Page 54 - ISCDEBK-12

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

6. Dr. BANK ACCOUNT Cr.

Particulars ` Particulars `
To Balance b/d 1,40,000 By Drawings A/cs:
To Premium for Goodwill A/c 2,00,000 X 1,63,250
To Z’s Capital A/c 2,50,000 Y 1,38,750
To Profit and Loss A/c (i.e., Increase in Cash) 5,24,500 Z 32,500 3,34,500
By Balance c/d 7,80,000
11,14,500 11,14,500

Illustration 7.
X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit
Z as a partner for 1/5th share. Z acquires his share from X and Y in the ratio of 2 : 3.
Goodwill of the firm has been valued at ` 50,000. Z issued cheques from his account of
` 10,000 in favor of ‘X’ and ‘Y’ as his share of goodwill. What Journal entry in the books
of the firm is to be passed?
Solution: No Journal entry will be passed in the books of the firm since Z has paid his
share of goodwill to X and Y privately, outside the firm.
Illustration 8.
Pass Journal entry to distribute Workmen Compensation Reserve of ` 50,000 at the time
of admission of Z, when there is no claim against it. The firm has two partners X and Y.
Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Workmen Compensation Reserve A/c ...Dr. 50,000
To X’s Capital A/c 25,000
To Y’s Capital A/c 25,000
(Being Workmen Compensation Reserve transferred to partners in their
old profit-sharing ratio)
Illustration 9.
Give Journal entry to distribute ‘Workmen Compensation Reserve’ of ` 80,000 at the time of
admission of Z, when there is claim of ` 60,000 against it. The firm has two partners X and Y.

Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

Workmen Compensation Reserve A/c ...Dr. 80,000
To Workmen Compensation Claim A/c 60,000
To X’s Capital A/c 10,000
To Y’s Capital A/c 10,000
(Being the workmen compensation claim accepted and surplus WCR
transferred to partners in their old profit-sharing ratio)
Notes: After adjusting Workmen Compensation Claim against the Workmen Compensation Reserve, the
balance amount of ` 20,000 (i.e., ` 80,000 – ` 60,000) is distributed between X and Y in their old
profit-sharing ratio.