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InterviewSolution
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Mr. A commenced business with a capital of ₹ 2,50,000 on 1st April, 2013. During the five years ended 31st March, 2018, the following profits and losses were made: 31st March, 2014, Loss – ₹ 5,000 31st March, 2015, Profit – ₹ 13,000 31st March, 2016, Profit – ₹ 17,000 31st March, 2017, Profit – ₹ 20,000 31st March, 2018, Profit – ₹ 25,000 During this period he had drawn ₹ 40,000 for his personal use. On 1st April, 2018, he admitted B into partnership on the following terms: B to bring for his half share in the business, capital equal to A’s Capital on 31st March, 2018 and to pay for the one-half share of goodwill of the business, on the basis of three times the average profit of the last five years. Prepare the statement showing what amount B should invest to become a partner and pass entries to record the transactions relating to admission. |
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Answer» When a BUSINESS is commenced, the INPUTS of owner are treated as a liability ( capital ) for business needs to return it to the owner. The JOURNAL entry for the same is. By CASH. To capital. The asset of business also increases in the form of cash. |
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