Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Page No 5.90:

Question 41:

X and Y are partners with capitals of ₹ 50,000 each. They admit Z as a partner for 1/4th share in the
profits of the firm. Z brings in ₹ 80,000 as his share of capital. The Profit and Loss Account showed a
credit balance of ₹ 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.

Answer:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + undistributed Profit +

Z’s Capital

= 50,000 + 50,000 + 40,000 + 80,000

= ₹ 2,20,000

Capitalised value of the firm on the basis Z’s share= 80,000×4/1=3,20,000

Goodwill= Capitalised value of the firm – T otal captial after z’s admission

=3,20,000-2,20,000=1,00,000

Page No 5.90:

Question 42:

Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the
profits of the firm. Ajay brings ₹ 5,00,000 as his share of capital. The value of the total assets of the
firm was ₹ 15,00,000 and outside liabilities were valued at ₹ 5,00,000 on that date. Give necessary
Journal entry to record goodwill at the time of Ajay's admission. Also show your workings.

Answer:

Journal

Debit Credit
Date Particulars L.F. Amount Amount

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

₹ ₹
Ajay’s Capital A/c Dr. 2,00,000
To Asin’s Capital A/c 1,00,000
To Shreya’s Capital A/c 1,00,000
(Ajay’s share of goodwill distributed
among
the old partners in their sacrificing ratio
1:1.)

Working Notes:

Calculation of Goodwill brought in by Ajay

Value of firm’s goodwill = Capitalised value of the firm – Net worth

= Share of Ajay's capital × Reciprocal of Ajay's share
Capitalised value of the firm = 5,00,000 ×51= ₹ 25,00,000
= Total assets-Outside liabilities + Ajay's capital
Net worth of the new firm = 15,00,000 - 5,00,000 + 5,00,000= ₹ 15,00,000
= Capitalised value of firm - Net worth of the new firm
=25,00,000 - 15,00,000
Value of firm's goodwill = ₹ 10,00,000
Ajay's share of goodwill = 10,00,000 × 1/5
= ₹ 2,00,000

Page No 5.90:

Question 43:

Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They
admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

and ₹ 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.

Answer:

Journal Entries

Debit Credit
S.No. Particulars L.F. Amount ₹ Amount ₹

Case (a)

Cash A/c Dr. 24,000

To Ghosh's Capital A/c 20,000

To Premium for Goodwill A/c 4,000

(Capital and Goodwill his

share broughtby Ghosh)

Premium for Godwill A/c Dr. 4,000

To Verma's Capital A/c 2,500

To Sharma's Capital A/c 1,500

(Goodwill brought by Ghosh credited to

Old Partnersin Sacrificing ratio)

Case (b) Cash A/c Dr. 24,000

To Ghosh Capital A/c 20,000

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Chapter 5 Admission of a Partner

To Premium for Goodwill A/c 4,000

(Capital and Goodwill brought by Ghosh for

(1/5)share of profit)

Premium for Goodwill A/c Dr. 4,000

To Verma's Capital A/c 2,500

To Sharma's Capital A/c 1,500

(Goodwill brought by Ghosh credited in Old Partner in

Sacrificing Ratio)

Verma's Capital A/c Dr. 2,500

Sharma's Capital A/c Dr. 1,500

To Cash A/c 4,000

(Amount of Premium for Goodwill withdrawn byOld Partners)

Case (c) Cash A/c Dr. 24,000

To Ghosh's Capital A/c 20,000

To Premium for Goodwill A/c 4,000

(Capital and Goodwill brought by Ghosh for

(1/5)share of profit)

Premium for Goodwill A/c Dr. 4,000

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Chapter 5 Admission of a Partner

To Verma's Capital A/c 2,500

To Sharma's Capital A/c 1,500

(Premium for Goodwill credited to Old Partner's Capital

Account in sacrificing ratio)

Verma's Capital A/c Dr. 1,250

Sharma's Capital A/c 750

To Cash A/c 2,000

(Half of the amount of premium for goodwill withdrawn by Old

partners)

Case (d) No entry: Goodwill was not brought into firm

Page No 5.90:

Question 44:

Disha and Divya are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital
of Disha is ₹ 4,80,000 and of Divya is ₹ 3,00,000. On 1st April, 2019 they admitted Hina as a new
partner for 1/5th share in future profits. Hina brought ₹ 3,00,000 as her capital. Calculate value of
goodwill of the firm and record necessary Journal entries on Hina's admission.

