Partnership admission problem & Solution

 Diya  and Tiya are partners sharing profit and losses in the ratio of

2 : 1. Their Balance Sheet was as follows:

Balance Sheet of Karan and Tarun as at December 31,2014

Liabilities `                     Assets `

Creditors 10,000            Cash in hand 7,000

Bills payable 7,000              Debtors 26,000

                                                Building 20,000

Capitals:                               Investment 15,000

Diya 40,000                      Machinery 13,000

Tiya 30,000 70,000                Stock 6,000

_-----------------------------------------+

                87000                                  87000

Banti  is admitted as a partner and assets are revalued and liabilities reassessed as

follows:

(i) Create a Provision for doubtful debt on debtors at ` 800.

(ii) Building and investment are appreciated by 10%.

(iii) Machinery is depreciated at 5%

(iv) Creditors were overestimated by ` 500.

Make journal entries and Prepare revaluation account before the admission of Banti.

Solution :

Journal

Date  Particulars।          L.F।     . Debit  Credit

Revaluation A/c Dr. 800

To Provision for Doubtful Debts 800

[Provision made for doubtful debts]

Building A/c Dr. 2,000

Investment A/c Dr. 1,500

To Revaluation A/c 3,500

[Increase in the value of Building &

Investment]

Revaluation A/c Dr. 650

To Machinery A/c 650

[Decrease in the value of machinery]

Creditors A/c Dr. 500

To Revaluation A/c 500

[Value of creditors reduced by ` 500]

                      Revaluation account

Dr.                                                                 Cr.

Particulars                   Particulars `

To Provision for

 Doubtful Debts 800        By Building 2,000

To Machinery 650              By Investment 1,500

To Profit transferred to        By Creditors 500

Diya’s Capital 1,700

Tiyas Capital 850 

--------------------------------------------   

                      4000                              4000