{"id":39247,"date":"2022-12-07T18:37:43","date_gmt":"2022-12-07T13:07:43","guid":{"rendered":"https:\/\/tsboardsolutions.com\/?p=39247"},"modified":"2022-12-07T18:37:43","modified_gmt":"2022-12-07T13:07:43","slug":"ts-inter-2nd-year-accountancy-study-material-chapter-5","status":"publish","type":"post","link":"https:\/\/tsboardsolutions.com\/ts-inter-2nd-year-accountancy-study-material-chapter-5\/","title":{"rendered":"TS Inter 2nd Year Accountancy Study Material Chapter 5 Admission of a Partner"},"content":{"rendered":"
Telangana TSBIE TS Inter 2nd Year Accountancy\u00a0Study Material<\/a> 5th Lesson Admission of a Partner Textbook Questions and Answers.<\/p>\n Very Short Answer Questions<\/span><\/p>\n Question 1. Question 2. <\/p>\n Question 3. Question 4. Question 5. Question 6. Question 7. Question 8. <\/p>\n Question 9. Question 10. Question 11. Question 12. Question 13. Question 14. Question 15. Question 16. Question 17. Question 18. Question 19. Question 20. <\/p>\n Question 21. Question 22. Question 23. Question 24. Question 25. Textual Problems<\/span><\/p>\n Question 1. Balance sheet of Ram, Rahim, Peter as on 01-04-2019 Question 2. <\/p>\n Question 3. Question 4. Question 5. Question 6. <\/p>\n Question 7. Question 8. Working Notes: Question 9. Balance Sheet as on 31-03-2020 <\/p>\n Question 10. On 1st April 2020, they admitted Mani as partner for 1\/4th share in the profits of the firm. The conditions of admission are as under: Problems on Creation of Goodwill<\/p>\n Question 11. Question 12. Question 13. <\/p>\n Question 14. Goodwill created and written off:<\/p>\n Question 15. Problems on Capital Adjustments:<\/p>\n Question 16. Working Notes: Question 17. Balance Sheet of X, Y, Z as on 31-3-2020 <\/p>\n Textual Examples<\/span><\/p>\n Question 1. (Note: It is to be understood that the 1\/5 share given to new partner C is contributed\/ sacrificed by A & B in their old profit sharing ratio, i.e., 3: 2. Even we calculate the ratio of sacrifice by A and B it will be same i.e., 3: 2 respectively. Question 2. Calculation of new profit sharing ratio: Thus the new profit sharing ratio of X, Y and Z are 2 : 2 : 1 i.e., 2\/5, 2\/5, 1\/5 respectively.<\/p>\n Question 3. Question 4. Question 5. Question 6. Question 7. Question 8. Question 9. Question 10. Question 11. Question 12. Question 13. <\/p>\n Question 14. Question 15. Therefore, goodwill brought in by new partner shared by A and B in their respective share of sacrifice ratio i.e., 2: 3. Question 16. Question 17. Question 18. Question 19. A’s capital balance is Rs. 45,000, but he has to contribute Rs. 40,000 towards capital. So he is having excess capital of Rs. 5,000. So Rs. 5,000 to be returned to A. The entries are: Question 20. Note:<\/p>\n <\/p>\n Question 21. Journal Entries Balance Sheet of Phani, Mani and Krishna as on 1st April 2020 Question 22. Question 23. <\/p>\n When Goodwill is created in the Books:<\/p>\n Question 24. Question 25. Question 26. Question 27. <\/p>\n Adjustment of capitals based on New Profit sharing Ratio:<\/p>\n Question 28. Working Notes: 2. Ascertainment of total capital of the firm: Telangana TSBIE TS Inter 2nd Year Accountancy\u00a0Study Material 5th Lesson Admission of a Partner Textbook Questions and Answers. TS Inter 2nd Year Accountancy Study Material 5th Lesson Admission of a Partner Very Short Answer Questions Question 1. What are the aspects which require attention when a new partner is admitted? Answer: The following Adjustments are … Read more<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[26],"tags":[],"yoast_head":"\nTS Inter 2nd Year Accountancy Study Material 5th Lesson Admission of a Partner<\/h2>\n
\nWhat are the aspects which require attention when a new partner is admitted?
\nAnswer:
\nThe following Adjustments are to be made in the books of accounts at the time of admission of a new partner. They are:<\/p>\n\n
\nWhat is a Revaluation account?
\nAnswer:
\nAn account prepared with the specific purpose of recording changes in the value of assets and liabilities of a partnership firm. It is called a Revaluation account.<\/p>\n
\nWhy Revaluation account is prepared?
\nAnswer:<\/p>\n\n
\nWhat is goodwill?
\nAnswer:<\/p>\n\n
\nState the essential features of goodwill.
\nAnswer:
\nFeatures of goodwill:<\/p>\n\n
\nWhat is Ratio of sacrifice?
\nAnswer:<\/p>\n\n
\nRatio of sacrifice = Old profit sharing Ratio – New profit sharing Ratio.<\/li>\n<\/ol>\n
\nX and Y are partners sharing profits and losses in the ratio of 3: 2. They decided to admit Mr. Z for 1\/5 share in profit. Calculate new profit-sharing ratio of X, Y and Z.
\nAnswer:
\nOld ratio of X and Y = 3: 2
\nAssume total profit = 1
\nShare of Z = 1\/5
\n
\nThe remaining profit is 1 – 1\/5 = 4\/5 will be given to X and Y in their old profit-sharing ratio<\/p>\n
\nRam and Rahim are partners sharing profits and losses in the ratio of 5: 3. They decided to admit Robert by giving him a 2,8th share in the profits. Calculate new profit-sharing ratio.
\nAnswer:
\nOld ratio of Ram and Rahim 5 : 3
\nAssume total profit = 1
\nShare of Robert 2\/8 th
\n<\/p>\n
\nA and B are partners sharing profits and losses equally. They decided to admit Krishna for 1\/5th share of profit in the business. Calculate New profit-sharing ratio of A, B & C.