Answer:

Journal

Debit
Date Amount Credit Amount
Particulars L.F. ₹ ₹

2019 Bank A/c Dr. 3,00,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

April
1
To Hina’s Capital A/c 3,00,000
(Capital brought in by Hina)
April
1 Hina’s Current A/c Dr. 84,000
To Disha’s Current A/c 50,400
To Divya’s Current A/c 33,600
(Hina’s Share of Goodwill
adjusted
through current accounts)

Working Note:

Calculation of Hidden Goodwill

15,00,000
Total capital of the firm on the basis of Hina’s capital=(3,00,000×5/1)=
Less- adjusted cpital of partners + new partner’s capital= (10,80,000)
4,20,000

Hina’s share of goodwill=4,20,000×1/5=84,000

Page No 5.90:

Question 45:

E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on
1st April, 2019 for 1/3rd share. It was decided that E, F and G will share future profits equally.
G brought ₹ 50,000 in cash and machinery valued at ₹ 70,000 as premium for goodwill.
Pass necessary Journal entries in the books of the firm.

Answer:

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹
2019
April 1 Cash A/c Dr. 50,000
Machinery A/c Dr. 70,000
To Premium for Goodwill A/c 1,20,000
(G brought cash ₹ 50,000 and
Machinery
₹ 70,000 for his share of Goodwill)

April 1 Premium for Goodwill A/c Dr. 1,20,000

To E’s Capital A/c 1,20,000
(G share of goodwill transferred to E’s
Capital Account)

April 1 F’s Capital A/c Dr. 30,000

To E’s Capital A/c 30,000
(F’s share of gain in goodwill charged
from his capital and transferred to E’s
capital)

Working Notes:

WN1

E F G

OLD RATION 3 : 1:

NEW RATIO 1 : 1 : 1:

Sacrificing Ratio =Old ratio- new ratio

E’s =3/4-1/3
=5/12
F’s =1/4-1/3
= -1/12
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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

WN2

Calculation of F’s share of gain in goodwill

G’s share of Goodwill = 50,000 + 70,000 = ₹ 1, 20,000

Goodwill of the firm on the basis of G’s share =120000×3/1=3,60,000

F’s share of gain in goodwill =3,60,000×1/12=30,000

Page No 5.90:

Question 46:

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

Cash A/c Dr. 3,01,000

To Boman’s capital A/c 2.80,000
To Premium for Goodwill A/c 21,000
(Being Boman’s brought his share of
goodwill and capital in cash)

Premium for Goodwill A/c Dr. 21,000

To Aman’s Capital A/c 21,000
(Being Aman’s share of Goodwill transferred
in their sacrificing Ratio)

Working ratio:

Calculation of Capital and Goodwill to be contributed by new partner Boman:

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Opening Capital of Aman = 2,50,000

Add; profit earned during the year = 70,000
(-5000+13,000+17,000+20,000+25,000)
Less; Total drawing during last five years = 40,000
Boman will have to Bring as capital for equal
partnership =
Add: Boman’s contribution for ¼ share of goodwill = 2,80,000
(70000×3/5×1/2=21,000) 21,000
Boman will have to Bring as capital and for goodwill = 3,01,000

Page No 5.90:

Question 47:

Pass entries in the firm's journal for the following on admission of a partner:
(i) Machinery be reduced by ₹ 16,000 and Building be appreciated by ₹ 40,000.
(ii) A provision be created for Doubtful Debts @ 5% of Debtors amounting to ₹ 80,000.
(iii) Provision for warranty claims be increased by₹ 12,000.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

(i) Revaluation A/c Dr. 16,000

To Machinery A/c 16,000
(Value of machinery decreased)

Building A/c Dr. 40,000

To Revaluation A/c 40,000
(Value of building increased)

(ii) Revaluation A/c

To Provision for Doubtful Debts A/c Dr 4,000
(Provision created on debtors) 4,000

(iii) Revaluation A/c Dr. 12,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

To Provision for Warranty Claims A/c 12,000

(Liability recorded)

Page No 5.91:

Question 48:

Pass entries in firm's Journal for the following on admission of a partner:

(i) Unrecorded Investments worth ₹20,000 are to be accounted.
(ii) Unrecorded liability towards suppliers for ₹ 5,000 is to be accounted.
(iii) An item of ₹ 1,600 included in Sundry Creditors is not likely to be claimed and hence should be
written back.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

(i) Investment A/c Dr. 20,000

To Revaluation A/c 20,000
(Investments recorded)

(ii) Revaluation A/c Dr. 5,000

To Creditors A/c 5,000
(Liability recorded)

(iii) Creditors A/c

To Revaluation A/c Dr 1,600
(Liability decreased) 1,600

Page No 5.91:

