Question

Dhwani and Iknoor were partners sharing Profits & Losses in the ratio 3 : 2. Their Balance Sheet on March 31, 2025 was as follows:

Liabilities	Amount (₹)	Assets	Amount (₹)
Dhwani’s Capital	2,40,000	Cash in Hand	50,000
Iknoor’s Capital	2,60,000	Building	3,00,000
Investment Fluctuation Reserve	50,000	Debtors 80,000 (−) Prov for Doubtful Debts (8,000)	72,000
Employee Provident Fund	50,000	Stock	88,000
Creditors	40,000	Accrued Income	20,000
Bills Payable	30,000	Profit and Loss	1,00,000
Bank Overdraft	20,000	Investment	1,20,000
	7,50,000		7,50,000

On the above date, they admitted Ishaya into partnership for 25% share. Ishaya brings ₹ 2,50,000 as capital and ₹ 40,000 for goodwill. Goodwill of the firm was valued at ₹ 2,00,000. Following agreements were agreed upon:

1. Bad Debts amounted to ₹ 5,000 and Provision for doubtful debts to be created at same existing rate.
2. Investments were valued at ₹ 1,00,000.
3. Accrued Income was recovered only of ₹ 14,500 in settlement.
4. Building was overvalued by 20%.
5. Capital of Dhwani and Iknoor were to be adjusted on the basis Ishaya’s capital contribution. Necessary adjustment to be done by opening current accounts.

You are required to prepare Revaluation Account and Partner’s Capital Account at the time of admission of partner.

Answer 1

Dr.	Revaluation Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Prov. For Doubtful Debts A/c	4,500	By Revaluation A/c (Loss):
To Accrued Income A/c	5,500	By Dhwani’s Capital A/c	36,000
To Building A/c	50,000	By Iknoor’s Capital A/c	24,000
	60,000		60,000

 

Dr.	Partner Capital Account						Cr.
Particulars	Dhwani	Iknoor	Ishaya	Particulars	Dhwani	Iknoor	Ishaya
To Rev. Loss	36,000	24,000	-	By Balance b/d	2,40,000	2,60,000	-
To P & L	60,000	40,000	-	By Inv. Fluct. Res.	18,000	12,000	-
To Balance c/d	2,28,000	2,52,000	2,50,000	By Gen. Res.	36,000	24,000	-
				By Cash A/c	-	-	2,50,000
				By Prem. for goodwill	24,000	16,000	-
				By Ishaya’s Current	6,000	4,000	-
	3,24,000	3,16,000	2,50,000		3,24,000	3,16,000	2,50,000
To Balance c/d	4,50,000	3,00,000	2,50,000	By Balance b/d	2,28,000	2,52,000	2,50,000
				By Dhwani’s Current A/c	2,22,000	-	-
				By Iknoor’s Current A/c	-	48,000	-
	4,50,000	3,00,000	2,50,000		4,50,000	3,00,000	2,50,000