Question

A and B distributes profit in 3 : 2 ratio. On 31st March, 2017, their balance sheet is as follows :

On 1st April, 2017, C was admitted in partnership on the following conditions :

1. New Ratio of partners will be 2 : 2 : 1.
2. C pays Rs 40,000 as his capital,
3. Stock be decreased by Rs 2,000. Provision for doubtful debts is to be maintained upto Rs 3,000.
4. C’s share in the goodwill of the firm be valued at Rs 5,000. C brings cash for goodwill.
5. Prepaid insurance Rs 1,000.
6. Outstanding electricity bills Rs 500.
7. Building undervalued by Rs 10,000.
8. The capitals of all partners will be in their profit sharing ratio.

Adjustment is to be done by cash. Prepare capital accounts and balance sheet of the new firm.

Comments

Sir can you please explain me that how you bring the amount of bank in partners's capital (debit and credit side)

Answer 1

[Note: Bank Balance = 25,000 + 45,000 + 31,000 – 28,500 = Rs 72,500]