Question 49:

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner and fixed
the new profit-sharing ratio as 3 : 2 : 1. At the time of admission of Z, Debtors and Provision for
Doubtful Debts appeared at ₹ 50,000 and ₹ 5,000 respectively all debtors are good. Pass the
necessary Journal entries.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

(i) Provision for Doubtful Debts A/c Dr. 5,000

To Revaluation A/c 5,000
(Provision on Debtors reduced)

(ii) Revaluation A/c Dr. 5,000

To X’s Capital A/c 3,000
To Y’s Capital A/c 2,000
(Profit on Revaluation transferred to Partners’
Capital A/c)

Page No 5.91:

Question 50:

X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th
share. At the time of admission of Z, Stock (Book Value ₹ 1,00,000) is to be reduced by 40% and
Furniture (Book Value ₹ 60,000) is to be reduced to 40%. Pass the necessary Journal entries.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

Revaluation A/c Dr. 76,000

To Stock A/c 40,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

To Furniture A/c 36,000

(Value of assets decreased)

X’s Capital A/c Dr. 45,600

Y’s Capital A/c Dr. 30,400
To Revaluation A/c 76,000
(Loss on Revaluation transferred to Partners’
Capital A/c)

Page No 5.91:

Question 51:

X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of
profits. At the time of admission of Z, Investments appeared at ₹ 80,000. Half of the investments to
be taken by X and Y in their profit-sharing ratio at book value. Remaining investments were valued
at ₹ 50,000. Pass the necessary Journal entries.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

X’s Capital A/c Dr. 24,000

Y’s Capital A/c Dr. 16,000
To Investments A/c 40,000
(Half of the investments taken over by X and Y)

Investment A/c Dr. 10,000

To Revaluation A/c 10,000
(Value of investments increased)

Revaluation A/c Dr. 10,000

To X’s Capital A/c 6,000
To Y’s Capital A/c 4,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(Profit on revaluation transferred to Partners’

Capital A/c)

Page No 5.91:

Question 52:

X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th
share of profits. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared
at ₹ 76,000 and ₹ 8,000 respectively. ₹ 6,000 of the debtors proved bad. A provision of 5% is to be
created on Sundry Debtors for doubtful debts. Pass the necessary Journal entries.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

Bad Debts A/c Dr. 6,000

To Debtors A/c 6,000
(Bad debts incurred)

Provision for Doubtful Debts A/c Dr 6,000

To Bad Debts A/c 6,000
(Bad debts adjusted)

Revaluation A/c (WN 1) Dr. 1,500

To Provision for Doubtful Debts A/c 1,500
(Provision created)

X’s Capital A/c Dr. 900

Y’s Capital A/c Dr. 600

To Revaluation A/c 1,500

(Loss on revaluation transferred to Partners’
Capital A/c)

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Working Notes:

WN1: Calculation of Provision for Doubtful Debts

Provision to be created = (76,000 - 6,000)×5100= ₹ 3,500
Old Provision = ₹ 2,000
New Provision to be created = 3,500 - 2,000 = 1,500

Page No 5.91:

Question 53:

At the time of admission of a partner C, assets and liabilities of A and B were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors ₹ 50,000).
(b) Creditors were written back by ₹ 5,000.
(c) Building was appreciated by 20% (Book Value of Building ₹ 2,00,000).
(d) Unrecorded Investments were valued at ₹ 15,000.
(e) A Provision of ₹ 2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was ₹ 3,000.
Pass necessary Journal entries.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

Creditors A/c Dr. 5,000

Building A/c Dr. 40,000
Investments A/c Dr. 15,000
To Revaluation A/c 60,000
(Increase in assets and decrease in liabilities
transferred to Revaluation Account)

Revaluation A/c Dr. 10,000

To Provision for Doubtful Debts A/c 5,000
To Reserve for outstanding Repairs Bill A/c 2,000
To Creditors A/c 3,000
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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(Increase in liabilities, decrease in assets and

creation of reserves and provisions transferred
to Revaluation Account)

Revaluation A/c Dr. 50,000

To Old Partners’ Capital A/c 50,000
(Profit on Revaluation transferred to Partners’
Capital)

Page No 5.91:

Question 54:

X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1. Z was admitted for 1/3rd
share in the profits. On the date of Z's admission, the Balance Sheet of X and Y 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 Z's admission.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹
General Reserve A/c Dr. 2,50,000
Profit and Loss A/c Dr. 50,000
To X’s Capital A/c 2,00,000
To Y’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

X's share=3,00,000×23=2,00,000, Y's share=3,00,000×13=1,00,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Page No 5.91:

Question 55:

X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2019, 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
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹
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=1,50,000×35=90,000 , Y's share=1,50,000×25=60,000

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

X's share=20,000×35=12,000, Y's share=20,000×25=8,000

Page No 5.91:

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Question 56:

(a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for
1/6th share. Following is the extract of the Balance Sheet on the date of admission:

Liabilities ₹ Assets ₹

24,000
General Reserve 36,000 Advertisement Suspense A/c
Contingency Reserve
6,000
Profit and Loss A/c
18,000

Pass necessary Journal entries.

