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12th Accountancy - Admission of a Partner

Published on: 04/01/2020

Admission of a Partner

Download Tamil Nadu 12th Standard Accountancy question papers, model tests, one-mark questions, important questions, and public exam papers in PDF format. Free study materials and answer keys for TN State Board students.

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Questions:

Generic 5

4 x 5 = 20

Lakshmi and Saraswathi are partners of a firm sharing profits and losses in proportion to capital. Trial Balance sheet as on 31^st March 2019 is as under

Liabilities	Rs.	Rs.	Assets	Rs.
Sundry creditors		60,000	Bank	12,000
Bills payable		40,000	Sundry debtors A/c	40,000
Capital Accounts:			Stock	40,000
Lakshmi	60,000		Plant	90,000
Saraswathi	40,000	1,000,000	Furniture	18,000
		2,00,000		2,00,000

They decided to admit Sulochana into the partnership with effect from 1st April, 2005 on the following terms.
(a) Sulochana shall bring in a capital Rs. 50,000 for \(\frac{1}{5}\)^th share of profits.
(b) Goodwill is to be valued at Rs. 40,000.
(c) Plant and furniture was to be depreciated by 5%
(d) Provision for doubtful debts be created at 1\(\frac{1}{2}\%\) on sundry debtors.
Show revaluation account, capital accounts, bank account and Balance sheet of the reconstituted partnership.

Sai and Shankar are partners, sharing profits and losses in the ratio of 5:3. The firm’s balance sheet as on 31st December, 2017, was as follows:

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Capital accounts:			Building		34,000
Sai	48,000		Furniture		6,000
Shankar	40,000	88,000	Investment		20,000
Creditors		37,000	Debtors	40,000
Outstanding wages		8,000	Less: Provision for bad debts	3,000	37,000
			Bills receivable		12,000
			Stock		16,000
			Bank		8,000
		1,33,000			1,33,000

On 31st December, 2017 Shanmugam was admitted into the partnership for 1/4 share of profit with Rs. 12,000 as capital subject to the following adjustments.
(a) Furniture is to be revalued at Rs. 5,000 and building is to be revalued at Rs. 50,000.
(c) Provision for doubtful debts is to be increased to Rs. 5,500
(d) An unrecorded investment of Rs. 6,000 is to be brought into account
(e) An unrecorded liability Rs. 2,500 has to be recorded now.
Pass journal entries and prepare Revaluation Account and capital account of partners after admission.

Anand and Balu are partners in a firm sharing profits and losses in the ratio of 7:3. Their balance sheet as on 31st March, 2018 is as follows:

Liabilities	Rs.	Rs.	Assets	Rs.
Capital accounts:			Land	60,000
Anand	50,000		Stock	40,000
Balu	30,000	80,000	Debtors	20,000
Sundry creditors		20,000	Cash in hand	10,000
Profit and loss A/c		30,000
		1,30,000		1,30,000

Chandru is admitted as a new partner on 1.4.2018 by introducing a capital of Rs. 20,000 for 1/4 share in the future profit subject to the following adjustments:
(a) Stock to be depreciated by Rs. 3,000
(b) Provision for doubtful debts to be created for Rs. 2,000.
(c) Land was to be appreciated by Rs. 10,000
Prepare revaluation account and capital account of partners after admission.

Sriram and Raj are partners sharing profits and losses in the ratio of 2:1. Nelson joins as a partner on 1st April 2017. The following adjustments are to be made:
(i) Increase the value of stock by Rs. 5,000
(ii) Bring into record investment of Rs. 7,000 which had not been recorded in the books of the firm.
(iii) Reduce the value of office equipment by Rs. 10,000
(iv) A provision would also be made for outstanding wages for Rs. 9,500.
Give journal entries and prepare revaluation account.

Generic 2

4 x 2 = 8

On the admission of C, A and B decide to record an unrecorded asset worth Rs.10,000 State whether the revaluation account will be debited or credited.

Praveena and Dhanya are partners sharing profits in the ratio of 7:3. They admit Malini into the firm. The new ratio among Praveena, Dhanya and Malini is 5:2:3. Calculate the sacrificing ratio.

