts: Bhushan 16,000 Provision 4,000 76,000
Creditors 1,20,000 Stock 2,10,000
Cash 20,000
Current Account: Charan 10,000
6,16,000 6,16,000
Dev is admitted as a partner on the above Date for 1/5th share in the profit and loss. Following
are agreed upon:
(1) The profit and loss sharing ratio among the old partners will be equal.
(2) Dev brings in 1,50,000 as capital but is unable to bring the required amount of premium
for goodwill
(3) The goodwill of the firm is valued at 60,000.
(4) Assets and Liabilities are to be valued as follows:
Machinery 2,06,000 : Furniture 1,28,000 : Provision for doubtful debts @10% on debtors.
(5) Necessary adjustments regarding goodwill and Profit/loss on revaluation are to made
through in Partner’s Current Accounts.
(6) It is decided that the revalued figures of Assets and Liabilities will not appear in the
Balance Sheet of the new firm.
(7) Capital Accounts of the old partners in the new firm should be proportionate to the new
profit and loss sharing ratio, taking Dev’s Capital as base. The existing partners will not
bring cash for further capital. The necessary adjustments are to be made through the
partner’s Current Account.
Prepare Partner’s Capital & Current Account, and the Balance Sheet of the new firm after
admission.
CHANGE IN PROFIT SHARING RATIO
Q.16. A, B and C are partners in a firm sharing profits and losses as 8:5:3. Their Balance Sheet as at
31st December, 1993 was as follows:
Sundry Creditors 1,50,000 Cash 40,000
General Reserve 80,000 Bills Receivable 50,000
Partners’ Loan Accounts: Sundry Debtors 60,000
A 40,000 Stock 1,20,000
B 30,000 Fixed Assets 2,80,000
Partners’ Capital Accounts:
A 1,00,000
B 80,000
C 70,000
5,50,000 5,50,000
From 1st January, 1994 they agreed to alter their profit-sharing ratio as 5:6:5. It is also decided
that:
(a) the fixed assets should be valued at 3,31,000;
(b) a provision of 5% on sundry debtors be made for doubtful debts;
(c) the goodwill of the firm at this date be valued at three years; purchase of the average net
profits of the last five years before charging insurance premium; and
(d) the Stock be reduced to 1,12,000.
There is a joint life insurance policy for 2,00,000 for which an annual premium of 10,000 is
paid, the premium being charged to Profit and Loss Account. The surrender value of the policy
on 31st December, 1993 was 78,000.
The net profits of the firm for the last five years were 14,000, 17,000, 20,000, 22,000 and
27,000.
Goodwill and the surrender value of the joint life policy was not to appear in the books.
Draft Journal Entries necessary to adjust the capital accounts of the partners and prepare the
revised Balance Sheet.
17. A and B are partners in a firm, sharing profits and losses in the ratio of 3:2. The Balance
Sheet of A and B as on 1.1.2020 was as follows
Trade payables 17,000 Building 26,000
Furniture 5,800
Bank overdraft 9,000 Inventories 21,400
Capital accounts: Trade receivables 35,000
A 44,000 Less: Provision (200) 34,800
B 36,000 80,000 Investment 2,500
Cash 15,500
1,06,000 1,06,000
‘C’ was admitted to the firm on the above date on the following terms:
(i) C is admitted for 1/6 share in the future profits and to introduce a capital of
25,000.
(ii) The new profit sharing ratio of A, B and C will be 3:2:1 respectively.
(iii) ‘C’ is unable to bring in cash for his share of goodwill, they decide to calculate
goodwill on the basis of C’s share in the profits and the capital contribution made
by him to the firm.
(iv) Furniture is to be written down by 870 and Inventory to be depreciated by 5%. A
provision is required for trade receivables @ 5% for bad debts. A provision would
also be made for outstanding wages for 1,560. The value of buildings having
appreciated be brought upto 29,200. The value of investments is increased by 450.
(v) It is found that the trade payables included a sum of 1,400, which is not to be
paid off.
Prepare the following:
(i) Revaluation account.
(ii) Partners’ capital accounts.
TRY YOUR SELF
Q.18. Ethan and Leo share profits and losses in the ratio of 3: 2 in partnership firm. Their balance
sheet as on 31st March, 2011 was as follows:
