Admission of a Partner
Learning objectives:-
After studying this lesson, the students will be able to:
·       Identify and deal effectively with the situation of reconstitution of partnership.
·       Identify the problem arising due to admission of a partner in the firm.
·       Calculate new and sacrifice ratio in different cases.
·       Understand, calculate and make treatment of goodwill in different cases.
·       Make accounting treatment of the revaluation of assets and liabilities and distribute the profit and loss on revaluation among the old partners.
·       Make accounting treatment of unrecorded assets and liabilities
·       Prepare capital Accounts, Cash A/c and Balance Sheet of the New firm
·       Adjust the Partners’ Capital Accounts
Salient Points:-
1.     Goodwill is the monetary value of business reputation. It is an intangible asset.
2.     Goodwill may be of two types:
a.      Purchased goodwill
b.     Non-purchased goodwill
3.     When existing firm faces problem of limited financial resources and man power then one new additional partner enters into firm.
4.     There are three methods of valuation of goodwill:
a.      Average Profit Method
b.     Super Profit method
c.      Capitalisation Method
5.     When new partner is admitted into existing partnership then existing partners have to sacrifice in favour of new partner, it is called sacrificing ratio.
6.     Share of goodwill of new partner will be credited to sacrificing partners into their sacrificing ratio.
7.     At the admission of new partner Profit & Loss on revaluation of assets and liabilities and balances of accumulated profits & losses will be distributed among old partners (only) in old ratio.
Ql.          At the time of change in profit sharing ratio among the existing partners, where will you record an unrecorded liability ?
Ans.        Revaluation Account-Debit side
Q2.         Anand, Bhutan  and Chadha are partners sharing profits in ratio of 3:2:1. On 1st April 2007, they decided to share profits equally. Name the partners who is gaining on consequence of such change.
Ans.        Chadha.
Q3.         Give two characteristics of  goodwill.
Ans.        (i)   it is an intangible asset having a definite value.
               (ii) It helps in earning more profit.
Q4.         Name any two factors affecting goodwill of a partnership firm.
Ans.        (i)   Favourable location      (ii) Time period                                                    
Q5.         In a partnership firm assets are Rs.5,00,000 and liabilities are Rs. 2,00,000.  The normal profit rate is 15%. State the amount of normal profits.
 Ans.    Rs.45,000
Q6.         State the amount of goodwill, if goodwill is to be valued on the basis of 2 years’ purchase of last year’s profit. Profit of the last year was Rs.20,000.
Ans.        Rs.40,000
Q7.         Where will you record ‘increase in machinery’ in case of change in profit sharing ratio among the existing partners?
Ans.        Revaluation Account- Credit Side.
Q8.         Name two methods for valuation of goodwill in case of partnership firm.
Ans.        (i) Average Profit Method (ii) Super Profit Method
Q9          Give formula for calculating goodwill under ‘super profit method’.
Ans.        Goodwill = Super Profit x   Number of Years’ Purchase.
Q IO.      Pass the journal entry for increase in the value of assets or decrease in the value of liabilities in the Revaluation A/c?
Ans         Assets A/c                Dr.    (with the amount of increase)
               Liabilities A/c                      Dr.    (with the amount of decrease)
                      To Revaluation A/c                   (with the total amount of gain)
                      (Being revaluation of assets and liabilities)
Qll.         P,Q and R are partners in a firm sharing profits in the ratio of 2:2:1 on 1.4.2007 the partners decided to share future profits   in the ratio of 3:2:1 on that day balance sheet of the firm shows General Reserve of  Rs    50,000. Pass entry for distribution of reserve.
Ans.        General Reserve                              A/c     Dr.     50,000
                      To P’s   Capital             A/c                                          30,000
                      To Q’s         Capital      A/c                                       20000
                      To R’s   Capital            A/c                                           10000                        
                      (Being Reserve distributed)
Q12.       “The gaining partner’s should  compensate to sacrificing partner’s with the amount of gain.” Journalise this statement.      
Ans.        Gaining Partner’s Capital A/c                                  Dr
