Snehal and Meenal are equal partners in a business. Their Balance Sheet is as follows:


Balance Sheet as on 31st March, 2012

Liabilities
Amount
Amount
Assets
Amount
Amount
Capital A/c


Premises

20500
Snehal
80000

Investments

10500
Meenal
45000
125000
Equipments

5000
Creditors

26000
Bills Receivable

18000
Bank Loan
(Taken on 1.1.2012)

40000
Debtors
110000




(-) R.D.D.
-11000
99000



Profit & Loss A/c

6600



Bank

31400


191000


191000

They agreed to admit Kamal on 1st April, 2012 on the following terms:

1. She should bring Rs. 50000 towards her capital for ¼ th share in future profit.

2. Goodwill A/c be raised in the books of the firm for Rs. 40,000.

3. R.D.D. to be maintained at 5% on debtors.

4. Premises to be valued at Rs. 30,000 and Equipments to be written off fully.

5. Interest at the rate of 15% p.a. is due on bank loan.

6. Creditors allowed a discount of Rs. 1,100 and they were paid off immediately.

Pass necessary Journal Entries to record the above scheme of admission.

Solution:

Journal Entries in the Books of New Partnership Firm.


Date
Particulars
L.F.
Debit
Credit
2012
April 1.

Snehal's Capital A/c ....Dr.

3300


Meenal's Capital A/c ....Dr.

3300


To Profit and Loss A/c


6600

[Being debit balance of Profit and Loss A/c transferred to old partners' capital A/c ]



1.
Bank A/c ....Dr.

50000


To Kamal's Capital A/c


50000

[Being Capital bought in by Kamal]



1.
Goodwill A/c ....Dr.

40000


To Snehal's Capital A/c


20000

To Meenal's Capital A/c


20000

[Being Goodwill raised]



1.
Profit & Loss Adjustment A/c ....Dr.

6500


To Equipment A/c


5000

To Interest on Bank Loan A/c


1500

[Being the value of equipment written off and interest due on Bank Loan]



1.
R.D.D. A/c ....Dr.

5500


Premises A/c

9500


To Profit & Loss Adjustment A/c


15000

[Being R.D.D. reduced and the value of premises increased]



1.
Creditors A/c ....Dr.

26000


To Bank A/c


24900

To Profit & Loss Adjustment A/c


1100

[Being creditors paid under discount]



1.
Profit & Loss Adjustment A/c ....Dr.

9600


To Snehal's  Capital A/c


4800

To Meenal's Capital A/c


4800

[Being Profit on revaluation divided and transferred to old partners capital account]