The document discusses the adjustment of capital accounts when admitting a new partner to a firm. It provides examples of adjusting capital accounts on the basis of the new partner's capital account or the existing partners' capital accounts. It also includes examples of journal entries for admitting a new partner when goodwill is involved and assets are revalued or reallocated between partners. The key information is how to account for changes to partners' capital accounts when admitting a new partner to the business in accordance with any terms of the new partnership agreement.

1. Prepared by
Ms.Jissy.C
Assistant Professor

2. Adjustment of capital
At the time of admission, the partner may agree that
their capital account should be adjusted as to make it in
proportion to the new profit sharing ratio. This can be
done either
On the basis of new partner capital a/c
On the basis of old partner capital a/c

3.  4)X & Y are partners sharing the result of the
business in the ratio of 5:3 .Z is admitted and
asked to bring Rs 64000 as goodwill and half of
the combined capital of X & Y after making
necessary adjustments
Revaluation a/c prepared on this date showed a
loss of Rs11200.Calculate the amount of capital
to be brought by Z.
Liabilities
Capital-x
y
Reserve Fund
Creditors
Amount
120000
40000
32000
8000
200000
Asset
Cash
Assets
Profit & Loss
Amount
6000
154000
40000
200000

4. Particulars X Y Particulars X Y
By Balance b/d 120000 40000
By Reserve 20000 12000
By Goodwill 40000 24000
To P/L a/c 25000 15000
To Revaluation
loss
7000 4200
To Balance C/d 148000 56800
180000 76000180000 76000

5.  Working Note
1.Reserve=32000
X=32000x5/8=20000
Y=32000x3/8=12000
2.Profit & Loss account Given in
Asset side=40000
X=40000x5/8=25000
Y=40000x3/8=15000
3.Goodwill=64000
X=64000x5/8=40000
Y=64000x3/8=24000
4.Revaluation Loss=11200
X=11200x5/8=7000
Y=11200x3/8=4200
5.Total Capital of the new firm (X & Y)
X Capital =148000
Y Capital =56800
Total
capital=148000+56800=204800
Z,s Half of the capital ½
Combined
Capital=204800x1/2=102400

6.  5.A &B are partners in affirm .They share P&L in
the ratio of 3:1 .Their B/S is as follows
 C is admitted into partnership for 1/5 th share of
the business on the following terms:
Liabilities Amount Assets Amount
Capital-A
B
Reserve
Creditors
Bills payable
80000
40000
40000
60000
20000
240000
Building
Plant
Stock
Debtors
Cash
100000
25000
40000
70000
5000
240000

7.  a)Building is revalued at Rs120000
 b) Plant is depreciated to 80%
 c) Provision for bad debts is made at 5%
 d) Stock is revalued at Rs 30000
 e)C should introduce 50% of the adjusted
capitals of Both A &B .Open various A/C and the
new B/S after the admission of C

8.  Revaluation Account
Particulars Amount Particulars Amount
By Building 20000
To Prov for D/D
70000x5%)
3500
20000
To Stock
(40000-30000) 10000
To Plant (25000x20%) 5000
20000
To Profit
A=1500x3/4=1125
B=1500x1/4=375
1500

9. Particulars A B C Particulars A B C
By Balance b/d 80000 40000 -
By Reserve 30000 10000 -
By Revaluation 1125 375 -
By Cash - - 80750
111125 50375 80750111125 50375 80750
By Bal
c/d
111125 50375 80750
Note: Capital of C=(111125+50375)
=161500 x 50%
=80750

10. Liabilities Amount Asset Amount
Building(100000+20000) 120000
Plant(25000-5000) 20000
Stock(40000-10000) 30000
Debtors 70000
Less Provision3500 66500
Cash 5000
Add C’s Capital80750 85750
Capital
A 111125
B 50375
C 80750
Creditors 60000
Bills payable 20000
322250 322250

11. 6.The B/S of P & R on 31st dec 1996 is set out
below : They share P/L in the ratio of 3:1
Liabilities
Capital-P
R
Amount
40000
30000
Assets
L&B
Amount
30000
Furniture 2000
Stock 8000
Sundry Debtors 60000
Reserve 20000 Cash 4000
Creditors 20000
110000
Profit & Loss 6000
110000

12.  They agreed to admit K into the firm, subject to
the following terms and Conditions:
 i) She will be entitled to ¼ shares of the profits.
 ii) She will bring in Rs21000 of which Rs10000
will be treated as her of goodwill to be retained
in the business.
 iii) Depreciation is to be provided on the
furniture @ 15%
 iv)Stock to be revalued at Rs 6500
 v)50% of the General reserve is to remain as a
provision for Bad &Doubtful debts.
 Give Journal Entries to give effect to these
arrangements and construct the B/S of the new
firm

