Manoj and Rahul are equal partners in a business. Their Balance Sheet as on 31st March, 2013 stood as under.

Balance Sheet as on 31^st March, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Sundry Creditors		180000	Cash at Bank		120000
General Reserve		36000	Debtors	62000
Capitals:			(-) R.D.D.	-2000	60000
Manoj		90000	Bills Receivable		24000
Rahul		60000	Buildings		114000
			Machinery		48000
		366000			366000

They decided to admit Amit on 1^st April, 2013 on the following terms:

1. The Machinery & Building be depreciated by 10%.

2. Reserve for doubtful debts be increased to Rs. 5000.

3. Bills Receivable are taken over by Manoj at a discount of 5%.

4. The amount of creditors paid at a discount of 10%.

5. The Capital Accounts of all partners be adjusted in proportion to new profit sharing ratio by opening current account of partners.

6. Amit should bring Rs. 80,000 as capital for his 1/4^th in future profits and goodwill account be opened in the books of the firm at RS. 40,000.

Prepare Profit and Loss Adjustment A/c, Partners' capital Account and Balance sheet of the firm.

Solution:

In the books of Partnership Firm

Profit & Loss Adjustment Account

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Machinery A/c		4800	By Creditors A/c		18000
To Building A/c		11400	By Partners' Capital A/c
To R.D.D. A/c		3000	Manoj	1200
To Bills Receivable		1200	Rahul	1200	2400
		20400			20400

Partner's Capital Accounts

Particulars	Manoj	Rahul	Amit	Particulars	Manoj	Rahul	Amit
To Bills Receivable	22800			By Balance b/d	90000	60000	-
To Profit & Loss Adjustment A/c	1200	1200		By General Reserve	18000	18000	-
To Balance C/d	120000	120000	80000	By Bank A/c	-	-	80000
				By Goodwill A/c	20000	20000	-
				By Partner's Current A/c	16000	23200	-
	144000	121200	80000		144000	121200	80000

Balance Sheet as on 1^st April, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Partners' Capital A/c			Goodwill		40000
Manoj	120000		Building	114000
Rahul	120000		(-) Depreciation @ 10%	-11400	102600
Amit	80000	320000	Machinery	48000
Sundry Creditors	180000		(-) Depreciation @ 10%	-4800	43200
(-) Discount @ 10%	-18000		Debtors	62000
	162000		(-) R.D.D.	-5000	57000
(-) Amount paid to creditors	162000	NIL	Bills Receivable	24000
			(-) Discount @ 5%	-1200
				22800
			(-) Bills Receivable Taken over by Manoj	-22800	NIL
			Cash at Bank		38000
			Current Accounts:
			Manoj	16000
			Rahul	23200	39200
		320000			320000