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Model Test Papers M.57
16. A and B are partners in a firm sharing profits in the ratio of 7 : 3. Their Balance Sheet
as on 31st March, 2018 was as follows:

BALANCE SHEET OF A AND B as on 31st March, 2018
Liabilities ` Assets `
Sundry Creditors 60,000 Cash 36,000
Outstanding Wages 9,000 Debtors 54,000
General Reserve 15,000 Less: Provision for Doubtful Debts 6,000 48,000
Capital A/cs: Stock 60,000
A 1,20,000 Furniture 1,20,000
B 1,80,000 3,00,000 Machinery 1,20,000
3,84,000 3,84,000

As both of them (A and B) are specially abled, sometimes they find it difficult to run
the business on their own.
On the above date, one of their common friends, C was admitted for 1/4th share in the
profits on the following terms:
(i) C will bring ` 90,000 as his capital and ` 30,000 as his share of goodwill premium,
half of which will be withdrawn by A and B.
(ii) Debtors ` 4,500 will be written off and provision for doubtful debts will be
maintained at 5% on debtors.
(iii) Outstanding wages will be paid.
(iv) Stock will be reduced by 10%, furniture by ` 1,500 and machinery by 8%.
(v) Investments of ` 7,500 not shown in the Balance Sheet will be recorded.
(vi) A creditor of ` 6,300 not recorded in the books was to be taken into account.
Pass necessary Journal entries for the above transactions in the books of the firm on
C’s admission.
Or
The Balance Sheet of X, Y and Z sharing profits and losses in the ratio of 2 : 3 : 5 as
at 31st March, 2018 is given below:

BALANCE SHEET OF X, Y AND Z
as at 31st March, 2018
Liabilities ` Assets `
Sundry Creditors 1,65,000 Cash 1,20,000
General Reserve 90,000 Debtors 1,35,000
Capital A/cs: Less: Provision for Doubtful Debts 15,000 1,20,000
X 2,25,000 Stock 1,50,000
Y 3,75,000 Machinery 4,50,000
Z 4,50,000 10,50,000 Patents 90,000
Building 3,00,000
Profit and Loss A/c 75,000
13,05,000 13,05,000