A B and C Are partners in a business sharing profits and losses in the ratio of 3:2:1. Their balance sheet as at 31/3/2020 was :
Liabilities :
sundry creditors 16000
general reserve 60000
capital account
A=1,00,000
B=1,00,000
C =1,00,000
=3,00,000
Assets:
cash in hand 6000
cash at bank 10000
sundry debtors 90000
stock in hand 70000
machinery 60000
building 1,40,000
C retires from business on 1/4/2020. It was agreed that the amount due to him will be paid on 30th June 2021. It was also agreed to adjust the value of assets as follows:
a) provide for doubtful debits at 5% on sundry debitors
b) reduce stock by 5% and machinery by 10%
c) building to be revaluated at 1,51,000
d) goodwill of the firm is valued at 1,50,000
e) A and B will continue to carry on the business and shall share profits and losses equally in the future.
Pass journal entries and prepare revaluation account, partner's capital account, C's loan account and balance sheet of the firm as at 1/4/2020
Answers
Explanation:
A,B and C are partners sharing profits and losses in the ratio of 3:2:1 respectively. Their Balance Sheet as at 31
st
March,2018 is as follows:
Liabilities (Rs.) Assets (Rs.)
Capital A/cs:
A 60,000
B 60,000
C 40,000
Creditors
Bills Payable
1,60,000
30,000
10,000 Land and Building
Plant and Machinery
Furniture
Stock
Debtors
Bills Receivable
Bank 50,000
40,000
30,000
20,000
30,000
20,000
10,000
2,00,000 2,00,000
D is admitted as a new partners on 1
st
April,2018 for an equal share and is to pay Rs.50,000 as capital. Following are the adjustment required on D
′
s admission:
(a) Out of the Creditors, a sum of Rs.10,000 is due to D which will be transferred to his capital Account.
(b) Advertisement Expenses of Rs.1,200 are to be carried forward to next accounting period as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of Rs.2,000 paid for B
′
s personal expenses.
(d) A Bill of Exchange of Rs.4,000 which was previously discounted with the banker, was dishonoured on 31
st
March,2018 but no entry has been passed for that.
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation amounted to Rs.2,100 is paid