Seeta and Geeta share profits and losses in the ratio of 3:2 in Partnership Firm. Their Balance Sheet as on 31
st
March, 2020 was as under:
Balance Sheet as on 31
st
March, 2020
| Liabilities | | Amount (₹) | Assets | | Amount (₹) |
| --- | --- | --- | --- | --- | --- |
| Capit

Question

Seeta and Geeta share profits and losses in the ratio of 3:2 in Partnership Firm. Their Balance Sheet as on 31
st
March, 2020 was as under:
Balance Sheet as on 31
st
March, 2020
| Liabilities |  | Amount (₹) | Assets |  | Amount (₹) |
| --- | --- | --- | --- | --- | --- |
| Capitals: |  | 40,500 | Bank |  | 11,250 |
| Seeta | 22,500 | Bills Receivable |  | 5,700 |  |
| Geeta | 18,000 | Debtors | 31,200 | 30,000 |  |
| Creditors |  | 18,750 | (-) R.D.D. | 1,200 |  |
| Biil Payable |  | 15,000 | Stock |  | 18,000 |
| Bank Loan |  | 24,000 | Furniture |  | 7,050 |
| General Reserve |  | 3,750 | Machinery |  | 7,500 |
|  |  |  | Building |  | 22,500 |
|  |  | 1,02,000 |  |  | 1,02,000 |
On 1
st
April, 2020 they admitted Reeta on the following terms:
For half (1/2) share in future profit Reeta should bring ₹
15,000 as capital and ₹ 7,500 for goodwill in cash.
Furniture should be appreciated up to ₹ 8,025 and building be appreciated by 20%.
R.D.D. is to be maintained at ₹ 1,500.
The stock is to be reduced by 10% and machinery depreciated by 5%.
Half of amount of goodwill is withdrawn by old partners.
Pass the necessary Journal Entries in the books of the firm.

Accepted Answer

>

> [!TLDR]
> Reeta brings ₹15,000 capital + ₹7,500 goodwill in cash. Revaluation profit ₹3,000 (F +975, Building +4,500, less RDD 300, Stock 1,800, Machinery 375) is credited to Seeta ₹1,800 and Geeta ₹1,200. Goodwill ₹7,500 credited to old partners 3:2 (₹4,500 / ₹3,000); half of it (₹3,750) withdrawn. General Reserve ₹3,750 credited 3:2.
>
> **Working Notes**
>
> *New profit-sharing ratio.* Reeta's share = 1/2. Balance 1/2 is shared by Seeta:Geeta in their old ratio 3:2, i.e. 3/10 and 2/10. New ratio = Seeta 3/10, Geeta 2/10, Reeta 5/10. Sacrifice = old − new = Seeta 3/5 − 3/10 = 3/10; Geeta 2/5 − 2/10 = 2/10, i.e. **sacrifice ratio 3:2**, so goodwill ₹7,500 is shared 3:2.
>
> *Revaluation Account.*
>
> | Particulars | ₹ | Particulars | ₹ |
> | --- | --- | --- | --- |
> | To R.D.D. (1,500 − 1,200) | 300 | By Furniture A/c (8,025 − 7,050) | 975 |
> | To Stock A/c (10% of 18,000) | 1,800 | By Building A/c (20% of 22,500) | 4,500 |
> | To Machinery A/c (5% of 7,500) | 375 |  |  |
> | To Profit — Seeta 1,800 / Geeta 1,200 | 3,000 |  |  |
> | **Total** | **5,475** | **Total** | **5,475** |
>
> *Goodwill withdrawn* = 1/2 of ₹7,500 = ₹3,750 → Seeta ₹2,250, Geeta ₹1,500 (3:2).
>
> **Journal Entries in the books of the firm**
>
> | No. | Particulars | Dr (₹) | Cr (₹) |
> | --- | --- | --- | --- |
> | 1 | Bank A/c ... Dr | 22,500 |  |
> |  |   To Reeta's Capital A/c |  | 15,000 |
> |  |   To Goodwill A/c |  | 7,500 |
> |  | *(Capital and goodwill brought in by Reeta)* |  |  |
> | 2 | Goodwill A/c ... Dr | 7,500 |  |
> |  |   To Seeta's Capital A/c |  | 4,500 |
> |  |   To Geeta's Capital A/c |  | 3,000 |
> |  | *(Goodwill distributed to old partners in 3:2)* |  |  |
> | 3 | Seeta's Capital A/c ... Dr | 2,250 |  |
> |  | Geeta's Capital A/c ... Dr | 1,500 |  |
> |  |   To Bank A/c |  | 3,750 |
> |  | *(Half of goodwill withdrawn by old partners)* |  |  |
> | 4 | Furniture A/c ... Dr | 975 |  |
> |  | Building A/c ... Dr | 4

Liabilities		Amount (₹)	Assets		Amount (₹)
Capitals:		40,500	Bank		11,250
Seeta	22,500	Bills Receivable		5,700
Geeta	18,000	Debtors	31,200	30,000
Creditors		18,750	(-) R.D.D.	1,200
Biil Payable		15,000	Stock		18,000
Bank Loan		24,000	Furniture		7,050
General Reserve		3,750	Machinery		7,500
			Building		22,500
		1,02,000			1,02,000
On 1
st
April, 2020 they admitted Reeta on the following terms:
For half (1/2) share in future profit Reeta should bring ₹
15,000 as capital and ₹ 7,500 for goodwill in cash.
Furniture should be appreciated up to ₹ 8,025 and building be appreciated by 20%.
R.D.D. is to be maintained at ₹ 1,500.
The stock is to be reduced by 10% and machinery depreciated by 5%.
Half of amount of goodwill is withdrawn by old partners.
Pass the necessary Journal Entries in the books of the firm.

Particulars	₹	Particulars	₹
To R.D.D. (1,500 − 1,200)	300	By Furniture A/c (8,025 − 7,050)	975
To Stock A/c (10% of 18,000)	1,800	By Building A/c (20% of 22,500)	4,500
To Machinery A/c (5% of 7,500)	375
To Profit — Seeta 1,800 / Geeta 1,200	3,000
Total	5,475	Total	5,475

No.	Particulars	Dr (₹)	Cr (₹)
1	Bank A/c ... Dr	22,500
	To Reeta's Capital A/c		15,000
	To Goodwill A/c		7,500
	(Capital and goodwill brought in by Reeta)
2	Goodwill A/c ... Dr	7,500
	To Seeta's Capital A/c		4,500
	To Geeta's Capital A/c		3,000
	(Goodwill distributed to old partners in 3:2)
3	Seeta's Capital A/c ... Dr	2,250
	Geeta's Capital A/c ... Dr	1,500
	To Bank A/c		3,750
	(Half of goodwill withdrawn by old partners)
4	Furniture A/c ... Dr	975
	Building A/c ... Dr	4,500
	To Revaluation A/c		5,475
	(Increase in value of assets)

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