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Admission of a Partner 3.7

Illustration 4.
A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively.
D is admitted as a new partner on 31st March, 2019 for an equal share and is to pay
` 50,000 as Capital. Following is the Balance Sheet on the date of admission:

BALANCE SHEET
Liabilities ` Assets `
Capital A/cs: Land and Building 50,000
A 60,000 Plant and Machinery 40,000
B 60,000 Furniture 30,000
C 40,000 Stock 20,000
Creditors 30,000 Debtors 30,000
Bills Payable 10,000 Bills Receivable 20,000
Bank 10,000
2,00,000 2,00,000
Following are the required adjustments on D’s admission:
(i) Out of the Creditors, a sum of ` 10,000 is due to D which will be transferred to his capital.
(ii) Advertisement Expenses of ` 1,200 is to be carried forward to next accounting period.
(iii) Expenses debited in the Profit and Loss Account includes a sum of ` 2,000 paid for
B’s personal expenses.
(iv) A Bill of Exchange of ` 4,000, which was previously discounted with the banker, was
dishonoured on 31st March, 2019 but no entry has been passed for that.
(v) Provision for Doubtful Debts @ 5% is to be created against Debtors.
(vi) Expenses on revaluation amounting to ` 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D’s admission.
Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 1,700 By Prepaid Advertisement Expenses A/c 1,200
(5/100 × ` 34,000) By B’s Capital A/c (B’s Drawings) 2,000
To A’s Capital A/c (Revaluation Expenses) 2,100 By Loss on Revaluation transferred to
Capital A/cs:
A (` 600 × 3/6) 300
B (` 600 × 2/6) 200
C (` 600 × 1/6) 100 600
3,800 3,800

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A B C Particulars A B C
` ` ` ` ` `
To Revaluation A/c (Loss) 300 200 100 By Balance b/d 60,000 60,000 40,000
To Revaluation A/c ... 2,000 ... By Revaluation A/c 2,100 ... ...
(Drawings) (Revaluation Expenses)
To Balance c/d 61,800 57,800 39,900
62,100 60,000 40,000 62,100 60,000 40,000