Page 99 - DEBKVOL-1

Chapter 5 Admission of a Partner 5.15
.
Working Notes:
1. Calculation of New Profit-Sharing Ratio:
D joins the business for 1/8th share. Therefore, remaining 7/8th (i.e., 1 – 1/8) share will be shared by the
old partners in their old ratio, i.e., 6 : 5 : 3 respectively. There fore, A’s New share = 6/14 × 7/8 = 42/112;
B’s New share = 5/14 × 7/8 = 35/112; C’s New share = 3/14 × 7/8 = 21/112; and D’s share = 1/8th or 14/112.
Thus, New Profit-sharing Ratio among A, B, C and D = 42 : 35 : 21 : 14 = 6 : 5 : 3 : 2.
2. Determination of the Combined Capital of the New Firm:
Taking D’s Capital as base, the combined capital of the new firm is ` 7,000 × 8/1 = ` 56,000. Total capital
of the new firm will be contributed by the partners in their new profit-sharing ratio, i.e., 6 : 5 : 3 : 2.
Therefore, capitals of the partners in new firm will be:
A—` 21,000; B—` 17,500; C—` 10,500; D—` 7,000.

3. Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A B C D Particulars A B C D
` ` ` ` ` ` ` `
To Cash A/c 1,750 1,625 ... ... By Balance b/d 19,000 16,000 8,000 ...
(Bal. Fig.) By Cash A/c ... ... ... 7,000
To Balance c/d 21,000 17,500 10,500 7,000 By Premium for
(WN 2) Goodwill A/c 1,800 1,500 900 ...
By P & L Adj.
A/c 1,950 1,625 975 ...
By Cash A/c ... ... 625 ...
(Bal. Fig.)
22,750 19,125 10,500 7,000 22,750 19,125 10,500 7,000

Illustration 11.
Anil and Sunil are partners sharing profits and losses in the ratio of 3 : 2. They admit Charan
as a new partner from 1st April, 2018. Anil gives 1/3rd of his share while Sunil gives 1/10th
from his share to Charan. Their Balance Sheet as at 31st March, 2018, is given below:

Liabilities ` Assets `
Anil‘s Capital 32,600 Land and Building 6,000
Sunil’s Capital 40,400 73,000 Investments 5,000
Workmen’s Compensation Reserve 2,000 (Market Value ` 4,500)
Investments Fluctuation Reserve 1,000 Debtors 30,000
Employees’ Provident Fund 1,000 Stock 10,000
Provision for Doubtful Debts 1,000 Bank 27,000
78,000 78,000
Terms of Charan’s admission are as follows:
(i) Charan brings ` 30,000 as his capital. His share of Goodwill was determined to be
` 18,000. He could bring in only 60% of his share.
(ii) Land and Building was found to be undervalued by ` 10,000, stock was found overvalued
by ` 7,000 and provision for doubtful debts is to made equal to 5% of the debtors.
(iii) Capital Accounts of the old partners to be re-adjusted in the new profit-sharing
arrangement on the basis of Charan’s Capital, any excess or deficiency to be adjusted
in cash.