The Balance Sheet of Rajkumar and Rajendra kumar as on 31st March, 2012 is set out below, they share profits and losses in the ratio of 2:1.



Balance sheet as on 31st March, 2012

Liabilities
Amount
Assets
Amount
Capital A/c

Buildings
100000
Rajkumar
200000
Furniture
30000
Rajendrakumar
150000
Stock
60000
General Reserve
120000
Debtors
300000
Creditors
80000
Cash
30000


Profit & Loss A/c
30000

550000

550000


They agreed to admit Dhirajkumar on 1st April, 2012 as a partner into the firm on the following terms.

1.    Dhirajkumar to bring Rs. 60000 as capital and Rs. 45000 as goodwill, which is to be retained in the business. He will be entitled to 1/4 th share of profit of the firm.
2.    50% of General Reserve is to remain as Reserve for doubtful debts.
3.    Furniture is to be depreciated by 5%
4.    Stock is to be revalued at Rs. 65,000.
5.    Creditors of Rs. 5000 are not likely to claim and hence should be written of.
6.    Rent of Rs. 2,000 due but not received has not been recorded in the books.
Pass necessary journal entries in the books of new firm and prepare Balance Sheet of the new firm.

Solution:

Journal Entries in the books of New Partnership Firm

Date
Particulars
LF
Debit
Credit
1.
Rajkumar's Capital A/c … Dr.
20000
Rajendra Kumar's Capital Ac/
10000
To Profit and Loss A/c
30000
[Being debit balance of Profit & Loss Account is transferred to Partners Capital Account in Old Ratio]
2.
General Reserve A/c ....... Dr.
60000
To Rajkumar's Capital A/c
40000
To Rajendra Kumar's Capital A/c
20000
[Being Credit Balance in General Reserve is transferred to Old Partners Capital Account in old ratio]
3.
Cash/ Bank A/c .... Dr.
105000
To Dhirajkumar's Capital A/c
60000
To Goodwill A/c
45000
[Being Capital and Goodwill brought in by the new partner]
4.
Goodwill A/c .... Dr.
45000
To Rajkumar's Capital A/c
30000
To Rajendra Kumar's Capital A/c
15000
[Being Goodwill is retained in the business]
5.
General Reserve A/c ... Dr.
60000
To R.D.D. A/c
60000
[Being R.D.D. is created by transferring fund from General Reserve A/c]
6.
Revaluation A/c ... Dr.
1500
To Furniture A/c
1500
[Being depreciation is charged on furniture]
7.
Stock A/c ....Dr.
5000
Creditors A/c
5000
Rent receivable A/c .... Dr.
2000
To Revaluation A/c
12000
[Being Asset appreciated, Creditors written off and income receivable recorded.]
8.
Revaluation A/c ... Dr.
10500
To Rajkumar's Capital A/c
7000
To Rajendra Kumar's Capital A/c
3500
[Being Profit on revaluation account is transferred to old partners capital A/c]

Balance Sheet as on 1st April, 2012

Liabilities
Amount
Amount
Assets
Amount
Amount
Capital A/c


Buildings

100000
Rajkumar
257000

Furniture
30000

Rajendrakumar
178500

(-) Depreciation @5%
1500
28500
Dhirajkumar
60000
495500
Stock
60000

Creditors
80000

(+) Appreciation
5000
65000
(-)Claims written off
-5000
75000
Debtors
300000




(-) R.D.D.
-60000
240000



Cash in Hand
(30000 + 60000  + 45000)

135000



Rent Due but not received

2000


570500


570500


1. Working Note

Revaluation A/c
Debit
Credit
1500
12000
10500
12000
12000