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Chapter 5 Admission of a Partner 5.39
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10. Ram and Shyam are partners sharing profits and losses in the ratio of 3 : 1. They agreed to admit Mohan
into the partnership firm.
Mohan is to bring in ` 40,000 as his capital and ` 12,000 as goodwill for 1/4th share of future
profits. This he acquires in the ratio of 2 : 1 from Ram and Shyam. The amount of goodwill brought in by
Mohan is to remain in the business. At the time of Mohan’s admission a General Reserve of ` 16,000 existed
in the books of the old firm. For the purpose of admission, the assets and liabilities are to be revalued as:
(a) Buildings were appreciated by ` 20,000.
(b) The Provision for Doubtful Debts was reduced from ` 2,000 to ` 1,000.
(c) A provision of ` 1,000 was to be made for an outstanding bill for repairs.
Pass necessary Journal entries in connection with Mohan’s admission and also calculate future profit-
sharing ratio of the partners. [Ans.: New Profit-sharing Ratio—7 : 2 : 3.]
11. M and S are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet stood at
31st March, 2018 as:
BALANCE SHEET

Liabilities ` Assets `
Sundry Creditors 44,000 Cash at Bank 17,000
Capital A/cs: Sundry Debtors 15,000
M 30,000 Bills Receivable 4,000
S 20,000 50,000 Stock 25,000
Furniture and Fixtures 3,000
Land and Building 30,000
94,000 94,000

R, a differently abled person, is very efficient in office management. He is admitted to partnership with
effect from 1st April, 2018 on the following terms:
(a) He brings in ` 15,000 as his capital for 1/4th share and pays ` 6,000 for goodwill, half of which is to
be withdrawn by M and S.
(b) There is likely to be a claim against the firm for damages for which a provision to the extent of
` 1,500 is to be made.
(c) A bill for ` 300 for electricity charges has been omitted to be accounted. It should, therefore, now
be provided for.
(d) The Stock is to be reduced to ` 23,000 and Furniture and Fixtures by ` 1,000.
(e) 5% Reserve for Bad and Doubtful Debts to be created.
(f) The value of Land and Building is to be appreciated by 20%.
(g) That included in the Sundry Creditors is an item of ` 1,200 which is not paid and, therefore, has to
be written back.
(h) The profit-sharing ratio of the old partners will not change.
You are required to show necessary accounts and Balance Sheet of the new firm stating the proportion
in which the partners will share profits in future.
[Ans.: Gain (Profit) on Revaluation—` 1,650; Closing Balance of Capital A/cs:
M—` 33,100; S—` 21,550; R—` 15,000; Balance Sheet Total—` 1,14,250.]