Question

Prem, Kumar and Aarti were partners sharing profits in the ratio of 5 : 3 : 2. Their Balance (8)

Sheet as at 31st March, 2019 was as under :

Balance Sheet of Prem, Kumar and Aarti as at 31st March, 2019

Liabilities Amount

Rs.

Assets Amount

Rs.

Capitals :

Prem 30,000

Kumar 20,000

Aarti 20,000

General Reserve

Investment Fluctuation Res

Sundry Creditors

Building 25,000

Plant and Machinery 15,000

Investment 10,000

70,000 Debtors 10,000

8,000 Stock 5,000

2,000

10000

Cash 25,000

90,000 90,000

On the above date, Kumar retired. The terms of retirement were :

(i) Kumar sold his share of goodwill to Prem for Rs. 8,000 and to Aarti for Rs. 4,000.

(ii) Stock was found to be undervalued by Rs. 1,000 and building by Rs. 7,000.

(iii) Investments were sold for Rs. 11,000.

(iv) There was an unrecorded creditor of Rs. 7,000.

(v) Total amount due to Kumar paid in cash immediately

Prepare the Revaluation Account, Capital Accounts of partners and the Balance Sheet of the reconstituted firm.​

Answer 1

right answer... you may also check and if this is wrong then please comment....

Answer 2

Answer:

• A partnership capital account indicates the equity in a partnership that is owned by specific partners.

The revaluation Account, Capital Accounts of partners, and the Balance Sheet of the reconstituted firm are as follows,

Explanation:

• A revaluation account exists as a nominal account, which is organized for the distribution and transfer of profits and losses arising due to the increase and decrease of the book value of assets and liabilities during a difference in profit sharing ratio, admission of a partner, the retirement of a partner, and death of a partner.
• A partnership capital account indicates the equity in a partnership that is owned by specific partners. This account normally exists as an item that is shown in a business's financial and accounting records rather than as a real bank account, although this depends on business rules.
• The term balance sheet guides to a financial statement that reports a company's assets, liabilities, and shareholder equity at a precise point in time.

The revaluation Account, Capital Accounts of partners, and the Balance Sheet of the reconstituted firm are as follows,

Working Note:

An amount of ₹ 30,000 paid to Kumar was contributed by Prem ₹20,000

$( 30,000 \times 2 / 3)$ and Aarti ₹ $10,000(30,000 \times 1 / 3)$. This payment will not affect Cash Balance.

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