Admission of a Partner
Very Short Question Answers
Q1. What are the aspects which requires attention when a new partner is admitted?
Q2. What is Revaluation account?
Q3. Why Revaluation account is prepared?
Q4. What is goodwill?
Q5. State the essential features of goodwill
Q6. What is Ratio of sacrifice?
Q7. X and Y are partners sharing profits and losses in the ratio of 3:2. They decided to admit Mr.Z. for 1/5 share in profit. Calculate new profit sharing ratio of X, Y and Z.
Q8. Ram and Rahim are partners sharing profits and losses in the ratio of 5:3. They decided to admit Robert by giving him 2/8th share in the profits. Calculate new profit sharing ratio.
Q9. A and B are partners sharing profits and losses equally. They decided to admit Krishna for 1/5th share of profit in the business. Calculate New profit sharing ratio of A, B & C.
Q10. Radha and Rani sharing profits in the ratio of 4: 3. Mamatha admitted into business for 1/8th share in the future profits. Calculate new profit sharing ratio.
Q11. X and Y are partners sharing profits & losses in the ratio of 3/5 and 2/5 respectively. They decided to admit Mr.Z for 3/7th share in profits, which he takes 2/7th share from X and 1/7th share from Y. Calculate New profit sharing ratio.
Q12. A and B are partners sharing profits and losses in the ratio of 5:3 respectively. Mr.C is admitted for 3/8th share of profit, which he takes 2/8th from Mr.A and 1/8th from Mr.B. Calculate new profit sharing ratio.
Q13. Akbar and Anthony are partners sharing profits and losses in the ratio of 3:2 respectively. Mr.Amar is admitted into partnership. The new profit sharing ratio of Akbar, Anthony and Amar is 5:3:2 respectively. Calculate Ratio of sacrifice of old partners.
Q14. Sitha and Geetha are partners sharing profits and losses in the ratio of 4:3 respectively. Kavitha joined as new partner. The new profit sharing ratio of Sitha, Geetha and Kavitha is 7:4:3. Calculate Ratio of sacrifice of Sitha and Geetha.
Q15. Give journal entry when goodwill is brought in cash
Q16. Give journal entry when general reserve is distributed to old partners
Q17. Give journal entry for distribution of undistributed profit among old partners
Q18. Give journal entry when goodwill is created/raised in the books
Q19. Give journal entry when goodwill is written off in the books
Q20. X and Y are partners sharing profits and losses in the ratio of 2:3 respectively. They admitted Mr.Z into partnership for 1/4th share. For the purpose of admission of Mr.Z., Goodwill is valued at 3 years purchase of average profits of last 5 years. The profits of last 5 years were ?30,000, ?40,000, ?35,000, ? 45,000 and 50,000 respectively. Calculate the value of Goodwill.
Q21. A and B are partners sharing profits and losses in the ratio of 5:3 respectively. They admitted Mr.C into partnership on 31-3-2020. On that date General Reserve a/c showing a credit balance of 16,000 and P & L a/c showing a credit balance 24,000. Give necessary Journal entries.
Q22. Ram and Ravan are in partnership sharing profits and losses in the ratio of 4:3. They admitted, Vibhishana for 1/4th share in profits, Vibhishana brings 40,000 for capital and 28,000 for goodwill in cash. Goodwill is retained in the business. Give necessary journal entries.
Q23. A and B are partners sharing profits and losses in the ratio of 3:2 respectively. They admitted Mr.C as new partner. He brings 40,000 as goodwill in cash. The goodwill is withdrawn by A and B from the business. Give necessary Journal entries.
Q24. Ram and Sitha are in partnership sharing profits and losses in the ratio of 5:3. They admitted Laxman as new partner for 1/5 share of profit. The Goodwill of the firm is valued at 80,000. Pass necessary Journal entry to raise the goodwill.
Q25. Saritha and Kavitha are sharing profits and losses equally. They admitted Lalitha as new partner. Their new profit sharing ratio would be 2:2:1 respectively. The goodwill of the firm is valued at 1,00,000. The partners decided to create and write off goodwill completely. Pass necessary Journal entries.
Problems Question Answers
Q1. v class="accounting-problem">
The following was the balance sheet of Ram and Rahim were sharing profits and losses in the ratio of 2:3 Their balance sheet as on 31 March 2019 was as under.
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Bills payable | 25,000 | Bank | 10,000 |
| Trade creditors | 50,000 | Debtors | 40,000 |
| General Reserve | 20,000 | Stock | 30,000 |
| P&L A/c | 10,000 | Investments | 20,000 |
| Capitals: | Furniture | 25,000 | |
| Ram | 50,000 | Buildings | 60,000 |
| Rahim | 30,000 | ||
| Total | 1,85,000 | Total | 1,85,000 |
On 1st April 2019, they agreed to admit Mr. Peter as new partner for 1/5th share in profits on the following terms:
- Peter should bring ₹40,000 for capital and ₹20,000 for goodwill in cash.
- Depreciate furniture by 5% and stock by 10%.
- Appreciate buildings value by 15%.
- Provide for bad debts at 5% on debtors.
Required: Give necessary journal entries and ledger accounts and opening balance sheet of new firm.
Q2. v class="accounting-problem">
Raju and Rao are partners sharing profits and losses in the ratio of 3:2.Their balance sheet as on 31 March 2020 was as under.
Balance Sheet as on 31 March 2020
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Sundry creditors | 1,50,000 | Cash at Bank | 2,00,000 |
| Bills payable | 2,00,000 | Sundry Debtors | 2,00,000 |
| General Reserve | 1,00,000 | Stock | 3,00,000 |
| Capitals: | Furniture | 1,00,000 | |
| Raju | 4,00,000 | Machinery | 1,00,000 |
| Rao | 3,00,000 | Land & Buildings | 2,50,000 |
| Total | 11,50,000 | Total | 11,50,000 |
They decided to admit Mr. Reddy into partnership by giving him 1/4th share in future profits of the firm on the following conditions[span_29](end_span):
Conditions for Reddy's Admission (1/4th share)
- Reddy is to bring ₹2,50,000 as capital and ₹1,00,000 as goodwill in cash.
- Stock and Furniture to be depreciated by 10%.
- Make a provision of 5% on sundry Debtors.
- Land & Buildings are to be appreciated by 20%.
Required: Prepare necessary ledger accounts and show the new balance sheet.
Q3. v class="accounting-problem">
Mr. X and Y are partners sharing profits and losses in the ratio of 4:1.Their balance sheet as on 31 March 2020 was as under.
Balance Sheet as on 31 March 2020
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capitals: | Furniture | 40,000 | |
| X | 50,000 | Stock | 80,000 |
| Y | 1,30,000 | Bills Receivable | 20,000 |
| General Reserve | 30,000 | Debtors | 60,000 |
| Profit & Loss A/c | 10,000 | Bank | 50,000 |
| Creditors | 25,000 | ||
| Bills payable | 5,000 | ||
| Total | 2,50,000 | Total | 2,50,000 |
They agreed to take Mr. Z into partnership with effect from 1st April 2020 on the following terms:
Terms of Z's Admission
- Mr. Z brings ₹40,000 towards goodwill and ₹60,000 as capital.
- The assets are revalued as under:
- Furniture: ₹50,000.
- Stock: ₹78,000.
- Debtors: ₹58,000.
- The goodwill will be retained in the business.
Required: Prepare necessary ledger accounts and prepare balance sheet of new firm.