                      To Sacrificing Partner’s Capital   A/c
               (Being compensation given by gaining partner to sacrificing partner)
Q13.       What are the two main rights acquired by the incoming new partner in a partnership firm?         ,
Ans,        The two main rights are:
               (i)   Right to share the assets of the firm.
               (ii) Right to share the future profits of the firm.
Q14.       A and B are partners, sharing profits in the ratio of 3:2. C admits for 1/5 share . State the sacrificing ratio.
Ans.        Sacrificing Ratio - 3:2.
Q15.       How should the goodwill of the firm be distributed when the sacrificing ratio of any of the existing partner is negative (i.e. he is gaining)
Ans.        In this case the partner with a negative sacrificing ratio, i.e. the gaining partner to the extent of his gain should compensate to the sacrificing partner to the extent of his gain.
Ql6.        In case of admission of a partner, in which ratio profits or loss on revaluation of assets and reassessment of liabilities shall be divided?     
Ans.        Old ratio.                                                                                 
Q17.       Give journal entry for distribution of ‘Accumulated Profits* in case of admission of a partner.
Ans.        Accumulated Profit    A/c    Dr.
                      To Old Partners Capital A/c
               (Being distribution of accumulated profits among old partners)
Q18.       At the time of admission of partner where will you record ‘unrecorded investment’?
Ans.        Revaluation Account- Credit side.
Q19.       The goodwill of a partnership is valued at Rs.20,000. State the amount required by a new partner, if he is coming for 1/5 share in profits.
Ans.        Rs.4,000.
Q20.       What journal entries should be passed when the new partner brings his share of goodwill in kind?
               (i)   Assets A/c                     Dr                                                        -                                                To Premium A/c
               (ii) Premium A/c                             Dr                      -                                                                             To Sacrificing Partners’ Capital A/c
Q21.       What journal entries will be passed when the new partner is unable to bring his share of goodwill in cash?
Ans.        New Partner’s Capital A/c                          -                         -
                      To Sacrificing Partners’ Capital A/c
Q22.       In case of admission of a new partner, goodwill was already appearing in the books of the firm.   Give journal entry for its treatment
Ans         Old Partners* Capital A/c  Dr.
                      To Goodwill A/c          -
               (Being old goodwill written off among old partners)
Q23.       At the time of admission of a new partner, workmen’s compensation reserve in appearing in the Balance sheet as Rs1,000. Give journal entry if workmen’s compensation at the time of admission is estimated at  Rs 1,200.
Ans:        Revaluation A/c                                           200
                      To Workmen’s Compensation   Reserve A/c                            200
               (Being workmen’s compensation estimated at Rs. 1,200)
Q24.       Give journal entry for recording deceased partner’s share in profit from the closure of last balance sheet till the date of his death.
Ans.        Profit & Loss Suspense Account                  Dr.
                      To Deceased Partner’s Capital Account
               (Being share of profit to deceased partners)           
Q25.       Define gaining ratio.
Ans.        Gaining ratio is the ratio in which remaining/continuing partners acquire the share of the outgoing partner(s).
Q26.       Give two circumstances in which gaining ratio can be applied.
Ans.        (i) Retirement of a partner (ii) Death of a partner.   .
Q27.       At the time of retirement of a partner give journal entry for writing off the existing goodwill.
Ans.        All Partners Capital (including retiring) A/c           Dr.
                      To Goodwill A/c
               (Being old goodwill written off among all partners in, old ratio)
1 Mark Questions
Admission of a Partner
Q.1         State the two financial rights acquired by a new Partner?
Ans.        New partner is admitted to the partnership if it provided in the partnership deed or all the existing partners agree to admit the new partner.  Section 31 of the Indian Partnership Act Provides that a person may be admitted as a new partner into a partnership firm with  the consent of all the Partners.

