Given below is the Balance Sheet of Pinky and Sony, who are carrying a partnership business on 31-12-2017. Pinky and Sony are sharing profits and losses in the ratio of 2 : 1.
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Bills payable | 18,000 | Cash in hand | 50,000 |
| Creditors | 50,000 | Sundry Debtors | 50,000 |
| Out Standing Expenses | 2,000 | Stock | 30,000 |
| Capitals : Pinky – 1,50,000; Sony – 1,00,000 | 2,50,000 | Plant | 80,000 |
| Buildings | 1,10,000 | ||
| 3,20,000 | 3,20,000 |
Sujee is admitted as a partner on the date of the balance sheet on the following terms :
- Sujee will bring in ₹ 80,000 as his Capital and ₹ 51,000 as his share of Goodwill for 1/4 Share in the profit.
- Plant is to be appreciate to ₹ 1,00,000 and the value of buildings is to be appreciate by 10%.
- Stock is found overvalued by ₹ 4,000.
- A provision for bad and doubtful debts is to be Created at 5% of debtors.
- Creditors were unrecorded to the extent of ₹ 3,500. Prepare necessary ledger accounts and show Balance Sheet after Sujee's Admission.
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Start your 14-day free trial to unlock the full solution →Prepare the Revaluation Account, Partners' Capital Accounts and the new Balance Sheet. Revaluation gives a profit of 21,000 (Plant up 20,000, Buildings up 11,000, against Stock down 4,000, provision for doubtful debts 2,500 and unrecorded creditors 3,500), shared 2:1. Sujee's 51,000 goodwill premium goes to the old partners in their sacrificing ratio (= old ratio 2:1). The Balance Sheet after admission totals 4,75,500.
This is a full admission-of-a-partner question from the AP Inter 2nd-year (Class 12) Accountancy previous-year paper; the AP syllabus here aligns with the standard partnership accounting taught across the NCERT/CBSE commerce curriculum.
Step 1 — Revaluation Account
Appreciations are credits (gains); reductions and new liabilities are debits (losses).
| Particulars | Amount (Rs) | Particulars | Amount (Rs) |
|---|---|---|---|
| To Stock (overvalued) | 4,000 | By Plant (1,00,000 - 80,000) | 20,000 |
| To Provision for doubtful debts (5% of 50,000) | 2,500 | By Buildings (10% of 1,10,000) | 11,000 |
| To Creditors (unrecorded) | 3,500 | ||
| To Profit transferred to Capitals: Pinky 14,000; Sony 7,000 | 21,000 | ||
| Total | 31,000 | Total | 31,000 |
Profit on revaluation = 31,000 - 10,000 = 21,000; shared 2:1 -> Pinky 14,000, Sony 7,000.
Step 2 — Goodwill
Sujee pays 51,000 as premium for a 1/4 share. Old partners sacrifice in their old ratio 2:1, so the premium is credited: Pinky 51,000 x 2/3 = 34,000; Sony 51,000 x 1/3 = 17,000. The cash is retained in the business.
Step 3 — Partners' Capital Accounts
| Particulars | Pinky (Rs) | Sony (Rs) | Sujee (Rs) | Particulars | Pinky (Rs) | Sony (Rs) | Sujee (Rs) |
|---|---|---|---|---|---|---|---|
| To Balance c/d | 1,98,000 | 1,24,000 | 80,000 | By Balance b/d | 1,50,000 | 1,00,000 | - |
| By Cash (capital) | - | - | 80,000 | ||||
| By Premium (goodwill) | 34,000 | 17,000 | - | ||||
| By Revaluation A/c (profit) | 14,000 | 7,000 | - | ||||
| Total | 1,98,000 | 1,24,000 | 80,000 | Total | 1,98,000 | 1,24,000 | 80,000 |
Step 4 — Cash in hand
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