(Q50-60) Admission of a Partner Ts Grewal Solutions 2025-26

In this article, I have provided Admission of a Partner TS Grewal Solutions 2025-26. You can find the solutions of specifically Q51 to Q60 here. If you have any doubts regarding any of these questions, you can ask in the comments. I will try to resolve your doubts as soon as possible.

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Question 51: ( Give the Journal Entry)

Give the Journal entry in the following cases:

(a) To distribute Workmen Compensation Reserve’ of ₹ 90,000 at the time of admission of R, when there is no claim against it. The firm has two partners P and Q.

(b) To distribute Workmen Compensation Reserve of ₹ 90,000 at the time of admission of R, when there is a claim of ₹ 60,000 against it. The firm has two partners P andQ.

(c) To distribute Investment Fluctuatiorn Reserve of 60,000 at the time of admission of R, when Investmnents (market value ₹ 2,85,000) exists at ₹ 3,00,000. The firm has two partners P and Q.

(d) To distribute ‘General Reserve of ₹ 60,000 at the time of admission of R, when ₹ 15,000 from General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two partners P and Q.

Answer:

Date	Particulars		L.F.	(Dr.) ₹	(Cr.) ₹
(a)	Workmen Compensation Reserve	Dr.		90,000
	To P’s Capital A/c				45,000
	To Q’s Capital A/c				45,000
	`(Being` Workmen Compensation Reserve distributed in equally`)`
(b)	Workmen Compensation Reserve	Dr.		90,000
	To P’s Capital A/c				15,000
	To Q’s Capital A/c				15,000
	To Workmen Compensation Claim A/c				60,000
	`(Being balance of` Workmen Compensation Reserve is distributed in equally after transferring to claim account`)`
(c)	Investment Fluctuation Reserve A/c	Dr.		60,000
	To Investment A/c				15,000
	To P’s Capital A/c				22,500
	To Q’s Capital A/c				22,500
	(`Being balance of` Investment Fluctuation Reserve is distributed in equally after adjusting)
(d)	General Reserve A/c	Dr.		60,000
	To Investment Fluctuation Reserve A/c				15,000
	To P’s Capital A/c				22,500
	To Q’s Capital A/c				22,500
	(`Being balance of` General Reserve is distributed in equally after transferring amount to Investment Fluctuation Reserve)

Question 52: (Ram and Shyam)

Ram and Shyam were partners in a firm sharing profits and losses in the ratio of 2 : 1. Mohan was admitted for 1/3rd share in the profits. On the date of Mohan‘s admission, the Balance Sheet of Ram and Shyam showed General Reserve of 2,50,000 and a credit balance of 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Mohan’s admission.

Answer:

Journal
Date	Particulars		L.F.	Debit	Credit
	General Reserve A/c	Dr.		2,50,000
	Profit and Loss A/c	Dr.		50,000
	To Ram’s Capital A/c				2,00,000
	To Shyam’s Capital A/c				1,00,000
	(Adjustment of balance in General Reserve A/c and P&L A/c in old ratio)

Working Notes:

WN1: Calculation of Share of General Reserve & P&L A/c

Ram ‘s share=3,00,000×2/3=2,00,000

Shyam ‘s share=3,00,000×1/3=1,00,000

Question 53: (X and Y)

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2024, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of 1,50,000 in General Reserve and a debit balance of 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.

Answer:

Journal
Date	Particulars		L.F.	Debit	Credit
2019 April 1	General Reserve A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Adjustment of balance in General Reserve A/c in old ratio)

	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		8,000
	To Profit and Loss A/c				20,000
	(Adjustment of debit balance in P&L A/c in old ratio)

Working Notes:

WN1: Calculation of Share of General Reserve

X’s share=1,50,000×3/5=90,000,

Y’s share=1,50,000×2/5=60,000

WN2: Calculation of Share of Debit Balance in P&L A/c

X’s share=20,000×3/5=12,000,

Y’s share=20,000×2/5=8,000

Question 54: (Murari and Vohra)

(a) An extract of the Balance Sheet of Murari and Vohra sharing profits & losses in the ratio of 3 :2 was as under:

Liabilities	Rs.	Assets	Rs.
General Reserve	30,000	Investments (Market Value 1,14,000)	1,20,000
Contingency Reserve	2,700	Advertisement Expenditure	6,000
Profit & Loss A/c	18,000	\| (Deferred Revenue
Investment Fluctuation Reserve	9,000
Workmen Compensation Reserve	7,200
Employees Provident Fund	20,000

New Partner Krishna was admitted for 1/5th share of profits. A claim on account of Workmen Compensation Reserve is estimated for Rs. 900.

