ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
ALL JOURNAL ENTRIES FOR XII ACCOUNTS
CH-1 FUNDAMENTALS
➢ Interest on Loan by Partner to the Firm:
o On allowing Interest on loan by partner:
Interest on Loan by partner A/C ----- Dr.
To Loan by Partner A/c or Interest outstanding A/c
o On payment of interest:
Loan by partner A/c or Interest outstanding A/c ----- Dr.
To cash/bank A/c
o To close the interest on loan by Partner A/c:
Profit and Loss A/c ---- Dr.
To interest on loan by partner A/c
➢ Interest on Loan by the Firm to Partner:
o For charging Interest on loan to partner:
Partner’s capital/current A/C ----- Dr.
To interest on loan to partner A/c (Given)
o If interest on loan to the partner is received:
Cash/Bank A/c ----- Dr.
To Partner’s capital/current A/c
o For transfer of interest on loan to Partner A/c to profit and loss A/c:
Interest on loan to partner A/c ---- Dr.
To Profit and Loss A/c
➢ Rent Paid or Payable to a partner:
o When rent is paid in cash or by cheque:
Rent A/C ----- Dr.
To Cash/Bank A/c (Given)
o When rent is payable:
Rent A/c ----- Dr.
To Rent payable A/c
o When rent A/C is transferred to profit and loss A/c:
Profit and Loss A/c ---- Dr.
To Rent A/c
➢ Journal entries relating to the Profit and Loss Appropriation Account:
o Transfer of profit from profit and loss account to profit and loss appropriation account:
Profit and loss A/C ----- Dr.
To Profit and loss appropriation A/c
o Transfer of loss from profit and loss account to profit and loss appropriation account:
Profit and loss appropriation A/C ----- Dr.
To Profit and loss A/c
o For Partner’s salaries/ Remuneration/ Commission:
(i) Partner’s salaries / Remuneration/Commission A/c ---- Dr.
To Partner’s capital/ current A/cs
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
(ii) To close salaries/ Remuneration/ Commission Account
Profit and loss Appropriation A/c ----- Dr.
To Partner’s salaries / Remuneration/Commission A/cs
o For allowing Interest on capitals:
(i) Interest on capital A/c ---- Dr.
To Partner’s capital/ current A/cs
(ii) To close Interest on capitals Account
Profit and loss Appropriation A/c ----- Dr.
To Interest on capital A/c
o For charging Interest on drawings:
(i) Partner’s capital/ current A/cs ---- Dr.
To Interest on drawings A/c
(ii) To close Interest on drawings Account
Interest on drawings A/c ----- Dr.
To Profit and loss Appropriation A/c
o For transfer to Reserve out of profit:
Profit and loss appropriation A/C ----- Dr.
To General reserve A/c
o For transfer of credit balance of profit and loss appropriation account (being divisible/
distributable profit):
Profit and loss appropriation A/C ----- Dr.
To Partner’s capital/ current A/cs
o For transfer of debit balance of Profit and loss appropriation account (Loss):
Partner’s capital/ current A/C ----- Dr.
To Profit and loss Appropriation A/c
➢ Past Adjustments:
o When single entry is passed:
Partner’s capital/current A/c ---- Dr. (Who received excess)
To Partner’s capital/current A/c (Who received short)
o When Adjustment journal entries (in place of one Adjustment Entry)
(i) Adjustment entries for the items which are to be credited to the partner’s
capital/current Accounts:
Profit and Loss adjustment A/c
To Partner’s capital/current A/c
(ii) Adjustment entries for the items which are to be debited to the partner’s capital/current
Accounts:
Partner’s capital/current A/c
To Profit and Loss adjustment A/c
(iii) For Net Profit/Loss due to above adjustments:
(a) For Profit
Profit and Loss adjustment A/c
To Partner’s capital/current A/c
(b) For Loss
Partner’s capital/current A/c
To Profit and Loss adjustment A/c
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
➢ Guarantee of Profit:
o On distributing the profit as if there is no Guarantee Agreement:
Profit and Loss adjustment A/c ---- Dr.
To All Partner’s capital A/cs
o On charging deficiency to Guaranteeing Partner’s:
Guaranteeing Partner’s capital A/cs ---- Dr.
To Guaranteed Partner’s capital A/c
CH-3 CHANGE IN PSR
➢ Accounting of goodwill:
o In case of fluctuating capitals:
Gaining partner’s capital A/cs ---- Dr.
To Sacrificing partner’s capital A/c
o In case of fixed capitals:
Gaining partner’s current A/cs ---- Dr.