(b) Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 72,000 at the time of
admission of Z, when there is no claim against it. The firm has two partners X and Y.
(c) Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 72,000 at the time of
admission of Z, when there is claim of ₹ 48,000 against it. The firm has two partners X and Y .
(d) Give the Journal entry to distribute 'Investment Fluctuation Reserve' of ₹ 24,000 at the time of
admission of Z, when Investment (Market Value ₹ 1,10,000) appears at ₹ 1,20,000. The firm has two
partners X and Y.
(e) Give the Journal entry to distribute 'General Reserve' of ₹ 4,800 at the time of admission of Z,
when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two
partners X and Y .
(f) 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, 2019. 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

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Advertisement Suspense A/c (Dr.) 1,20,000

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

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹
2019
April 1 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)

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)

April 1 General Reserve A/c Dr. 84,000

To A’s Capital A/c 48,000
To B’s Capital A/c 36,000
(General Reserve distributed)

A’s Capital A/c Dr 4,800

B’s Capital A/c Dr. 3,600
To Profit & Loss A/c 8,400
(Profit & Loss A/c distributed)

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)

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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)

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)

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)

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=610−310=6−310=310 (Sacrifice)
B's share=310−310=0
C's share=110−310=1−310=−210 (Gain)
D's share=0−110=−110 (Gain)

WN2: Calculation of Net Effect

General Reserve 1,50,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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 = 1,80,000×310= ₹ 54,000
Amount debited in C's Current A/c = 1,80,000×210= ₹ 36,000
Amount debited in D's Current A/c = 1,80,000×110= ₹ 18,000

Page No 5.92:
Question 57:

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

Cash A/c Dr. 3,3000

To W’s capital A/c 1,8000
To Premium for Goodwill A/c 1,5000
(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/c 5000
To Y’s Capital A/c 5000
To Z’s Capital A/c 5000
(Being A’s share of Goodwill transferred in
their sacrificing Ratio)
Revaluation A/c Dr.
To Motor A/c 2500
To Furniture A/c 2700 200

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(Being decrease in value assets transferred to

Revaluation a/c)
X’s Capital A/c Dr.
Y’s Capital A/c Dr.
Z’s Capital A/c Dr.
To Revaluation A/c 900
(Being loss of Revaluation of transferred to 900
old partners capital a/c) 900 2700

Working notes;

WN-1

Memorandum balance sheet is prepared to find out Cash balance.

Liabilities ₹ Assets ₹

Cash balance

Liabilities 30,000 (Balancing figure) 2200

X's Capital 15,000 Motor 1,2000

Y's Capital 17,500 furniture 4000

Z’s Capital 20,000 5,250 Stock 2,6500

Debtors 3,7800

8,250 8,2500

WN-2

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

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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 ₹ Particulars ₹

By Loss

Capital a/c

To Motors A/c 2500 X=2700×1/3=900

To Furniture A/c 200 Y=2700×1/3=900 2700

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(In old Ratio)

2700 2700

WN-5

Partners’ Capital a/c

X Y Z W X Y Z W

Particulars ₹ ₹ ₹ ₹ Particulars ₹ ₹ ₹ ₹

By balance
To
b/d
ravaluation
15,000 17,500 20,000
a/c By Cash a/c
900 900 900
To balance By Premium
c/d 19,100 21,600 24,100 1,8000 a/c 5000 5000 5000 18,000

20,000 22,500 25,000 18,000 20,000 22,500 25,000 18,000

Page No 5.92:

Question 58:

A and B are carrying on business in partnership and sharing profits and losses in the ratio of 3 : 2. Their
Balance Sheet as at 31st March, 2019 stood as:

Liabilities ₹ Assets ₹

Creditors 11,800 Cash 1,500

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

A's
Capital 51,450 Stock 28,000

B's
Capital 36,750 88,200 Debtors 19,500

Furniture 2,500

Machinery 48,500

1,00,000 1,00,000

They admit C into partnership on 1st April, 2019 and give him 1/8th share in future profits on the
following terms:
(a) Goodwill of the firm be valued at twice the average of the last three years' profits which amounted
to ₹ 21,000; ₹ 24,000 and ₹ 25,560.
(b) C is to bring cash for the amount of his share of goodwill.
(c) C is to bring cash ₹ 15,000 as his capital.
Pass Journal entries recording these transactions, draw out the Balance Sheet of the new firm and
determine new profit-sharing ratio.