\nAnswer:
\nOld ratio of A and B is 1 : 1
\nAssume total profit = 1
\nKrishna share (given) = 1\/5
\n
\n= 4 : 4 : 2
\n= 2 : 2 : 1.<\/p>\n
\nRadha and Rani share profits in the ratio of 4: 3. Mamatha admitted into business for l\/8th share in the future profits. Calculate new profit-sharing ratio.
\nAnswer:
\nOld ratio of Radha and Rani = 4 : 3
\nGive share to Mamatha 1\/8 th
\nTotal profits assumed ‘1’
\n<\/p>\n
\nX and Y are partners sharing profits & losses in the ratio of 3\/5 and 2\/5 respectively. They decided to admit Mr. Z for 3\/7th share in profits, which he takes 2\/7th share from X and 1\/7th share from Y. Calculate New profit sharing ratio.
\nAnswer:
\nProfit sharing ratio of X and Y = 3\/5 : 2\/5
\nGive to Z = 3\/7th
\nNew Profit shares ratio = Old profit sharing ratio – Share profit given to new partner
\n<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 5: 3 respectively. Mr. C is admitted for 3\/8th share of profit, which he takes 2\/8th from Mr. A and 1\/8th from Mr. B. Calculate new profit sharing ratio.
\nAnswer:
\nOld ratio of A and B = 5\/8 : 3\/8
\nC’s New share 3\/8th
\nNew Profit shares ratio = Old profit sharing ratio – Share profit given to new partner
\n<\/p>\n
\nAkbar and Anthony are partners sharing profits and losses in the ratio of 3 : 2 respectively. Mr. Amar is admitted into partnership. The new profit sharing ratio of Akbar, Anthony and Amar is 5 : 3 : 2 respectively. Calculate Ratio of sacrifice of old partners.
\nAnswer:
\nAkbar and Anthony old ratio = 3:2
\nAkbar and Anthony old ratio = 3:2
\nRatio of Akbar, Anthony and Amar is 5: 3: 2
\nSacrifice of old partners = Old ratio – New ratio
\n
\nRatio of sacrifice 1 : 1.<\/p>\n
\nSitha and Geetha are partners sharing profits and losses in the ratio of 4: 3 respectively. Kavitha joined as new partner. The new profit sharing ratio of Sitha, Geetha and Kavitha is 7: 4: 3. Calculate Ratio of sacrifice of Sitha and Geetha.
\nAnswer:
\nSitha and Geetha profit sharing ratio = 4:3
\nSitha, Geetha, Kavitha New profit sharing ratio = 7 : 4 : 3
\nSacrifies Raju = Old ratio – New ratio
\n
\nRatio of sacrifice Sitha and Geetha = 1 : 2.<\/p>\n
\nGive journal entry when goodwill is brought in cash.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nGive journal entry when general reserve is distributed to old partners.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nGive journal entry for distribution of undistributed profit among old partners.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nGive journal entry when goodwill is created\/raised in the books.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nGive journal entry when goodwill is written off in the books.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of 2: 3 respectively. They admitted Mr. Z into partnership for l\/4th share. For the purpose of admission of Mr. Z, Goodwill is valued at 3 years purchase of average profits of last 5 years. The profits of last 5 years were X 30,000, Rs. 40,000, Rs. 35,000, Rs. 45,000 and Rs. 50,000 respectively. Calculate the value of Goodwill.
\nAnswer:
\n
\nGoodwill = Average profit x Purchase of 3 years
\n= 40,000 x 3
\nGoodwill = Rs. 1,20,000.<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 5: 3 respectively. They admitted Mr. C into the partnership on 31-3-2020. On that date General Reserve a\/c showing a credit balance of Rs. 16,000 and P & L a\/c showing a credit balance t 24,000. Give necessary Journal entries.
\nAnswer:
\nJournal Entries
\n
\n<\/p>\n
\nRam and Ravan are in partnership sharing profits and losses in the ratio of 4: 3. They admitted, Vibhishana for 1\/4 share in profits, Vibhishana brings Rs. 40,000 for capital and Rs. 28,000 for goodwill in cash. Goodwill is retained in the business. Give necessary journal entries.
\nAnswer:
\nJournal Entries
\n<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2 respectively. They admitted Mr. C as new partner. He brings Rs. 40,000 as goodwill in cash. The goodwill is withdrawn by A and B from the business. Give necessary Journal entries.
\nAnswer:
\nJournal Entries
\n
\n<\/p>\n
\nRam and Sitha are in partnership sharing profits and losses in the ratio of 5: 3. They admitted Laxman as new partner for 1\/5 share of profit. The Goodwill of the firm is valued at Rs. 80,000. Pass necessary Journal entry to raise goodwill.
\nAnswer:
\nJournal Entries
\n<\/p>\n
\nSaritha and Kavitha are sharing profits and losses equally. They admitted Lalitha as new partner. Their new profit sharing ratio would be 2: 2: 1 respectively. The goodwill of the firm is valued at Rs. 1,00,000. The partners decided to create and write off goodwill completely. Pass necessary Journal entries.
\nAnswer:
\nJournal Entries
\n<\/p>\n
\nThe following was the Waianae sneer oi Jttam ana nanim, who were sharing profits and losses in the ratio of 2: 3. Their balance sheet as on 31 March 2019 was as under.
\nOn 1st April 2019, they agreed to admit Mr. Peter as new partner for l\/5th share in profits on the following terms:
\n(a) Peter should bring Rs. 40,000 for capital and Rs. 20,000 for goodwill in cash.
\n(b) Depreciates furniture by 5% and stock by 10%.
\n(c) Appreciate building value by 15%.
\n(d) Provide for bad debts at 5% on debtors.
\nGive necessary journal entries and ledger accounts and opening the balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\n
\n<\/p>\n
\n<\/p>\n
\nAmar and Akbar are partners sharing profits and losses in the ratio of 4: 3 respectively. Their balance sheet as on 31 March 2020 was as under.