Balance sheet as on 31st March, 2011
Liabilities ( ) ( ) Assets ( ) ( )
Creditors 25,000 Cash in hand 5,000
Bills Payable 20,000 Bills Receivable 7,600
Bank Loan 32,000 Debtors 41,600
General Reserve 5,000 Less: R.D.D (1,600) 40,000
Capital Accounts : Stock 24,000
Ethan 30,000 Furniture 9,400
Leo 24,000 54,000 Machinery 20,000
Building 30,000
1,36,000 1 36,000
On 1 April, 2011, they admitted Logan on the following terms:
st
(1) For 1/5th share in future profits, Logan should bring 20,000 for his capital and 10,000
for goodwill in cash
(2) Half of the amount of goodwill be withdrawn by old partners.
(3) The stock is to be depreciated by 10% and Machinery by 5%.
(4) R.D.D. is maintained at 2,000.
(5) Furniture should be appreciated upto 10,700 and Building be appreciated by 20%
Prepare, Revaluation A/c Partners Capital Accounts and Balance Sheet of the new firm.
Q.19. The following is the Balance Sheet of Sanjay and Chauhan sharing Profit and Losses in the ratio
of 3:2 as on 31st March, 2019
Capital Account Building 36,000
Sanjay 40,000 Plant and Machinery 30,000
Chauhan 50,000 Stock 24,000
Sundry Creditors 30,000 Debtors 21,000
Bills Payable 5,000 Less : R.D.D. 1,000 20,000
Bank 10,000
Furniture 5,000
1,25,000 1,25,000
On 01/04/2019 Rashmi is admitted on the following terms:
(1) She is to pay 50000 as her capital and 20,000 as her share of Goodwill.
(2) The new profit sharing ratio is to be 5:3:2
(3) The assets are to be revalued as under:
Building 50,000, Plant and Machinery 24,000
(4) RDD to be increased up to 2,000.
(5) The old partners decided to retain half of the amount of goodwill in the business.
(6) Sundry creditors should be revalued at 33,000
Give Revaluation Account, Capitals Accounts and Balance Sheet of New firm,
Q.20. The Balance Sheet of Oscar and James as on 31st March, 2012 is set out below, they share Profits
and losses in the ratio of 3 : 2.
Balance Sheet as on 31st March, 2012
Capital Accounts Buildings 40,000
Oscar 80,000 Furniture 10,000
James 60,000 Stock 24,000
General Reserve 48,000 Debtors 80,000
Profit & Loss A/c 20,000
Bills Receivable 10,000
2,20,000 2,20,000
They agreed to admit Henry as a partner into the firm on the following terms:
(i) He should bring 24,000 as capital and 18,000 as goodwill, which is to be retained in
the business. He will be entitled to 1/4th share in future profits of the firm.
(ii) 50% of General Reserve is to remain as Reserve for Doubtful Debts.
(iii) Furniture is to be depreciated by 5%
(iv) Stock is to be revalued at 30,000.
(v) Creditors of 2000 are not likely to claim and hence should be written off.
(vi) Rent of 1,000 due but not received and it has not been recorded in the books.
(vii) Bills Receivable taken over by James at the discount of 10%
Prepare, Revaluation A/c Partners Capital Accounts and Balance Sheet of the new firm.
Q.21. Kailash and Nandan share profits and losses in the ratio 3:2 in partnership firm. Their Balance
Sheet as on 31st March 2019 was as under:
Bills payable 15,000 Bills Receivable 5,700
Bank loans 24,000 Debtors 31200
General reserve 3,750 Less: R. D. D 1200 30,000
Capitals : Stock 18,000
Kailash 22,500 Furniture 7,050
Nandan 18,000 40,500 Machinery 7,500
Building 22,500
1,02,000 1,02,000
On 1.04.2019 they admitted Shankar on the following terms : -
(1) For 1/2 Share in profits in future, Shankar should bring 15,000 for capital and 7,500 for
goodwill in cash.
(2) Half of amount of goodwill is withdrawn by old partners.
(3) The Stock is to depreciated by 10% and Machinery by 5%
(4) RDD is to be maintained at 1,500
(5) Furniture should be appreciated to 8,025 and Building be appreciated by 20%
Pass the necessary Journal entries in the books of the firm.
Q.22. The Balances sheet of Bhavin and Sachin who share profit and losses in the ratio of 3:1 as at 31st
March 2018 was as under :
Workmen’s Compensation Reserve 15,000 Debtors 6,500
General Reserve 12,000 Less : Provision 500 6,000
Bhavin’s Capital 16,000 Bills Receivable 5,000
Sachin’s Capital 14,000 Stock 10,000
Land & Building 15,000
Goodwill 21,000
67,000 67,000
Rajesh was admitted on 1.4.2018 for 1/5th share on the following terms :