Answer:

Journal
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹
2019
Apr.1 Cash A/c Dr. 20,880
To C’s Capital A/c 15,000
To Premium for Goodwill A/c 5,880

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(C brought capital and share of

goodwill)

Premium for Goodwill A/c Dr. 5,880

To A’s Capital A/c 3,528
To B’s Capital A/c 2,352
(Premium for Goodwill distributed
between
A and B in sacrificing ratio i.e. 3:1)

Partners’ Capital Account

Dr. Cr.
Particulars A B C
Particulars A B C
Balance
b/d 51,450 36,750
Cash 15,000
Premium
Balance for
c/d 54,978 39,102 15,000 Goodwill 3,528 2,352
54,978 39,102 15,000 54,978 39,102 15,000

Balance Sheet
after Admission of C
Amount Amount
Liabilities ₹ Assets ₹
Capital: Cash (1,500 + 20,880) 22,380
A 54,978 Stock 28,000
B 39,102 Debtors 19,500
C 15,000 1,09,080 Furniture 2,500
Creditors 11,800 Machinery 48,500
1,20,880 1,20,880

Calculation of New Profit Sharing Ratio

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

A B

Old ratio= 3 : 2

C is admitted for 1/8 share of profit

Let combined share of all partners after admission of C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
=1-1/8
=7/8

New ratio= old ratio × combined share of X and Y

A’s =3/5×7/8
=21/40
B’s =2/5×7/8
=14/40

X Y Z

New profit sharing ratio= 21/40 : 14/40 : 1/8

= 21/40 : 14/40 : 5/40

= 21 : 14 : 5

Working Note-

WN1
Calculation of goodwill

Average profit =21,000+25,000+25,560/3=23,520

Goodwill= Average profit × no. of purchases years’

Goodwill= 23,520×2 =47,040

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

C‘s of goodwill=47,040×1/8 =5,880

WN2
Distribution of premium of goodwill

A will get =5,880×3/5=3528

B will get =5,880×2/5=2352

Page No 5.93:

Question 59:

Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st
March, 2019:

Liabilities ₹ Assets ₹

Capital A/cs: Building 25,000

Plant and
A 15,000 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

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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 ₹ 375.
(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
Debit Credit
Amount Amount
Date Particulars L.F. ₹ ₹

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)
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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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)

Profit and Loss Adjustment Account

Dr. Cr.
Amount Amount
Particulars ₹ Particulars ₹
Stock 500
Plant and Machinery 875 Building 2,500
Reserve for Doubtful Debts 375
Profit transferred to
A Capital 500
B Capital 250
2,500 2,500

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
Profit and Loss
Balance c/d 17,500 11,250 7,500 Adjustment (Profit) 500 250
17,500 11,250 7,500 17,500 11,250 7,500

Balance Sheet
as on March 31, 2016 after admission of C

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

Amount Amounts
Liabilities ₹ Assets ₹

Capital
Accounts: Building (25,000 + 2,500) 27,500
Plant and Machinery
A 17,500 (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)

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

A will get =750×2/3=500

B will get =750×1/3=250

Page No 5.93:

Question 60:

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March,
2019. A and B share profits and losses in the ratio of 2 : 1.

BALANCE SHEET OF A AND B

as at 31st March, 2019

Liabilities ₹ Assets ₹
Bills Payable 10,000 Cash in Hand 10,000
Creditors 58,000 Cash at Bank 40,000
Sundry
Debtors 60,000
Outstanding Expenses 2,000
Stock 40,000
Capital A/cs:
A Plant 1,00,000
1,80,000
B Building 1,50,000
1,50,000 3,30,000

4,00,000 4,00,000

C is admitted as a partner on 1st April, 2019 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.
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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

(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
Amount Amount
Date Particulars L.F. ₹ ₹

2019 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)

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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.
Amount Amount
Particulars ₹ Particulars ₹
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

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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, 2019
Amount Amount
Liabilities ₹ Assets ₹
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
Less: Provision for
Capital: Doubtful Debt 3,000 57,000

A 2,38,000 Stock 36,000

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 Class 12 Accountancy TS Grewal Solutions Vol 1

Chapter 5 Admission of a Partner

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.

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