Class XII Accountancy

Unit : Partnership
Chapter : Admission of Partner

By Mamta Narula
Topics to be covered
Treatment of
Accumulated profits and Accumulated losses

 Workmen compensation Fund

 Investment Fluctuation Fund
 Treatment of
Accumulated profits and Accumulated losses

Balance Sheet
Liabilities Amount Assets Amount
P & L Account (Cr. Balance) ****** P & L Account (Dr. Balance) ******
General Reserve ****** Deferred Revenue ******
Contingency Reserve ****** Expenditure
Workmen compensation Fund ******
Investment Fluctuation Fund ******
 Treatment of
Accumulated profits and Accumulated losses

• Credited in the old

Accumulated
Profits
partner’s capital In
Old
• Debited in the old Ratio
Accumulated partner’s capital
Losses
 Balance Sheet
Liabilities Amount Assets Amount
P & L Account (Cr. Balance) ****** P & L Account (Dr. Balance) ******
General Reserve ****** Deferred Revenue ******
Contingency Reserve ****** Expenditure
Workmen compensation Fund ******
Investment Fluctuation Fund ******

Dr. Partner’s Capital Accounts Cr.

Particulars Amount Particulars Amount
P & L Account (Dr. Balance) ****** P & L Account (Cr. Balance) *******
Deferred Revenue Expenditure ****** General Reserve ******
****** Contingency Reserve ******
****** Workmen compensation Fund ******
****** Investment Fluctuation Fund ********
***
******
 Journal Entries

For distribution of undistributed profit and For distribution of loss

reserve.

Reserves A/c Dr Old Partner’s Capital A/c Dr. [individually]

Profit & Loss A/c(Profit) Dr. To Profit and Loss A/c [Loss]
To Old Partner’s Capital A/c[individually]

In
Old
Ratio
 Mohan Sohan

Profit sharing ratio

2:1 Meena

Mohan and Sohan are partners sharing profit in the ratio of 2:1.
On 1st April2013 they admit Meena as new partner for 1/4 shares in profits.
On that date the balance sheet of the firm shows a balance of Rs.30,000 in general
reserve and debit balance of Profit and Loss A/c of Rs.6,000.
Make the necessary journal entries.
 Balance Sheet
Liabilities Amount Assets Amount
General Reserve 30,000 P & L Account (Dr. Balance) 6000
****** ******
******
******
******

Journal Entries
For distribution of general reserve For distribution of Profit and Loss A/c

Reserves A/c Dr 30,000 Mohan’s Capital A/c 4,000

To Mohan’s Capital A/c 20,000 Sohan’s Capital A/c 2 ,000
To Sohan’s Capital A/c 10,000 To Profit and Loss A/c 6,000
 Treatment of
Workmen Compensation Fund

Workmen
compensation
Fund is made to
face the loss due to
payment of
compensation due
to injury suffered
by worker during
work
 Treatment of
Workmen Compensation Fund

Particulars Amount Assets Amount

Workmen compensation Fund 70,000

Different
Cases

Claim Claim There is Claim

Is Is no Is
40,000 70,000 Claim 1,00,000
 Mohan Sohan

Profit sharing ratio

2:1 Meena

Mohan and Sohan are partners sharing profit in the ratio of 2:1.
On 1st April2013 they admit Meena as new partner for 1/4 shares in profits.
On that date the balance sheet of the firm shows a balance of Rs.70,000 in
workmen compensation fund .
Make the necessary journal entries.
Treatment of Workmen Compensation Fund
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 1 Is
40,000

Keep Distribute remaining

40,000 aside among old partners in
old ratio
 Journal Entries
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 1 Is
40,000

Workmen compensation Reserves A/c Dr 70,000

To claim for workmen compensation A/c 40,000
To Mohan’s Capital A/c 20,000
Old partners To Sohan’s Capital A/c 10,000
Old
Ratio
Treatment of Workmen Compensation Fund
Particulars Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 2 Is
70,000

Keep Nothing is left to

70,000 aside Distribute among old
partners
 Journal Entries
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 2 Is
70,000

Workmen compensation Reserves A/c Dr 70,000

To claim for workmen compensation A/c 70,000
Treatment of Workmen Compensation Fund
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

There

Case - 3 Is
No Claim

No need to
Keep Distribute whole amount
Anything aside among old partners in
old ratio
 Journal Entries
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

There

Case - 3 Is
No Claim

Workmen compensation Reserves A/c Dr 70,000

To Mohan’s Capital A/c 46667
To Sohan’s Capital A/c 23333
Old partners
Old
Ratio
Treatment of Workmen Compensation Fund
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 4 Is
1,00,000

• Nothing is left to be
Keep aside distributed
100,000 • Old partner will have
to bear loss of 30,000
 Journal Entries
Liabilities Amount Assets Amount

Workmen compensation Fund 70,000

Claim

Case - 4 Is
1,00,000

Workmen compensation Reserves A/c Dr 70,000

Revaluation A/c Dr. 30,000
To claim for workmen compensation A/c 100,000
Old partners Mohan’s Capital A/c Dr. 20,000
Old Sohan’s Capital A/c Dr. 10,000
Ratio To Revaluation 30,000
 Point
to
Workmen Compensation Fund is used
remember
WHEN

Claim on account of workmen

compensation has arise

Claim for workmen Compensation is

shown in
New Balance sheet
Liability side
Treatment of Investment Fluctuation Fund

Investment Investment Investment

value Fluctuation Fund is
value
made to face the
increases loss due to decrease decreases
in value of
Investment
 Treatment of Investment Fluctuation Fund
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Different
Cases

Market value of Market value of Market value of

Investment Investment Investment
Is Is Is
27,000 32,000 30,000
 Treatment of Investment Fluctuation Fund
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 1 Investment
Don’t Is
Worry
We have
27,000
Arrangement
We will use
3,000 out of
21,000
 Treatment of Investment Fluctuation Fund
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 1 Investment
Is
What
about 27,000
remaining
18,000 We will distribute
18,000 among old
partners in old ratio
 Journal Entries
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 1 Investment
Is
27,000

Investment Fluctuation Fund A/c Dr 21,000

To Investment A/c 3,000
Old partners To Mohan’s Capital A/c 12,000
Old To Sohan’s Capital A/c 6,000
Ratio
 Treatment of Investment Fluctuation Fund
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 2 Investment
Is
No need to
use 32,000
This fund

We will distribute
21,000 among old
partner in old ratio
 Journal Entries
Liabilities Amount Assets Amount

Investment Fluctuation Fund 20,000 Investment 30,000

Market value of
Case 2 Investment
Is
32,000

Investment Fluctuation FundA/c Dr 21,000

To Mohan’s Capital A/c 14000
Old partners To Sohan’s Capital A/c 7000
Old
Ratio
 Treatment of Investment Fluctuation Fund
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 3 Investment
Is
What to do 30,000
with this fund
We will distribute
21,000 among old
partner in old ratio
 Journal Entries
Liabilities Amount Assets Amount

Investment Fluctuation Fund 21,000 Investment 30,000

Market value of
Case 3 Investment
Is
30,000

Investment Fluctuation FundA/c Dr 21,000

To Mohan’s Capital A/c 14000
To Sohan’s Capital A/c 7000
Old partners
Old
Ratio
 Point
to Investment Fluctuation Fund is used

remember WHEN
Market Book
value of value of
Investment Investment

Book
value
Market
value