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5.24 Double Entry Book Keeping—CBSE XII

BALANCE SHEET OF A, B AND C as at 1st April, 2018
Liabilities ` Assets `
Capital A/cs: Machinery 66,000
A 84,400 Furniture 27,000
B 62,600 Investments 26,000
C 49,000 1,96,000 Debtors 38,000
Bank Loan 18,000 Less: Provision for Doubtful Debts 4,000 34,000
Creditors 72,000 C’s Current A/c 6,000
Stock 46,000
Cash ` (24,000 + 8,000 + 49,000) 81,000
2,86,000 2,86,000
Working Notes:
1. A part of Goodwill brought in by C in cash has been shared by A and B in their sacrificing ratio of 9 : 1.
Calculation of Sacrificing Ratio:
Partners Old Share New Share Sacrifice Sacrificing Ratio
(Old Share – New Share)
A 3/5 3/8 3/5 – 3/8 = 9/40 A : B
B 2/5 3/8 2/5 – 3/8 = 1/40 9 : 1
2. Goodwill not brought in cash out of his share by ` 6,000 will be recorded as follows:
C’s Current A/c ...Dr. ` 6,000
To A’s Capital A/c ` 5,400
To B’s Capital A/c ` 600
3. Capital brought in by C:
C’s share in profits = 25% or 1/4
For 3/4th share, combined capitals of A and B (after adjustments) are (` 84,400 + ` 62,600)
` 1,47,000.
∴ Total capital of New Firm = ` 1,47,000 × 4/3 = ` 1,96,000.
∴ C’s capital in New Firm = ` 1,96,000 × 1/4 = ` 49,000.
Illustration 16 (Admission-cum-Retirement: Workmen Compensation Reserve).
X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. On 1st April, 2018, R
is admitted into the partnership for 1/5th share in profits and brings ` 1,00,000 as his capital.
On the same date Z retires from the firm. On that date, balance in Workmen Compensation
Reserve is valued at ` 35,000. Claim for workmen compensation was determined at ` 25,000.
Give necessary Journal entries.
Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2018
April 1 Workmen Compensation Reserve A/c ...Dr. 25,000
To Workmen Compensation Claim A/c 25,000
(Workmen Compensation Reserve equivalent to claim is
transferred to Workmen Compensation Claim Account)
April 1 Workmen Compensation Reserve A/c ...Dr. 10,000
To X’s Capital A/c 5,000
To Y’s Capital A/c 3,000
To Z’s Capital A/c 2,000
(Balance of Workmen Compensation Reserve in excess
distributed among old partners in old ratio)
April 1 Bank A/c ...Dr. 1,00,000
To R’s Capital A/c 1,00,000
(Capital brought in by R for 1/5th share)