(1) Rajesh shall bring 10,000 for her share of goodwill and necessary amount for her share
of capital in cash.
(2) Anju, an old customer whose account was written off as bad, has paid 200 in cash in full
settlement of his dues.
(3) The market value of Land and Building be taken as 20,000.
(4) Workmen’s Compensation Reserve is to be increased by 5,000.
(5) Unaccounted Accrued Incomes of 100 to be accounted for.
(6) The capitals of all partners are to be in new profit sharing ratio taking old partners total
capital as base after adjustment. Actual cash is to be paid off or brought in by the partners
for adjusting their capital accounts.
Prepare Revaluation Account, Partner’s Capital Account and Balance Sheet after Rajesh’s
admission.
Q.23. Jeevan and Kailash are partners in a firm sharing profits and losses in the ratio of 4:1. Their
Balance Sheet as on 31st March, 2019 is as follows.
Capitals :
Jeevan 52,500 Goodwill 33,000
Kailash 37,500 Sundry Debtors 15,000
General Reserve 15,000 Less: RDD 1,500 13,500
Profit and Loss A/c 3,000 Land and Building 50,000
Creditors for goods 24,000 Bank 41,500
Creditors for expenses 6,000
1,38,000 1,38,000
On 1 April 2019 Nitin is admitted in the partnership on the following terms :
(1) Nitin to bring for 20% share in future Profits 22,500.
(2) Goodwill of the firm is valued at 37,500.
(3) RDD is no longer required.
(4) Rent receivable 2,250 to be adjusted in the books.
(5) Capital Accounts of partners to be adjusted in new profit sharing ratio by opening
Current Account
Prepare : 1) Profit and Loss Adjustment Account 2) Partner’s Capital A/c and
3) New Balance Sheet.
Q.24. Following is the Balance Sheet of Rock and Austin who shared profits and losses equally :
Capital A/cs : Rock 1,25,000 Plant and Machinery 45,000
Austin 35,000 Land and Building 84,000
Creditors 86,200 Patents 3,400
Bills Payable 28,000 Stock 47,800
General Reserve 6,800 Furniture 10,600
Debtors 80,000
Cash 10,200
2,81,000 2,81,000
On 1 April, 2013 they agreed to admit Cena on the following terms and conditions:
st
(1) Cena to bring for 1/3rd share in future profit in cash 90,000 towards his capital.
(2) The firm's goodwill should be raised to 90,000 and it is to be written off after Cena
admission in new profit ratio.
(3) Plant and Machinery was found undervalued by 10% and Land and Building was found
overvalued by 20%.
(4) Stock is to be increased by 2,200 and furniture to be reduced to 10,000.
(5) Out of creditors 1,200 is no more payable.
(6) The Capital Accounts to be adjusted in new profit sharing ratio by opening the current
accounts.
Prepare Revaluation Account, Capital Accounts and New Balance Sheet.
Q.25. Mr. Vidhi & Mrs. Twinkle were in Partnership sharing profits & losses in the proportion of 3:1
respectively. Their Balance Sheet as on 31st March 2019 of their business was as follows.
Balance Sheet as on 31st March. 2019
Capitals : Building 45,000
Vidhi 45,000 Stock 30,000
Twinkle 37,500 Debtors 23,250
Sundry Creditors 15,750 Cash 3,000
General Reserve 3,000
1,01,250 1,01,250
Tushar is admitted as a partner in the firm on the following terms :
1 He shall have 1/4 the share in profits of the firm.
2. Tushar shall bring in cash 30,000 as his capital and 15,000 as his share of goodwill.
3 Building overvalued by 6,000 and the stock is undervalued by 20% in the books, these
asset are to be adjusted at their proper values.
4. Provided Reserve for Doubtful Debts 600 on Debtors.
You are required to prepare Revaluation A/c. Capital accounts of partners and Balance Sheet
of the firm after admission of Tushar.
Q.26. Sakshi and Sam were partners in a firm sharing profits in the ratio of 3:1. Their Balance Sheet as
on 31st March, 2019 on which date Saif is admitted as a partner is as follows.
Creditors 30,000 Debtor 50000
Bills Payable 1,000 Less: Provisions 5000 45,000
Reserve Fund 16,000 Stock 30,000
Outstanding Salary 3,000 Bills Receivable 10,000
Capital Account: Patents 1,000
Sakshi 60,000 Machinery 40,000
Sam 20,000 80,000 Cash 4,000
1,30,000 1,30,000
They admitted Saif as a new partner on 1 Apri 2019. New Profit sharing ratio is agreed 3:2:3,
st
Saif brings 48,000 as capital

