A, B and C were partners, sharing profits and losses in the ratio of 2 : 2 : 1. They decided to change their profit sharing ratio to 5:3:2. from 1st April, 2020. On the date some of the assets and liabilities appeared in the books as follows: Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of Raw Materials ₹ 20,000; Stock of Finished Goods ₹ 30,000 and Debtors ₹ 20,000. Following was agreed among the partners: (a) Building to be appreciated by 20%. (b) Plant and Machinery to be reduced by 10%. (c) A Provision of 5% on Debtors to be created for Doubtful Debts. (d) Stock of Raw Materials to be valued at ₹ 18,000 and Finished Goods at ₹ 35,000. Prepare revaluation account and distribute the profits/losses among the partners.
Answers
Answer:
Revaluation Account
Dr.
Cr.
Particulars
Rs.
Particulars
Rs.
To Plant and Machinery A/c (40,000*10%) 4,000
By Building A/c (1,00,000*20%)
20,000
To Provision for Doubtful Debts
1,000
By Stock of Finished Goods A/c
5,000
To Stock of Raw Materials A/c
2,000
By Computer A/c
2,000
To Workmen’s Compensation A/c
5,000
To Profit transferred to:
A’s Capital A/c
6,000
B’s Capital A/c
6,000
C’s Capital A/c
3,000
15,000
27,000
27,000
Date
Particulars
L.F.
Debit
Credit
Building A/c Dr.
20,000
Stock of Finished Goods A/c Dr.
5,000
Computer A/c Dr.
2,000
To Revaluation A/c
27,000
(Being increase in value of assets and decrease in value of liabilty is transferred to Revaluation Account
Revaluation A/c Dr.
12,000
To Plant and Machinery A/c
4,000
To Provision for Doubtful Debts A/c
1,000
To Stock of Raw Material A/c
2,000
To Workmen’s Compensation A/c
5,000
(Being decrease in value of assets and increase in value of liability is transferred to Revaluation Account)
Revaluation A/c Dr.
15,000
To A’s Capital A/c
6,000
To B’s Capital A/c
6,000
To C’s Capital A/c
3,000
(Being Revaluation profit transferred to Partner’s Capital A/c)