Q.2         Give the name of the compensation which is paid by a new Partner to sacrificing Partners for sacrificing their share of profits.
Ans.        When a partner joins the firm, he gets the following two rights along with others :
               i)    Right to share future profit  of the firm and
               ii)   Right to share  the assets of the firm.

Q.3         Enumeration the matters that need adjustment at the time of admission of a new Partner.
Ans.        The matter that needs adjustment of the time of admission of a new partner are:
               i)    Adjustment in profit sharing ratio and adjustment of capital
               ii)   Adjustment for goodwill
               iii)  Adjustment of Profit / Loss arising from the Revolution of Assets and        Reassessment of Liabilities.
               iv)  adjustment of accumulated profits, reserves and losses.

Q.4         Give two circumstances in  which sacrificing Ratio may be applied.
Ans.        Circumstances in which sacrificing Ratio may be applied are:
               i)    At the time of admission of a new partner for distributing goodwill brought in by the new partner.
               ii)   For adjustment goodwill in case of change in Profit - sharing ratio of existing partners.

Q.5         Why is it necessary to revalue assets and reassess liabilities of a firm in case of admission of a new partner?
Ans.        The assets are revalued and liabilities of a firm are reassess, at the time of admission of a partner because the new partner should; neither benefit nor suffer because change in the value of assets and liabilities as on the date of admission.

Q.6         What are the accumulated profit and accumulated losses?
Ans.        The profit accumulated over the years and have not been credited to partners’ capital A/c are known as accumulated Profit or undistributed profit, e.g. the  General Reserve, Profit and Loss A/c (credit balance).
               The losses which have not yet been written off to the debit of Partners’ Capital A/c are known as accumulated Losses, e.g. the Profit and Loss A/c appearing on the assets side of Balance Sheet, etc.

Q.7         Explain the treatment of goodwill in the books of a firm on the admission of a new Partner when goodwill already appears in the Balance sheet at its full value and the new partner brings his share of good will in cash.
Ans.        By following accounting standard - 10, the existing goodwill (i.e. goodwill appearing in the Balance Sheet ) is written off to the old partners Capital a/c in their old profit sharing ratio.
                      Old partners capital A/c           Dr. .....
                                 To Goodwill A/c                                                           [in old Ratio]
                      [Being the existing g/w written off in the old ratio.]

Q.8         Under what circumstances the premium for goodwill paid by the incoming Partner will not recorded in the books of Accounts ?
Ans.        When the premium for goodwill is paid by the incoming partner privately, it is not recorded in the books of A/c as it is as a matter outside the business.
Q.9         A and B share profits and losses in the Ratio of 4:3, they admit C with 3/7th share; which he gets 2/7th from A and 1/7 from B. What is the new profit sharing ratio?
Ans.        A :   -  =  4/7-2/7 =2/7
               B :  :    = 3/7-1/7=2/7
               C :       =2/7+1/7=3/7
               New Profit sharing Ratio is 2:2:3.

Q.10       The capital of A and B are Rs. 50,000 and Rs. 40,000.  To Increase the Capital base of the firm to Rs. 1,50,000, they admit C  to join the firm, C is required to Pay a sum of Rs. 70,000, what is the amount of premium of goodwill ?
Ans.        The total capital of the firm is Rs. 90,000.  To increase the capital base to Rs. 1,50,000, C is to bring in Rs. 60,000 (Rs. 1,50,000 - 9,00,00) But he bring in Rs.  70,000.  Therefore, the excess of Rs. 10,000 represent premium for goodwill.

