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Admission of a Partner 3.11

BALANCE SHEET
as at 31st March, 2018
Liabilities ` Assets `
Capital A/cs: X 4,40,000 Machinery (` 2,00,000 – ` 20,000) 1,80,000
Y 3,30,000 Furniture 40,000
Z 3,10,000 10,80,000 Investments (` 1,20,000 – ` 40,000) 80,000
Creditors 1,60,000 Stock 1,00,000
Debtors 60,000
Cash at Bank (WN 5) 7,80,000
12,40,000 12,40,000

Working Notes:
1. Goodwill should be distributed as per sacrificing ratio, i.e., 1/8 : 1/24 or 3 : 1.
X’s share = ` 2,00,000 × 3/4 = ` 1,50,000; Y’s share = ` 2,00,000 × 1/4 = ` 50,000.

2. Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `

To Machinery A/c 20,000 By Loss transferred to:
To Investments A/c 40,000 X’s Capital A/c (7/12) 35,000
Y ’s Capital A/c (5/12) 25,000 60,000

60,000 60,000

3. Since there is interest on capital, it is better to carry forward this balance of Capital Account and thereafter
interest on capital should be allowed.

4. New Profit-sharing Ratio
X’s New Share = 7/12 – 1/8 = 11/24, Y’s New Share = 5/12 – 1/24 = 9/24.
Hence New Profit-sharing Ratio of X, Y and Z = 11/24 : 9/24 : 1/6 = 11 : 9 : 4.

PROFIT AND LOSS APPROPRIATION ACCOUNT
5. Dr. for the year ended 31st March, 2018 Cr.

Particulars ` Particulars `
To Interest on Capital A/cs: By Profit and Loss A/c 5,24,500
X 18,250 —Net Profit
Y 13,750
Z 12,500 44,500
To Share of Profit trfd. to Capital A/cs:
X (` 4,80,000 × 11/24) 2,20,000
Y (` 4,80,000 × 9/24) 1,80,000
Z (` 4,80,000 × 4/24) 80,000 4,80,000
5,24,500 5,24,500