12th Accountancy Unit 5 Admission of a Partner Three Marks Questions | QB365

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12th Accountancy Unit 5 Admission of a Partner Three Marks Questions

Published on: 01/10/2019

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 2

5 x 2 = 10

Oviya and Kavya are partners in a firm sharing profits and losses in the ratio of 5:3. They admit Agalya into the partnership. Their balance sheet as on 31^st March, 2019 is as follows:

**Balance Sheet as on 31st March 2019**
Liabilities		Rs.	Assets	Rs.
Capital accounts:			Buildings	40,000
Oviya	50,000		Plant	50,000
Kavya	40,000	90,000	Furniture	30,000
Profit and loss appropriation A/c		40,000	Debtors	20,000
General reserve		8,000	Stock	10,000
Workmen’s compensation fund		12,000	Cash	20,000
Sundry creditors		20,000
		1,70,000		1,70,000

Pass journal entry to transfer the accumulated profits and reserve on admission.

Arul and Anitha are partners sharing profits and losses in the ratio of 4:3. On 31.3.2018, Ajay was admitted as a partner. On the date of admission, the book of the firm showed a general reserve of Rs.42,000. Pass the journal entry to distribute the general reserve.

Vasu and Devi are partners sharing profits and losses in the ratio of 3:2. They admit Nila into partnership for 1/4 share of profit. Nila pays cash Rs. 3,000 towards her share of goodwill. The new ratio is 3:3:2. Pass necessary journal entry on the assumption that the fixed capital system is followed.

Arun, Babu and Charles are partners sharing profits and losses equally. They admit Durai into partnership for 1/4 share in future profits. The goodwill of the firm is valued at Rs. 36,000 and Durai brought cash for his share of goodwill. The existing partners withdraw half of the amount of their share of goodwill. Pass necessary journal entries on the assumption that the fluctuating capital method is followed.

Amudha and Bhuvana are partners who share profits and losses in the ratio of 5:3. Chithra joins the firm on 1st January, 2019 for 3/8 share of profits and brings in cash for her share of goodwill of Rs. 8,000. Pass necessary journal entry for adjusting goodwill on the assumption that the fluctuating capital method is followed and the partners withdraw the entire amount of their share of goodwill.

Generic 3

5 x 3 = 15

Anu and Arul were partners in a firm sharing profits and losses in the ratio of 4:1. They have decided to admit Mano into the firm for 2/5 share of profits. The goodwill of the firm on the date of admission was valued at Rs.25,000. Mano is not able to bring in cash for his share of goodwill. Pass necessary journal entry for goodwill on the assumption that the fluctuating capital method is followed.

Malathi and Shobana are partners sharing profits and losses in the ratio of 5:4. They admit Jayasri into partnership for 1/3 share of profit. Jayasri pays cash Rs. 6,000 towards her share of goodwill. The new ratio is 3:2:1. Pass necessary journal entry for adjusting goodwill on the assumption that the fixed capital method is followed.

Write a short note on accounting treatment of goodwill.

What are the journal entries to be passed on revaluation of assets and liabilities?

10.

Sathish and Sudhan are partners in a firm sharing profits and losses in the ratio of 4:3. On 1st April 2018, they admitted Sasi as a partner. On the date of Sasi’s admission, goodwill appeared in the books of the firm at Rs. 35,000. By assuming fluctuating capital account, pass the necessary journal entry if the partners decide to
(i) write off the entire amount of existing goodwill
(ii) write off Rs.21,000 of the existing goodwill

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Answers Key:

Generic 2

5 x 2 = 10

Journal Entry
Date	Particulars	Debit Rs.	Credit Rs.
2019 Apr 1	Profit and loss appropriation A/c Dr	40,000
	General reserve A/c Dr	8,000
	Workmen's compensation fund A/c Dr	12,000
	To Oviya's capital A/c(60,000 × 5/8)		37,500
	To Kaviyas capital A/c(60,000 × 3/8)		22,500
	(Accumulated profit and reserve transferred to Old partner's capital account in the old profit staring ratio)

Journal Entry
Date	Particulars	Debit Rs.	Credit Rs.
2018 March 31	General reserve A/c Dr	42,000
	To AruI's capital A/c \(\left( 42,000\times \frac { 4 }{ 7 } \right) \)		24,000
	To Anita's capital A/ c \(\left( 42,000\times \frac { 3 }{ 7 } \right) \)		18,000
	(General reserve transferred to old partner's capital account in the old profit sharing ratio)

Calculation of sacrificing ratio
Sacrificing ratio = Old share – New share
Vasu = \(\frac { 3 }{ 5 } -\frac { 3 }{ 8 } =\frac { 24-15 }{ 40 } =\frac { 9 }{ 40 } \)
Devi = \(\frac { 2 }{ 5 } -\frac { 3 }{ 8 } =\frac { 16-15 }{ 40 } =\frac { 1 }{ 40 } \)
Therefore, sacrificing ratio is 9:1

**Journal entry**
Particulars		Debit Rs.	Credit Rs.
Bank A/c	Dr.	3,000
To Vasu’s current A/c (9/10)			2,700
To Devi’s current A/c (1/10) (Cash brought for goodwill credited to old partners’ capital account in sacrificing ratio)			300

Durai’s share of goodwill = 36,000 × 1/4 = Rs. 9,000
As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio 1:1:1. Therefore, sacrificing ratio is 1:1:1.

