Question

Banana & Guava are partners sharing profits in the ratio of 3:2. Their balance sheet as on 31- March-2015 was as follows: Liabilities Amount(₹.) Assets Amount(₹.) Capitals Banana Guava Creditors Bills Payable 3,00,000 1,50,000 1,00,000 50,000 Land And Building Plant and Machinery Furniture Debtors Stock Bank 2,50,000 1,00,000 30,000 70,000 1,00,000 50,000 6,00,000 6,00,000 They decided to admit Mango as a partner with 1/6th share in profits with effect from 1- April-2015. The terms of agreement are as under: (i) Land and building is undervalued by ₹25,000. (ii) Plant and Machinery is overvalued by ₹10,000. (iii) A provision of 10% is to be made for doubtful debts.

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ACCOUNTANCY

Asked on December 26, 2019 byTanish Sherab

A,B and C are partners sharing profits and losses in the ratio of 3:2:1 respectively. Their Balance Sheet as at 31stMarch,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

10,000Land and Building

Plant and Machinery

Furniture

Stock

Debtors

Bills Receivable

Bank50,000

40,000

30,000

20,000

30,000

20,000

10,0002,00,0002,00,000D is admitted as a new partners on 1stApril,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 31stMarch,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 by A.

Prepare necessary Ledger Accounts and Balance Sheet after D′s admission.

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ANSWER

(i)                                              REVALUATION A/C

Dr.                                                                                                                    Cr. 

ParticularsAmount Particulars Amount  To Provision for Doubtful Debts1700By Prepaid advertisement Expenses  1200To 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.

ParticularsA B C D Particulars A B C D To Revaluation a/c

(personal) 2000   By Balance b/d60000 40000 40000  To Revaluation a/c

(loss)300 200 100  By Cash a/c   40000 To Balance c/d61800 37800 39900 50000 By Creditors   10000      By revaluation expenses2100     62100 40000 40000 50000  62100 40000 40000 50000 

(iii)                                    BALANCE SHEET

Dr.                                                                                                                     Cr.

 LiabilitiesAmount Assets Amount Capital a/cs:

- A

- B

- C

- D

61800

57800

39900

50000 Land and Building50000 Bills Payable10000 Plant and Machinery40000 Creditors                 30000

(-) D's Capital           (10000) 20000Furniture30000   Stock20000   Prepaid Advertisement

Expenses1200   Debtors                         30000

(-) Provision for              (1700)

Doubtful debts

(+) Bills receivable          4000

dishonoured 32300  Bills receivable20000   Bank (10000+40000-4000)46000 239500 239500

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