X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2023 was:
| Liabilities | ₹ | Assets | ₹ | |
|---|---|---|---|---|
| Creditors Employee’s Provident Fund Workmen Compensation Reserve Capital A/cs: X Y |
15,000 |
Cash at Bank Sundry Debtors Less: Provision for Doubtful Debts Stock Fixed Assets Profit & Loss A/c |
20,000 |
5,000 19,400 25,000 80,000 2,400 |
| 1,31,800 | 1,31,800 |
They admit Z into partnership with 1/8th share in profits on 1st April, 2023. Z brings ₹ 20,000 as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employee’s Provident Fund liability is to be increased by ₹ 5,000.
(b) All debtors are good.
(c) Stock includes ₹ 3,000 for obsolete items. Hence, are to be written off.
(d) Creditors are to be paid ₹ 1,000 more.
(e) Fixed Assets are to be revalued at ₹ 70,000.
Prepare Journal entries, necessary accounts and new Balance Sheet.
Also, calculate new profit-sharing ratio.
[Ans.: Loss on Revaluation – ₹ 18,400; Capitals: X – ₹ 72,625; Y – ₹ 25,375; Z – ₹ 20,000; Balance Sheet Total – ₹ 1,49,000; New Profit sharing ratio – 4 : 3 : 1.]
Solution :
