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Chapter 5 Admission of a Partner 5.21
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JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

2018
April 1 Cash A/c ...Dr. 6,44,000
To B’s Capital A/c 6,02,000
To Premium for Goodwill A/c 42,000
(Amount brought in by B)
April 1 Premium for Goodwill A/c ...Dr. 42,000
To A’s Capital A/c 42,000
(Amount of goodwill credited to A’s Capital Account)

Illustration 14 (Comprehensive).
A and B are partners in a firm sharing profits and losses in the ratio of 7 : 3. Their Balance
Sheet as at 31st March, 2018 is:

Liabilities ` Assets `
Sundry Creditors 40,000 Cash in Hand 36,000
Bank Overdraft 20,000 Sundry Debtors 46,000
Reserve 10,000 Less: Provision for
Capital A/cs: Doubtful Debts 2,000 44,000
A 50,000 Stock-in-Trade 50,000
B 40,000 90,000 Furniture 30,000
1,60,000 1,60,000
On 1st April, 2018, C joins the firm as the third partner for 1/4th share of the future profits
on the following terms and conditions:
(i) Goodwill is valued at ` 40,000 and C is to bring in the necessary amount in cash as
premium for goodwill.
(ii) 20% of the reserve is retained as a Contingency Reserve.
(iii) Stock-in-Trade is to be reduced by 40% and Furniture is to be reduced to 40%.
(iv) A is to pay off the Bank Overdraft.
(v) C is to introduce ` 30,000 as his share of capital to which amount other partners’
capitals shall have to be adjusted.
Prepare Balance Sheet of the new firm after C has become a partner. Show the workings clearly.
Solution: BALANCE SHEET as at 1st April, 2018
Liabilities ` Assets `

Sundry Creditors 40,000 Cash in Hand (WN 3) 76,000
Contingency Reserve 2,000 Sundry Debtors 46,000
Capital A/cs: Less: Provision for Doubtful Debts 2,000 44,000
A 63,000 Stock (` 50,000 – ` 20,000) 30,000
B 27,000 Furniture 12,000
C 30,000 1,20,000
1,62,000 1,62,000