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X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2023 was:

Liabilities Assets
Creditors

Employee’s Provident Fund

Workmen Compensation Reserve

X

Y

 

 

 

 

70,000

31,000

15,000

 

10,000

5,800

 

1,01,000

Cash at Bank

Sundry Debtors
Less: Provision for Doubtful Debts

Stock

Fixed Assets

Profit & Loss A/c

 

20,000
600

 

5,000

19,400

25,000

80,000

2,400

1,31,800  1,31,800

They admit Z into partnership with 1/8th share in profits on 1st April, 2023. Z brings ₹ 20,000 as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:

a) Employees’ Provident Fund liability is to be increased by ₹ 5,000.

b) All Debtors are good.

c) Stock includes ₹ 3,000 for obsolete items. Hence, are to be written off.

d) Creditors are to be paid ₹ 1,000 more.

e) Fixed Assets are to be revalued at ₹ 70,000.

Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit sharing ratio.

Anurag Pathak Changed status to publish May 25, 2023
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