PRACTICE QUESTIONS OF "ADMISSION OF A PARTNER"

Question 1. Gabbar and Kaliya are partners in a firm. They share profits and losses in the ratio of 3:2. They admit Sambha into partnership firm on the condition that he will bring Rs. 30,000 for goodwill and will bring such an amount that his capital will be 1/3 of the total capital of the new firm. Sambha will be given 1/3 share in future profits. At the time of admission


of Sambha, the Balance Sheet of Gabbar & Kaliya was as under:-

                                                              Balance Sheet

Liabilities	Rs.		Assets	Rs.
Capital Accounts: Gabbar Kaliya Creditors Bills Payable	2,70,000 2,50,000 60,000 20,000		Cash Machinery Furniture Stock Debtors	1,80000 2,40,000 20,000 1,00,000 60,000
	6,00,000			6,00,000

It was decided to:

(a)- revalue stock at Rs. 90,000.

(b)- depreciate furniture by 5% and machinery by 5%.

(c)- make provision of Rs. 6,000 on sundry debtors for doubtful debts..

Prepare Revaluation Account ,Capital Accounts and Balance Sheet of the  new firm.Give full workings.

Question 2. Apple and Guava started business partnership and sharing profit and loss in 5:3, when their Balance Sheet stood as follows:-

Balance Sheet

Liabilities	Rs.	Assets	Rs.
Apple’s Capital Guava’s Capital Creditors	28,000 20,000 7,200	Furniture & Fixtures Debtors Stock Cash	5,000 19,000 30,000 1200
	55,200		55,200

They admit Orange into partnership giving him 1/8 share on the following terms:

(a)- Goodwill is valued at one year’s average profit of the last three years which amounted to Rs. 8,000, Rs. 10,000 and Rs. 12,000.

(b) Orange brings in cash as his capital to the extent of 1/8 of the combined capitals of the old partners after the adjustment in respect of Goodwill.

  Show Journal entries recording these transactions, draw out the Balance Sheet of the new firm and also state how the partners will share in the profits of the new firm.

Question 3. Cheeku and Meeku are in a partnership, sharing profits in proportion of 3:2 respectively. Their Balance Sheet is as follows:-

                                                              Balance Sheet

Liabilities	Rs.	Assets	Rs.
Capitals: Cheeku                               3,000 Meeku                              2,000       Creditors	5,000 800	Cash Debtors                     1,000 Less:Provision             500 Stock Plant	1300 500 2,000 2,000
	5,800		5,800

They admit Keeku and give him 1/3 share upon the condition that he is to pay into the business Rs. 1,000 as Goodwill and sufficient capital to give him 1/3 share of the total capital of the new firm. It was agreed that the Provision for Bad Debts be reduced to Rs. 100, that the Stock be revalued at Rs. 2,000 and that the Plant be reduced to Rs. 500.

 Show the Balance Sheet of the new partnership.

Question 4. A and B started a business in the partnership with the profit sharing ratio of 3:2. The balance sheet of the firm is given:-

                                                         Balance Sheet

Liabilities	Rs.	Assets	Rs.
Creditors Outstanding rent Capital Accounts: A                                     4,000 B                                     2,000	2,000 1,000 6000	Land and Buildings Plant Stock Book Debts                       1,500 Less:provision                      500 Cash at Bank	1,500 2,000 3,000 1,000 1,000      500
	9,000		9,000

They agreed to admit C into partnership giving him 1/5 share on the following terms:

(a)- The value of Land and Buildings to be increased by Rs. 1,500.

(b)- The value of Plant to be increased by Rs. 1,000.

(c)- Goodwill to be valued at Rs. 2,000.

(d)- C to bring in capital to the extent of 1/5^th of the total capital of the new firm after adjustment.

  Show the Journal and Ledger entries recording these adjustments and prepare the Balance Sheet of the new firm, assuming C to have brought in the requisite cash. State the proportion in which the profits and losses will be divided in future. Also show the calculation for Capital to be introduced by C.

