Question

Uma and Umesh were partners in a firm sharing profits and losses in the ratio of 2:3. On 31st March, 2024, their Balance Sheet was given. Daya was admitted with 2:3:5 profit sharing ratio, bringing in capital and goodwill. Various revaluations and adjustments were also made. Journalise the transactions related to Daya’s admission.

Hint:

Always analyse admission adjustments in 4 parts: capital + goodwill + revaluation + reserves. Ensure revaluation profit/loss and reserves are shared in the old ratio, and goodwill in the sacrificing ratio.

Answer 1

Journal Entries in the Books of Uma, Umesh and Daya
1. Bank A/c Dr. ₹12,00,000 To Daya's Capital A/c ₹10,00,000 To Premium for Goodwill A/c ₹2,00,000 (Being capital and goodwill brought in by Daya)
2. Premium for Goodwill A/c Dr. ₹2,00,000 To Uma’s Capital A/c ₹80,000 To Umesh’s Capital A/c ₹1,20,000 (Being goodwill distributed in sacrificing ratio of 2:3) 
3. Land and Building A/c Dr. ₹2,00,000 To Revaluation A/c ₹2,00,000 (Being increase in value of Land and Building) 
4. Revaluation A/c Dr. ₹10,000 To Furniture A/c ₹10,000 (Being depreciation of furniture @ 10% on ₹1,00,000) 
5. Provision for Doubtful Debts A/c Dr. ₹5,000 Bad Debts A/c Dr. ₹3,000 To Debtors A/c ₹8,000 (Being ₹3,000 bad debts written off and old provision removed) 
6. Revaluation A/c Dr. ₹4,000 To Provision for Doubtful Debts A/c ₹4,000 (Being new provision created @ 5% of ₹80,000) 
7. Revaluation A/c Dr. ₹1,86,000 To Uma’s Capital A/c ₹74,400 To Umesh’s Capital A/c ₹1,11,600 (Being profit on revaluation distributed in old ratio 2:3) 
8. General Reserve A/c Dr. ₹75,000 To Uma’s Capital A/c ₹30,000 To Umesh’s Capital A/c ₹45,000 (Being distribution of general reserve in 2:3) 
9. Workmen Compensation Fund A/c Dr. ₹25,000 To Uma’s Capital A/c ₹10,000 To Umesh’s Capital A/c ₹15,000 (Being distribution of Workmen Compensation Fund) 
10. Outstanding Electricity Bill A/c Dr. ₹10,000 To Bank A/c ₹10,000 (Being payment of outstanding electricity bill)