Give the journal entry for writing off existing goodwill at the time of admission of a new partner.

Ramesh and Raju are partners sharing profits in the ratio of 2:1. They admit Ranjan into partnership with 1/4 share of profit. Ranjan acquired the share from old partners in the ratio of 3:2. Calculate the new profit sharing ratio and sacrificing ratio.

Multiple Choice Question

6 x 1 = 6

Introduction of a new partner due to _________

(a)

Need to more capital

(b)

Fresh ideas and more contacts

(c)

Obtaining of a skilled and reputable person

(d)

All of the above

10.

At the time of admission of a new partner, ________ profit ratio should be find out.

(a)

old

(b)

new

(c)

both (a) and (b)

(d)

none of these

11.

_______ is created out of profit to adjust the reduction in the market value of the investments.

(a)

Invest fluctuation fund

(b)

Capital fund

(c)

Fixed capital method

(d)

Fluctuating capital fund

12.

Old ratio of profit minus sacrifice ratio will be __________

(a)

New ratio

(b)

Old profit sharing ratio

(c)

Sacrifice ratio

(d)

None of these

13.

When the value of an asset increases, it results in

(a)

profit

(b)

loss

(c)

income

(d)

expense

14.

Which of the following statements is not true in relation to admission of a part _________.

(a)

Generally mutual rights of the partners change

(b)

The profits and losses of the previous years are distributed to the old partners

(c)

The firm is reconstituted under a new agreement

(d)

The existing agreement does not come to an end

Generic 3

1 x 3 = 3

15.

Varun and Barath are partners sharing profits and losses 5:4. They admit Dhamu into partnership. The new profit sharing ratio is agreed at 1:1:1. Dhamu’s share of goodwill is valued at Rs. 15,000 of which he pays Rs .10,000 in cash. Pass necessary journal entries for adjustment of goodwill on the assumption that the fluctuating capital method is followed.

Odd one out

1 x 2 = 2

16.

(a) Revaluation Method
(b) Memorandum Revaluation Method
(c) Average Period Method
(d) Premium Method

Assertion and reason

1 x 2 = 2

17.

Assertion (A): The Profit and Loss of Revaluation account shows the net effect on account of revaluation which is transferred to old partners accounts in their old profit.
Reason (R): The assets and liabilities appear in the Balance Sheet of the reconstituted firm at their revised values.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

One or Two Words / Correct Statement

1 x 1 = 1

18.

(i) Shareholders funds includes Equity share capital, Preference share capital, Reserves and surplus.
(ii) There should be at least one month gap between two calls unless otherwise provided by the Articles of Association of the company.
(iii) It is not compulsory that the new partner bring capital at the time of admission.
(a) (i) is correct
(b) (i), (ii) and (iii) are correct
(c) (i) and (ii) are correct
(d) (iii) is correct

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Answers Key:

Generic 5

4 x 5 = 20

Dr Revaluation Account Cr
Particulars	Rs.	Particulars	Rs.	Rs.
To Plant A/c	4,500	By Loss on revaluation:
To Furniture A/c	900	Lakshmi's capital A/c	3,600
To Provision for doubtful debts	600	Saraswathi's capital A/c	2,400	6,000
	6,000			6,000

Dr Capital Account Cr
Particulars	Lakshmi Rs.	Saraswathi Rs.	Sulochana Rs.	Particulars	Lakshmi Rs.	Saraswathi Rs.	Sulochana Rs
To Revaluation A/c	3,600	2,400		By Balance b/d	60,000	40,000
To Balance c/d	34,000	26,000		By Bank A/c	-	-	50,000
	84,000	56,000	50,000		84,000	56,000	50,000
				By Balance b/d	80,400	53,000	50,000

Dr Bank A/c cr
Particulars	Rs.	Particulars	Rs.
To Balance b/s	12,000	By Balance c/d	62,000
To Sulochana's capital A/c	50,000
	62,000		62,000

