Question

Kishore and Ranjan were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1stApril, 2024, their Balance Sheet was as follows :
Balance Sheet of Kishore and Ranjan as at 1stApril, 2024

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	1,80,000	Cash in hand	30,000
General Reserve	20,000	Debtors	1,20,000
Capitals:	Kishore – 6,00,000	Stock	1,50,000
	Ranjan – 4,00,000	Furniture	1,00,000
		Land and Building	8,00,000
Total	12,00,000	Total	12,00,000

On the above date, Singh was admitted as a new partner on the following terms :
(i) Singh will bring \(₹1,50,000\) as his capital and \(₹50,000\) as his share of goodwill premium.
(ii) The value of stock will be reduced by 10% and Land and Building will be appreciated by 10%.
(iii) Furniture will be revalued at \(₹90,000\).
(iv) A provision for doubtful debts will be created on sundry debtors at 5%.
(v) Investments worth \(₹10,000\) not mentioned in the Balance Sheet will be taken into account.
(vi) A creditor of \(₹1,000\) is not likely to claim his money and is to be written off.
Pass necessary journal entries for the above transactions in the books of the firm on Singh's admission.

Hint:

Journal entries on admission include: \begin{itemize} \item Bringing capital and goodwill by new partner. \item Adjustments in revaluation and reserves. \item Distribution of goodwill and revaluation profit/loss in old ratio. \end{itemize}

Answer 1

Journal Entries in the books of the firm:

Particulars	L.F.	Amount (₹)
Cash A/c Dr.     To Singh's Capital A/c     To Premium for Goodwill A/c (Being capital and goodwill premium brought in by Singh)		2,00,000 1,50,000 50,000
Premium for Goodwill A/c Dr.     To Kishore's Capital A/c     To Ranjan's Capital A/c (Being goodwill premium distributed in sacrificing ratio 3:2)		50,000 30,000 20,000
Revaluation A/c Dr.     To Stock A/c     To Furniture A/c     To Provision for Doubtful Debts A/c     To Creditors A/c (Being decrease in assets and provision created)		38,000 15,000 10,000 6,000 1,000
Land and Building A/c Dr. Investments A/c Dr.     To Revaluation A/c (Being increase in assets recorded)		80,000 10,000 90,000
Revaluation A/c Dr.     To Kishore’s Capital A/c     To Ranjan’s Capital A/c (Being profit on revaluation distributed in 3:2)		52,000 31,200 20,800
General Reserve A/c Dr.     To Kishore’s Capital A/c     To Ranjan’s Capital A/c (Being general reserve distributed in old ratio)		20,000 12,000 8,000