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

BALANCE SHEET OF THE NEW FIRM as at 1st April, 2018
Liabilities ` Assets `

Creditors 50,000 Land and Building 4,20,000
Employees’ Provident Fund 10,000 Investments 55,000
Capital A/cs: Debtors 3,00,000
Amit 4,00,000 Less: Provision for Doubtful Debts 15,000 2,85,000
Sumit 3,00,000 Stock 60,000
Puneet 3,00,000 10,00,000 Cash at Bank (WN 4) 2,40,000
10,60,000 10,60,000

Working Notes:
1. Calculation of Sacrificing Ratio and New Ratio:
Amit Sumit
(a) Old Share 3/5 2/5
(b) Sacrifice 1/5(i.e., 1/3 × 3/5) 1/10(i.e., 1/4 × 2/5)
(c) New Share (a – b) 2/5 or 4/10 3/10
∴ Sacrificing Ratio of Amit and Sumit = 1/5 : 1/10 = 2 : 1
Puneet’s Share = Sacrifice Share of Amit + Sacrifice Share of Sumit
= 1/5 + 1/10 = 3/10
Thus, New Profit-sharing Ratio of Amit, Sumit and Puneet = 4/10 : 3/10 : 3/10 = 4 : 3 : 3.
2. Puneet’s Share of Goodwill = ` 3,00,000 × 3/10 = ` 90,000, which is contributed by Amit and Sumit in
his sacrificing ratio, i.e., 2 : 1.
3. Capital of the Partners in New Firm:
Total Capital of the New Firm = ` 10,00,000
Thus, Amit’s Capital = 4/10 × ` 10,00,000 = ` 4,00,000;
Sumit’s Capital = 3/10 × ` 10,00,000 = ` 3,00,000;
Puneet’s Capital = 3/10 × ` 10,00,000 = ` 3,00,000.
4. Dr. BANK ACCOUNT Cr.
Particulars ` Particulars `

To Balance b/d 50,000 By Revaluation A/c (Architect’s Fee) 10,000
To Premium for Goodwill A/c 90,000 By Amit’s Capital A/c 60,000
To Amit’s Capital A/c 1,82,000 By Sumit’s Capital A/c 30,000
To Sumit’s Capital A/c 18,000 By Balance c/d 2,40,000
3,40,000 3,40,000

Illustration 17.
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z as a
new partner from 1st April, 2018. They have decided to share future profits in the ratio
of 4 : 3 : 3. The Balance Sheet as at 31st March, 2018 is given below:

Liabilities ` Assets `
X’s Capital 4,40,000 Goodwill 85,000
Y’s Capital 6,35,000 Land and Building 1,50,000
Workmen Compensation Reserve 50,000 Investment (Market value ` 1,12,500) 1,25,000
Investment Fluctuation Reserve 25,000 Debtors 2,50,000
Employees’ Provident Fund 85,000 Less: Provision for Doubtful Debts 25,000 2,25,000
Z’s Loan 7,50,000 Stock 7,50,000
Bank Balance 6,25,000
Advertisement Suspense A/c 25,000
19,85,000 19,85,000