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Home Questions 67GSGNK39X
Target Exam

CUET

Subject

Accountancy

Chapter

Admission of a Partner

Question:

Match the following JOURNAL ENTRIES with respect to admission of new partner in partnership firm.

LIST 1 LIST 2
A) Appreciation in the amount of a liability I) Liability A/c Dr.
         To Revaluation A/c
B) Distribution of debit balance of profit and loss account

 II) P & L A/c  Dr.
             To Partner's Capital A/c
C) Distribution of credit balance of profit and loss account III) Revaluation A/c Dr.
          To Liability A/c
D) Depreciation in the amount of a liability IV) Partner's Capital A/c  Dr.
             To P & L A/c
Options:

(A)-(III), (B)-(II), (C)-(IV), (D)-(I)

(A)-(III), (B)-(IV), (C)-(II), (D)-(I)

(A)-(I), (B)-(II), (C)-(IV), (D)-(III)

(A)-(I), (B)-(IV), (C)-(II), (D)-(III)

Correct Answer:

(A)-(III), (B)-(IV), (C)-(II), (D)-(I)

Explanation:

The correct answer is option 2- (A)-(III), (B)-(IV), (C)-(II), (D)-(I).

LIST 1 LIST 2
A) Appreciation in the amount of a liability III) Revaluation A/c Dr.
          To Liability A/c
B) Distribution of debit balance of profit and loss account

 IV) Partner's Capital A/c  Dr.
             To P & L A/c
C) Distribution of credit balance of profit and loss account II) P & L A/c  Dr.
             To Partner's Capital A/c
D) Depreciation in the amount of a liability I) Liability A/c Dr.
         To Revaluation A/c

 

* Appreciation in the amount of a liability-  As liability is increased so it is credited. Journal entry will be-
Revaluation A/c Dr.  To Liability A/c

* Distribution of debit balance of profit and loss account-  If there are any accumulated losses represented by a debit balance in the Profit and Loss Account and/or deferred revenue expenditure in the firm's balance sheet, these losses are also transferred to the capital accounts of the old partners. This transfer helps adjust the old partners' capital accounts to account for any past losses that have not yet been fully accounted for. Partner's account is debited for the share of loss.

* Distribution of credit balance of profit and loss account- If a firm may have accumulated profits in the form of a general reserve, reserve, and/or credit balance of the Profit and Loss Account. When a new partner joins the firm, they do not have any entitlement to a share in these accumulated profits. Instead, these profits are distributed among the existing partners by transferring them to their capital or current accounts, based on the old profit-sharing ratio. Partner's account is credited for the profit share.

* Depreciation in the amount of a liability-  As liability is decreased so liability account is debited and reduction of liability is gain for the firm so revaluation account is credited. Journal entry will be-
Liability A/c  Dr.  To Revaluation A/c.

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