\n
\nOn the above date, Anthony was admitted into partnership for 1\/4 share in the future profits on the following conditions:
\n(a) Anthony should bringRs. 35,000 towards capital andRs. 28,000 towards goodwill in cash.
\n(b) Land to be valued atRs. 20,000.
\n(c) Machinery valued atRs. 23,000.
\n(d) Stock be depreciated by 10%.
\n(e) Provide for bad debtsRs. 1,300.
\nPass necessary journal entries, ledger accounts and give balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\nAmar, Akbar, Anthony Balance Sheet as on 31.03.2020.
\n<\/p>\n
\nNaresh and Ramesh are partners in a firm sharing profits and losses in the ratio of 2: 1. Their balance sheet as on 31 March 2019 was as under.
\n
\nOn 1st April 2019, Suresh was admitted into partnership for 1\/6th share in the profits of the business. The terms of admission are:
\n(a) Suresh should bring Rs. 30,000 as his capital.
\n(b) Stock be depreciated by 5%.
\n(c) Machinery was valued at Rs. 50,000.
\n(d) Provide for bad debts @ 8% on debtors.
\n(e) Bill payable need not be paid Rs. 2,000.
\n(f) Suresh should pay Rs. 15,000 to Naresh and Ramesh as goodwill privately.
\nGive journal entries, necessary ledger accounts and balance sheet of new firm.
\n[Hints: Provision for bad debtsRs. 1,680 i.e., 21,000 x 8\/100. Provision already existing is Rs. 1,000. So Rs. 680 to be debited to Revaluation a\/c for provision. Deduction from debtors in balance sheetRs. 1,680 as provision.]
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\nBalance Sheet as on 1-04-2019
\n<\/p>\n
\nRaju and Rao are partners sharing profits and losses in the ratio of 3: 2. Their balance sheet as on 31 March 2020 was as under.
\n
\nThey decided to admit Mr. Reddy into partnership by giving him l\/4th share in future profits of the firm the following conditions:
\n(a) Reddy is to bring ^ 2,50,000 as capital andRs. 1,00,000 as goodwill in cash.
\n(b) Stock and Furniture to be depreciated by 10%.
\n(c) Make a provision of 5% on Sundry debtors.
\n(d) Land & Buildings are to be appreciated by 20%.
\nPrepare necessary ledger accounts and show the new balance sheet.
\nAnswer:
\n
\n
\nBalance Sheet of Raju, Rao & Reddy as on 31-3-2020
\n<\/p>\n
\nMr. X and Y are partners sharing profits and losses in the ratio of 4: 1. Their balance sheet as on 31 March 2020 was as under.
\n
\nThey agreed to take Mr. Z into partnership with effect from 1st April 2020 on the following terms:
\n(a) Mr. Z brings Rs. 40,000 towards goodwill and Rs. 60,000 as capital.
\n(b) The assets are revalued as under:
\nFurniture \u2014 Rs. 50,000
\nStock \u2014 Rs. 78,000
\nDebtors \u2014 Rs. 58,000.
\n(c) The goodwill will be retained in the business.
\nPrepare necessary ledger accounts and prepare balance sheet of new firm.
\nAnswer:
\n
\n
\nBalance Sheet of X, Y, Z as on 31-3-2020
\n<\/p>\n
\nVasu and Dasu are partners sharing profits and losses equally. Their balance sheet as on 31 March 2020 was as under:
\n
\nThey decided to admit Mr. Sonu from 1st April 2020 on the following conditions:
\n(a) Sonu has to pay Rs. 1,25,000 as capital for 1\/4th share in future profits.
\n(b) Sonu shall pay Rs. 30,000 as Goodwill.
\n(c) Machinery be depreciated by 10%.
\n(d) Buildings to be appreciated by 20%.
\n(e) Provide for bad debts @ 6% on debtors.
\nPass necessary journal entries to give effect to the above and give opening balance sheet of Vasu, Dasu and Sonu.
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\nBalance Sheet of Vasu, Dasu & Sonu as on 1-04-2020
\n<\/p>\n
\nGanesh and Sankar are the partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31 March 2020 was as under:
\n
\nOn 1st .April 2020, they decided to admit Mr. Balu, for 1\/4 share in the future profits. The conditions of admission are:
\n(a) Balu should bring Rs. 75,000 as capital and Rs. 40,000 as goodwill.
\n(b) The amount of goodwill is withdrawn from the business by old partners.
\n(c) Buildings be appreciated by 20%.
\n(d) Furniture and stock to be depreciated by 5%.
\n(e) There is an unrecorded liability in respect of workmen compensation Rs. 3,000.
\nGive journal entries, necessary ledger accounts and balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\n<\/p>\n
\nGanga and Yamuna are partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31st March 2020 was as follows.
\n
\nOn the above date they decided to admit Saraswathi for 2\/9\u201c share in profits of business. The conditions of admission are:
\n(a) Saraswathi should bringRs. 50,000 as capital andRs. 20,000 as goodwill.
\n(b) Land & Buildings be appreciated by 20%.
\n(c) Furniture be depreciated by 5% and stock by 10%.
\n(d) There is an unrecorded Investments valued atRs. 3,000 to be brought into books.
\n(e) Goodwill be retained in the business. New profit sharing of Ganga, Yamuna and Saraswathi is 4: 3: 2.
\nGive journal entries, Ledger accounts and Balance sheet of Ganga, Yamuna and Saraswathi.
\n[Hint: Ratio of sacrifice between Ganga and Yamuna is 7: 3 GoodwillRs. 20,000 distributed accordingly i.e.,Rs. 14,000 andRs. 6,000 Unrecorded InvestmentsRs. 3,000 credited to Revaluation a\/c and appear on assets side of New Balance Sheet.]
\nAnswer:
\nJournal Entries
\n
\n
\n<\/p>\n
\nOld ratio = 3 : 2,
\nNew ratio = 4 : 3 : 2
\nSacrificing ratio:
\nGanga = Old ratio – New ratio
\n
\n
\n
\nBalance Sheet of Ganga, Yamuna, Saraswathi as on 31-03-2020
\n<\/p>\n
\nP and Q are partners sharing profits and losses equally. Their balance sheet as on 31 March 2020 was as under.