Adjustments :
1 Saif paid 16,000 as his share of goodwill privately to the partners.
2. Provision for doubtful debts is to be reduced by 2,000.
3. Unrecorded Computer valued at 2,400 not appearing in the books of the firm. It is now
to be recorded.
4. Patents are useless.
Prepare : Revaluation Account, Capital A/c and New Balance Sheet.
Q.27. Krisha and Kuldeep are equal partners in the business. Their Balance sheet as on 31st March
2018 stood as under.
Balance Sheet as on 31 March 2018
Sundry Creditors 22,500 Cash in Bank 15,500
Capitals : Debtors 7,750
Krisha 11,250 Less: R.D.D 250 7,500
Kuldeep 7,500 18,750 Building 13,750
General Reserves 4,500 Machinery 6,000
Bills Receivable 3,000
45,750 45,750
They decided to admit Khushi on 1st April 2018 on the following terms:
1. The Machinery and Building be depreciated by 10%. Reserve for Doubtful Debts to be
increased by 1,250.
2. Bills Receivable are taken over by Krisha at the discount of 10%
3. Khushi should bring 15,000 as capital for her 1/4th share in future profits.
4. The capital accounts of all the partners be adjusted in proportion in the new profit
sharing ratio by opening current accounts of the partners.
Prepare Profit and Loss Adjustment A/c, Partner’s capital A/c, Balance sheet of new firm.
Q.28. Akash and Suraj are partners in a firm sharing profits and losses in the ratio 3 : 2. Their balance
sheet as on 31st Mar, 2013 was as follows :
Balance Sheet as on 31st Mar, 2013
Liabilities Debit ( ) Assets Credit ( )
Capital A/c’s: Furniture 2,100
Akash 50,000 Stock 28,700
Suraj 50,000 Land and Building 35,000
General Reserve 10,000 Plant and Machinery 49,000
Sundry Creditors 60,000 Sundry Debtors 63,000
1,87,000 1,87,000
They agreed to admit Sanjay in their partnership on 1st Apr, 2013, on the following terms:
(1) Sanjay should bring 1,500, as his share of goodwill in the firm, and 20,000 as his capital.
(2) Reserve for doubtful debts is to be provided @ 5% on debtors.
(3) Land and building be depreciated at 10% p.a.
(4) Plant and machinery to be depreciated @ 5% and stock to be depreciated @ 10% p.a.
(5) The new profit sharing ratio will be 2 : 1 : 1.
Prepare:
(a) Revaluation Account.
(b) Partner’s Capital Accounts.
(c) New Balance Sheet of the firm. (March 2015)
Q.29. Rani and Geeta are partners sharing profits and losses 3:2 respectively. Their position on 31st
March, 2013 was as follows:
Liabilities Debit ( ) Assets Credit ( )
Capital A/c’s Building 1,00,000
Rani 1,00,000 Furniture 10,000
Geeta 75,000 Stock 31,000
Creditors 10,000 Debtors 50,000
Bills payable 5,000 Less : R.D.D. − 1,000 49,000
General Reserve 15,000 Bank Balance 15,000
2,05,000 2,05,000
On 1st April, 2013 they admitted Suvarna on the following terms:
(1) Suvarna should bring in cash 1,00,000 as capital for 1/5th share in future profit and
25,000 as goodwill.
(2) Building should be revalued at 1,25,000.
(3) Depreciate furniture @ 12 ½% p.a. and stock @ 10% p.a.
(4) R.D.D. should be maintained as it is.
(5) The Capital Accounts of partners should be adjusted in their new profit sharing ratio
through bank account.
Prepare:
Profit and Loss Adjustment Account, Capital Accounts and Balance Sheet of the new firm.
(March 2016)
Q.30. Following is the Balance Sheet of Harish and Girish.
Creditors 38,000 Cash in hand 37,000
Bills payable 46,000 Stock 21,000
Profit and Loss Debtors 46,000
account 16,000 Less : R.D.D. 6,000 40,000
Capital A/c’s Equipments 12,000
Harish 1,00,000 Furniture 25,000
Girish 1,40,000 Plant 85,000
Building 1,20,000
3,40,000 3,40,000
They admitted Shirish on 1st April, 2013 on following conditions:

