NOTES

Give the necessary entries to give effect to the above arrangement; prepare revaluation account and opening balance sheet of the firm as newly constituted.

Gopal and Govind  are partners sharing profits and losses in the ratio 60:40. The firm’s balance sheet as on 31:03:2016 was as follows:

Due to financial difficulties, they have decided to admit Guru as a partner in the firm from 1.04.2016 on the following terms:

Guru will be paid 40% of the profits.

Guru will bring in cash Rs.1,00,000 as capital. It is agreed that goodwill of the firm will be valued at 2 years purchase of 3 years normal average profits of the firm and guru will bring i cash his share of goodwill. It was also decided that the partners will not withdraw their share of goodwill nor will the goodwill appear in the books of account.

The profits of the previous three years were as follows:

For the year ended 31.03.2014: profit Rs.20,000 (includes insurance claim received of Rs.40,000).

For the year ended 31.03.2015: loss Rs.80,000( includes voluntary retirement compensation paid Rs.1,10,00).

For the year ended 31.03.2016: profit of Rs.1,05,000 (includes a profit of Rs. 25,000 on the sale of assets).

It was decided to revalue the assets on 31.03.2016 as follows:

 The new profit sharing ratio after the admission of Guru was 35:25:40.

Pass journal entries on admission, show goodwill calculation and prepare revaluation account, parner’s capital accounts and balance sheet as on 01.04.2016 after the admission of guru.

A,B and C were in partnership, sharing profits and losses as to A one-half, B one-third and C one-sixth , as from 1^st January,2016 they admitted D into partnership on the following terms:

D to have a one-sixth share which he purchased entirely from A paying A Rs.8,000 for the share of goodwill. Of this amount, A had withdrawn Rs.6,000 and put the balance in the firm as additional capital. As a condition to admission of D as a partner, D also brought Rs.5,000 capital into the firm.. it was further agreed that the investments should be valued at his market value of Rs.3,600 and plant be valued at Rs.5,800

The balance sheet of the old firm on 31.12.2015 was as follows:

Cash at bank Rs.8,000; debtors Rs.12,000;stock Rs.10,000; Investments at cost Rs.6,000; furniture Rs.2,000; plant Rs. 7,000; creditors Rs.21,000; Capital:A Rs.12,000; B Rs.8,000 and C Rs.4000.

The profits for the year 2016 were rs.12,000 and the drawings were A Rs.6,000, B Rs.6,000, C Rs.3,000 and D Rs.3,000.

You are  required to journalise the opening adjustments, prepare the opening balance sheet of the new firm as on 1^st january,2016 and give the capital account of each partner as on 31^st December,2016.

Following is the Balance sheet of Sohan and Mohan on 31^st March, 2012. They share profits and losses in the ratio of 3:2.

                                                                                      Balance sheet as on 31^st March, 2012 

They agreed to admit Rohan on 1^st April, 2012 as a partner into the firm on the following terms:

          1.    He should bring Rs. 40,000 as a share of goodwill, which is to be retained in the business.

          2.    He should bring Rs. 50,000 as capital for 1/4^th share in future profits.

3. Land & building to be valued at Rs. 1,20,000, plant and machinery and furniture to be reduced by 10%.
4. A provision of 5% on debtors to be made for doubtful debts.
5. The stock is to be taken at a value of Rs. 1,00,000.
6. The excess capital of Sohan and Mohan over their due proportion of sharing profits in the firm is to be transferred to their respective loan accounts.

Prepare Profit & Loss Adjustment A/c, Partners Capital A/c and New Balance sheet of the firm.