\n
\nOn the above date Mr. R was admitted into partnership for 2\/9th share in future profits of the firm. The following are the terms of admission:
\n(a) R should bring Rs. 40,000 as capital andRs. 16,000 as goodwill.
\n(b) Half of their share of goodwill will be withdrawn from the business by the old partners.
\n(c) Provide for bad debts @ 5% on Trade debtors.
\n(d) Buildings are valued at Rs. 50,000.
\n(e) The new profit-sharing ratio of P, Q and R would be 4: 3: 2 respectively.
\nGive journal entries and opening balance sheet of P, Q and R.
\n[Hints: Ratio of sacrifice between P & Q is 1: 3. Goodwill Rs. 16,000 shared by P & Q i.e., Rs. 4,000 and Rs. 12,000. Goodwill withdrew by Rs. 2,000 and Q Rs. 6,000 in cash]
\nAnswer:
\nJournal Entries
\n
\n
\nWorking Note:
\nOld ratio = 1 : 1,
\nNew ratio = 4 : 3 : 2
\nSacrificing ratio = Old ratio – New ratio
\n
\n
\n<\/p>\n
\n<\/p>\n
\nVani and Rani are partners sharing profits and losses in the ratio of 1: 2 respectively. Their balance sheet as on 31 March 2020 was given below:
\n<\/p>\n
\n(a) Mani should bring Rs. 30,000 as capital and Rs. 21,000 as goodwill in cash.
\n(b) The assets are valued as follows:
\nMachinery Rs. 47,000; Buildings Rs. 25,000 Stock Rs. 38,000.
\n(c) Goodwill is to be retained in the business.
\n(d) The new profit-sharing ratio of Vani, Rani and Mani would be 1: 2: 1 respectively. Give necessary ledger accounts and opening balance sheet.
\n[Hint: Ratio of sacrifice between Vani and Rani is 1: 2 respectively and Goodwill Rs. 21,000 shared accordingly i.e., Rs. 7,000 & Rs. 14,000]
\nAnswer:
\nWorking Note: Old Ratio =1:2,
\nNew Ratio =1:2:1
\nSacrificing ratio = Old ratio – New ratio
\n
\nBalance Sheet of Vani, Rani & Mani as on 1-4-2020
\n
\n
\nBalance Sheet of Vani and Rani & Mani as on 1-4-2020
\n<\/p>\n
\nVani and Sarada are partners sharing profits and losses equally. Their balance sheet was as under as on 31 March 2020.
\n
\nOn the above date Neeraja was admitted for 1\/4th share in future profits on the following conditions.
\n(a) Neeraja should bring Rs. 50,000 as capital.
\n(b) Goodwill of business valued at Rs. 40,000.
\n(c) Stock revalued at Rs. 58,000 and Building at Rs. 40,000.
\n(d) Creditors increased by Rs. 3,000.
\nGive journal entries, necessary ledger accounts and balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\n
\nNew Balance Sheet as on 31-3-2020
\n<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31 March 2020 was as follows.
\n
\nMr. C was admitted into business on the above date for 1\/5 profit in the business on the following terms.
\n(a) C should bring Rs. 60,000 as capital.
\n(b) Goodwill of the firm valued at Rs. 40,000.
\n(c) Plant and Machinery to be depreciated by 5%.
\n(d) Create a provision for Bad Debts @ 5% on Debtors.
\n(e) Buildings valued at Rs. 40,000.
\nGive journal entries and opening balance sheet of A, B and C.
\n[Hint: Goodwill to be created is Rs. 30,000, Goodwill already exists in books at Rs. 10,000. Goodwill now appears at Rs. 40,000 in New Balance Sheet]
\nAnswer:
\nJournal Entries
\n
\n
\nNote: Goodwill to be created is 40,000 – 10,000 = 30,000
\nGoodwill already in the balance sheet 1 10,000. Goodwill now appears atRs. 40,000 in new Balance Sheet.
\n
\n
\n<\/p>\n
\nPraveen and Naveen are partners sharing profits and losses in the ratio of 3: 1 respectively. Their balance sheet as on 31st March 2020 was as follows.
\n
\nThey decided to admit Kiran into partnership on the following conditions.
\n(a) Kiran has to bring Rs. 25,000 as capital for 1\/5th share in profits.
\n(b) Machinery and furniture to be depreciated by 10%.
\n(c) Buildings to be appreciated by 20% and stock by 10%.
\n(d) Goodwill of the firm valued at Rs. 20,000.
\n(e) Create a provision for bad debts at 5% on Trade Debtors.
\nShow necessary accounts and balance sheet of new firm.
\nAnswer:
\n
\n
\nNew Balance Sheet as on 1-4-2020
\n<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of their capitals. Their balance sheet as on 31 March 2019 was as under.
\n
\nThey admitted Z as new partner for 1\/3rd share in the profits. The conditions of admission are:
\n(a) Z should bring t 20,000 as capital.
\n(b) Stock valued at t 11,000 and Land at Rs. 30,000.
\n(c) Depreciate furniture by 5%.
\n(d) Provide for bad debts @ 5% on debtors.
\n(e) Goodwill of the firm is valued at 2 years purchase of average profit of last 3 years. The profit for last 3 years was Rs. 5,000,1 11,000 and t 8,000. Prepare necessary ledger accounts and balance sheet of X, Y and Z.
\nAnswer:
\nX, Y profit sharing Ratio = 30,000: 20,000 = 3:2
\n
\nWorking Notes:
\n
\nGoodwill = Average profit x purchase of 2 years
\n= 8,000 x 2
\n= 16,000.<\/p>\n
\nNaidu and Shekar are partners sharing profits and losses in the ratio of 3: 2. Their balance sheet as on 31 March 2020 was as follows.
\n
\nOn the above date, Harish was admitted into partnership for 1\/6 share in profits. The terms of admission are:
\n(a) Harish should bring Rs. 2,00,000 as capital.