To Sacrificing partner’s current A/c
➢ Accounting treatment of existing goodwill:
All partner’s capital/ current A/c [in old profit-sharing ratio]
To Goodwill A/c [with existing book value of goodwill]
➢ Accounting of reserves, Accumulated profits and Losses:
(i) For transfer of Reserves and Accumulated Profits:
Reserve A/c----Dr
Profit and Loss A/c ----Dr
Workmen Compensation Reserve A/c----Dr(Excess of Reserve over Liability)
Investment Fluctuation Reserve A/c----Dr(Excess of Reserve over the Difference
between Book Value and Market Value)
To Partners’ Capital (or Current) A/cs (In old sharing ratio)
(ii) For transfer of Accumulated Losses and Deferred Revenue Expenditure:
All Partners’ Capital(or Current) A/cs----Dr (In old Profit-sharing Ratio)
To Profit & Loss A/c (Dr. Balance)
To Deferred Revenue Expenditure A/c (Say, Advertisement Suspense Account)
➢ Accounting of Workmen Compensation Reserve
o When Claim against Workmen Compensation Reserve does not Exist
Workmen Compensation Reserve A/c----Dr
To Partners’ Capital(or Current) A/c
o When Claim for Workmen Compensation exists
(i) Workmen Compensation Claim is equal to the Workmen Compensation Reserve:
Workmen Compensation Reserve A/c ----Dr.
To Workmen Compensation Claim A/c
(ii) Workmen Compensation Reserve is less than the Amount of Workmen
Compensation Reserve:
Workmen Compensation Reserve A/c ----Dr
To Workmen Compensation Claim A/c
To Partners’ Capital(or Current) A/c
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
(iii) Workmen Compensation Claim is more than the Amount of Workmen
Compensation Reserve:
Workmen Compensation Reserve A/c ----Dr
Revaluation A/c ----Dr
To Workmen Compensation Claim A/c
Partners’ Capital (or Current) A/cs ----Dr(In Old Profit-sharing Ratio)
To Revaluation A/c
➢ Accounting of Investments Fluctuation Reserve
o When Market Value of Investments is equal to Book Value
Investment Fluctuation Reserve A/c ----Dr.
To Partners’ Capital(or Current) A/c (In Old Profit-sharing Ratio)
o When Market Value of Investments is lower than Book Value
(i) Fall in Value of Investments is Less than Investments Fluctuation Reserve:
Investment Fluctuation Reserve A/c ----Dr.
To Investments A/c (Book Value-Market Value)
To Partners’ Capital(or Current) A/cs (In Old Profit-sharing Ratio)
(ii) Fall in Value of Investments is equal to Investments Fluctuation Reserve:
Investments Fluctuation Reserve A/c ----Dr.
To Investments A/c
(iii) Fall in Value of Investments is More than Investments Fluctuation Reserve:
Investments Fluctuation Reserve ----Dr.
Revaluation A/c ----Dr.
To Investments A/c
Partners’ Capital (or Current) A/c ----Dr ( In Old Profit-sharing Ratio)
To Revaluation A/c
➢ When Market Value of Investments is higher than Book Value
o Investments Fluctuation Reserve A/c ----Dr.
To Partners’ Capital (or Current) A/cs (In Old Profit-sharing Ratio)
o Investments A/c ---- Dr (Investments Brought up to Market Value)
To Revaluation A/c
o Revaluation A/c ----Dr.
To Partners’ Capital(or Current) A/c (In Old Profit-sharing Ratio)
➢ Accounting of Deferred Revenue Expenditure
o Partners’ Capital(Current) A/cs---- Dr.
To Deferred Revenue Expenditure A/c (Say Advertisement Suspense A/c)
➢ Revaluation of Assets and Reassessment of Liabilities
o For increase in the value of an asset
(i) Asset A/c (Individually) ---- Dr.
To Revaluation A/c
o For decrease in the value of an asset
(ii) Revaluation A/c ----Dr
To Asset A/c (Individually)
o For increase in the amount of a liability
(iii) Revaluation A/c Dr.
To Liability A/c (Individually)
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
o For decrease in the amount of liability
(iv) Liability A/c----Dr.
To Revaluation A/c
o For recording an unrecorded asset
(v) Unrecorded Asset A/c ----Dr.
To Revaluation A/c
o For recording an unrecorded liability
(vi) Revaluation A/c ----Dr.
To Unrecorded Liability A/c
o For transfer of Balance in Revaluation Account:
a. If total of credit side is more than the total of debit side (Net Gain)
(i) Revaluation A/c
To Partners’ Capital( or Current) A/cs
b. If total of debit side is more than the total of credit side (Net Loss)
(ii) Partners’ Capital (for Current) A/cs ----Dr
To Revaluation A/c (Individually in old profit-sharing ratio)
➢ Expenses on Reconstitution of the Firm
o When Remuneration is paid to a Partner:
Revaluation A/c ----Dr
To Concerned Partners’ Capital A/c
(Remuneration credited to concerned Partner’s Capital Account)
o In case, expenses that were to be borne by the partner but are paid by the firm, following
entry is passes:
Concerned Partner’s Capital A/c ---- Dr.
