Skip to content
Question 17 of 20
Q.

Dinesh and Ramesh are partners in a firm sharing profits and losses in the ratio of 3:2. They decided to admit Vasu as a partner with 1/5 share in the profits. Their Balance Sheet as on March 31, 2015 was as follows:

LiabilitiesAmount (₹)AssetsAmount (₹)
Sundry Creditors1,50,000Cash at Bank40,000
General Reserve80,000Bills Receivables50,000
Bank O.D.70,000Debtors60,000
Partners' Capitals :Stock1,20,000
Dinesh 1,00,000Fixed Assets2,80,000
Ramesh 1,50,0002,50,000
5,50,0005,50,000

It was also decide that :

(1) The fixed assets should be valued at ₹ 3,31,000.

(2) A provision of 5% on sundry debtors to be made for doubtful debts.

(3) The value of stock be reduced to ₹ 1,12,000.

(4) Vasu brings ₹ 75,000 as capital and ₹ 15,000 as Goodwill.

Prepare necessary accounts and the revised Balance Sheet of the firm after admission of the partner.

Andhra Pradesh BieapBIEAP AP Intermediate (2nd Year) Commerce Board 2023Subjective· 20mImportance★★★★★est
85% · 17/20 Questions
🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

This is a standard AP Intermediate 2nd-year Accountancy admission-of-a-partner problem. We prepare the Revaluation Account, the Partners' Capital Accounts and the revised Balance Sheet. Revaluation gives a profit of Rs 40,000; the General Reserve of Rs 80,000 and the Rs 15,000 goodwill brought by Vasu are credited to the old partners 3:2. The revised Balance Sheet totals Rs 6,80,000.

Step 1 — Revaluation Account

Fixed Assets rise from Rs 2,80,000 to Rs 3,31,000 (gain Rs 51,000). Stock falls from Rs 1,20,000 to Rs 1,12,000 (loss Rs 8,000). A 5% provision on debtors of Rs 60,000 = Rs 3,000 (loss).

Dr — ParticularsAmount (Rs)Cr — ParticularsAmount (Rs)
To Stock (reduction)8,000By Fixed Assets (increase)51,000
To Provision for Doubtful Debts3,000
To Profit transferred: Dinesh 24,000; Ramesh 16,00040,000
51,00051,000

Profit on revaluation = 51,000 − 11,000 = Rs 40,000, shared 3:2 → Dinesh Rs 24,000, Ramesh Rs 16,000.

Step 2 — General Reserve and Goodwill

General Reserve Rs 80,000 belongs to the old partners and is distributed 3:2 → Dinesh Rs 48,000, Ramesh Rs 32,000. Vasu brings Rs 15,000 goodwill; as the old partners sacrifice in their old ratio 3:2, it is credited Dinesh Rs 9,000, Ramesh Rs 6,000.

Step 3 — Partners' Capital Accounts

ParticularsDinesh (Rs)Ramesh (Rs)Vasu (Rs)
Balance b/d1,00,0001,50,000—
Cash (Capital introduced)——75,000
General Reserve48,00032,000—
Revaluation Profit24,00016,000—
Goodwill (from Vasu)9,0006,000—
Balance c/d1,81,0002,04,00075,000

Step 4 — Bank (Cash at Bank)

…

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.