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3.6 Double Entry Book Keeping (Section A)—ISC XII

Illustration 3.
Akash, Biswas, and Pooja are partners sharing profits and losses equally. Their Balance Sheet
as at 31st March, 2019 was as follows:
BALANCE SHEET as at 31st March, 2019
Liabilities ` Assets `
Sundry Creditors 30,000 Goodwill 40,000
General Reserve 10,000 Sundry Debtors 70,000
Workmen Compensation Reserve 10,000 Stock 60,000
Investment Fluctuation Reserve 40,000 Machinery 1,00,000
Capital A/cs: Akash 2,00,000 Investment 1,60,000
Biswas 90,000 Cash in Hand 10,000
Pooja 60,000 3,50,000
4,40,000 4,40,000
They admit Deep into partnership with effect from 1st April, 2019. They would share
profits and losses in 5 : 3 : 2 : 2. It was agreed that:
(i) Stock be valued at ` 90,000.
(ii) Machinery is reduced by 10%.
(iii) A liability of ` 5,000 included in sundry creditors is not likely to arise.
(iv) Market value of investment is ` 1,00,000.
(v) Partners agreed that the revised values are not to be recorded in the books.
You are required to pass Journal entry to give effect to the above.
Solution: Calculation of Net Effect of Accumulated Profits, Losses and Reserves: `
General Reserve 10,000
Workmen Compensation Reserve 10,000
Investment Fluctuation Reserve 40,000
Add: Increase in Value of Stock 30,000
Decrease in Amount of Sundry Creditors 5,000
Less: Decrease in Value of Machinery (10,000)
Goodwill (40,000)
Decrease in Value of Investment (60,000)
Net Effect of Adjustment to be made (15,000)
Calculation of Sacrifice/(Gain) of Each Partner:
Akash Biswas Pooja Deep
(i) Their Old Share 1/3 1/3 1/3 ...
(ii) Their New Share 5/12 3/12 2/12 2/12
(iii) Sacrifice/(Gain) (i – ii) –1/12 1/12 2/12 –2/12
Gain Sacrifice Sacrifice Gain
Akash’s Gained Share = ` 15,000 × 1/12 = ` 1,250;
Biswas’s Sacrificed Share = ` 15,000 × 1/12 = ` 1,250;
Pooja’s Sacrificed Share = ` 15,000 × 2/12 = ` 2,500;
Deep’s Gained Share = ` 15,000 × 2/12 = ` 2,500.
ADJUSTMENT JOURNAL ENTRY
Date Particulars L.F. Dr. (`) Cr. (`)
2019
April 1 Biswas’s Capital A/c ...Dr. 1,250
Pooja‘s Capital A/c ...Dr. 2,500
To Akash’s Capital A/c 1,250
To Deep’s Current A/c 2,500
(Being the adjustment entry passed)