Question

P and S were partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31-3-2025 was as follows:

Liabilities	₹	₹	Assets	₹
Bank Overdraft		20,000	Cash	8,000
Creditors		30,000	Debtors	30,000
Provision for Bad Debts		1,000	Bills Receivable	40,000
General Reserve		15,000	Stock	50,000
V's Loan		20,000	Building	90,000
Capitals			Land	1,48,000
P	1,00,000
S	1,80,000	2,80,000
		3,66,000		3,66,000

On 1-4-2025 they admitted V as a new partner on the following conditions:

1. V will get 1/8th share in the profits of the firm.
2. V’s loan will be converted into his capital.
3. The goodwill of the firm was valued at ₹ 80,000 and V brought his share of goodwill premium in cash.
4. Provision for bad debts was to be made equal to 5% of the debtors.
5. Stock was to be depreciated by 5%.
6. Land was to be appreciated by 10%.

Prepare Revaluation Account, Capital Accounts of P, S and V, and the Balance Sheet of the new firm as on 1-4-2025.

Answer 1

Revaluation Account
Revaluation Account	Amount (₹)	Amount (₹)	Revaluation Account	Amount (₹)
To Provision for Bad Debts (1,500 − 1,000)		500	By Land (10% of 1,48,000)	14,800
To Stock (5% of 50,000)		2,500
To Profit transferred to Capital A/cs:
P (`11,800 xx 3/5`)	7,080
S (`11,800 xx 2/5`)	4,720	11,800
Total		14,800	Total	14,800

 

Partners' Capital Accounts
Particulars	P (₹)	S (₹)	V (₹)	Particulars	P (₹)	S (₹)	V (₹)
To Balance c/d	1,22,080	1,94,720	20,000	To Balance c/d	1,00,000	1,80,000	-
				By V's Loan A/c	-	-	20,000
				By General Reserve (3 : 2)	9,000	6,000	-
				By Premium for Goodwill	6,000	4,000	-
				By Revaluation A/c (Profit)	7,080	4,720	-
Total	1,22,080	1,94,720	20,000	Total	1,22,080	1,94,720	20,000

 

Balance Sheet of the New Firm (as on 1-4-2025)
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Bank Overdraft		20,000	Land (1,48,000 + 14,800)	1,62,800
Creditors		30,000	Building	90,000
Provision for Bad Debts (Total 5%)		1,500	Stock (50,000 - 2,500)	47,500
Capital Accounts:			Bills Receivable	40,000
P	1,22,080		Debtors	30,000
S	1,94,720		Cash (8,000 + 10,000)	18,000
V	20,000	3,36,800
Total		3,88,300	Total	3,88,300