Question

A and B are partners in a firm sharing profits and losses in the ratio of 3:2. On 31 st

March 2017, their balance sheet was as under:

Liabilities Amount Assets Amount

Creditors

Capital A/cs

A 1,50,000

B 80,000



70,000



2,30,00

0



Bank

Debtors

Stock

Furniture

Goodwill



40,000

1,20,000

60,000

50,000

30,000



3,00,00

0



3,00,000



On the above date C is admitted as a partner. A surrendered 1/6 th of his share and B

1/3 rd of his share in favour of C. Goodwill is valued at ₹ 1,20,000. C brings in only ½

of his share of Goodwill in cash and ₹ 1,00,000 as his capital. Following adjustments

are agreed upon.

i. Stock is to be reduced to ₹ 56,000 and furniture by ₹ 5,000.

ii. There is an unrecorded asset worth ₹ 20,000.

iii. One month’s rent of ₹ 15,000 is outstanding.

iv. A creditor for goods purchased for ₹ 10,000 had been omitted to be recorded

although the goods had been correctly included in stock.

v. Insurance premium amounting to ₹ 8,000 was debited to P and L A/c, of

which ₹ 2,000 is related to the period after 31. 3.2017.

You are required to prepare Revaluation Account, Partner’s Capital Accounts and

the Balance Sheet of the new firm. Also calculate the new profit-sharing ratio.​

Answer 1

Answer:

(i) REVALUATION A/C

Dr. Cr.

Particulars Amount Particulars Amount

To Provision for Doubtful Debts 1700 By Prepaid advertisement Expenses 1200

To A's Capital

(revenue expense) 2100 By B's Capital

(personal expenses) 2000

By Loss transferred to:

- A's Capital a/c

- B's Capital a/c

- C's Capital a/c

300

200

100

3800 3800

(ii) PARTNER'S CAPITAL A/C

Dr. Cr.

Particulars A B C D Particulars A B C D

To Revaluation a/c

(personal) 2000 By Balance b/d 60000 40000 40000

To Revaluation a/c

(loss) 300 200 100 By Cash a/c 40000

To Balance c/d 61800 37800 39900 50000 By Creditors 10000

By revaluation expenses 2100

62100 40000 40000 50000 62100 40000 40000 50000

(iii) BALANCE SHEET

Dr. Cr.

Liabilities Amount Assets Amount

Capital a/cs:

- A

- B

- C

- D

61800

57800

39900

50000 Land and Building 50000

Bills Payable 10000 Plant and Machinery 40000

Creditors 30000

(-) D's Capital (10000) 20000 Furniture 30000

Stock 20000

Prepaid Advertisement

Expenses 1200

Debtors 30000

(-) Provision for (1700)

Doubtful debts

(+) Bills receivable 4000

dishonoured 32300

Bills receivable 20000

Bank (10000+40000-4000) 46000

239500 239500