Question

Pawan and Vikas are partners in a firm sharing profits and losses in the ratio
of 4:3.
Balance Sheet (Extract)
Liabilities ` Assets `
Stock 2,00,000
If the value of Stock reflected in the balance sheet is overvalued by 25%,
find out the value of Stock to be shown in the new Balance Sheet:
(a) 1,60,000. (b) 2,00,000.
(c) 2,40,000. (d) 3,00,000

Answer 1

Given:

• Pawan and Vikas are partners in a firm, sharing profits and losses in the ratio 4:3.
• A stock of Rs 2,00,000 exists in the balance sheet.
• The stock is reflected, is assumed to be overvalued by 25%.

To find: The value of stock to be shown in the new balance sheet.

Answer:

Let the stock to be shown in the new balance sheet be assumed as 'x'.

As per the question,

25% × x = Rs 2,00,000 - x

(25 ÷ 100) × x = Rs 2,00,000 - x

(1 ÷ 4) × x = Rs 2,00,000 - x

(x ÷ 4) + x = Rs 2,00,000

x + 4x = Rs 8,00,000

x = Rs 8,00,000 ÷ 5

x = Rs 1,60,000

Therefore, the new value of stock to be shown in the new balance sheet is (A) Rs 1,60,000.

• The overvaluation is deducted from the value reflected in the balance sheet since the actual value would be lesser than it.

• In case of undervaluation, the value is added to the value reflected in the new balance sheet.