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 Rs.	Assets	Amount Rs.
Capital A/c Rajkumar Rajendrakumar General Reserve Creditors	200000 150000 120000 80000	Buildings Furniture Stock Debtors Cash Profit and Loss A/c	100000 30000 60000 300000 30000 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:

1. Rajkumar’s Capital A/c......... Dr. 2000

   Rajendrakumar’s Capital A/c Dr. 1000

To Proft and Loss A/c 3000

[Being debit balance of Profit and Loss Accopunt is transfered to

Partners Capital Account in old ratio]

2. General Reserve A/c ....... Dr. 60,000

To Rajkumar’s Capital A/c 40000

To Rajendrakumar’s Capital A/c 20000

[Being Credit Balance in General Reserve Account is transfered to

Old Partners Capital ACcount]

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 new partner]

4.Goodwill A/c ....... Dr. 45000

To Rajkumar’s Capital A/c 30000

To Rajendrakumar’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 ..... Dr. 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 Rajendrakumar’s Capital A/c 3500

[Being Profit on revaluation account is transfered to old partners capital A/c]