Q.11       Distinguish between New Profit - sharing ratio and sacrificing ratio?
Ans.        Distinction between New Profit - Sharing ratio and sacrificing ratio:
                      New Profit sharing Ratio                                              Sacrificing Ratio
1)            It is related to all the Partners          1)         It is related to old partners only
               (including new)
2)            It is the ratio in which the all           2)         It is the ratio in which old partners
               partner (including new) will share               have sacrificed their share in favour  
               profit in future.                                             of new Partner or when profit
                                                                                    sharing Ratio is changed.
3)            New Profit sharing Ratio =              3)         Sacrificing Ratio =
               Old Ratio - Sacrificing Ratio                       Old Ratio - New Ratio
2-3 marks questions:
Q 1 A & B are partners sharing in the ratio of 3:2. C is admitted. C gets 3/20th from A and 1/20th from B. calculate new and sacrifice ratio
Ans:      9: 7: 4

Q2   X & Y are partners share profits in the ratio of 5:3. Z the new partner gets    1/5 of X’s share and 1/3rd of Y’s share. Calculate new ratio.

Ans:    4:2:2

Q 3  P & Q are partners sharing in the ratio of 5:3. They admit R for 1/4th share and agree to share between them in the ratio of 2:1 in future. Calculate new ratio.

Ans:  2:1:1.

6-8 Marks Questions
Q.1         Dinesh, Yasmine and Faria are partners in a firm, sharing profits and losses in 11:7:2 respectively. The Balance Sheet of the firm as on 31st Dec 2001 was as follows:
Sundry Creditors
Public Deposits
Plant & Machinery
Reserve fund
Capital A/c

Debtors Rs.                           1,500

Less: bad debts  Rs.    300    provisions
Cash in hand


On the same date, Annie is admitted as a partner for one-sixth share in the profits with Capital of Rs. 4,500 and necessary amount for his share of goodwill on the following terms:-
a.         Furniture of Rs. 2,400 were to be taken over by Dinesh, Yasmine and Faria equally.
b.         A Liability of Rs. 1,670 be created against Bills discounted.
c.         Goodwill of the firm is to be valued at 2.5 years' purchase of average profits of 2 years. The profits are as under:
                      2000:- Rs. 2,000 and 2001 - Rs. 6,000.
d.         Drawings of Dinesh, Yasmine, and Faria were Rs. 2,750; Rs. 1,750; and Rs. 500 Respectively.
e.         Machinery and Public Deposits are revalued to Rs. 2,000 and Rs. 1,000 respectively.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Solution 1

Books of Dinesh, Yamine, Farte and Anie

         Particulars                                              Rs.    Assets                                                     Rs.
         To Bills Discounted A/c                     1670    By Public deposits A/c             190
                                                                                 By Machinery A/c                                 200
                                                                                 By Loss transferred to
                                                                                   Dinesh's capital A/c                704                                                                                                Yasmine's Capital A/c                       448
                                                                                   Faria's Capital A/c                  128    1280
                                                                     1670                                                                1670

         Dr.                                                                                                                                  Dr.
         Particulars     Dinesh Yasmine  Faria    Annie   Particulars   Dinesh Yasmine    Faria         Annie
                                     Rs.         Rs.      Rs.        Rs.                             Rs          Rs.       Rs.  Rs.
         To Revaluation                                                   By Balance b/d 5100      3000    5000    --
         A/c (Loss)          704        448     128          --   By Reserve F A/c 495      315        90    --
         To Furniture A/c 800        800     800          --   By Cash A/c        --            --         --         4500
         To Drawings     2750      1750     500          --   By Premium A/c 917        583      167    --
         To Balance c/d 2258        900   3829     4500
                                   6512      3898   5257     4500                          6512       3898    5257         4500
                                                                                    By Balance b/d 2258        900    3829         4500                        


as at 31.12.2001
         Particulars                                                 Rs.   Assets                                                  Rs.
         Sundry Creditors                                       800   Cash in Hand                                              2757
         Public Deposits                                       1000   Factory Buildings                                       7350
         Capitals :       Dinesh      2258           Machinery                                                                   2000                                                                                                   Furniture                                                        200
                           Yashmine        900               Stock                                                      1450
                                  Faria      3829            Debtors                          1500
                                 Annie      4500              11487    Less : Provision 300      1200
         Bills Discounted                                     1670  
                                                                     14957                                                    14957

Q.2      X and Y are partners as they share profits in the proportion of 3:1 their        balance sheet as at 31.03.07 as follows.