Balance sheet of Lakshmi, Saraswathi and Sulochana as on 31.3.2005
Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Sundry creditors		60,000	Bank		62,000
Bills payable		40,000	Sundry Debtors	40,000
			Less: Provision for doubtful debts	600	39,400
Capital Accounts:			Stock		40,000
Lakshmi	80,400		Plant	90,000
Saraswathi	53,600		Less: Depreciation	4,500	85,500
Sulochana	50,000	1,84,000	Furniture	18,000
			Less: Depreciation	900	17,100
			Goodwill		40,000
		2,84,000			2,84,000

Journal Entry
Date	Particulars		Debit Rs.	Credit Rs.
2017 December 31	Bank A/c	Dr	12,000
	To Shanmugam's capital A/c			12,000
	(Capital brought by Shanmugam)
2017 December 31	Building A/c	Dr	16,000
	Unrecorded investment A/c	Dr	6,000
	To Revaluation A/c			22,000
	(Appreciation on building and unrecorded investments adjusted)
2017 December 31	Revaluation A/c	Dr	6,000
	To Furniture A/c			1,000
	To Unrecorded liability A/c			2,500
	To Provision for doubtful debts A/c			2,500
	(Decreased on furniture, unrecorded Liability and provision made for doubtful debts adjusted)
2017 December 31	Revaluation A/c	Dr	16,000
	To Sai's capital A/c			10,000
	To Shankar's capital A/c			6,000
	(Profit on revaluation transferred to capital accounts)

Dr Revaluation A/c Cr
Particulars	Rs.	Rs.	Particulars	Rs.
To Furniture A/c		1,000	By Buildings A/c	16,000
To Provision for bad debts A/c		2,500	By Unrecorded investment A/c	6,000
To Unrecorded liability A/c		2,500
To Profit on revaluation transferred to
Sai's capital A/c (5/8)	10,000
Shankar's capital A/c (3/8)	6,000	16,000
		22,000		22,000

Dr Capital A/c Dr
Particulars	Sai	Shankar	Shanmugan	Particulars	Sai	Shankar	Shanmugam
To Balance c/d	58,000	46,000	12,000	By Balance b/d	48,000	40,000	-
				By Bank A/c	-	-	12,000
				By Revaluation A/c	10,000	6,000	-
	58,000	46,000	12,000		58,000	46,000	12,000
				By Balance b/d	58,000	46,000	12,000

**Dr. Revaluation Account Cr.**
Particulars	Rs.	Rs	Particulars	Rs.
To		3,000	By Land A/c	10,000
To Provision for doubtful debts		2,000
To Profit on revaluation transferred to
Anand’s capital A/c (7/10)	3,500
Balu’s capital A/c (3/10)	1,500	5,000
		10,000		10,000

**Dr. Capital Account Cr.**
Particulars	Anand Rs.	Balu Rs.	Chandru Rs.	Particulars	Anand Rs.	Balu Rs.	Chandru Rs.
To Balance c/d	74,500	40,500	20,000	By Balance b/d	50,000	30,000	-
				By Bank A/c	-	-	20,000
				By Revaluation A	3,500	1,500	-
				By Profit and loss A/c	21,000	9,000	-
	74,500	40,500	20,000		74,500	40,500	20,000
				By Balance b/d	74,500	40,500	20,000

**Journal entries**
Date	Particulars		Debit Rs.	Credit Rs.
2017	Stock A/c	Dr.	5,000
April 1	Investment A/c	Dr.	7,000
	To Revaluation A/c (Increase in the value of stock and unrecorded investment accounted)			12,000
"	Revaluation A/c	Dr.	19,500
	To Office equipment A/c			10,000
	To Outstanding wages A/c (Reduction in the value of office equipment and provision of outstanding wages recorded)			9,500
"	Sriram’s capital A/c	Dr.	5,000
	Raj’s capital A/c	Dr.	2,500
	To Revaluation A/c (Loss on revaluation transferred)			7,500

**Dr. Revaluation Account Cr.**
Particulars	Rs.	Particulars	Rs.	Rs.
To Office equipment A/c	10,000	By Stock A/c		5,000
To Outstanding wages A/c	9,500	By Investment A/c		7,000
		By Loss on revaluation transferred to
		Sriram’s capital A/c (2/3)	5,000
		Raj’s capital A/c (1/3)	2,500	7,500
	19,500			19,500

