The Balance Sheet of Rajkumar and Rajendra kumar as on 31st March, 2012 is set out below, they share profits and losses in the ratio of 2:1.

Balance sheet as on 31st March, 2012

Liabilities	Amount	Assets	Amount
Capital A/c		Buildings	100000
Rajkumar	200000	Furniture	30000
Rajendrakumar	150000	Stock	60000
General Reserve	120000	Debtors	300000
Creditors	80000	Cash	30000
		Profit & Loss A/c	30000
	550000		550000

They agreed to admit Dhirajkumar on 1st April, 2012 as a partner into the firm on the following terms.

1.    Dhirajkumar to bring Rs. 60000 as capital and Rs. 45000 as goodwill, which is to be retained in the business. He will be entitled to 1/4 th share of profit of the firm.

2.    50% of General Reserve is to remain as Reserve for doubtful debts.

3.    Furniture is to be depreciated by 5%

4.    Stock is to be revalued at Rs. 65,000.

5.    Creditors of Rs. 5000 are not likely to claim and hence should be written of.

6.    Rent of Rs. 2,000 due but not received has not been recorded in the books.

Pass necessary journal entries in the books of new firm and prepare Balance Sheet of the new firm.

Solution:

Journal Entries in the books of New Partnership Firm

Date	Particulars	LF	Debit	Credit
1.	Rajkumar's Capital A/c … Dr.		20000
	Rajendra Kumar's Capital Ac/		10000
	To Profit and Loss A/c			30000
	[Being debit balance of Profit & Loss Account is transferred to Partners Capital Account in Old Ratio]
2.	General Reserve A/c ....... Dr.		60000
	To Rajkumar's Capital A/c			40000
	To Rajendra Kumar's Capital A/c			20000
	[Being Credit Balance in General Reserve is transferred to Old Partners Capital Account in old ratio]
3.	Cash/ Bank A/c .... Dr.		105000
	To Dhirajkumar's Capital A/c			60000
	To Goodwill A/c			45000
	[Being Capital and Goodwill brought in by the new partner]
4.	Goodwill A/c .... Dr.		45000
	To Rajkumar's Capital A/c			30000
	To Rajendra Kumar's Capital A/c			15000
	[Being Goodwill is retained in the business]
5.	General Reserve A/c ... Dr.		60000
	To R.D.D. A/c			60000
	[Being R.D.D. is created by transferring fund from General Reserve A/c]
6.	Revaluation A/c ... Dr.		1500
	To Furniture A/c			1500
	[Being depreciation is charged on furniture]
7.	Stock A/c ....Dr.		5000
	Creditors A/c		5000
	Rent receivable A/c .... Dr.		2000
	To Revaluation A/c			12000
	[Being Asset appreciated, Creditors written off and income receivable recorded.]
8.	Revaluation A/c ... Dr.		10500
	To Rajkumar's Capital A/c			7000
	To Rajendra Kumar's Capital A/c			3500
	[Being Profit on revaluation account is transferred to old partners capital A/c]

Balance Sheet as on 1^st April, 2012

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital A/c			Buildings		100000
Rajkumar	257000		Furniture	30000
Rajendrakumar	178500		(-) Depreciation @5%	1500	28500
Dhirajkumar	60000	495500	Stock	60000
Creditors	80000		(+) Appreciation	5000	65000
(-)Claims written off	-5000	75000	Debtors	300000
			(-) R.D.D.	-60000	240000
			Cash in Hand (30000 + 60000  + 45000)		135000
			Rent Due but not received		2000
		570500			570500

1. Working Note

Revaluation A/c

Debit	Credit
1500	12000
10500
12000	12000