Page 95 - DEBKVOL-1

Chapter 5 Admission of a Partner 5.11
.
On 1st April, 2018, they admitted V as a new partner on the following conditions:
(i) V will get 1/8th share in the profits of the firm.
(ii) V’s Loan will be converted into his capital.
(iii) The goodwill of the firm was valued at ` 80,000 and V brought in his share of goodwill
in cash.
(iv) A Provision for Doubtful Debts was to be made equal to 5% of the Debtors.
(v) Stock was to be reduced by 5%.
(vi) Land was to be appreciated by 10%.
Prepare Revaluation Account, Partners’ Capital Accounts of P, S and V and Balance Sheet
of the new firm as at 1st April, 2018. (Delhi 2002, Modified)

Solution: In the Books of the Firm
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 500 By Land A/c 14,800
To Stock A/c 2,500
To Gain (Profit) transferred to:
P’s Capital A/c 7,080
S’s Capital A/c 4,720 11,800
14,800 14,800

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.

Particulars P S V Particulars P S V
` ` ` ` ` `
To Balance c/d 1,22,080 1,94,720 20,000 By Balance b/d 1,00,000 1,80,000 ...
By V’s Loan A/c ... ... 20,000
By Premium for
Goodwill A/c 6,000 4,000 ...
By Revaluation A/c 7,080 4,720 ...
By General Reserve A/c 9,000 6,000 ...
1,22,080 1,94,720 20,000 1,22,080 1,94,720 20,000

BALANCE SHEET OF M/s P, S AND V as at 1st April, 2018
Liabilities ` Assets `
Capital A/cs: Land 1,62,800
P 1,22,080 Building 90,000
S 1,94,720 Bills Receivable 40,000
V 20,000 3,36,800 Debtors 30,000
Creditors 30,000 Stock (` 50,000 – ` 2,500) 47,500
Provision for Doubtful Debts 1,500 Cash 8,000
Bank Overdraft 20,000 Add: Paid by V 10,000 18,000
3,88,300 3,88,300