Anil and Sunil were partners sharing profits and losses in the ratio of 2:1 respectively. Their Balance Sheet was as follows: [10]

Balance Sheet as on 31st March, 2010
Liabilities
Amount
Assets
Amount
Capital A/cs

Cash at Bank
4000
Anil
24000
Debtors
15000
Sunil
16000
Stock
23500
Trade Creditors
26000
Furniture
5000
Anil’s Loan A/c
6500
Building
25,000

72,500

72,500
On 1st April, 2010, Ram is admitted in the partnership on the following terms:
(1) Ram should bring in cash of Rs. 12,000 as capital for 1/5th share in future profit.
(2) Goodwill A/c is raised in the books of the firm for Rs. 4,500.
(3) Building is revalued at Rs. 28,000 and the value of stock be reduced by Rs. 1,500.
(4) Reserve for doubtful debts be provided at 5% on debtors.
Prepare:
(a) Profit and Loss Adjustment account.
(b) Capital Accounts of partners.
(c) Balance Sheet of the new firm.
Solution:
In the books of Partnership Firm
Profit & Loss Adjustment Account
Particulars
Amount
Amount
Particulars
Amount
Amount
To Stock A/c
[Reduction in Value]

1500
By Building A/c
[Appreciation in value)

3000
To R.D.D. A/c
(RDD created)

750



To Partners’ Capital A/c





Anil
500




Sunil
250
750





3000


3000

Partners’ Capital Accounts
Particulars
Anil
Sunil
Ram
Particulars
Anil
Sunil
Ram




By Balance C/d
24000
16000
-




By Bank A/c
[Capital Contributed]


12000




By Goodwill A/c
[Transfer]
3000
1500
-




By Profit & Loss Adjustment A/c
[Accumulated Profit]
500
250
-
To Balance c/d
27500
17750
12000





27500
17750
12000

27500
17750
12000

Balance Sheet as on 1st April, 2010
Liabilities
Amount
Amount
Assets
Amount
Amount
Trade Creditors

26000
Building
25000

Anil’s Loan

6500
Add: Appreciation
3000
28000
Partners’ Capital A/c


Furniture

5000
Anil
27500

Stock
23500

Sunil
17750

Less: Reduction in value
-1500
22000
Ram
12000
57250
Debtors
15000




Less: RDD @ 5%
750
14250



Cash at bank

16000



Goodwill

4500


89750


89750
Working Notes:
(i) Transfer of Goodwill in the ration 2:1
Anil’s Capital A/c  = (2 ÷ 3) × 4500 = Rs. 3000
Sunil’s Capital A/c = (1÷ 3) × 4500 = Rs. 1500
Goodwill A/c
Particulars
Amount
Particulars
Amount
To Anil’s Capital A/c
3000


To Sunil’s Capital A/c
1500
By Balance C/d
4500

4500

4500
 Now, the Balance in Goodwill A/c is shown on the Assets side of Balance Sheet.

Working Note: Transfer of Profit on Revaluation A/c in the ratio of 2:1
Anil’s Capital A/c = (2÷ 3) × 750 = Rs. 500

Sunil’s Capital A/c = (1÷ 3) × 750 = Rs. 250.