M AND S are partners sharing profits and losses in the ratio 2:1. Their balance sheet was as follows :

Liabilities = Creditors - 44000, Capital accounts : M- 30000 and S- 20000 TOTAL = 94000

Assets = Cashat bank- 17000, debtors - 15000, Bills recievables- 4000 Stock - 25000, kland and building - 30000, furniture and fixtures- 3000, TOTAL= 94000

R admitted on 1st april 2012 on the following terms :

(a). That he brings in Rs.15000 as his capital for 1/4th share and pays Rs.6000 for goodwill , half of which is withdrawn by M and S.

(b). There is likely to be a claim against the firm for damages for which a provision to the extent of Rs 1500 is to be made.

©. A bill for Rs.300 for electric charges has been omitted to be accounted. It should , therefore. Now be provided for.

(d). Stock is reduced to Rs.23000 and furniture and fixtures by Rs.1000

( e) . 5% reserve for bad and doubtful debts to be created.

(f). value of land and building to be appreciated by 20%/

(g). Included in the creditors is an item of Rs.1200 which is not paid and therefore has to be written back.

(h). That the profit sharing ratio of the old firm will not change.

Show jouranls, revaluation account, partners capital account. And balance sheet of new firm stating the proportion in which the partners will share profits and losses in future.

 

Revaluation Account

Dr.

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Provision Against Claim for Damages

1,500

Land and Building (30,000 × 20%)

6,000

Outstanding Electricity Bill

300

Creditors (Unclaimed)

1,200

Stock

2,000

 

 

Furniture

1,000

 

 

Reserve for Doubtful Debts (15,000 × 5%)

750

 

 

Profit transferred to Capital Account:

 

 

 

M

1,100

 

 

 

S

550

1,650

 

 

 

7,200

 

7,200

 

 

      

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

M

S

R

Particular

M

S

R

Bank (Goodwill Withdrawn)

2,000

1,000

 

Balance b/d

30,000

20,000

 

 

 

 

 

Bank

 

 

15,000

 

 

 

 

Premium for Goodwill

4,000

2,000

 

Balance c/d

33,100

21,550

15,000

Revaluation (Profit)

1,100

550

 

 

35,100

22,550

15,000

 

35,100

22,550

15,000

 

 

 

 

 

 

 

Balance Sheet

as on April, 01 after M’s admission

Liabilities

Amount

Rs

Assets

Amount

Rs

Provision Against Claim for Damages

 

1,500

Cash at Bank (17,000 + 21,000 – 3,000)

35,000

Outstanding Electricity Bill

300

Stock (25,000  – 2,000)

23,000

Sundry Creditors (44,000 – 1,200)

42,800

Furniture and Fixtures (3,000 – 1,000)

2,000

Capitals Account:

 

Sundry Debtors

15,000

 

M

33,100

 

Less: 5% Reserve for Doub. Debts

750

14,250

S

21,550

 

Bills Receivable

4,000

R

15,000

69,650

Land and Building (30,000 + 6,000)

36,000

 

1,14,250

 

1,14,250

 

 

 

Working Notes:

1.

2. Distribution of Premium for Goodwill

 

3. Withdrawn of Premium for Goodwill

4. Distribution of Revaluation Profit

 

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