Question 5. Jay and Veeru are partners sharing profits in the proportions of 3:2. The Balance Sheet as on 31^st March, 2018 stand as:-

                                                                 Balance Sheet

Liabilities	Rs.	Assets	Rs.
Creditors Reserve Fund Bills payable Capital Accounts: Jay                               37,000 Veeru                           28,000	54,000 25,000 20,000 65,000	Land and Buildings Bills Receivable Stock Debtors                             25,000 Less:provision                       250 Cash Furniture P & L Account	40,000   5,000 35,000 24,750 28,250    3,000 28,000
	1,64,000		1,64,000

Thakur is admitted to partnership with effect from 1^st April,  2019 on the following terms:

(a)- That he brings in Rs. 30,000 as his capital for 1/3 share and pays Rs. 12,000 for goodwill, half of which is to be withdrawn by Jay and Veeru.

(b)- That there is likely to be a claim against the firm for damages. Provision to the extent of Rs. 2,500 is to be made.

(c)- That a bill for Rs. 1,500 for electric charges has been omitted to be accounted is, therefore, to be provided for.

(d)- That the stocks are to be reduced to Rs. 26,000 and furniture by Rs. 500.

(e)- That 5% provision for Doubtful debts is to be created.

(f)- That the value of Land and Building is to be appreciated by 15%.

(g)-That included in the creditors is an item of Rs. 1,500 which is not to be paid and, therefore, has to be written back.

(h)- That a commission of Rs. 1,000 receivable by A and B is to be accounted for.

(i)- That the new profit sharing ratio shall be Jay 1/2, Veeru 1/6, and Thakur 2/6.

(j)- That after making the above adjustments the Capital Accounts of the old partners be adjusted on the basis of the proportion of Thakur’s capital to his share in the business (i.e; actual cash to be paid off or to be brought in by the old partners, as the case may be).

  Make Journal entries and prepare the Balance Sheet of the newly constituted firm.

Question 6. Ram and Shyam were partners in a firm sharing profits and losses in the ratio of 3:2. The following is the Balance Sheet of the firm as on 31^st March, 2004:

BALANCE SHEET OF RAM AND SHYAM

as on 31^st March, 2018

Liabilities	Rs.	Assets	Rs.
Sundry Creditors Bank overdraft Bills payable Capital Accounts: Ram                          1,30,000 Shyam                      1,10,000	40,000 34,000 6,000 2,40,000	Land and Buildings Stock Debtors                                30,250 Less: provision                         250 Cash Furniture P & L Account	1,50,000 60,000 30,000    5,000 15,000 60,000
	3,20,000		3,20,000

They agreed to admit Satish with effect from 1^st April, 2019 with 1/5^th share in profits on the following terms:

(a)- Satish will bring in Capital to the extent of 1/5^th of the total capital of the new firm after all adjustments have been made.

(b)- Buildings are to be appreciated by Rs. 28,000 and Plant to be depreciated by Rs. 14,000.

(c)- The Provision on Debtors is to be raised to Rs. 2,600.

(d)- The goodwill of the firm has been valued at Rs. 40,000. Satish paid his share of goodwill in Cash.

  Prepare the Revaluation Account, Partner’s Capitals Accounts and the Balance Sheet of the firm after Satish’s Admission.

Question 7.- Given below is the Balance Sheet of Sanjay and Vijay, who are carrying on partnership  business on 31-03-2018. Sanjay and Vijay share profits and losses in the ratio of 2:1.

BALANCE SHEET OF SANJAY AND VIJAY

as on 31^st March, 2018

Liabilities	Rs.	Assets	Rs.
Bills Payable Creditors Outstanding Expenses Capital Accounts:-   Sanjay               1,85,000                   Vijay                 1,55,000	15,000 63,000   7,000   3,40,000	Cash in Hand Cash at Bank Sundry Debtors                         Stock Plant Building	15,000   45,000   65,000   40,000 1,05,000  1,55,000
	4,25,000		4,25,000

Ashish is admitted as a partner on the date of the Balance Sheet on the following terms:

(a)- Ashish will bring in Rs. 1,20,000 as his capital and Rs. 70,000 as his share of goodwill for 1/4 share in the profits.

