After revaluation has been done, the assets and liabilities appear at their current market values in the Balance Sheet of the reconstituted firm. This can be better explained with the help of the below explained example.
A and B shares profit and loss equally.
Balance Sheet of A and B as on April 01, 2011
|Sundry Creditors||1,00,000||Cash in Hand||8,000|
|Capital Accounts||Cash at Bank||28,000|
|A 75,000||Cash at Bank||40,000|
Plant and Machinery
1) On that date C is admitted for 1/3rd share and brings 1,00,000 as capital.
2) The value of stock is increased by Rs 7,000.
3) A provision of Rs 2,000 has been created against Debtors.
4) Furniture revalued at Rs 35,000.
5) A machinery costing Rs 50,000 purchased is not recorded in books.
6) Rent outstanding Rs 2,000.
Prepare Revaluation Account, Partners’ Capital Account, Cash Account and Balance Sheet.
At the time of admission of a partner C, assets and liabilities of A and B were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors ₹ 50,000).
(b) Creditors were written back by ₹ 5,000.
(c) Building was appreciated by 20% (Book Value of Building ₹ 2,00,000).
(d) Unrecorded Investments were valued at ₹ 15,000.
(e) A Provision of ₹ 2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was ₹ 3,000.
Pass necessary Journal entries.
X, Y and Z are partners sharing profits and losses in the ratio of 6 : 3 : 1. They admitted W into partnership with effect from 1st April, 2019. New profit-sharing ratio between X, Y, Z and W was agreed to be 3 : 3 : 3 : 1. They also decide to record the effect of the following revaluations without affecting the book values of the assets and liabilities by passing an adjustment entry:
|Book Values (₹)||Revised Values (₹)|
|Plant and Machinery||3,50,000||3,40,000|
|Land and Building||5,00,000||5,50,000|
Pass necessary adjustment entry.
Name any two items that are shown under the head’ Other Current Liabilities’ and any two items that are shown under the head ‘Other Current Assets’ in the Balance Sheet of a company as per schedule III of the Companies Act, 2013.