Capital Account


Bills Receivable




On the same date, Z is admitted into partnership for 1/5th share on the following terms
a.         Goodwill is to be valued at 3½ years purchase of average profits of last for year which was Rs. 20,000 Rs. 17,000 Rs. 9,000 (Loss) respectively.
٠          Stock is fund to be overvalued by Rs. 2,000 Furniture is reduced and Land to be appreciated by 10% each, a provision for Bad Debts @ 12% is to be created on Debtors and a Provision of Discount of Creditors @ 4% is to be created.
٠          A liability to the extent of Rs. 1,500 should be created for a claim against the firm for damages.
٠          An item of Rs. 1,000 included in Creditors is not likely to be claimed, and hence it should be written off.
            Prepare Revaluation Account, Partners: Capital Accounts and Balance Sheet of the new firm if Z is to contribute proportionate capital and goodwill. The capital of partners is to be in profit sharing ratio by opening current Accounts.
Solution 2
         Dr.                                                                                                                                  Cr.
         Particulars                                      Amount    Particulars                                        Amount
         To Stock A/c                                      2000    By land A/c                                        16500
         To furniture A/c                                  2420    By creditors A/c                                   1000
         To Provision for bad debts A/c 4224 By provision of discount on                               3612
         To claim against damages A/c 1500 creditors A/c
         To profit transferred to
             X's capital A/c               8266
             Y's                                  2742       10968
                                                                   21112                                                               21112        

         Dr.                                                                                                                                   Cr
         Particulars         X Rs.       Y Rs.         Z Rs.    Particulars             X Rs.        Y Rs.    Z Rs.
         Y's Current A/c         -     64,900                -    By Balance b/d 1,76,000  1,45,200           -
         To Balance   2,54,901     84,967      84,967    By revaluation       8,226        2,742           -
                                                                                 By premium a/c     5,775        1,925           -
                                                                                 By Cash a/c                  -                -              84,967
                                                                                 By X's current     64,900                -           -
                              2,54,901  1,49,867      84,967                             2,54,901   1,49,867 84,967

         Liabilities                                              Rs.    Assets                                                     Rs.
         Claim against damages                      1,500    Cash                                                         1,20,167
         Creditors                  Rs. 91,300                     Land                                                         1,81,500
         Less                            Rs. 1,000                     Furniture                                            21,780
                                                                  90,300    Stock                                                        1,30,000
         Less Prov.                         3,612      86,688    Debtors                                35,200            
         Capital                                                            Less provision.                      4,224  30,976
             X                        Rs. 2,54,901                     Bills receivables                               28,600
             Y                           Rs. 84,967                     X's current a/c                                   64,900
             Z                           Rs. 84,967   4,24,835   
         Current A/c (Y)                               64,900                                                                        
                                                            5,77,923                                  5,77,923         

Q.3.     Rashmi and Pooja are partners in a firm. They share profits and losses in the ratio of 2:1. They admit Santosh into partnership firm on the condition that she will bring Rs. 30,000 for Goodwill and will bring such an amount that her capital will be 1/3 of the total capital of the new firm. Santosh will be given 1/3 share in future profits. At the time of admission of Santosh, the Balance Sheet of Rashmi and Pooja was as under:

                                                            Balance sheet
Capital Account

Bills Payable



It was decided to:
a.                revalue stock at Rs. 45,000.
b.               depreciated furniture by 10% and machinery by 5%.
c.                make provision of Rs. 3,000 on sundry debtors for doubtful debts.
Prepare Revaluation Account, Partners: Capital Accounts and Balance Sheet of the new firm. Give full workings.