Journal entries to adjust accumulated profits and losses.

(b) A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1. They decide to take D into partnership with effect from 1st April, 2024. The new profit-sharing ratio between A, B, C and D will be 3 : 3 : 3 : 1. They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:

	Book Values
General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
Advertisement Suspense A/c (Dr.)	1,20,000

Pass the necessary single adjustment entry through the Partner’s Current Account.

Answer:

Case (a)

Journal
Date	Particulars		L.F.	Debit	Credit
(i)
	Investment Fluctuation Reserve A/c	Dr.		6,000
	To Investment A/c				6,000
	(Being )
(ii)
	Workmen Compensation Reserve A/c	Dr.		900
	To Workmen Compensation Claim A/c				900

(iii)	General Reserve	Dr.		30,000
	Contingency Reserve	Dr.		2,700
	Profit & Loss A/c	Dr.		18,000
	Investment Fluctuation Reserve A/c	Dr.		3,000
	Workmen Compensation Reserve A/c	Dr.		6,300
	To Murari’s Capital A/c				36,000
	To Vohra’s Capital A/c				24,000
	(Being balance of reserves transferred to capital accounts )
(iv)	Murari’s Capital A/c	Dr.		3,600
	Vohra’s Capital A/c	Dr.		2,400
	To Advertisement Expenditure				6,000

Case (b)

Journal
Date	Particulars		L.F.	Debit	Credit
(A)
(i)	General Reserve A/c	Dr.		36,000
	Contingency Reserve A/c	Dr.		6,000
	Profit & Loss A/c	Dr.		18,000
	To X’s Capital A/c				30,000
	To Y’s Capital A/c				18,000
	To Z’s Capital A/c				12,000
	(Reserves distributed)

(ii)	X’s Capital A/c	Dr.		12,000
	Y’s Capital A/c	Dr.		7,200
	Z’s Capital A/c	Dr.		4,800
	To Advertisement Suspense A/c				24,000
	(Advertisement Suspense distributed)

(B)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To X’s Capital A/c				36,000
	To Y’s Capital A/c				36,000
	(Workmen Compensation Reserve distributed)
(C)
April 1	Workmen Compensation Reserve A/c	Dr.		72,000
	To Workmen Compensation Claim A/c				48,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				12,000
	(Surplus Workmen Compensation Reserve distributed)
(D)
April 1	Investment Fluctuation Reserve A/c	Dr.		24,000
	To Investment A/c				10,000
	To X’s Capital A/c				7,000
	To Y’s Capital A/c				7,000
	(Surplus Investment Fluctuation Reserve distributed)
(E)
April 1	General Reserve A/c	Dr.		4,800
	To Investment Fluctuation Reserve A/c				960
	To X’s Capital A/c				1,920
	To Y’s Capital A/c				1,920
	(Surplus General Reserve distributed)
(F)
April 1	C’s Current A/c	Dr.		36,000
	D’s Current A/c	Dr.		18,000
	To A’s Current A/c				54,000
	(Adjustment entry made)

Working Notes:

WN1: Calculation of Sacrifice or Gain

A :B :C=6:3:1 (Old Ratio)

A :B :C :D:=3:3:3:1 (New Ratio)

Sacrificing (or Gaining) Ratio = Old Ratio – New Ratio

A’s share=6/10−3/10=6−3/10=3/10 (Sacrifice)

B’s share=3/10−3/10=0

C’s share=1/10−3/10=1−3/10=−2/10 (Gain)

D’s share=0−1/10=−1/10 (Gain)

WN2: Calculation of Net Effect

General Reserve	1,50,000
Contingency Reserve	60,000
Profit and Loss A/c (Cr.)	90,000
	3,00,000
Less: Advertisement Suspense A/c (Dr.)	1,20,000
	1,80,000

WN 3: Adjustment of Net Effect
Amount credited in A’s Current A/c = 1,80,000×3/10= 54,000

Amount debited in C’s Current A/c = 1,80,000×2/10= 36,000

Amount debited in D’s Current A/c = 1,80,000×1/10= 18,000

Question 55: (Amit and Anil)