(1) For his 1/3 share in future profit, Shirish brings 2,00,000 as his capital.
(2) It is decided to raise goodwill by 90,000 and write it off fully after Shirish’s admission.
(3) Equipments and plant to be depreciated by 20% and 10% respectively and building to be
appreciated by 15%.
(4) Bills payable were retired for 35,000.
(5) All debtors are considered good.
(6) Furniture of the book value 12,000 was taken over by Harish at 40% of the book value.
Prepare:
(1) Revaluation account.
(2) Partner’s capital account.
(3) Balance Sheet of new firm. (July 2016)
Q.31. Ram and Madan were partners in a firm sharing profits and losses equally. Following was their
balance sheet as on 31.03.2012:
Balance Sheet as on 31.03.2012
Capital : Plant and machinery 90,000
Ram 1,00,000 Furniture 15,000
Madan 1,00,000 Sundry debtors 92,600
General reserve 40,000 Less: R.D.D 1,600 91,000
Sundry creditors 55,300 Stock 68,000
Cash in hand 4,200
Cash at bank 27,100
2,95,300 2,95,300
On 1st April, 2012, Soham was admitted as a partner in the firm on the following terms:
(1) Soham is to bring in 1,00,000 as his capital. He is to be given 1/3rd share in future
profits.
(2) Goodwill of the firm to be raised at 30,000. It was decided that ‘goodwill’ should not
appear in the books of the new firm.
(3) Furniture to be depreciated by 10%. Stock was valued at 70,500.
Prepare:
(1) Profit and Loss Adjustment Account.
(2) Partners’ Capital Accounts.
(3) Balance Sheet of the new firm. (March 2017)
Q.32. Ganga, Yamuna are partners sharing profits and losses 3:2 respectively. Their position on
31.03.2013:
Balance Sheet as on 31.03.2013
Capital : Building 1,00,000
Ganga 1,00,000 Furniture 10,000
Yamuna 75,000 Stock 31,000
Creditors 10,000 Debtors 50,000
Bills Payable 5,000 Less: R.D.D –1,000 49,000
General Reserve 15,000 Bank 15,000
2,05,000 2,05,000
On 1st April, 2013, they admitted Saraswati on the following terms:
(1) Saraswati should bring in cash 1,00,000 as capital for 1/5 share in future profit and
25,000, as goodwill.
(2) Building should be revalued for 1,25,000.
(3) Depreciate furniture at 12½% p.a. and stock at 10% p.a.
(4) R.D.D. should be maintained as it is.
(5) The capital accounts of partners should be adjusted in their new profit sharing ratio
through bank account.
Prepare:
(1) Profit and Loss Adjustment Account
(2) Capital Account
(3) Balance Sheet of new firm (July 2017)
Q.33. The Balance Sheet of Meena and Heena who shared the profits and losses in the ratio of 2 : 1 is
as under:
Capital : Leasehold property 20,000
Meena 1,34,000 Livestock 6,600
Heena 1,20,000 Loose tools 90,200
Rent outstanding 10,000 Debtors 48,000
Reserve fund 7,200 Less: R.D.D. 2,000 46,000
Bank 75,400
3,25,000 3,25,000
On 1st April, 2016, Seema was admitted as ¼ th partner on the following terms:
(1) Seema should bring in 1,20,000 towards her capital.
(2) Firm’s goodwill is valued at 1,44,000 and Seema agreed to bring her share in the firm’s
goodwill by a cheque.
(3) Reserve for doubtful debts should be maintained at 7.5% on debtors.
(4) Increase live stock by 4,400 and write off loose tools by 20%.
(5) Outstanding rent 9,040 is paid in full settlement.
Prepare:
(1) Profit and Loss Adjustment Account.
(2) Partners’ Capital Account.
(3) Balance Sheet of the new firm. (March 2018)
Q.34. Darshan and Amar were partners sharing profit and losses in the proportion of 2:1. Their
Balance Sheet is as follows :
Capital: Building 1,00,000
Darshan 96,000 Furniture 20,000
Amar 64,000 1,60,000 Equipments 10,000
General Reserve 18,000 Debtors 63,000
Profit and Loss A/c 6,000 Less: R.D.D. 3,000 60,000
Pawan’s Loan A/c 26,000 Cash 16,000
2,90,000 2,90,000
On 1st April, 2016, Ranjit is admitted in the partnership on the following terms:
(1) Ranjit should bring in cash 48,000 as capital for 1/5th share in future profits.
(2) Goodwill was raised in the books of the firm for 18,000.
(3) Building is revalued at 1,12,000 and the value of stock to be reduced by 6,000.
(4) Reserve for doubtful debts be maintained at 1,800.
(5) Pawan’s loan is to be repaid.
Prepare:
(1) Revaluation A/c
(2) Capital A/c’s of Partners and
(3) Balance Sheet of the new firm (July 2018)
Q.35. Following is the Balance Sheet of Harsha and Varsha’s firm on 31st March, 2016. They share
profit and losses in the ratio of 3: 2.
Liabilities ( ) Assets ( ) ( )
Capital A/Cs: Land and building 2,00,000
Harsha 2,80,000 Furniture 76,000
Varsha 2,80,000 Sundry debtors 3,00,000
Sundry creditors 4,00, 000 Stock 1,60,000
Cash at bank 2,24,000
9,60,000 9,60,000
They decided to admit Asha on 1st April, 2016, into partnership on the following terms:
(1) Asha should bring 80,000 as her share of goodwill, which is to be retained in the
business.
(2) She should bring 1,00,000 as her capital for ¼ th share in future profits.
(3) Land and building to be valued at 2,40,000 and furniture be reduced by 10%.
(4) A provision of 5% on debtors to be made for doubtful debts.
(5) The stock is to be taken at a value of 2,00,000.
(6) The excess of capital of Harsha and Varsha over their due proportion of sharing profits in
the firm is to be transferred to their respective loan acoounts.
Prepare:
Profit and Loss Adjustment Account, Partners’ Capital Accounts and new Balance Sheet of the
firm. (March 2019)
Q.36. Jayesh and Kamal are partners in a firm sharing profits and losses in the ratio 3 : 1. The
following is their Balance Sheet as on 31st March, 2016:
Capital accounts: Building 60,000
Jayesh 60,000 Stock 40,000
Kamal 50,000 Sundry debtors 31,000
Current accounts Cash 4,000
Jayesh 3,000 Profit and loss account 5,000
Kamal 2,000
Sundry creditors 21,000