\n(b) Stock appreciate by Rs. 20,000.
\n(c) Machinery depreciate by Rs. 26,000.
\n(d) Outstanding expenses Rs. 10,000 not required.
\n(e) Goodwill of the firm valued at Rs. 60,000. This is to be written off immediately.
\n(f) New profit sharing ratio of Naidu, Shekar and Harish is 3: 2: 1 respectively. Prepare necessary Ledger accounts and Balance sheet of new firm.
\n[Hint: Goodwill a\/c will not appear in New Balance Sheet as it is written off]
\nAnswer:
\n
\n
\nBalance Sheet of Ram, Rahim, Harish as on 31-03-2020
\n<\/p>\n
\nRajesh and Ramesh are partners sharing profits and losses in the ratio of 3: 1. Their Balance sheet as on 31 March 2020 was as under.
\n
\nThey decided to take Mr. Suresh into partnership for 1\/5th share in future profits. The conditions of admission are as follows.
\n(a) Suresh should bring Rs. 20,000 as his capital in cash.
\n(b) Depreciate furniture and stock by 10%.
\n(c) Land & Buildings are to be appreciated by 20%.
\n(d) Goodwill of the firm valued at Rs. 8,000.
\n(e) Create a provision for bad debts @ 5% on Debtors.
\n(f) Capital accounts of the partners to be adjusted in cash on the basis of their new profits sharing ratio.
\nAnswer:
\n
\n<\/p>\n
\nCalculation of New profit sharing ratio.
\nOld ratio = 3:1
\n
\n<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31 March 2015 was as under.
\n
\n
\nOn the above date Mr. Z is admitted into the partnership for 1\/5th share in profits. The conditions of admission are as follows.
\n(a) Z should bring Rs. 40,000 as capital and Rs. 10,000 for goodwill in cash.
\n(b) Appreciate buildings by Rs. 10,000.
\n(c) Depreciate machinery by Rs. 8,000 and furniture by Rs. 2,000.
\n(d) New profit sharing ratio of X, Y and Z is 12: 8: 5 respectively.
\n(e) Capital accounts of partners to be adjusted in cash on the basis of new profit-sharing ratio. Give necessary ledger accounts and balance sheet of X, Y, Z.
\nAnswer:
\nWorking Notes:
\nNew ratio of X: Y: Z = 12 : 8 : 5
\n
\n
\n
\n<\/p>\n
\n<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2. They admitted Mr. C. into partnership firm for l\/5th share in future profits. Calculate new profit-sharing ratio of A, B and C.
\nAnswer:
\nTotal profit of the business is 1 out of this 1\/5 share given to Mr. C. Remaining profit is 4\/5 (i.e., 1-1\/5). The remaining profit of 4\/5th will be given to Mr. A and B in their old profit sharing ratio, i.e., 3: 2 respectively.
\nNew profit sharing ratio of existing partners = Remaining Profit Share x Old Profit Sharing Ratio.
\n
\nSo, new profit sharing ratio of A, B and C is 12: 8: 5 respectively, (or) 12\/25 : 8\/25 : 5\/25<\/p>\n
\nThe ratio of sacrifice = Old profit sharing ratio – New profit sharing ratio).<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of 2 : 3. They agreed to adimit Z into partnership for l\/5,h share in profits. Z’s entire share is given by Mr. Y alone. Calculate new profit sharing ratio.
\nAnswer:
\nX and Ys old profit sharing ratio is 2: 3
\nZ gets 1\/5th share in profit from Mr. Y
\nX share of profit remain unchanged.<\/p>\n
\nNew profit sharing ratio of Mr. Y = Old profit sharing ratio – Profit given to Z
\n
\nNew profit sharing ratio of Mr. X = 2\/5
\nNew profit sharing ratio of Mr. Z (given) = 1\/5<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2. Mr. C is admitted into partnership business for 1\/5th share, Mr. C purchases his share as to 2\/25 th from A and 3\/25 from B. Calculate new profit sharing ratio of A, B and C.
\nAnswer:
\nNew profit sharing ratio = Old profit sharing ratio – Share of profit given to new partner.
\n<\/p>\n
\nRam and Robert are partners sharing profits and losses in the ratio of 7: 3. Rahim admitted as new partner. Ram and Robert decided to surrender in favour of Rahim 1\/ 7 and 1\/3 of their share respectively.
\nCalculate New Profit sharing Ratio of the partners.
\nAnswer:
\nOld profit sharing ratio of Ram and Robert = 7 : 3 (or) 7\/10 and 3\/10 respectively.
\nRam gives\/surrenders 1\/7th in his share of profit.
\nRobert surrenders 1\/3rd of his share of profit.
\nSacrificing ratio to Ram and Robert are
\n
\nNew profit sharing ratio or Ram, Robert and Rahim is 6\/10 : 2\/10 : 2\/10 or 6: 2: 2 (or) 3:1:1.<\/p>\n
\nP and Q are partners sharing profits and losses in the ratio of 9: 7. They agreed to admit R into partnership who gets 1\/8th share equally from P and Q. Calculate new profit sharing ratio of P, Q and R.
\nAnswer:
\n
\nNow, the new profit sharing ratio of P, Q and R is 8: 6: 2 (or) 8\/16: 6\/16: 2\/16 respectively.<\/p>\n
\nGanga and Yamuna are partners sharing profits and losses in the ratio of 3: 2. They admitted Saraswathi as new partner. Hereafter, they share profits and losses in the ratio of 4: 3: 2 by Ganga, Yamuna and Saraswathi respectively. Calculate the ratio of sacrifice.
\nAnswer:
\nThe old profit sharing ratio of Ganga and Yamuna is
\n3:2 (or) 3\/5 : 2\/5
\nThe new profit sharing ratio of Ganga, Yamuna and Saraswathi is 4: 3: 2 respectively.
