Chapter – Admission

Q1. State the need for treatment of Goodwill on admission of a Partner. (1)
Q2. On 31st March 2009 the Balance Sheet of Ram and Shyam, who were sharing
profits in the ratio of 3:1 was as follows:
Liabilities Rs. Assets Rs.
Creditors 2,800 Cash at Bank 2,000
Employees’ provident fund 1,200 Debtors 6,500
General Reserve 2,000 Less Reserve for debts 500 6,000
Capitals: Stock 3,000
Ram 6,000 Investments 5,000
Shyam 4,000
10,000
16,000 16,000
They decided to admit, Mohan on April 1st 2009 for 1/5ih share on the following
terms:
(i) Mohan shall bring Rs. 6,000 as his share of premium.

(ii) That unaccounted accrued income of Rs. 100 be provided for.

(iii) The market value of investments was Rs. 4,500.

(iv) A debtor whose dues of Rs. 500 was written off as bad debts paid Rs. 400 in
full settlement.

(v) Mohan to bring in capital to the extent of 1/5th of the total capital of the new
firm.

Prepare Revaluation A/c, Partners Capital A/cs and the Balance Sheet of the new
firm.

Q3. On 31-3-2010 the Balance Sheet of W and R who shared profits in 3: 2 ratio was as
follows:
Liabilities Rs. Assets Rs.
Creditors 20,000 Cash 5,000
Profit and Loss accounts 15,000 Sundry Debtors 20,000
Capital Accounts: Less: Provision 700 19,300
W 40,000 Stock 25,000
R 30,000 70,000 Plant and Machinery 35,000
Patents 20,700
1,05,000 1,05,000
On this date B was admitted as a partner on the following conditions:

i. 'B' will get 4/15th share of profits.

ii. 'B' had to bring Rs. 30,000 as his capital to which amount other Partners capitals
shall have to be adjusted.

iii. He would pay cash for his share of goodwill which would be based on 2½ years
purchase of average profits of past 4 years.

iv. The assets would be revalued as under:

Sundry debtors at book value less 5% provision for bad debts. Stock at Rs.
20,000, Plant and Machinery at Rs. 40,000.
 v. The profits of the firm for the years 2007, 2008 and 2009 were Rs. 20,000; Rs.
14,000 and Rs. 17,000 respectively.

Prepare Revaluation Account, Partner's Capital Accounts and the Balance

Sheet of the new firm.

Q4. ‘B’ and ‘C’ were partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as
on 31.3.2011 was as follows: (8)

Balance Sheet of B and C as on 31.3.2011

Liabilities Rs. Assets Rs.
Capitals Land & Building 80,000
B 60,000 Machinery 20,000
C 40,000 1,00,000 Furniture 10,000
Provision for bad debts 1,000 Debtors 25,000
Creditors 60,000 Cash 16,000
Profit & Loss Account 10,000
1,61,000 1,61,000
‘D’ was admitted to the partnership for 1/5th share in the profits on the following
terms:
i. The new profit sharing ratio was decided as 2 : 2 : 1.

ii. D will bring Rs. 30,000 as his capital and Rs. 15,000 for his share of goodwill.

iii. Half of goodwill amount was withdrawn by the partner who sacrificed his share
of profit in favour of ‘D’.

iv. A provision of 5% for bad and doubtful debts was to be maintained.

v. an item of Rs. 500 included in Sundry Creditors was not likely to be paid,

vi. A provision of Rs. 800 was to be made for claims for damage against the firm.

vii. After making the above adjustments the capital Accounts of ‘B’ and ‘C’ were to
be adjusted on the basis of D’s capital actual cash was to be brought in or to be
paid off as the case may be.

Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the
New firm.

Q5. Abhay and Beena are partners in firm. They admit Chetan as partner with 1/4th
share in the profits of the firm. Chetan bring Rs. 2,00,000 as his share of
capital. The value of the total assets of the firm is Rs. 5,40,000 and outside
liabilities are valued at Rs. 1,00,000 on that date. Give the necessary entry to
record goodwill at the time of Chetan’s admission. Also show your working
notes.

Q6. Shahaj and Nimish are partners in firm. They share profits and losses in the ratio
2 : 1, since both of them are specially abled, sometimes they find it difficult to
run the business on their own. Gauri, a common friend decides to help them.
Therefore, they admitted her into partnership for a 1/3rd share. She brought her
share of goodwill in cash proportionate capital. At the time of Gauri’s admission,
the Balance Sheet of Sahaj and Nimish was as under:
 Liabilities Rs. Assets Rs.
Capital Accounts: Machinery 1,20,000
Sahaj 1,20,000 Furniture 80,000
Nimish 80,000 2,00,000 Stock 50,000
General Reserve 30,000 Sundry Debtors 30,000
Creditors 40,000 Cash 20,000
Employees provided Fund 30,000
3,00,000 3,00,000
It was decided to:

i. Reduce the value of stock by Rs. 5,000.

ii. Depreciate furniture by 10% and appreciate machinery by 5%.

iii. Rs. 3,000 of the debtors proved bad. A provision of 5% was to be created on sundry
Debtors for doubtful debts.

iv. Goodwill of the firm was valued at Rs. 45,000.

Prepare Revolution Account Partner’s Capital Account and Balance Sheet of the
reconstituted firm. Identify the value being conveyed in the question.

Q7. Hemant and Nishant were partners in a firm sharing profits in the ratio of 3 : 2.
Their capitals were Rs. 1,60,000 and Rs. 1,00,000 respectively. They admitted
Somesh on 1st April 2013 as a new partner for 1/5 share in the future profits.
Somesh brought Rs. 1,20,000 as his capital. Calculate the value of goodwill of the
firm and record necessary journal entries for the above transactions on Somesh’s
admission. (3)

Q8. State the rights acquired by a newly admitted partner.

Q9. On 1.1.2008, Uday and Kaushal entered into partnership with fixed capitals of Rs
7,00,000 and Rs 3,00,000 respectively. They were doing good business and were
interested in its expansion but could not do the same because of lack of capital.
Therefore, to have more capital, they admitted Govind as a new partner on
1.1.2010. Govind brought Rs 10,00,000 as capital and the new profit sharing ratio
decided was 3 : 2 : 5. On 1.1.2012, another new partner Hari was admitted with a
capital of Rs 8,00,000 for 1/10th share in the profits, which he acquired equally
from Uday, Kaushal and Govind. On 1.4.2014 Govind died and his share was taken
over by Uday and Hari equally.
Calculate:
i. The sacrificing ratio of Uday and Kaushal on Govind’s admission.

ii. New profit-sharing ratio of Uday. Kaushal, Govind and Hari on Hari’s
admission.

iii. New profit-sharing ratio of Uday, Kaushal and Hari on Govind’s death.