8. Gopal and Govind are partners sharing profits and losses in the ratio of 60 : 40. The firm's Balance Sheet as on 31315 was as follows • Liabilities Capital Accounts : Gopal G ovind Long-term Loan Current Liabilities Fixed Assets Investments Current Asse ts Loans and Advances 2ä0,om 630,000 3,oomo 50/100 2,00ß00 650,000 Due to financial difficulties, they have decided to admit Guru as a partner in the firm from 1.42015 on the following terms : Guru will be entitled to 40% of the profits. Guru will bring in cash as capital. It is agreed that Goodwill of the firm will be valued at 2 years' purchase Of 3 years' normal average profits of the firm and Guru will bring in cash his share of Goodwill. It was also decided that the partners will not withdraw their share of goodwill nor will the goodwill appear in the books of account. The profits of the previous three years were as follows For the year ended 313.2013 profit 20,000 (including insurance claim received 40,000). For the year ended 31.32014 loss 80,000 (including voluntary retirement compensation paid For the year ended 3132015 profit (including a profit of e 25,000 on the sale of assets). It was decided to revalue the assets on 31.3.2015 as follows • Fixed Assets (net) Investments Current Assets Loans and Advances The new profit-sharing ratio after the admission of Guru was 35 : 25 : 40. pass Journal entries on admission, show goodwill calculation and prepare Revaluation Account, partners' Capital Accounts, and Balance Sheet as on 1.4.2015 after the admission of Guru.

Dear Student,
Journal Entries        
Date Particulars LF Debit Amount (in Rs) Credit Amount (in Rs)
31 Mar 2015 Cash A/c Dr 124,000  
        To Guru's Capital A/c     100,000
        To Premium for Goodwill A/c     24,000
  (Goodwill & Capital brought in by new partner)      
  Premium for Goodwill A/c Dr 24,000  
     To Gopal's Capital A/c     15,000
     To Govind's Capital A/c     9,000
  (Premium for goodwill distributed among sacrificing partners in sacrificing ratio)      
  Fixed Assets A/c Dr 100,000  
        To Revaluation A/c     100,000
  (Fixed Assets revalued)      
  Revaluation A/c Dr 70,000  
        To Current Assets A/c     20,000
        To Investments A/c     50,000
  (Current Assets  & Investments Revalued)      

Calculation of last three years' normal profit
Year Actual Profit/ Loss (A) Abnormal profit/Loss (B) Normal profit/Loss (A)+(B)
2013 20,000 -40,000 -20,000
2014 -80,000 1,10,000 30,000
2015 1,05,000 -25,000 80,000

Total Normal profit = -20,000+30,000+80,000= 90,000
Goodwill = 90,000×23=60,000
Guru's share of Goodwill= 60,000×40100= 24,000

Old Ratio was 3:2 , New Ratio is 7:5:8
So Sacrificing ratio is 5:3

Revaluation A/c          
Date Particulars Amount (in Rs) Date Particulars Amount (in Rs)
31 Mar 2015 Current Assets A/c 20,000 31 Mar 2015 Fixed Assets A/c 100,000
  Investments A/c 50,000      
  Revaluation profit transferred to        
  Gopal's Capital A/c 18,000      
  Govind's Capital A/c 12,000      
    100,000     100,000
Partner's Capital A/c
Date Particulars Gopal's Capital A/c Govind's Capital A/c Guru's Capital A/c Date Particulars Gopal's Capital A/c Govind's Capital A/c Guru's Capital A/c
31 Mar 2015 Balance c/d 153,000 101,000 100,000 31 Mar 2015 Balance b/d 120,000 80,000  
            Cash A/c     100,000
            Cash A/c (Premium for goodwill) (5:3) 15,000 9,000  
            Profit on revaluation A/c 18,000 12,000  
    153,000 101,000 100,000     153,000 101,000 100,000
Balance Sheet as on 01.04.2015
Liabilities Amount (in Rs) Assets Amount (in Rs)
Long term Loan 200,000 Fixed Assets 400,000
Current Liabilities 250,000 Current Assets 180,000
Capital A/cs   Loans and Advances 100,000
Gopal's Capital A/c 153,000 Cash 124,000
Govind's Capital A/c 101,000    
Guru's Capital A/c 100,000    
  804,000   804,000


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