Solution : 3

         Dr.                                                                                                                                  Cr.            
         Particulars                                             Rs.    Particulars                                               Rs.
         To Stock                                             5000    By Loss on Revaluation distributed            
         To Furniture                                        1000      Rashmi                                             10000
         To Machinery                                     6000      Pooja                                                  5000
         To Debtors                                         3000
                                                                   15000                                                               15000


         Particulars      Rashmi       Pooja     Santosh    Particulars          Rashmi        Pooja          Santosh
                                       Rs.           Rs.            Rs.                                     Rs.            Rs.       Rs.
         To Revaluation A/c 10000  5000              --    By Balance b/d  115000     115000          --
         To Adv Susp. A/c 2000       1000              --    By Cash A/c                --              --          --
         To Balance C/d 145000  130000              --    By Premium a/c    20000       10000          --
                                                                                 By Reserve          16000         8000          --
                                                                                 By Work com.Res. 6000         3000           -
                                157000    136000              --                               157000     136000          --
         To Balance c/d 145000   130000     137500    To Balance c/d   145000     130000           -
                                                                                 By Cash A/c                --              -- 137500
                                                                                 ½ of (Rs. 145000        --              -- 137500
                                                                                  + Rs. 130000)
                                145000    130000     137500                               145000     130000 137500

         Dr.                                                                                                                                  Cr.            
         Liabilities                                              Rs.    Assets                                                     Rs.
         Creditors                                          30000    Cash                                                 257500
         Bills Payable                                    10000    Machinery                                        114000
         Rashmi's Capital                             145000    Furniture                                               9000
         Pooja's capital                                130000    Stock                                                  45000
         Santosh's capital                             137500    Debtors                                 30000
                                                                                 Less : Provision                      3000
                                                                 452500                                                            452500

Q.4      A, B and C are equal partners in a firm, their Balance Sheet as on 31st          March 2002 was as follows:
Sundry Creditors
Employees Provident Fund
Bills Payable
General Reserve

Bad Debts
Advertisement Suspense A/c



On that date they agree to take D as equal partner on the following terms:
a.         D should bring in Rs. 1,60,000 as his capital and goodwill. His share of goodwill is valued at Rs. 60,000.
b.         Goodwill appearing in the books must be written off.
c.         Provision for loss on stock and provision for doubtful debts is to be made at 10% and 5% respectively.
d.         The value of building is to taken Rs. 2,00,000.
e.         The total capital of the new firm has been fixed has been fixed at Rs. 4,00,000 and the partners capital accounts are to be adjusted in the profit sharing ratio. Any excess is to be transferred to current account and any deficit is to be brought in cash.
Required : Revaluation Account, Partners Capital Accounts, and the Balance Sheet of the new firm.

Solution 4
         Dr.                                                                                                                                  Cr.            
         Particulars                                             Rs.    Particulars                                               Rs.
         To Stock                                           11400    By land & building                             75000
         To provision for doubtful debtors      5100
             A's Capital A/c (1/3)                    19500
             B's Capital A/c (1/3)                    19500
             C's Capital A/c (1/3)                    19500
                                                                   75000                                                               75000


         Particulars      Rashmi       Pooja     Santosh    Particulars          Rashmi        Pooja          Santosh
                                       Rs.           Rs.            Rs.                                     Rs.            Rs.       Rs.
         To Adver.                                                        By Balance c/d   217000     166000  90000
         Sus. A/c              1000        1000         1000    By Revaluation    19500       19500  19500
         to goodwill       39000      39000       39000    By General Res.     6000         6000    6000
         To Current A/c 122500     71500              --    By Premium A/c   20000       20000  20000
         To Balance c/d 100000   100000     100000    By Current A/c            --              --    4500
                                262500    211500     140000                               262500     211500 140000

