Question

Dhruv and Ansh are partners in a firm sharing profits and losses: Dhruv 75% and Ansh 25%. Their Balance Sheet as at 31st March, 2021 is given below: Balance Sheet of Dhruv and Ansh As at 31st March, 2021 Liabilities Amount (₹) Amount (₹) Assets Amount (₹) Amount (₹) Sundry Creditors   49,000 Cash   62,000 Workmen Comp. Reserve   5,000 Sundry Debtors 18,500 17,000 Capital A/c:   50,000 Less: Prov. for Doubtful Debts (1,500) Dhruv 30,000 Land and Building   25,000 Ansh 20,000           1,04,000     1,04,000 On 1st April 2021, Kavi is admitted as a new partner on the following terms: Land and building is found to be valued at 25% above cost. It is decided to bring it to its cost. Bad debts amounting to ₹ 1,800 are to be written off. The remaining debtors are good. Creditors include an amount of ₹ 5,000 received as commission from Amar. The necessary adjustment is required to be made. The liability on the Workmen’s Compensation Reserve is determined at ₹ 3,000. Kavi is to pay ₹ 15,000 to the existing partners as a premium for Goodwill for 20% of the future profits of the firm. He is also to bring in ₹ 25,000 as capital.

The provision for Doubtful Debts in the reconstituted firm will be:

विकल्प

• ₹ 1,500

• ₹ 1,800

• Nil

• None of the above

Answer 1

Nil

Explanation:

The provision for doubtful debts, according to the adjustments in the case of the reconstitution of the firm, is being adjusted to reflect the changes. Since the debts are considered good (with bad debts being written off), the provision is no longer needed in the reconstituted firm, resulting in a provision of Nil.