Amit and Anil are partners sharing profits and losses in the ratio of 2 : 1. Their Balance Sheet as on 31st March, 2025 was as follows:

Liabilities	Rs.	Assets	Rs.
Sundry Creditors	58,000	Cash in Hand	5,000
General Reserve	12,000	Cash at Bank	45,000
Capital Acs:		Sundry Debtors	60,000
Amit 1,80,000Anil 1,50,000	3,30,000	Machinery	1,00,000
		Stock	40,000
		Building	1,50,000

	4,00,000		4,00,000

Ankit is admitted as a partner on the date of the Balance Sheet on the following terms:

(a) Ankit will bring in 1,00,000 as his capital and 60,000 as his share of goodwill for 1/4th share in profits.

(b) Machinery is to be appreciated to 1,20,000 and the value of building is to be appreciated by 10%.

(d) General Reserve will continue to appear in the books of the reconstituted firm at its original value.

(e) A Provision for Doubtful Debts is to be created at 5% of debtors.

(f) Creditors were unrecorded to the extent of 1,000.

Prepare Revaluation Account and Partners Capital Accounts.

Answer:

Revaluation Account
Particulars	Rs.	Particulars	Rs.
Stock	4,000	Machinery	20,000
Provision for Doubtful Debts	3,000	Building	15,000
Creditors	1,000
Gain	27,000

	35,000		35,000

Capital account
Particulars	Amit	Anil	Ankit	Particulars	Amit	Anil	Ankit
To Balance c/d	2,40,000	1,80,000	1,00,000	By Balance b/d	1,80,000	1,50,000	–
				By Bank A/c	–	–	1,00,000
				By Premium A/c	40,000	20,000	–
				By Revaluation A/c	18,000	9,000	–
				By Ankit’s Current A/c	2,000	1,000
	2,40,000	1,80,000	1,00,000		2,40,000	1,80,000	1,00,000

Working note:

1. Goodwill 60,000 shared in 2:1 in sacrificing ratio

Amit=60,000×2/3=40,000

Anil=60,000×1/3=20,000

Ankit’s Current A/c	Dr.	3,000
To Amit’s capital A/c			2,000
To Anil’s capital A/c			1,000
(Being sacrificing partners compensated for sacrifice)

2. Profit of Revaluation shared in old ratio (2:1)

Amit=27,000×2/3=18,000

Anil=27,000×1/3=9,000

3. General Reserve 12,000 adjusted in gaining and sacrificing ratio

Share of Ankit=12,000×1/4=3,000

3,000 compensated in 2:1 in sacrificing ratio

Amit=3,000 ×2/3=2,000

Anil=3,000 ×1/3=1,000

Note: since no information regarding how Ankit will compensate, will be compensated through Ankit’s current account.

Question 56: (Vimal and Nirmal)

Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 5:3. They admit Kailash into the firm on 1st April, 2024, when their Balance Sheet was as follows:

Liabilities	Rs.	Assets	Rs.
Vimal’s Capital	32,000	Goodwill	8,000
Nirmal’s Capital	34,000	Machinery	38,000
General Reserve	8,000	Furniture	5,000
Bank Loan	6,000	Debtors	23,000
Creditors	6,000	Stock	7,000
		Cash	5,000

	86,000		86,000

Terms of Kailash’s admission were as follows:

(i) Kailash will bring 30,000 as his share of capital and will be entitled to 1/3rd share in the profits.

(ii) Kailash is not to bring goodwill in cash, Vimal and Nirmal raise the goodwill in the books.

(iii) Goodwill of the firm is valued on the basis of 2 years’ purchase of the average profit of the last three years. Average profit of the last three years is 6,000.

(iv) Machinery and stock are revalued at 45,000 and 8,000 respectively.

Prepare a Revaluation Account and Partners’ Capital Accounts incorporating the above adjustments.