To Cash/ Bank A/c
(Expenses to be borne by the partner paid by the firm)
o When Expenses are incurred and paid by the firm:
Revaluation A/c ----Dr.
To Cash/ Bank A/c
(Expenses for reconstituting the firm)
➢ Adjustment of Capital
(i) For Adjusting Shortage of Capital:
Bank A/c or Concerned Partner’s Current A/c ----Dr
To Concerned Partners’ Capital A/c
(ii) For Adjusting Surplus of Capital:
Concerned Partners’ Capital A/c ----Dr
To Bank A/c or Concerned Partners’ Current A/c
CH-4 ADMISSION OF A PARTNER
➢ Accounting Entries
o For premium for goodwill brought by new partner
Cash/ Bank A/c ----Dr
To Premium for Goodwill (Amount of premium)
o For sharing of premium for goodwill:
Premium for Goodwill A/c ----Dr (Amount of premium)
To Sacrificing Partners’ Capital A/cs (In sacrificing ratio)
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
o For withdrawal of premium amount fully/ partly
Sacrificing Partners’ capital A/cs ----Dr(Amount withdrawn)
To Cash/ Bank A/c
o For Assets bought in by the New Partner
Assets A/c ----Dr (Individually)
To New Partner’s Capital A/c (With amount of Capital)
To Premium for Goodwill A/c (With Share of Goodwill bought in)
o For Crediting Sacrificing Partners’ Capital Accounts for Goodwill:
Premium for Goodwill A/c ----Dr
To Sacrificing Partners’ Capital/ Current A/cs
o If the amount is withdrawn:
Partners’ Capital/Current A/c ----Dr
To Bank A/c
o For Amount Brought by the Incoming Partner:
Bank A/c ----Dr.
To Incoming Partner’s Capital A/c
To Premium for Goodwill (With Capital)
(With Share of Goodwill brought in)
o For Crediting Sacificing Partners by Incoming Partner’s total share of Goodwill:
Premium for Goodwill A/c ----Dr(With Premium for Goodwill brought in)
Incoming Partner’s Current A/c ----Dr(With Unpaid Share of Goodwill)
To Sacrificing Partners’ Capital A/cs (In sacrificing ratio)
o When the New Partner does not bring his/her Share of Goodwill
New Partner’s Current A/c ----Dr(With Share of Goodwill)
To Sacrificing Partners’ Capital/ Current A/cs
(Premium for goodwill credited to sacrificing partners in their sacrificing ratio)
➢ Revaluation of Assets and Reassessment of Liabilities
o For an increase in value of assets
Assets A/c (Individually)----Dr
To Revaluation A/c or Profit &Loss Adjustment A/c
o For a decrease in value of assets
Revaluation A/c or Profit & Loss Adjustment A/c ----Dr
To Assets A/c (Individually)
o For an increase in amount of liabilities
Revaluation A/c or Profit & Loss Adjustment A/c ----Dr
To Liabilities A/c (Individually)
o For a decrease in amount of liabilities
Liabilities A/c (Individually)
To Revaluation A/c or Profit & Loss Adjustment A/c
o For accounting Unrecorded Assets
Unrecorded Assets A/c (Individually)----Dr
To Revaluation A/c or Profit & Loss Adjustment A/c
o For accounting Unrecorded Liabilities
Revaluation A/c or Profit & Loss Adjustment A/c ----Dr
To Unrecorded Liabilities A/c (Individually)
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
➢ Accounting of Reserves, Accumulated (Undistributed) Profits and Losses
o Claim against Workmen Compensation Reserve does not Exist
Workmen Compensation Reserve A/c----Dr
To Old Partners’ Capital/Current A/cs (In Old Profit- sharing Ratio)
o When Claim for Workmen Compensation Exists
(i) Claim Amount is less than the Amount of Workmen Compensation Reserve:
Workmen Compensation Reserve A/c----Dr
To Workmen Compensation Claim A/c (With claim amount)
To Old Partners’ Capital/Current A/cs(In Old Profit sharing Ratio)
(Claim accounted and balance transferred to Old Partners’ Capital/Current Accounts in
their old profit-sharing ratio)
o Claim Amount is Equal to the Amount of Workmen Compensation Reserve:
Workmen Compensation Reserve A/c----Dr
To Workmen Compensation Claim A/c
(Amount for Workmen Compensation Claim)
o Claim amount is more than the Amount of Workmen Compensation Reserve:
Workmen Compensation Reserve A/c ----Dr
Revaluation A/c----Dr (Excess of claim over reserve)
To Workmen Compensation Claim
(Amount of claim debited to Workmen Compensation Reserve and shortfall charged
to Revaluation Account)
➢ Investments Fluctuation Reserve
o Book Value and Market Value of Investments is same
Investments Fluctuation Reserve A/c---- Dr
To Old Partners’ Capital/ Current A/cs (In Old Profit-sharing Ratio)
o Market Value of Investments is less than the Book Value
(i) Fall in Value is Less than Investments Fluctuation Reserves:
Investments Fluctuation Reserve A/c----Dr.
