Question

Terry and C.L. Stephen are in partnership engaged in software development on accounting packages to various companies. Ledger balances as shown by the books of accounts are:

Capital : Terry	3,00,000
C.L Stephen	2,50,000
Plant and machinery	2,00,000
Office fixtures	1,00,000
Current Assets	1,50,000
General Reserve	80,000
Bank loan	1,60,000
Stock in trade	40,00,000
Land and Building	3,00,000

• They have decided to admit Francis who is the son of Mr. Terry on the following terms.
• Fixed Assets valued 10% more than the book value. 
• Interest payable on Bank loan Rs 16,000 
• Office Fixtures was taken over by C.L. Stephen.

The new partner’s capital A/c is to be credited with half of Mr. Terry’s capital A/c before making any adjustments. Prepare capital accounts of the partners.

Answer 1

Revaluation A/c

Capital Accounts

Note: The new partners capital A/c is to be credited with half of Mr. Terry’s capital a/c before making Adjustment. 

Journal entry is:

Terry's capital A/c Dr.	1,50,000
To Francis capital A/c     (3,00,000 x 1/2)	1,50,000