General reserve 4,000
1,40,000 1,40,000
They admitted Vimal as a partner on 1st April, 2016 in the firm on the following terms:
(1) He should bring 40,000 as his capital for 1/4 th share in future profit and 20,000 as his
share of goodwill.
(2) Building is found overvalued by 20% and stock is found undervalued by 20% in the
books. These assets are to be adjusted at their proper values.
(3) 1,000 are to be maintained as reserve for doubtful debts.
Prepare:
(a) Revaluation account
(b) Old Partners’ Current Accounts
(c) Balance Sheet of the firm after Vimal’s admission (March 2020)
TRY YOUR SELF (CAF)
Q.37. X, Y and Z who are presently sharing profits & losses in the ratio of 5:3:2, decide to admit W for
1/6th share with effect from 1st April, 2020. An extract of their Balance Sheet as at 31st March,
2020 is as follows:
Sundry Creditors 3,00,000 Land & Building 2,50,000
Outstanding Rent 10,000 Plant & Machinery 1,00,000
Stock 80,000
Debtors 3,00,000
Less: Provision 10,000 2,90,000
It is decided that:
1. Land & Building be valued at 2,85,000.
2. Plant & Machinery be depreciated by 15%.
3. Stock is found overvalued by 38,000.
4. Provision for doubtful debts is to be made equal to 5% of the debtors.
5. An item of 30,000 included in Sundry Creditors is not likely to be claimed.
6. Rent of 4,000 still outstanding.
7. Out of the amount of insurance which was debited entirely to P & L A/c. 5,000 be
carried forward as an unexpired insurance.
8. Out of total commission received 3,000 is to be treated as advance commission. This
amount was earlier credited to Profit & Loss Account.
9. An unaccounted accrued income of 1,000 be provided for.
10. A debtor whose dues of 5,000 were written off as bad debts paid 4,000 in full
settlement.
Required: Pass the necessary Journal Entries and prepare Revaluation Account.
Q.38. The Balance Sheet of X & Y, a partnership firm, as at 31st March, 2004 is as follows:
Capital Account: Goodwill 14,000
X 26,400 Land & Building 14,400
Y 33,600 60,000 Furniture 2,200
Cash at Bank 12,000
75,000 75,000
X & Y share profits and losses as 1 : 2. They agree to admit Z (who is also in business on his
own) as a third partner from 1.4.2004.
The assets are revalued as under:
Goodwill - 18,000, Land and Building 30,000, Furniture 6,000. Z brings the following assets
into the partnership – Goodwill 6,000, Furniture 2,800, Stock 13,600.
Profit in the new firm are to be shared equally by three partners and the Capital Accounts are
to be so adjusted as to be equal. For this purpose, additional cash should be brought in by the
partner or partners concerned.
Prepare the necessary accounts and the opening Balance Sheet of new firm, showing the
amounts of cash, if any, which each partner may have to provide.
Q.39. Dinesh, Ramesh and Naresh are partners in a firm sharing profit and losses in the ratio of 3:2:1.
Their Balance Sheet as on 31st March, 2018 is as below:
Trade Payables 22,500 Land & Buildings 37,000
Outstanding Liabilities 2,200 Furniture & Fixtures 7,200
General Reserve 7,800 Closing Stock 12,600
Capital Accounts: Trade Receivables 10,700
Dinesh 15,000 Cash in Hand 2,800
Ramesh 15,000 Cash at Bank 2,200
Naresh 10,000 40,000
72,500 72,500
The partners have agreed to take Suresh as a partner with effect from 1st April, 2018 on the
following terms:
(i) Suresh shall bring 8,000 towards his capital .
(ii) The value of stock to be increased to 14,000 and Furniture & Fixtures to be depreciated
by 10%.
(iii) Reserve for bad and doubtful debts should be provided at 5% of the Trade Receivables.
(iv) The value of Land & Buildings to be increased by 5,600 and the value of the goodwill be
fixed at 18,000.
(v) The new profit sharing ratio shall be divided equally among the partners.
The outstanding liabilities included 700 due to Ram which has been paid by Dinesh.
Necessary entries were not made in the books.
Prepare (i) Revaluation Account, (ii) Capital Accounts of the partners,
(iii) balance Sheet of the firm after admission of Suresh.
Q.40. The Balance Sheet of X and Y who shares profits and losses in the ratio of 3 : 2, at 31st March,
2020 was as follows:
Creditors 36,000 Cash at Bank 20,000
Workmen’s Compensation Fund 24,000 Debtors 1,30,000
Employees’ Provident Fund 20,000 Less: provision 10,000 1,20,000
X’s Capital 1,68,000 Investments 1,00,000
Y’s Capital 1,12,000 Patents 20,000
Goodwill 80,000
4,00,000 4,00,000
They decided to admit Z on that Date for 1/4th share on the following terms:
(a) New Profit Sharing Ratio will be 6 : 9 : 5. Z brings in 83,000 as his capital.
(b) Goodwill of the firm is to be valued at 4 years’ purchase of the average super profits of
the last three years. Average profits of the last three years are 90,000., while the normal
profits that can be earned with the capital employed are 50,000. No goodwill is to
appear in the books. Z brings in 24,000 cash out of his share of goodwill.
(c) Patents are overvalued by 17,000 and Stock to be written up to 62,000. 20% of General
Reserve to be transferred to Provision for Doubtful Debts. 3,000 included in Sundry
Creditors be written back as no longer payable.
(d) Out of the amount of insurance which was debited entirely to P & L A/c. 10,000 be
carried forward as an Unexpired Insurance. A debtor whose dues of 10,000 were
written off as bad debts paid 8,000 in full settlement. A claim of 6,000 on account of
workmen’s compensation to be provided for.
(e) Half of investments are to be taken over by old partners in their profit sharing ratio and
remaining valued at 40,000.
Prepare the Revaluation Account, Capital Accounts of the Partners and the Balance sheet of the