\nRatio of sacrifice = Old ratio – New ratio
\n
\nThe ratio of sacrifice between Ganga and Yamuna is 7: 3 respectively. It means loss to old partners Ganga and Yamuna and is a gain new partner Saraswathi i.e.,
\n[Note: Ratio of sacrifice is to be calculated, when both old profit sharing ratio and new profit sharing ratio of all the partners, including new partner, are given in the problem. Otherwise, no need to calculate the ratio of sacrifice. Because, it is assumed that old partners sacrifice in their respective old profit sharing ratio.]<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 7: 3. Following was the balance sheet as on 31 March, 2020.
\n
\nOn the above date the assets and liabilities are to be revalued as under:
\n(a) Depreciate Machinery by 10%.
\n(b) Stock to be depreciated by 5%.
\n(c) Create a provision for bad debts at 5% on debtors.
\n(d) The value of buildings to be appreciated by 20%.
\n(e) Creditors are to be increased byRs. 1,000.
\nGive necessary journal entries to record the changes in the value of assets & liabilities and Prepare the Revaluation account and Partners capital accounts.
\nAnswer:
\nJournal Entries in the Books of A and B
\n
\n
\n
\n<\/p>\n
\nRam and Rahim are partners sharing profits and losses in the ratio of 2: 1 respectively. Their balance sheet as on 31 March 2020 stands as follows.
\n
\nThey agreed to admit Joseph into partnership for 1\/4th share in the profits on 1st April 2020. Give necessary entries for distribution of Reserves and surpluses and draw new balance sheet.
\nAnswer:
\nJournal Entries in the Books of Ram and Rahim
\n
\n
\n
\nBalance Sheet of Ram, Rahim and Joseph as on 01-04-2020
\n<\/p>\n
\nThe Net profit of a firm for last four years was Rs. 40,000, Rs. 38,000, Rs. 50,000 and Rs. 52,000 respectively. The goodwill is to be taken as 2 years purchase of average profits of last four years. Calculate the value of Goodwill.
\nAnswer:
\n
\nGoodwill = Average profit x 2 years = 45,000 x 2 =Rs. 90,000.<\/p>\n
\nThe normal of rate of return on the capital employed (Investment) in the industry is 20%. The investment\/or capital employed in the firm isRs. 2,00,000. Actual average profit of the firm isRs. 60,000. Goodwill of the firm is valued at 4 years purchase of super profit. Calculate the value of goodwill.
\nAnswer:
\nCapital employed = Rs. 2,00,000
\nRate of return\/profit on capital employed = 20%
\nActual average profit = 7 60,000
\nNormal profit\/retum = Capital employed x Return on capital employed.
\nNormal profit\/return =Rs. 2,00,000 x 20\/100 = Rs. 40,000
\nSuper profit = Actual average profit – Normal profit on capital employed.
\nSuper profit =Rs. 60,000 -Rs. 40,000
\nSuper profit =Rs. 20,000
\nGoodwill = Super profit x 4 years purchase of super profit.
\nGoodwill = Rs. 20,000 x 4 years =Rs. 80,000.<\/p>\n
\nAverage profits of a firm areRs. 20,000, the normal rate of return expected on capital from similar business is 10%. The actual capital employed\/or net tangible assets of the business isRs. 1,50,000. Calculate the value of goodwill as per capitalisation of average profit method.
\nAnswer:
\n
\nActual capital employed\/Net assets (given) = Rs. 1,50,000
\nGoodwill = Capitalised value of business – Actual capital employed \/ or Net tangible assets.
\n= Rs. 2,00,000 – Rs. 1,50,000
\nGoodwill = Rs. 50,000.
\nNotes: To earn a profit of Rs. 20,000 at 10% return on capital, the amount of capital required is Rs. 2,00,000 i.e., 20,000 x 100\/10 = Rs. 2,00,000. But, this firm is actually earning a profit of Rs. 20,000 with an investment of Rs. 1,50,000. So, the firm is efficient and has goodwill.<\/p>\n
\nAverage profit of a firm is Rs. 18,000. Normal profit is Rs. 12,000. Normal rate of return is 12%. Calculate Goodwill.
\nAnswer:
\n
\nSuper profit = Average profit – Normal profit
\n= Rs. 18,000 – Rs. 12,000 = Rs. 6,000
\nGoodwill = Rs. 6,000 x 100\/2 = Rs. 50,000.<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 2: 3 respectively. They admitted Mangal as new partner for 1\/5th share in profits. He brings in 7 30,000 towards goodwill in cash. The share of profit of Ramu and Somu remains same as earlier. Give Journal Entries.
\nAnswer:
\nJournal Entries
\n<\/p>\n
\nX and Y are partners sharing profits in the ratio of 3: 1 respectively. They decided to admit Mr. Z as new partner for 1\/4 share in profits given by X and Y in their old profit sharing ratio. Mr. Z brings inRs. 16,000 towards goodwill. X and Y withdraw their entire share of goodwill from the business. Give Journal entries.
\nAnswer:
\nJournal Entries
\n
\nNote: The above last two entries may be combined.<\/p>\n
\nA & B are partners sharing profits and losses in the ratio of 3: 2 respectively. They admitted C into partnership for l\/4th share in profits foFwhich Mr. C brings inRs. 30,000 towards his share of goodwill. The old partners withdrew half of their share of goodwill from the business. Here after, they share profits and losses in the ratio of 2:1:1 among A, B and C respectively . Give journal entries.
\nAnswer:
\nCalculation of Ratio of sacrifice.
\nRatio of sacrifice = Old profit sharing ratio – New profit sharing ratio.
\n<\/p>\n
\nJournal Entries
\n
\n<\/p>\n
\nP and Q are partners sharing profits and losses in the ratio of 2: 1. They admitted Mr. R into partnership for 1\/5th share in future profits. For the purpose of admission, the value of goodwill agreed at Rs. 60.000. Give Journal entries.
\nAnswer:
\n
\nNote: When goodwill is created, the value of goodwill appears on assets side of the balance sheet of new firm.<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2. They decided to admit Mr. C into partnership for 1\/5 share in the profit. Mr. C is unable to bring goodwill in cash, it is decided to create goodwill and writeoff immediately. The new profit sharing ratio of A, B and C is 2: 2: 1 respectively. The value of goodwill is Rs. 60,000. Give necessary Journal entries.