To Investments A/c (Book Value-Market Value)
To Old Partners’ Capital/ Current A/cs ( In Old Profit-sharing
Ratio)
(ii) Fall in Value is Equal to Investments Fluctuation Reserve:
Investments Fluctuation Reserve A/c ----Dr
To Investments A/c
(iii) Fall in Value is More than Investments Fluctuation Reserve:
Investment Fluctuation Reserve A/c----Dr
Revaluation A/c----Dr
To Investments
➢ Market Value of Investments is more than the Book Value
o Investments Fluctuation Reserve A/c ----Dr
To Old Partners’ Capital (Current) A/cs
o Investments A/c ----Dr (Investments Brought up to Market
To Revaluation A/c Value)
➢ In case of Net Accumulated Profit (Positive Balance)
o Gaining Partners’ Capital/ Current A/cs ----Dr
To Sacrificing Partners’ Capital/Current A/cs
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
➢ In case of Net Accumulated Loss (Negative Balance)
o Sacrificing Partners’ Capital/Current A/cs----Dr
To Gaining Partners’ Capital/Current A/cs
➢ In case Present Capital is less than the New Capital
o Cash/Bank A/c ----Dr (If amount brought)
Concerned Partner’s Current A/c ----Dr (If amount not brought)
To Concerned Partner’s Capital A/c
➢ In case Present Capital is more than the New Capital:
o Concerned Partner’s Capital A/c----Dr
To Cash/Bank A/c(If amount withdrawn)
To Concerned Partner’s Current A/c(If amount is not withdrawn)
Chapter-5 Retirement of a Partner
➢ Valuation and Accounting of Goodwill
o When Goodwill does not exist in the Books
Gaining Partners’ Capital A/cs----Dr(Individually in gaining ratio)
To Retiring Partner’s Capital
(Adjustment made for goodwill on retirement)
➢ When Goodwill exists in the Books
o All Partners’ Capital A/cs ----Dr (In Old Profit-sharing Ratio)
To Goodwill (With Existing Value of Goodwill)
o Gaining Partners’ Capital/Current A/cs----Dr(In gaining ratio)
To Retiring Partner’s Capital/Current A/c (with his share of goodwill)
(Adjustment made for goodwill on retirement)
➢ Sacrifice by a Continuing Partner or Partners along with Retiring Partner
Gaining Partners’ Capital (or Current) A/cs----Dr(Who have gained)
To Retiring Partner’s Capital A/c(With his share of Goodwill)
To Sacrificing Partner’s Capital(or Current)A/c(Who has sacrificed)
➢ Revaluation of Assets and Reassessment of Liabilities
o For increase in value of asset:
Asset A/c ----Dr
To Revaluation A/c
o For decrease in the value of asset:
Revaluation A/c ----Dr
To Asset A/c
o For increase in amount of liabilities:
Revaluation A/c ----Dr
To Liabilities A/c
o For decrease in amount of liabilities:
Liabilities A/c ----Dr
To Revaluation A/c
o If there is gain(profit) on revaluation:
Revaluation A/c ----Dr
To All Partners’ Capital A/cs
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ANGAD SINGH CLASSES
Tilak Nagar, New Delhi
o If there is loss on revaluation:
All Partner’s Capital----Dr
To Revaluation A/c
➢ For Distribution of Reserves and Accumulated Profits:
o General Reserve A/c ----Dr
Profit & Loss A/c----Dr
Investments Fluctuation Reserve A/c ----Dr(Excess of Reserve over Difference
between Book Value and Market Value)
Workmen Compensation Reserve A/c----Dr(Excess of Reserve over Liability)
To Partners’ Capital/Current A/cs (in their Old Profit-sharing Ratio)
➢ For writing off Accumulated Losses
o Partners’ Capital/Current A/cs
To Profit & Loss A/c (Dr. Balance)
To Advertisement Suspense A/c (Deferred Revenue Expenditure)
➢ Methods of Payment of Amount due to the Retiring Partner
o Amount due is transferred to Retiring Partner’s Loan A/c
Retiring Partner’s Capital A/c ----Dr
To Retiring Partner’s Loan
o For interest provided
Interest A/c ----Dr
To Retiring Partner’s Loan A/c
o For payment of instalment
Retiring Partner’s Loan A/c ----Dr
To Bank A/c
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