new Firm.
Q.41. The following is the Balance Sheet of A, B and C sharing profits and Losses in the proportion of
6/14, 5/14 and 3/14 respectively :
Bills Payable 12,600 Debtors 52,920
Capital Accounts : Furniture 14,700
A 70,800 Land and Building 90,300
B 59,700 Goodwill 10,500
C 29,100
2,31,000 2,31,000
They agreed to take D into partnership and give him 1/8th share on the following terms:
(i) That furniture to depreciated by 1,840.
(ii) That stock be depreciated by 10%.
(iii) That a provision of 2,640 be made for outstanding repair bills.
(iv) That the value of land and building, having appreciated, be brought upto 1,19,700.
(v) That the value of goodwill be brought up to 28,140.
(vi) That D should bring in 29,400 as his capital.
(vii) That after making the above adjustments the Capital accounts of old partners be adjusted
on the basis of the proportion of D’s capital to his share in the business and actual cash to
be paid off or brought in by the old partners, as the case may be.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance sheet of the new firm.
Q.42. The Balance Sheet of A & B, a partnership firm, as at 31st March, 2001 is as follows:
Capital Account: Goodwill 14,000
A 26,400 Land & Building 14,400
B 33,600 60,000 Furniture 2,200
Contingency Reserve 6,000 Stock 26,000
Cash at Bank 12,000
75,000 75,000
A & B share profits and losses as 1 : 2. They agree to admit C (who is also in business on his
own) as a third partner from 1.4.2001.
The assets are revalued as under:
Goodwill - 18,000, Land and Building 30,000, Furniture 6,000. C brings the following assets
into the partnership – Goodwill 6,000, Furniture 2,800, Stock 13,600.
Profit in the new firm are to be shared equally by three partners and the Capital Accounts are
to be so adjusted as to be equal. For this purpose, additional cash should be brought in by the
partner or partners concerned.
Prepare the necessary accounts and the opening Balance Sheet of new firm, showing the
amounts of cash, if any, which each partner may have to provide.
Q.43. Hari and Ram were in partnership, sharing profits and losses equally. On 1st January, 1999.
Suraj was admitted into partnership on the following terms:
Suraj is to have one-sixth share in the profit/losses, which he has got from Hari, paying him
40,000 for that share as goodwill. Out of this amount. Hari is to withdraw 30,000 and the
balance amount is to remain in the firm. It was further agreed that the value of investments
should be reduced to 18,000 and plant to be valued at 29,000. Creditors were to be reduced
to 3,000 as one of the creditors has business and gone.
Suraj is to bring in proportionate capital on his admission.
The Balance sheet is at 31st December, 1998 was as follows:
Creditors 1,05,000 Cash at Bank 40,000
Capitals Book Debts 60,000
Hari 60,000 Stock 50,000
Ram 60,000 1,20,000 Investments 30,000
Furniture 10,000
Plant 35,000
2,25,000 2,25,000
The profits for the year ended 31st December 1999 were 60,000 and the drawings were: hari
15,000; Ram 22,500 and Suraj 7,500
Journalise the entries on Suraj’s admission and give the Capital Accounts and the Balance Sheet
as at 31st December 1999.
Q.44. A and B are Partners of X & Co. sharing profits and loses in 3:2. Ratio between themselves. On
31st March, 1998, the Balance Sheet of the firm was as follows:
Balance Sheet of X & Co. as at 31.3.1998
Capital Accounts: Plant And Machinery 20,000
A 37,000 Furniture and Fitting 5,000
B 28,000 65,000 Stock 15,000
Cash on Hand 10,000
70,000 70,000
X agrees to join the business on the following conditions as and firm 1.4.1998.
(a) He will introduce 25,000 as his capital and pay 15,000 at the partners as premium for
Goodwill for 1/3rd share of the future profits of the firm.
(b) A revaluation of assets of the firm will be made by reducing the value of Plant and
Machinery to 15,000, Stock by 10% Furniture and Fittings by 1,000 and by making a
provision of bad and doubtful debts at 750 on Sundry debtors.
You are asked to prepare Profit and Loss Adjustment Account, Capital accounts of partners
including the incoming partner X, Balance Sheet of the firm after admission of X and also find
out the new profit sharing ratio assuming that the relative ratios of the old partners will be in
equal proportion after admission.
Q.45. A, B C were in partnership, sharing profits and losses as to A one-half, B one-third and C one-
sixth. As from 1st January 1996 they admitted D into Partnership on the following terms:
D to have a one –sixth share which he purchased entirely from A paying A 8,000 for that
share of Goodwill. Of this amount, A had withdrawn 6,000 and put the balance in the firm as
additional capital. As a condition to admission of D as a partner, D also brought 5,000 capital
into the firm. It was further agreed that the investment should be valued at its market value of
3,600 and plant be valued at 5,800.
The Balance Sheet of the old firm on 31.12.1995 was as following:
Cash at Bank 8,000; Debtors 12,000; Stock 10,000; Investments at Cost 6,000; Furniture
2,000 Plant 7,000 Creditors 21,000; Capital: A 12,000; B 8,000 and C 4,000.
The profits for the year 1996 were 12,000 and the drawings were: A 6,000, B 6,000, C 3,000
and D 3,000.
You are required to Journalise the opening adjustments, prepare the opening Balance Sheet of
the new firm as on 1st January, 1996 and five the capital account of each partner as on 31st
December, 1996.
Q.46. On 31st March, 1996 the Sheet of M/s P, R and S sharing profit and losses in the ratio of 6:5:3,
stood as follows:
Sundry Creditors 37,800 Cash 3,780

