X and Y are partners in a firm, sharing Profits and Losses in the ratio of 3: 2. The Balance Sheet of X and Y as on 31st March, 2025 was as follows:…

CA Foundation · Accounting · RTP · September 2026
X and Y are partners in a firm, sharing Profits and Losses in the ratio of 3: 2. The Balance Sheet of X and Y as on 31st March, 2025 was as follows: Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 45,150 Building 91,000 Bill Payable 14,350 Furniture 20,300 Bank Overdraft 31,500 Stock-in-Trade 74,900 Capital Account: Debtors 1,22,500 X: 1,54,000 Less: Provision (700) Y: 1,26,000 2,80,000 1,21,800 Investment 8,750 Cash 54,250 3,71,000 3,71,000 'Z' was admitted to the firm on 1.4.2025 on the following terms: (i) He is admitted for 1/6th share and introduces a Capital of ₹ 87,500. The new profit sharing ratio of X, Y and Z will be 3: 2:1 respectively. (ii) Z is unable to bring in cash for his share of goodwill; The partners decided to calculate goodwill on the basis of 'Z's share in the profits and the capital contribution made by him to the firm. (iii) Furniture is written down by ₹ 3,045 and stock to be depreciated by 5%. (iv) Building is appreciated to ₹ 1,02,200. Investment value increases by ₹ 1,575. (v) Creditors include ₹ 4,900 not to be paid. Provision for Debtors is to be maintained at 5%. (vi) A printer purchased for ₹ 3,500 on credit was entered in Furniture A/c by mistake. It is now to be treated as Office Equipment, and the liability to the supplier is still outstanding. (vii) Outstanding wages of ₹ 5,460 are also to be provided You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of New Partnership firm after admission of 'Z'.

Suggested Answer and Working Notes:

Revaluation Account Particulars Amount (₹) Particulars Amount (₹) To Furniture 3,045 By Building 11,200 To Stock (5% of 74,900) 3,745 By Sundry Creditors 4,900 To Prov. for Doubtful Debts (6,125 - 700) 5,425 By Investment 1,575 To Outstanding Wages 5,460 To Office Equip. Supplier 3,500 By Loss transfered to Capital A/cs: X's Capital A/c (3/5) 2,100 Y's Capital A/c (2/5) 1,400 21,175 21,175 Partners' Capital Accounts Particulars X (₹) Y (₹) Z (₹) Particulars X (₹) Y (₹) Z (₹) To Revaluation Loss 2,100 1,400 By Balance b/d 1,54,000 1,26,000 To X &Y Capital A/c 26,250 By Cash A/c 87,500 To Balance c/d 1,67,650 1,35,100 61,250 By Z's Capital A/c (WN-1) 15,750 10,500 1,69,750 1,36,500 87,500 1,69,750 1,36,500 87,500 Balance Sheet of X, Y & Z as at 1st April,2025 Liabilities Amount (₹) Assets Amount (₹) Capital Accounts: X's Capital A/c = 1,67,650 Building 1,02,200 Y's Capital A/c = 1,35,100 Furniture (20,300 - 3,045 - 3,500) 13,755 Z's Capital A/c = 61,250 3,64,000 Office Equipment 3,500 Bills Payable 14,350 Stock-in-Trade (74,900 - 3,745) 71,155 Bank Overdraft 31,500 Debtors (1,22,500 - 6,125) 1,16,375 Sundry Creditors (45,150 - 4,900) 40,250 Investment 10,325 Outstanding Wages 5,460 Cash (54,250 + 87,500) 1,41,750 Supplier for Office Equipment 3,500 4,59,060 4,59,060 Working Note: Calculation of goodwill Z's contribution of ₹ 87,500 consists only 1/6th of capital. Therefore, total capital of firm should be ₹ 87,500 × 6 = ₹ 5,25,000. But combined capital of X, Y and Z amounts ₹ 1,54,000 + 1,26,000 + 87,500 = 3,67,500 Thus Hidden goodwill is 5,25,000 - ₹ 3,67,500 = ₹ 1,57,500. Z's Share of Goodwill = 1,57,500 x 1/6 =26,250 Calculation of sacrificing ratio Partner New Share Old Share Difference X 3/6 3/5 = 3/30 Y 2/6 2/5 = 2/30 Z 1/6 - = 1/6 (gain)

Topics: Admission of a New Partner

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