13. Date Particulars Debit Credit
Cash a/c Dr
To Capital a/c
To Goodwill a/c
(Being Cash brought in for capital & G/W by
a new partner)
21000
11000
10000
Goodwill a/c Dr
To P,s Capital a/c
To R,s Capital a/c
(Being new partner share of g/w divided to
Partners P & R in Sacrificing Ratio)
10000
7500
2500
P,s Capital a/c Dr
R,s Capital a/c Dr
To Profit & Loss
Being accumulated loss distributed to old
partners in the old ratio)
4500
1500
6000
General Reserve a/c Dr
To Provision for D,D (20000*50%)
To P,s Capital ( 10000*3/4)
To R,s Capital (10000*1/4)
(Being 50% of General Reserve transferred to
Provision for Bad debts & the balance of General
reserve credited to old partners a/c)
20000
10000
7500
2500

14. Revaluation a/c Dr
To furniture (2000 X 15/100)
(Being Asset Revalued)
300
300
Revaluation a/c
To Stock (8000-6500)
(Being depreciated in the value of stock)
1500
1500
P,s Capital a/c
R,s Capital a/c
To Revaluation a/c
(Being Revaluation loss transferred to old
partners Capital in the old ratio)
1350
450
1800

15. Particulars Amount Particulars Amount
To Furniture 300
To Stock 1500
By Loss 1800
P,s Capital
1800 x3/4=1650
R,s Capital
1800 x1/4=450
18001800

16. Particulars P R K Particulars P R K
By Balance b/d 40000 30000 -
By cash - - 11000To Revaluation
Loss
1350 450
To Profit /loss 4500 1500 -
By Goodwill 7500 2500 -
By General
Reserve
7500 2500 -
To balance c/d 49150 33050 11000
55000 35000 1100055000 35000 11000

17. Liabilities Amount Asset Amount
Capital:
P’s Capital 49150
Q,s Capital 33050
K,s Capital 11000
Creditors 20000
Furniture 2000
- Dep 300 1700
Stock 8000
-Revalued1500 6500
Land & Building 30000
Sundry Drs 60000
-Provision D/D 10000 50000
Cash 4000
Add Capital 11000
Add Goodwill 10000 25000
113200 113200

18. 7.P,Q,R is affirm sharing P/L in the ratio of
2:2:1.Their B/S as on 31st Dec 1996 is as follows
Liabilities Amount Asset Amount
Capital-P 24000 L&B 50000
Q 24000 Furniture 13000
R 10000 Stock 23500
Creditors 26700 Sundry Debtors 11000
O/S Liabilities
Reserve
2000
13000
Cash 2200
99700 99700

19. The partners have agreed to admit Mr.A as a partner
with effect from 1/1/97 on the following terms:
 i)Mr A shall bring Rs 10000 towards Capital
 ii)The value of stock should be increased by Rs5000
 iii)Provision for bad &Doubtful debts should be
created at 5% of debtors
 iv)The furniture should be depreciated by 15%
 v)The value of L&B should be enhanced by 25%
 vi)The value of goodwill be fixed at Rs30000
 vii)The new profit sharing ratio shall be 5:5:3:2
 viii)The goodwill A/C shall be written back to the
partners in accordance with the new profit sharing
proportion.
 ix)The O/S liabilities include Rs 1200 due to Mr.X
which has be paid by Mr.P .Prepare necessary
accounts.

20. Particulars Amount Particulars Amount
By Stock 5000To Provis D/D 550
To Furniture 1950 By Land &Building 12500
To Profit (O.R) 15000
P:6000
Q:6000
R:3000
17500 17500

21. Particulars P Q R A Particulars P Q R A
By Bal b/d 24000 24000 10000 -
By O/s Lib 1200
By G/W 12000 12000 6000
By Reserve 5200 5200 2600
By Rev. P 6000 6000 3000
To G/W 10000 10000 6000 4000
By Cash 10000
To Bal
c/d
38400 37200 15600 6000
48400 47200 21600 1000048400 47200 21600 10000

22. Liabilities Amount Asset Amount
Capital:
P Capital 38400
Q Capital 37200
R Capital 15600
A,s Capital 6000
Sundry Creditors 26700
Out standing Lib 800
2000-1200
Land Build 50000
Add Appre 12500 62500
Furniture 13000
less Depre 1950 11050
Sundry Debtors 11000
Less Provision 550 10450
Stock 23500
Add Appreci 5000 28500
Cash 2200
Add A Capital 10000 12200
124700124700