Question

A and B is partners sharing profits and losses in the ratio of 3/4: 1/4. They agree to admit C in to business. C is to get 1/4th share of the future profits. At the time of C’s admission, there was a General Reserve of Rs.4,000 appearing in the Balance Sheet of A and B. Revaluation of assets and liabilities resulted in gain of Rs.2,000. Pass necessary Journal entries on C’s admission.

Answer 1

Working notes:

A's capital account will be credited by = ( 4,000+2000) x 3/4 =Rs. 4,500

B's Capital account will be credited = ( 4,000+2,000) x 1/4 = Rs. 1,500