\nAnswer:
\nJournal Entries
\n<\/p>\n
\nRam and Rahim are partners sharing profits and losses in the ratio of 2: 1 respectively. They admitted Robert as a new partner for 1\/4th share in profit. He brings in Rs. 40,000 towards his capital. Give Journal entry.
\nAnswer:
\nJournal Entry
\n<\/p>\n
\nA and B are partners sharing profits and losses in the ratio of 3: 2 respectively. They admitted Mr. C into partnership for 1\/5th share in profits, for which he has to contributeRs. 20,000 for his share of capital. The capital accounts of A and B stood atRs. 45,000 andRs. 30,000 respectively on that date. As per the partnership agreement, the partners capital is to be adjusted in accordance with their new profit sharing ratio. The new profit sharing ratio of A, B and C is 2: 2: 1 respectively. Excess or deficiency of capital of old partners be adjusted in cash. Give Journal entries.
\nAnswer:
\nCalculation of total capital of the firm:
\nFor C’s 1\/5 share of profit, the capital is Rs. 20,000
\nTotal capital =Rs. 20,000 x 5\/1 =Rs. 1,00,000
\nThis total capitals is to be contributed by all the partners in their new profit sharing ratio. Capital to be contributed by:
\n<\/p>\n
\nIncase of B capital to be contributed is Rs. 40,000, but his capital a\/c balance is Rs. 30,000. He has to bring into business Rs. 10,000 in cash.<\/p>\n
\nJournal Entries
\n
\nNow, the following illustrations help in understanding accounting treatment of all issues\/ transactions pertaining to admission of a new partner;<\/p>\n
\nRavi and Kiran are partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31 March 2020 was as follows.
\n
\nOn 1st April 2020, they decided to admit Mr. Bharath for 1\/5th share in profits. The terms of admission are:
\n(a) He has to bring Rs. 20,000 towards capital and Rs. 10,000 towards goodwill in cash.
\n(b) Furniture is to be depreciated by Rs. 1,000.
\n(c) Create a provision on Rs. 1,500 for Bad Debts on Debtors.
\n(d) Appreciate the value of Buildings by Rs. 5,000.
\nGive necessary Journal entries, ledger accounts and opening balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\nLedger Accounts:
\n
\n
\n
\n
\nBalance Sheet of Ravi, Kiran and Bharath as on 1st April 2015
\n<\/p>\n\n
\nPhani and Mani are partners sharing profits and losses in the ratio of 3: 2. Their balance sheet as on 31 March 2020 is as under.
\n
\nOn 1st April 2020 Mr. Krishna is admitted into the partnership for 1\/5th share in profits. The terms and conditions are
\n(a) Krishna has to bring Rs. 30,000 towards capital andRs. 20,000 for his share of goodwill.
\n(b) Stock to be depreciated by 5%.
\n(c) Machinery to be reduced to Rs. 28,000.
\n(d) Sundry creditors increased by Rs. 2,000.
\nThe new profit-sharing ratio of A, B and C in the new firm is 2: 2: 1 respectively.
\nGive necessary Journal entries and Ledger accounts and opening Balance sheet.
\nAnswer:
\nCalculation of Ratio of sacrifice.
\nRatio of sacrifice = Old profit sharing ratio – New profit sharing ratio.
\n
\nOn admission of Mr. Krishna as a new partner, Phani alone losing\/sacrificing, hence the entire amount brought in by Krishna for goodwill to be given to Phani only.<\/p>\n
\n
\n
\nLedger Accounts
\n
\n
\n
\n<\/p>\n
\n<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of 4: 3. Their balance sheet as on 31 March 2020 stood as follows.
\n
\nOn 1st April 2020 Mr. Z is admitted into partnership for 1\/5th share in future profits on the following terms.
\n(a) He has to bring Rs. 40,000 as capital Rs. 21,000 for goodwill.
\n(b) Stock to be reduced by 10% and machinery by Rs. 1,700.
\n(c) Create a provision for Bad Debts @ 5% on Debtors.
\n(d) There is an unrecorded liability in respect of rent due Rs. 1,000 and an unrecorded investments (asset) of Rs. 2,000. Both are to be brought into Books.
\n(e) Land is valued at Rs. 25,000.
\n(f) New profit sharing ratio of X, Y and Z will be 2: 2: 1 respectively.
\nGive necessary Journal entries and Ledger accounts and the opening balance sheet of new firm.
\nAnswer:
\nCalculation of Ratio of sacrifice:
\n
\nRatio of sacrifice = Old profit sharing ratio – New profit sharing ratio.
\nThe ratio of sacrifice of X and Y is 6: 1. Goodwill is to be distributed accordingly. Z gets
\n
\nJournal Entries
\n
\n
\n
\nLedger Accounts:
\n
\n
\n
\nBalance Sheet of X, Y and Z as on April 2020
\n<\/p>\n
\nAmar and Akbar are partners sharing profits and losses in the ratio of 3:1 respectively. The balance sheet of firm as on 31 March 2020 was as under.
\n
\nOn 1st April 2020, they admitted Mr. Anthony into partnership for 1\/4th share in profits on the following conditions.
\n(a) Anthony was to bring Rs. 40,000 towards capital and Rs. 20,000 for goodwill.
\n(b) Amar and Akbar withdraw from business their share of goodwill.
\n(c) Stock and machinery to be depreciated by 10%.
\n(d) Buildings value to be appreciated by 25%.
\nGive Journal entries and necessary ledger accounts and show balance sheet of the new firm.
\nAnswer:
\nJournal Entries
\n
\n
\nLedger Accounts
\n
\n
\nBalance Sheet of Amar, Akbar and Anthony as on 1-4-2020
\n<\/p>\n
\nSitha and Geetha are partners sharing profits and losses in the ratio of 2: 1 respectively. Their balance sheet as on 31st March 2020 was as under.