Bills Payable 12,600 Sundry Debtors 52,920
Capital Accounts: Furniture 14,700
P 70,800 Land & Buildings 90,300
S 29,100 Goodwill 10,500
R 59,700
2,31,000 2,31,000
They agree to admit Q into partnership giving him 1/8th share, on 1.4.1996 on the following
terms:
1. Furniture be depreciated by 1,840.
2. Stock shall be valued 10% less than the balance sheet value.
3. A provision of 2,640 be made for outstanding repair bill.
4. The value of land and buildings having appreciated be brought up-to 1,19,700.
5. Value of Goodwill be brought up-to 28,140.
6. Q should bring in cash 29,400 as his capital.
After making the above adjustments, the capital accounts of the old partners be adjusted on the
basis of proportion of Q’s Capital to his share in the business by bringing in or taking out cash.
You are required to prepare Revaluation Account, Capital Accounts of Partners, Cash Account
and Balance Sheet as on 1.4.1996 after Q’s admission.
Q.47. A and B are partnership sharing profits and losses in the proportion of three, fourth and one-
fourth respectively. Their Balance Sheet on 31st march, 1995 was as follows:
Cash 1,000; Sundry Debtors 25,000; Stock 22,000; Plant and machinery 4,000; Sundry
Creditors 12,000; bank Overdraft 15,000; A’s Capital 15,000; B’s Capital 10,000. On 1st April,
1995 they admitted C into Partnership on the following terms:
(a) C to purchase one-third of the Goodwill for 2,000 and provide 10,000 as capital.
Goodwill not to appear in books.
(b) Future profits and losses are to be shared by A, B and C equally,
(c) Plant and Machinery is to be reduced by 10% and 500 is to be provided for estimated
bad debts. Stock is to be take at a valuation of 24,940.
(d) By bringing in, or withdrawing cash, capitals of A and B are to be made Set our entries
relating to the above arrangement in the firm’s journal, give partner’s Capital Account in
tabular form and submit the opening balance Sheet of the new firm.



Admission of Partners

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Admission of Partners

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CA FOUNDATION THE COMMERCE HUB

Asset A/c Dr. Revaluation A/c Dr.

Revaluation A/c Dr. Liability A/c Dr.

Undistributed / Accumulated Profits and Losses:

Undistributed Profits: Undistributed Losses:

Capital introduced by new partners:

 Calculate the following

TREATMENT OF GOODWILL (For SYJC)

 When goodwill given in Old Balance Sheet: (Revaluation of Goodwill)

following terms and condition :

Capital Accounts : Stock 36,000

Cash/Bank A/c Dr. New Partner’s Capital A/c Dr.

If goodwill amount is withdrawn by old partners partly or fully :

When new partner pays premium for goodwill privately / secretly :

CHANGE IN PROFIT SHARING RATIO

TRY YOUR SELF

Saif brings 48,000 as capital

They admitted Shirish on 1st April, 2013 on following conditions:

TRY YOUR SELF (CAF)

Sundry Creditors 37,800 Cash 3,780

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