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

Working Notes:

1. B sold his share to A and C in the ratio of 4 : 5. The consideration of ` 36,000 and ` 45,000 will be credited to
B’s Capital Account and the respective amount will be debited to A’s and C’s Capital Accounts respectively.

2. Total Capital of the New Firm is ` 6,00,000. New Profit-sharing Ratio is 2 : 1.
A’s Share of Capital = ` 6,00,000 × 2/3 = ` 4,00,000
C’s Share of Capital = ` 6,00,000 × 1/3 = ` 2,00,000

After all adjustments, A’s Capital will be ` (2,00,000 + 40,000 + 40,000 + 4,000 – 36,000) = ` 2,48,000.
Therefore, A will bring in (` 4,00,000 – ` 2,48,000) = ` 1,52,000.

After all adjustments, C’s Capital will be ` (2,00,000 + 10,000 + 10,000 + 1,000 – 45,000) = ` 1,76,000.
Therefore, C will bring in (` 2,00,000 – ` 1,76,000) = ` 24,000.

3. Journal entry for Car given to B will be: ` `
B’s Capital A/c ...Dr. 3,59,900
To Car A/c 2,50,000
To Revaluation A/c 55,000
To Output CGST A/c 27,450
To Output SGST A/c 27,450
(Being Car given to B at ` 3,05,000 plus CGST and SGST)

4. Journal entry for Revaluation Expenses: ` `
Revaluation A/c ...Dr. 5,000
Input CGST A/c ...Dr. 450
Input SGST A/c ...Dr. 450
To Cash A/c 5,900
(Being Revaluation Expenses plus CGST an SGST paid)
5. Cash in Hand: ` `
Opening Balance 20,000
Less: Revaluation Expenses 5,000
Input CGST 450
Input SGST 450 5,900
14,100

6. Cash at Bank: `
Opening Balance 1,50,000
Add: Amount Brought by:
A 1,52,000
C 24,000
3,26,000
Less: Paid to B 42,050
2,83,950