16. X and Y are partners, sharing profit and losses in the ratio of 3/5 : 2/5. They admit Z a differently abled person into the firm on 1st April, 2017, when their Balance sheet as follows:
Liabilities Amount Assets Amount
Creditors 45000 Cah at Bank 15000
General Reserve 36000 Debtors                      60000  
X Capital A/cs 180000 Less: Provision for doubtful Debts          2400 57600
Y Capital A/cs 90000 Patents 44400
X Current A/cs 30000 Investments 24000
Y Current A/cs 6000 Fixed Assets 216000
    Goodwill 30000
  387000   387000
Z is admitted on the following terms; 
(a) Provision for Doubtful Debts is to be maintained at 5% on Debtors. 
(b) Outstanding rent amounted to 15,000. 
(c) An accrued income of the 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of Rs. 18,000.
(e) New profit-sharing Ratio of partners will be 4 : 3 : 2. 
(f) Z will bring in Rs. 60,000 as his capital by cheque. 
(g) Z is to pay an amount equal to his share in firm's goodwill valued at twice the average profit Of the last three years which were Rs. 90,000; Rs. 78,000 and Rs. 75,000 respectively. 
(h) Half of the amount of goodwill is to be withdrawn by X and Y. 
Give the necessary Journal entries, Partners' Capital and Current Accounts, and the Balance Sheet of the new firm. Identify the value being highlighted by admitting Z as a partner in the firm. 

Dear Student,

The solution is worked out below.
Date Particulars L.F. Debit
(i) Bank A/c Dr.   78,000  
    To Z’s Capital A/c       60,000
    To Premium for Goodwill A/c       18,000
  (Capital and goodwill brought in by Z)        
(ii) Premium for Goodwill A/c Dr.   18,000  
    To X’s Current A/c       12,600
    To Y’s Current A/c       5,400
  (Goodwill distributed in sacrificing ratio)        
(iii) X’s Current A/c Dr.   6,300  
  Y’s Current A/c Dr.   2,700  
    To Bank A/c       9,000
  (Half goodwill withdrawn)        
Dr. Partners’ Capital Accounts Cr.
Particulars X Y Z Particulars X Y Z
Balance c/d 1,80,000 90,000 60,000 Balance b/d 1,80,000 90,000  
  1,80,000 90,000 60,000   1,80,000 90,000 60,000
Dr. Partners’ Current Accounts Cr.
Particulars X Y Particulars X Y
Revaluation A/c 10,260 6,840 Balance b/d 30,000 6,000
Goodwill A/c 18,000 12,000 General Reserve 12,600 5,400
Revaluation A/c 18,000   Premium for Goodwill A/c 21,600 14,400
Bank A/c 6,300 2,700      
Balance c/d 11,640 4,260      
  13,560 5,750   13,560 5,750
Bank Account
Dr.   Cr.
Particulars Amount
Particulars Amount
Balance b/d 15,000 X’s Current A/c 6,300
Premium for Goodwill 18,000 Y’s Current A/c 2,700
Z’s Capital A/c 60,000 Balance c/d 84,000
  93,000   93,000
Balance Sheet
Liabilities Amount
Assets Amount
Outstanding Rent 15,000 Cash at Bank 84,000
X’s Current A/c 11,640 Patents 44,400
Y’s Current A/c 4,260 Fixed Assets 2,16,000
Capital A/c   Accrued Income 4,500
X 1,80,000   Debtors 60,000  
Y 90,000   Less: Provision 3,000 57,000
Z 60,000 3,30,000    
Creditors 45,000    
  4,05,900   4,05,900
Working Notes:
Revaluation Account
Dr.   Cr.
Particulars Amount
Particulars Amount
To Provision for Doubtful Debts 600 Accrued Income 4,500
To Outstanding Rent 15,000 Loss on Revaluation  
To Investments 6,000 X’s Current A/c 10,260  
    Y’s Current A/c 6,840 17,100
  21,600   21,600

Calculation of Z's Share of Goodwill

Firm's Goodwill=90,000+78,000+75,0003=81,000Z's share=81,000×29=18,000 (to be distributed in sacrificing ratio)
Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio - New Ratio

X's sacrifice=35-49=745Y's  sacrifice=25-39=345

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