Answer:

Revaluation Account
Particulars	Rs.	Particulars	Rs.
Gain	8,000	Machinery	7,000
Vimal’s cap-5,000		Stock	1,000
Nirmal’s cap- 3,000
	8,000		8,000

Capital account
Particulars	Vimal	Nirmal	Kailash	Particulars	Vimal	Nirmal	Kailash
To Goodwill A/c	5,000	3,000	–	By Balance b/d	32,000	34,000	–
To Goodwill A/c	5,000	3,000	–	By Cash A/c	–	–	30,000
To Balance c/d	39,500	38,500	30,000	By Goodwill A/c	7,500	4,500	–
				By Revaluation A/c	5,000	3,000	–
				By General reserve A/c	5,000	3,000
	49,500	44,500	30,000		49,500	44,500	30,000

Working note:

1. Goodwill valuation

Goodwill = 6,000×2=12,000

2. Goodwill 12,000 raised in 3:2 in sacrificing ratio

Vimal =12,000×3/5=7,500

Nirmal =12,000×2/5=4,500

Goodwill A/c	Dr.	12,000
To Vimal’s capital A/c			7,500
To Nirmal’s capital A/c			4,500
(Being goodwill raised)

Goodwill 12,000 written off in 5:3:4 in sacrificing ratio

Vimal =12,000×5/12=5,000

Nirmal =12,000×3/12=3,000

Kailash = 12,000×4/12=4,000

Vimal’s capital A/c	Dr.	5,000
Nirmal’s capital A/c	Dr.	3,000
Kailash’s current A/c	Dr.	4,000
To Goodwill A/c			12,000
(Being goodwill written off)

1. Profit of Revaluation shared in old ratio (3:2)

Vimal =8,000×3/5=5,000

Nirmal =8,000×3/5=3,000

2. General reserve shared in old ratio (3:2)

Vimal =8,000×3/5=5,000

Nirmal =8,000×3/5=3,000

Note: Since, Kailash is not to bring goodwill in cash,will be compensated through Kailash’s current account.

Question 57: (X, Y, and Z)

X, Y and Z are equal partners with capitals of 15,000, 17,500 and 20,000 respectively. They agree to admit W into equal partnership upon payment in cash 15,000 for 1/4th share of the goodwill and 18,000 as his capital, both sums to remain in the business. The liabilities of the old firm were 30,000 and the assets, apart from cash, consist of Motors 12,000, Furniture 4,000, Stock 26,500 and Debtors 37,800. The Motors and Furniture were revalued at 9,500 and 3,800 respectively.

Pass Journal entries to give effect to the above arrangement and also show Balance Sheet of the new firm.

Answer:

Journal
Date	Particulars		L.F.	Debit	Credit

	Cash A/c	Dr.		3,3000
	To W’s capital A/cTo Premium for Goodwill A/c				1,80001,5000
	(Being C’s brought his share of goodwill and capital in cash)

	Premium for Goodwill A/c	Dr.		1,5000
	To X’s Capital A/cTo Y’s Capital A/cTo Z’s Capital A/c				500050005000
	(Being w’s share of Goodwill transferred in their sacrificing Ratio)
	Revaluation A/c Dr. To Motor A/c To Furniture A/c(Being decrease in value assets transferred to Revaluation A/c)			2700	2500200
	X’s Capital A/c Dr.Y’s Capital A/c Dr.Z’s Capital A/c Dr. To Revaluation A/c (Being loss of Revaluation of transferred to old partners capital A/c)			900900900	2700

Balance sheet of new firm
Liabilities		Rs.	Assets	Rs.
Liabilities		30,000	Cash balance(2,200+33,000)	35,200
X’s Capital	19,100		Motor	9,500
Y’s CapitalZ’s Capital	21,60024,100		furnitureStock	3,80026,500
Z’s Capital	18,000	82,800	Debtors	37,800
		1,12,800		1,12,800

Working notes:

WN-1

Memorandum balance sheet is prepared to find out Cash balance.

Liabilities		Rs.	Assets	Rs.
Liabilities		30,000	Cash balance (Balancing figure)	2200
X’s Capital	15,000		Motor	12,000
Y’s CapitalZ’s Capital	17,50020,000	52,500	furnitureStock	4,00026,500
			Debtors	37,800
		82,500		82,500