\n
\nOn 1st April 2020, they decided to admit Radha into partnership for 1\/4th share in profits on the following terms.
\n(a) Radha should bring Rs. 20,000 towards capital.
\n(b) Goodwill account be raised in the books of the new firm at a value of Rs. 15,000.
\n(c) Trade creditors be reduced by Rs. 2,000.
\n(d) Buildings to be appreciated by Rs. 10,000.
\nGive Journal entries and necessary ledger accounts and balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\nLedger Accounts
\n
\n
\nBalance Sheet of Sitha, Geetha and Radha as on 1-4-2020
\n
\nWhen Goodwill account created and writtenoff:<\/p>\n
\nRam and Shyam are partners sharing profits and losses in the ratio of 2: 3. Their balance sheet as on 31 March 2020 was given below.
\n
\nOn 1st April 2020, they admitted Mr. Madhav for 1\/4th share in profits on the following conditions.
\n(a) Madhav should bring Rs. 20,000 towards capital in cash.
\n(b) Goodwill of the firm is valued atRs. 30,000 and it has been decided to create and write it off completely.
\n(c) Depreciate furniture by 5% and machinery by 10%.
\n(d) Appreciate the value of buildings by 20%.
\n(e) New profit-sharing ratio of Ram, Shyam & Madhav would be 1: 2: 1 respectively. Give Journal entries and necessary ledger accounts and balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\nLedger Accounts:
\n
\n
\nBalance Sheet of Ram, Shyam and Madhav as on 1-04-2020
\n
\nWhen Goodwill is already existing in the books:<\/p>\n
\nX and Y are partners sharing profits and losses in the ratio of 2: 1 respectively. Their balance sheet as on 31 March 2019 was given below.
\n
\nOn 1st April 2019, they decided to admit Mr. Z into partnership for 1\/4th share in future profits on the following conditions.
\n(a) Z should bring Rs. 30,000 towards his capital.
\n(b) Goodwill of the firm is valued at Rs. 18,000 and decided to write it off immediately.
\n(c) Buildings to be appreciated by 10%.
\n(d) Create a provision for bad debts @ 8% on Debtors.
\n(e) Depreciate machinery by Rs. 5,000.
\n(f) New profit sharing ratio of X, Y and Z would be 2: 1: 1 respectively in the new firm. Give Journal entries and necessary ledger accounts and balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\nLedger Accounts:
\n
\n
\n
\n
\nWorking Notes:
\n1. Provision for bad debts required isRs. 2,400 ie., 30,000 x 8\/100. Provision already existing is Rs. 1,000. It requires additional Rs. 1,400 to make it Rs. 2,400. So additional provision required debited to revaluation a\/c is Rs. 1,400.
\n2. Goodwill value of firm is Rs. 18,000. Goodwill already existing in the books was Rs. 6,000. So, Goodwill is to be created to the extent of Rs. 12,000 in order to make it Rs. 18,000. Hie full value of goodwill Rs. 18,000 writtenoff against all partners capital accounts in their new profit sharing ratio.<\/p>\n
\nHari and Giri are partners sharing profits and losses in the ratio of 3: 1 respectively. Their balance sheet as on 31-03-2020 was given below.
\n
\nOn 1st April 2015 Mr. Siva is admitted for 2\/5th share in profits. The terms of admission are:
\n(a) Siva should bring Rs. 40,000 towards capital.
\n(b) Fixed assets are valued at Rs. 35,000.
\n(c) Goodwill of the firm valued at Rs. 25,000.
\n(d) Provision for bad debts required is Rs. 2,000.
\nGive Journal entries, Ledger accounts and opening balance sheet.
\nAnswer:
\nJournal Entries
\n
\n
\n
\nLedger Accounts:
\n
\n
\n
\nBalance Sheet of Hari, Giri and Siva as on 1-04-2020
\n
\nWorking Notes:
\n1. Provision for bad debts required isRs. 2,000, but the provision existing is Rs. 3,000, so, Rs. 1,000 is in excess, credited to revaluation.
\n2. Goodwill value reduced by Rs. 20,000 (45,000 – 25,000) debited to old partners capital a\/cs in their old profits sharing ratio.<\/p>\n
\nP and Q are partners sharing profits and losses in the ratio of 3: 2 respectively. Their balance sheet as on 31 March 2020 was as here under.
\n
\nOn 1st April 2020, Mr. R is admitted into partnership 1\/3rd share in future profits on the following terms.
\n(a) R shall bring Rs. 50,000 towards capital andRs. 20,000 towards goodwill in cash.
\n(b) Depreciate machinery by t 5,000.
\n(c) Provide for bad debts @ 5% on Debtors.
\n(d) Appreciate the value of Buildings by 20%.
\n(e) Creditors to be reduced by Rs. 2,000.
\nP, Q and R will share the profits and losses equally. P and Q capitals are to be adjusted in cash based on R’s capital.
\nGive Journal entries and necessary ledger accounts and the balance sheet of new firm.
\nAnswer:
\nJournal Entries
\n
\n
\n
\nLedger Accounts:
\n
\n
\nBalance Sheet of P, Q and R as on 1-04-2020
\n<\/p>\n
\n1. Calculation of Ratio of sacrifice:
\nRatio of sacrifice = Old Ratio – New Ratio
\n
\nRatio of sacrifice = 4:1
\nSo, goodwill Rs. 20,000 transferred to P & Q’s capital accounts in their ratio of sacrifice.
\n<\/p>\n
\nFor 1\/3 share of profit capital =Rs. 50,000
\n
\nP’s capital balance is Rs. 83,800 and required to contribute Rs. 50,000. He is having excess capital, so refunded Rs. 33,800 (83,800 – 50,000).
\nQ’s capital balance after all adjustments is Rs. 49,200 his share of capital for 1\/3 share of profit is 7 50,000. There is a shortage Rs. 800 (50,000 – 49,200). So, he brings cash 7 800 to make his capital equal to Rs. 50,000.<\/p>\n","protected":false},"excerpt":{"rendered":"