Generic 2

4 x 2 = 8

Revaluation account will be credited

Old ratio of Praveena and Dhanya = 7:3 that is \(\frac{7}{10}:\frac{3}{10}\)
New ratio of Paveena, Dhanya and Malini = 5:2:3 that is, \(\frac{5}{10};\frac{2}{10};\frac{3}{10}\)
Share sacrificed = Old share - New share
Praveena \(=\frac { 7 }{ 10 } -\frac { 5 }{ 10 } =\frac { 7-5 }{ 10 } =\frac { 2 }{ 10 } \)
Dhanya \(=\frac { 3 }{ 10 } -\frac { 2 }{ 10 } =\frac { 3-2 }{ 10 } =\frac { 1 }{ 10 } \)
Sacrificing ratio ofPraveena and Dhanya is \(\frac { 2 }{ 10 } :\frac { 1 }{ 10 } \) that is 2:1

Jourbal Entry
Particular	Debit Rs.	Credit Rs.
Old partner's capital/current Ale (in old ratio) Dr	xxx
To goodwill A/c		xxx
(Existing goodwill written off)

Computation of sacrificing ratio and new profit sharing ratio
Ranjan’s share = \(\frac { 1 }{ 4 } \)
Old ratio=2:1 that is, \(\frac { 2 }{ 3 } :\frac { 1 }{ 3 } \)
Proportion of share sacrificed = 3:2 that is, \(\frac { 3 }{ 5 } :\frac { 2 }{ 5 } \)
Share sacrificed = New partner’s share × Proportion of share sacrificed
Ramesh = \(\frac { 1 }{ 4 } \times \frac { 3 }{ 5 } =\frac { 3 }{ 20 } \)
Raju = \(\frac { 1 }{ 4 } \times \frac { 2 }{ 5 } =\frac { 2 }{ 20 } \)
Sacrificing ratio of Ramesh and Raju is \(\frac { 3 }{ 20 } \) and \(\frac { 2 }{ 20 } \), that is, 3:2
New share of old partner = Old share - Share sacrificed
Ramesh = \(\frac { 2 }{ 3 } -\frac { 3 }{ 20 } =\frac { 40-9 }{ 60 } =\frac { 31 }{ 60 } \)
Raju = \(\frac { 1 }{ 3 } -\frac { 2 }{ 20 } =\frac { 20-6 }{ 60 } =\frac { 14 }{ 60 } \)
Share of new partner Ranjan = \(\frac { 1 }{ 4 } \)
In order to equate the denominator, multiply and divide Ranjan’s share by 15
= \(\frac { 1 }{ 4 } \times \frac { 15 }{ 15 } =\frac { 15 }{ 60 } \)
Thus, the new profit sharing ratio = \(\frac { 31 }{ 60 } :\frac { 14 }{ 60 } :\frac { 15 }{ 60 } \) = 31 : 14 : 15

Multiple Choice Question

6 x 1 = 6

(d)
All of the above

10.

(b)
new

11.

(a)
Invest fluctuation fund

12.

(a)
New ratio

13.

(a)
profit

14.

(d)
The existing agreement does not come to an end

Generic 3

1 x 3 = 3

15.

Calculation of sacrificing ratio
Sacrificing ratio = Old share - New share
Varun \(=\frac { 5 }{ 9 } =\frac { 1 }{ 3 } =\frac { 5-3 }{ 9 } =\frac { 2 }{ 9 } \)
Bharath \(=\frac { 4 }{ 9 } =\frac { 1 }{ 3 } =\frac { 4-3 }{ 9 } =\frac { 1 }{ 9 } \)
Therefore, sacrificing ratio is 2 : 1

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Cash A/c Dr	10,000
Damn's capital A/c Dr	5,000
To Varun's capital A/c (2/3)		10,000
To Bharath's Capital A/c (1/3)		5,000
(Share of goodwill of Damu credited to old partner's capital account)