Page 57 - ISCDEBK-12

Admission of a Partner 3.15

Lily was admitted as a partner on 1st April, 2019 on the following terms:

(i) She was to bring in ` 35,000 as her Capital for 1/5th share in the profits.
(ii) Goodwill of the firm was valued at ` 1,00,000. Lily was to bring half of her share of
Goodwill in cash.
(iii) Stock and Furniture were to be reduced in value by 10% and the Provision for Doubtful
Debts was to be brought up to 10% of the Debtors.
(iv) The value of Land and Building was appreciated by 25%.
(v) Creditors include an amount of ` 5,000 received as commission from Pinky. The
necessary adjustment is required to be made.
You are required to prepare necessary accounts and Balance Sheet of the newly constituted
firm. (ISC 1995, Modified)

Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Stock A/c 5,000 By Land and Building A/c 15,625
To Furniture A/c 250 (25% of ` 62,500)
To Provision for Doubtful Debts A/c 2,875 By Creditors A/c 5,000
(` 4,125 – ` 1,250)
To Gain (Profit) on Revaluation:
Rose (3/4) 9,375
Daisy (1/4) 3,125 12,500
20,625 20,625

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Rose Daisy Lily Particulars Rose Daisy Lily
` ` ` ` ` `
To Balance c/d 1,06,875 50,625 35,000 By Balance b/d 75,000 40,000 ...
By General Reserve A/c 7,500 2,500 ...
By Bank A/c ... ... 35,000
By Premium for Goodwill A/c 7,500 2,500 ...
(WN 1)
By Lily’s Current A/c (WN 2) 7,500 2,500 ...
By Revaluation A/c (Gain) 9,375 3,125 ...
1,06,875 50,625 35,000 1,06,875 50,625 35,000

Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 56,250 By Balance c/d 1,01,250
To Lily’s Capital A/c 35,000
To Premium for Goodwill A/c 10,000
1,01,250 1,01,250