The following is the Balance Sheet of Krish and Bala, sharing profit and loss in the ratio 3:2 Liabilities Amount (₹) Assets Amount (₹) Capital…

Revaluation A/c Liabilities ₹ Assets ₹ To Provision for Doubtful Debts 1,500 By Land and Building 5,000 To Profit on revaluation By Stock 3,500 Krish 4,200 Bala 2,800 7,000 8,500 8,500 Partners’ Capital A/c Particulars Krish Bala Sobha Particulars Krish Bala Sobha To Krish and Bala’s capital A/c – (Goodwill) 12,000 By Balance b/d 25,000 15,000 To Advertisement expenses 2,400 1,600 By Bank - (Capital + GW) 37,000 To Balance c/d 53,200 33,800 25,000 By Sobha‘s Capital A/c (Goodwill) 7,200 4,800 By General Reserve 18,000 12,000 By Workman comp. Reserve 1,200 800 By Revaluation A/c 4,200 2,800 55,600 35,400 37,000 55,600 35,400 37,000 Balance Sheet of the Firm (after admission of Sobha) Liabilities ₹ Assets ₹ Capital Accounts: Land and Building 33,000 Krish 53,200 Bala 33,800 Plant & Machinery 15,000 Sobha 25,000 1,12,000 Stock 13,500 Employees provident fund 8,000 Debtors 25,000 Workman compensation Reserve 8,000 Less: Provision for Doubtful Debts 5,500 Creditors 10,000 19,500 Bank (W.N.2) 57,000 1,38,000 1,38,000 Working Note: (1) Calculation of Sacrificing ratio Partner Old Share New Share Difference Krish 3/5 – 3/6 = 3/30 Bala 2/5 – 2/6 = 2/30 Sobha – 1/6 (2) Bank A/c Particulars ₹ Particulars ₹ To Balance b/d 20,000 By Balance c/d 57,000 To Sobha’s capital A/c 37,000 57,000 57,000 It may be noted that Advertisement expenses are not permitted to be deferred. It must be written off when incurred, as they do not result in acquisition or creation of an intangible or recognizable asset. That is why it is routed through partner’s capital account.