BALANCE SHEET OF M/S A, B & C as at 31st march 20x2
         Dr.                                                                                                                                  Cr.            
         Liabilities                                              Rs.    Assets                                                      Rs
         Sundry creditors                               27000    Cash at bank                                     172000
         Employees' Provident Fund                6000    Debtors                               102000
         Bills Payable                                    45000    Less : Provision                      5100   96900
             A's Capital                                  100000    Mr. X                                                         --
             B's Capital                                  100000    Stock                                                102600
             C's Capital                                  100000    Furniture & Fixtures                           24000
             D's Capital                                  100000    Plant & Machinery                             72000
             A's Current A/c                           122500    Land & Building                               200000
             B's Current A/c                             71500    C's Current A/c                                    4500
                                                                 672000                                                             672000
Q.5   A, Band C were partners in a firm sharing profits equally:   Their Balance Sheet on.31.12.2007 stood  as:
         Liabilities                                              Rs.    Assets                                                     Rs.
         A                       Rs. 30,000                            Goodwill                                           18,000
         B                       Rs. 30,000                            Cash                                                  38,000
         C                       Rs. 25,000              85,000    Debtors                              . 43,000            
         Bills payable                                   20,000    Less: Bad Debt provision     3,000  40,000
         Creditors                                         18,000    Bills Receivable                               25,000
         Workers Compensation Fund             8,000    Land and Building                             60,000
         Employees provide4nt Fund            60,000    Plant and Machinery                          40,000
         General Reserve                              30,000                                                           
                                                               2,21,000                                                                     2,21,000
         It was mutually agreed that C will retire from partnership and for this purpose following terms were      agreed upon.
         i)            Goodwill to be valued on 3 years’ purchase of average profit of last 4 years which were 2004 : Rs.50,000 (loss); 2005 : Rs. 21,000; 2006: Rs.52,000; 2007 : Rs.22,000.
         ii)                       The Provision for Doubtful Debt was raised to Rs. 4,000.
         iii)          To appreciate Land by 15%.
         iv)          To decrease Plant and Machinery by 10%.
         v)                       Create provision of Rs;600 on Creditors.
         vi)          A sum of Rs.5,000 of Bills Payable was not likely to be claimed.
         vii)         The continuing partners decided to show the firm’s capital at 1,00,000 which would be in their new profit sharing ratio which is 2:3. Adjustments to be made in cash
         Make necessary accounts and prepare the Balance Sheet of the new partners.
Ans.5                                                               REVALUATION ACCOUNT
         Particulars                                             Rs.    Particulars                                               Rs.
         To Provision for Debts A/c               1,000    By Land A/c                                        9,000
         To Plant & Machinery A/c                4,000    By Provision on Creditors A/c               600
         To Profit transferred to                                   By Bills Payable A/c                          5,000
             A’s Capital A/c             Rs. 3,200                                                                     
             B’s Capital A/c             Rs. 3,200                                                                     
             C’s Capital A/c             Rs. 3,200  9,600                                                           
                                                                  14,600                                                              14,600
Particulars                        ARs.    B Rs.      C Rs.    Particulars                      A Rs.    B Rs.     C Rs.
To Goodwill A/c             6,000    6,000      6,000    By Balance b/d             30,000 30,000         25,000
To C’s Capital A/c          2,250    9,000              -    By General Reserve     10,000 10,000         10,000
To C’s Loan A/c                     -            -    46,116    By Workmen A/c            2,667   2,667         2,666
                                                                                 Compensation Fund
To Balance c/d              40,000  60,000              -    By Revalue A/c (profit) 3,200   3,200         3,200
                                                                                 By A’s Capital A/c                -           -         2,250
                                                                                 By B’s Capital A/c                -           -         9,000
                                                                                 By Cash A/c (Deficiency) 2,383 29,133      -
                                      48,250  75,000    52,116                                         48,250 75,000         52,116
                                                                                 By Balance b/d             40,000 60,000      -
as at 31.12.07
         Liabilities                                              Rs.    Assets                                                     Rs.
         Bills Payable                                   15,000    Debtors                         Rs.  43,000            
         Creditors                                         17,400    Less: Provision               Rs.  4,000  39,000
         Employees Provident Fund              60,000    Bills Receivables                              25,000
         C’s Loan                                          46,116    Land & Buildings                              69,000
         A’s Capital                      40000                     Plant & Machinery                            36,000
         B’S Capital                      60000   1,00,000    Cash                                                  69,516
                                                               2,38,516                                                                     2,38,516