(b)- Plant is to be appreciated to Rs. 1,20,000 and the value of Buildings is to be appreciated by 10%.

(c)- Stock is found over valued by Rs. 4,500.

(d)- A provision for bad and doubtful debts is to be created at 5% of debtors.

(e)- Creditors were unrecorded to the extent of Rs. 1,500.

Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of Ashish.

Question 8. – Tina and Lina were partners in a firm sharing profits and losses in the ratio of 3:2. On 1^st January, 2007 they admitted Mina as a new partner. On the date of Mina’s admission the Balance Sheet of Tina and Lina showed a balance of Rs. 32,000 in general reserve and Rs. 48,000(Cr.) in Profit and Loss Account. Record necessary Journal entries for the treatment of these items on Mina’s Admission. The new profit sharing ratio between Tina, Lina and Mina was 5:3:2.

Question 9.- Sujal and Mrinal are partners in a firm  sharing profits and losses in 4:1 ratio. On 1.1.2007, they admitted Kapil as a partner. On Kapil’s admission, the profit and loss account of Sujal and Mrinal showed a debit balance of Rs. 40,000.Record necessary journal entry for the treatment of the same.

Question 10.- Kamal and Pankaj share profits in the proportions of 2:3 . Their Balance Sheet on 31 March, 2018 was as follows:

BALANCE SHEET OF KAMAL AND PANKAJ

as on 31^st March, 2018

Liabilities	Rs.	Assets	Rs.
Sundry Creditors General reserve Capital Accounts:-    Kamal                        Pankaj	53,500   4,500   45,000 31,000	Cash Bills Receivable        Stock Furniture Plant & Machinery Debtors  Land	34,000    5,500  20,000    3,500 12,000 24,000  35,000
	1,34,000		91,500

On 1^st April, 2019, Suraj was entered into partnership on the following terms:

(a)- That Stock and Furniture be reduced by 10% and 5% provision for doubtful debts be created on Sundry Debtors and Bills Receivable.

(b)- An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence should be written back.

(c)- That Suraj pays Rs. 10,000 as his capital.

(d)- There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created.

(e)-That the value of land and buildings be appreciated by 20%.

(f)- That Suraj pays 5,000 for goodwill. Half of this sum is to be withdrawn by A and B.

Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between Kamal and Pankaj has not changed. Prepare the new Balance Sheet on the admission of Suraj.

Question 11.- A and B were partners in a firm sharing profits in the ratio of 3:2. Their Balance Sheet as on 31.3.2018 was a follows:

BALANCE SHEET OF A AND B

as on 31^st March, 2018

Liabilities	Rs.	Assets	Rs.
Sundry Creditors Bank Overdraft General Reserve C’s Loan Provision for Bad Debts Capital Accounts:-    A                          2,00,000    B                          3,60,000	60,000     40,000     30,000     40,000       2,000  5,60,000	Cash Debtors                                 Bills Receivable                         Stock Building Land	16,000       60,000       80,000    1,00,000    1,80,000    2,96,000
	3,66,000		3,66,000

On 1.4.2019 they admitted C as a new partner on the following conditions:

(a)- C’s loan will be converted into his capital.

(b)- The Goodwill of the firm was valued at Rs. 1,60,000 and C brought his share of Goodwill premium in cash.

(c)- C’s loan will get 1/8^th share in the profits of the firm.

(d)- Stock was to be depreciated by 15%.

(e)- Provision for bad debts was to be made equal to 5% of the debtors.

(f)- Land was to be appreciated by 20%.

Prepare Revaluation Account, Capital Accounts of A, B and C and the Balance Sheet of the new firm as on 1.4.2019.