WN-2

Old ratio of X:Y:Z=1;1;1

W is admitted for ¼ share

Let total profit =1

Remaining profit after W’s admission= 1-1/4=3/4

X=3/4×1/3=3/12

Y=3/4×1/3=3/12

Z=3/4×1/3=3/12

W=1/4×3/3=3/12

Therefore share of X, Y , Z and W=3:3:3:3=1:1:1:1

Sacrificing ratio= old –new

X=1/3-1/4=1/12

Y=1/3-1/4=1/12

Z=1/3-1/4=1/12

Sacrificing ratio of X, Y , Z = 1:1:1

WN-4

Particulars	Rs.	Particulars	Rs.
To Motors A/cTo Furniture A/c	2500200	By LossCapital A/c (In old Ratio)X=2700×1/3=900Y=2700×1/3=900Z=2700×1/3=900	2700
	2700		2700

WN-5

Partners’ Capital A/c
Particulars	X	Y	Z	W	Particulars	X	Y	Z	W
To ravaluation A/cTo balance c/d	90019,100	90021,600	90024,100	-1,8000	By Balance b/dBy Cash A/cBy Premium A/c	15,000-5000	17,500-5000	20,000-5000	-18,000-
	20,000	22,500	25,000	18,000		20,000	22,500	25,000	18,000

Question 58: (A and B)

Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2024:


Liabilities		Rs.	Assets	Rs.
Capital A/c’s:			Building	25,000
A	15,000		Plant and Machinery	17,500
B	10,000	25,000	Stock	10,000
Sundry Creditors		32,950	Sundry Debtors	4,850
			Cash in Hand	600
		57,950		57,950

They admit C into partnership on the following terms:
(a) C was to bring 7,500 as his capital and 3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Partners’ Capital Accounts and Balance Sheet of the new firm.

Answer:

Journal
Date	Particulars		L.F.	Debit	Credit

	Profit and Loss Adjustment A/c	Dr.		1,750
	To Stock A/c				500
	To Plant and Machinery A/c				875
	To Reserve for Doubtful Debts A/c				375
	(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

	Building A/c	Dr.		2,500
	To Profit and Loss Adjustment A/c				2,500
	(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

	Profit and Loss Adjustment A/c			750
	To A’s Capital A/c				500
	To B’s Capital A/c				250
	(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

	Cash A/c	Dr.		10,500
	To C’s Capital A/c				7,500
	To Premium for Goodwill A/c				3,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				1,000
	(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e 2:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			7,500
				Premium for Goodwill	2,000	1,000
Balance c/d	17,500	11,250	7,500	Profit and Loss Adjustment (Profit)	500	250
	17,500	11,250	7,500		17,500	11,250	7,500

Balance Sheet as on March 31, 2024 after admission of C
Liabilities		Rs.	Assets		Rs.

Capital Accounts:			Building (25,000 + 2,500)		27,500
A	17,500		Plant and Machinery (17,500 – 875)		16,625
B	11,250		Stock (10,000 – 500)		9,500
C	7,500	36,250
Sundry Creditors		32,950	Sundry Debtors	4,850
			Less: Provision for D. Debts	375	4,475
			Cash in Hand (600 + 10,500)		11,100
		69,200			69,200

Working Notes:

WN1

	A	B
Sacrificing ratio	2 :	1

WN2
Distribution of Premium for Goodwill (in sacrificing ratio)
A will get =3,000×2/3=2,000

B will get =3,000×1/3=1,000

WN3
Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

A will get =750×2/3=500

B will get =750×1/3=250

Question 59: (J and K)

Balance Sheet of J and K who share profits in the ratio of 3 : 2 is as follows:

BALANCE SHEET as at 31st March, 2024
Liabilities		Rs.	Assets	Rs.
Reserve		1,00,000	Cash	2,00,000
J’s Capital	1,50,000		Other Assets	1,50,000
K’s Capital	1,00,000	2,50,000
		3,50,000		3,50,000

M joins the firm from 1st April, 2024 for a half share in the future profits. He is to pay 1,00,000 for goodwill and 3,00,000 for capital. Draft the Journal entries and prepare Balance Sheet in each of the following cases:
(a) If M acquires his share of profit from the firm in the profit-sharing ratios of the partners.
(b) If M acquires his share of profits from the firm in equal proportions from the original partners.
(c) If M acquires his share of profit in the ratio of 3 : 1 from the original partners, ascertain the future profit-sharing ratio of the partners in each case.

Answer:

(a) If M acquires his share of profit from the firm in the original ratios of the partners.