**Journal Entries**
Particulars		Debit Rs.	Credit Rs.
Bank A/c	Dr..	9,000
To Arun’s capital A/c			3,000
To Babu’s capital A/c			3,000
To Charles’s capital A/c (Cash brought for goodwill credited to old partners’ capital account in sacrificing ratio)			3,000
Arun’s capital A/c	Dr.	1,500
Babu’s capital A/c		1,500
Charles’s capital A/c		1,500
To Bank A/c (Cash withdrawn by the partners			4,500

As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio 5:3. Therefore, sacrificing ratio is 5:3.

**Journal Entry**
Date	Particulars		Debit Rs.	Credit Rs.
2019		Dr..	8,000
January 1	To Amudha’s capital A/c (5/8)			5,000
	To Bhuvana’s capital A/c (3/8) (Cash brought for goodwill credited to Amudha and Bhuvana in sacrificing ratio)			3,000
	Amudha’s capital A/c	Dr.	5,000
	Bhuvana’s capital A/c	Dr.	3,000
	To Bank A/c (Amount withdrawn by the partners)			8,000

Generic 3

5 x 3 = 15

As the sacrifice made by the existing partners is not mentioned, it is assumed that they sacrifice in their old profit sharing ratio of 4 : 1. Therefore sacrificing ratio is 4 : 1
Manos share of goodwill = 25,000 x \(\frac{2}{5}\)
= Rs. 10,000

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Manos capital A/c Dr	10,000
To Anu's capital A/c \((\frac{4}{5})\)		8,000
To Arul's capital A/c \((\frac{1}{5})\)		2,000
(Mano's share of goodwill created to the old partner's capital account in the sacrificing ratio)

Calculation of sacrificing ratio
Sacrificing ratio = Old share - New share
Malathi \(=\frac { 5 }{ 9 } -\frac { 3 }{ 6 } =\frac { 30-27 }{ 54 } \)
\(=\frac { 3 }{ 54 } =\frac { 1 }{ 18 } \)
Shobana \(=\frac { 4 }{ 9 } -\frac { 2 }{ 6 } =\frac { 24-18 }{ 54 } =\frac { 6 }{ 54 } =\frac { 2 }{ 18 } \)
Therefore sacrificing ratio is \(\frac { 1 }{ 18 } :\frac { 2 }{ 18 } \) (or) 1:2

Journal Entry
Particulars	Debit Rs.	Credit Rs.
Bank A/c Dr	6,000
To Malathi's current A/c (1/3)		2,000
To Shoban's current A/c (2/3)		4,000
(Cash brought for goodwill credited to old partners capital account in sacrificing ratio)

According treatment for goodwill on admission of a partner is discussed below:
i) When new partner brings cash onwards goodwill
When the new partner brings cash towards goodwill in addition to the amount of capital it is distributed to the existing partners in the sacrificing ratio.
(ii) When the new partner does not bring goodwill in cash or in kind
If the new partner does not bring goodwill in cash or in kind, his share of goodwill must be adjusted through the capital accounts of the partners.
(iii) When the new partner brings only a part of the goodwill in cash or in kind
Sometimes the new partner may bring only a part of the goodwill in cash or assets. In such a case, for the cash or the assets brought the respective account is debited and for the amount not brought in cash or kind, the new partner's capital account is debited
(iv) Existing goodwill
If goodwill already appears in the books of accounts at the time of admission if the partners decide, it can be written off by transferring it to the existing partner's capital account/current account in the old profit sharing ratio.

Following are the journal entries to be passed to record the revaluation of assets and liabilities
Particulars		Debit Rs.	Credit Rs.
1. For increase in the value of asset
Concerned asset A/c	Dr	XXX
To Revaluation A/c			XXX
2. For decrease in the value of asset
Revaluation A/c	Dr	XXX
To Concerned asset A/c			XXX
3. For increase in the amount of liabilities
Revaluation A/c	Dr	XXX
To Concerned liabilities A/c			XXX
4. For decrease in the amount of liability
Concerned liability A/c	Dr	XXX
To Revaluation A/c			XXX
5. For recording an unrecorded asset
Concerned asset A/c	Dr	XXX
To Revaluation A/c			XXX
6. For recording an unrecorded liability
Revaluation A/c	Dr	XXX
To Concerned liability A/c			XXX
7. For transferring the balance in revaluation Alc
(a) If there is profit on revaluation
Revaluation A/c	Dr	XXX
To Old partner's capital A/c (individually in old ratio)			XXX
(b) If there is loss on revaluation
Old partner's capital Alc (individually in old ratio)		XXX
To Revaluation Ale			XXX

10.

i) To write off the entire amount of existing goodwill

**Journal entry**
Date	Particulars		Debit Rs.	Credit Rs.
2018	Sathish’s capital A/c (4/7)	Dr..	20,000
Apri 1	Sudhan’s capital A/c (3/7)	Dr.	15,000
	To Goodwill A/c (Existing goodwill written off)			35,000

(ii) To write off Rs. 21,000 of the existing goodwill

**Journal entry**
Date	Particulars		Debit Rs.	Credit Rs.
2018	Sathish’s capital A/c (21,000 \(\times\) 4/7)	Dr.	12,000
Apri 1	Sudhan’s capital A/c (21,000 \(\times\) 3/7)	Dr.	9,000
	To Goodwill A/c (Existing goodwill written off to the extent of Rs. 21,000)			21,000