Journal
Date	Particulars		L.F.	Debit	Credit
2024Apr.1	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought capital and his of goodwill in cash)

Apr.1	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Premium for Goodwill distributed between J and K in their Sacrificing Ratio)

Apr.1	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distribution between M and J in their old ratio)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,50,000	1,00,000
				Cash			3,00,000
				Premium for Goodwill	60,000	40,000
Balance c/d	2,70,000	1,80,000	3,00,000	Reserve	60,000	40,000
	2,70,000	1,80,000	3,00,000		2,70,000	1,80,000	3,00,000

Balance Sheet as on April 01, 2024 after M’s admission
Liabilities	Rs.	Assets	Rs.
		Cash (2,00,000 + 4,00,000)	6,00,000
J’s Capital	2,70,000	Other Assets	1,50,000
K’s Capital	1,80,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio:

	M	J
OLD RATIO	3	2

M is admitted for ½ share of profit
Let the combined share of all partners after admission of M be = 1

Combined share of J and K after M’s admission = 1 − M’s share

=1-1/2

=1/2

New ratio= old ratio –Combined share of B and C

J= 3/5×1/2=3/10

k=2/5×1/2=2/10

	J		K		M
New profit sharing ratio=	3/10	:	2/10	:	1/2
=	3/10	:	2/10	:	5/10
=	3	:	2	:	5

Working Notes-

WN1
Distribution of Premium for Goodwill (in sacrificing ratio)

J will get =1,00,000×3/5=60,000

K will get =1,00,000×2/5=40,000

WN2
Distribution of General Reserve (in old ratio)
J will get =1,00,000×3/5=60,000

K will get =1,00,000×2/5=40,000

(b) If M acquires his share of profit from the firm in equal proportions from the original partners.

Journal
Date	Particulars		L.F.	Debit	Credit
2022
April 1	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distributed between J and K in old ratio)

April 1	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To J’s Premium for Goodwill A/c				1,00,000
	(M brought capital and his share of goodwill)

April 1	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				50,000
	To K’s Capital A/c				50,000
	(Premium for Goodwill distributed between J and K in sacrificing Raito i.e 1:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,50,000	1,00,000
				Cash			3,00,000
				Premium for Goodwill	50,000	50,000
Balance c/d	2,60,000	1,90,000	3,00,000	Reserve	60,000	40,000
	2,60,000	1,90,000	3,00,000		2,60,000	1,90,000	3,00,000

Balance Sheet as on April 01, 2022 after M’s admission
Liabilities	Rs.	Assets	Rs.
J’s Capital	2,60,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	1,90,000	Others Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of future (new) profit sharing ratio

	J	K
Old ratio	3 :	2

M is admitted for ½ share of profit
J and K each will sacrifice in favour of M=1/2×1/2=1/4

New ratio= old ratio – Sacrificing Ratio

	J’s	=3/5-1/4
		=7/20
	k’s	=2/5-1/4
		=3/20
			J		K		M
New profit sharing ratio=			7/20	:	3/20	:	1/2
=			7/20	:	3/20	:	10/20
=			7	:	3	:	10

	J		K
Sacrificing ratio=	1/4	:	1/4	=1:1

Working Notes:

WN1
Distribution of Premium for Goodwill (in Sacrificing ratio)
J and K each will get =1,00,000×1/2=50,000

WN2
Distribution of General Reserve (in old ratio)
J will get =1,00,000×3/5=60,000
K will get =1,00,000×2/5=40,000

(c) If M acquires his share of profit in the ratio of 3:1 from the original partner

Journal
Date	Particulars		L.F.	Debit	Credit
2022Apr.1	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	(Reserve distributed between J and K at the time of M’s admission)

April 1	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought Capital his share of Goodwill)

April 1	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				75,000
	To K’s Capital A/c				25,000
	(Premium for Goodwill distributed between J and K in their sacrificing ratio i.e 3:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,50,000	1,00,000
				Cash			3,00,000
				Premium for Goodwill	75,000	25,000
				Reserve	60,000	40,000
Balance c/d	2,85,000	1,65,000	3,00,000
	2,85,000	1,65,000	3,00,000		2,85,000	1,65,000	3,00,000

Balance Sheet as on April 01, 2022 after M’s admission
Liabilities	Rs.	Assets	Rs.
J’s Capital	2,85,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	1,65,000	Other Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio

	J	K
Old ratio	3 :	2

M is admitted for ½ share of profit

J’s sacrificing rato	=1/2×3/4
	=2/8
K’s sacrificing rato	=1/2×1/4
	=1/8

New Ratio = Old Ratio − Sacrificing Ratio

J’s	=3/5-3/8
	=9/40
K’s	=2/5-1//8
	=11/40
		J		K		M
New profit sharing ratio=		9/40	:	11/40	:	1/2
=		9/40	:	11/40	:	20/40
=		9	:	11	:	20

Working Notes:
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
J will get =1,00,000×3/4=75,000

K will get =1,00,000×1/4=25,000

WN2
Distribution of Reserve (in old ratio)
J will get =1,00,000×3/5=60,000

K will get =1,00,000×2/5=40,000

Question 60: (A and B)

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March, 2025. A and B share profits and losses in the ratio of 2 : 1.

BALANCE SHEET OF A AND B as at 31st March, 2025
Liabilities		Rs.	Assets	Rs.
Bills Payable		10,000	Cash in Hand	10,000
Creditors		58,000	Cash at Bank	40,000
Outstanding Expenses		2,000	Sundry Debtors	60,000
Capital A/cs:			Stock	40,000
A	1,80,000		Plant	1,00,000
B	1,50,000	3,30,000	Building	1,50,000
		4,00,000		4,00,000

C is admitted as a partner on 1st April, 2024 on the following terms:
(a) C will bring 1,00,000 as his capital and 60,000 as his share of goodwill for 1/4th share in the profits.
(b) Plant is to be appreciated to 1,20,000 and the value of building is to be appreciated by 10%.
(c) Stock is found overvalued by 4,000.
(d) A provision for doubtful debts is to be created at 5% of sundry debtors.
(e) Creditors were unrecorded to the extent of 1,000.
Pass the necessary Journal entries, prepare the Revaluation Account and Partners’ Capital Accounts, and show the Balance Sheet after the admission of C.

Answer:

Journal
Date	Particulars		L.F.	Rs.	Rs.
2025	Bank A/c	Dr.		1,60,000
Mar 31	To C’s Capital A/c				1,00,000
	To Premium for Goodwill A/c				60,000
	(Capital and premium for goodwill brought by C for 1/4 share)

	Premium for Goodwill A/c	Dr.		60,000
	To A’s Capital A/c				40,000
	To B’s Capital A/c				20,000
	(Premium for Goodwill brought transferred to old partners’ capital account in their sacrificing ratio)
	Plant A/c	Dr.		20,000
	Building A/c	Dr.		15,000
	To Revaluation A/c				35,000
	(Increase in value of assets)

	Revaluation A/c	Dr.		8,000
	To Stock				4,000
	To Provision for Doubtful Debts A/c				3,000
	To Creditors A/c (Unrecorded)				1,000
	(Assets and liabilities revalued)

	Revaluation A/c	Dr.		27,000
	To A’s Capital A/c				18,000
	To B’s Capital A/c				9,000
	(Profit on revaluation transferred to old partners)

Revaluation Account
Dr.					Cr.
Particulars		Rs.	Particulars	Rs.
Stock		4,000	Plant	20,000
Provision for Doubtful Debts		3,000	Building	15,000
Creditors (Unrecorded)		1,000
Revaluation Profit
A’s Capital	18,000
B’s Capital	9,000	27,000
		35,000		35,000

Partners’ Capital Account
Dr.								Cr.
Particulars	A	B	C	Particulars	A	B	C
Balance c/d	2,38,000	1,79,000	1,00,000	Balance b/d	1,80,000	1,50,000
				Bank			1,00,000
				Premium for Goodwill	40,000	20,000
				Revaluation	18,000	9,000

	2,38,000	1,79,000	1,00,000		2,38,000	1,79,000	1,00,000

Balance Sheet as on March 31, 2025
Liabilities		Rs.	Assets		Rs.
Bills Payable		10,000	Cash in Hand		10,000
Creditors		59,000	Cash at Bank		2,00,000
Outstanding Expenses		2,000	Sundry Debtors	60,000
Capital:			Less: Provision for Doubtful Debt	3,000	57,000
A	2,38,000		Stock		36,000
B	1,79,000		Plant		1,20,000
C	1,00,000	5,17,000	Building		1,65,000
		5,88,000			5,88,000

Note: Since no information is given about the share of sacrifice, it is assumed that the old partners are sacrificing in their old profit sharing ratio.