Question

Vinoth, Karthi and Pranav are partners sharing profits and losses in the ratio of 2:2:1. Pranav retires from partnership on 1st April 2018. The following adjustments are to be made:

1. Increase the value of land and building by ₹ 18,000
2. Reduce the value of machinery by ₹ 15,000
3. A provision would also be made for outstanding expenses for ₹ 8,000.
   Give journal entries and prepare a revaluation account.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars	₹	Particulars		₹
To Machinery A/c	15,000	By Buildings A/c		18,000
To Outstanding exp. A/c	8,000	By Revaluation loss
		Vinoth	2,000
		Karthi	2,000
		Pranav	1,000	5,000
	23,000			23,000

Journal entry

Particulars	Debit	Credit
Revaluation A/c   Dr.      To Machinery A/c      To Outstanding Expenses A/c (Decrease in value of asset)	23,000	15,000 8,000
Building's A/c  Dr.      To Revaluation A/c (Value of Buildings)	18,000	18,000
Vinoth's Capital A/c  Dr. Karthi's Capital A/c  Dr. Pranav's Capital A/c  Dr.      To Revaluation A/c (Loss on revaluation A/c)	2,000 2,000 1,000	5,000

Working note:

Profit/loss sharing ratio- 2:2:1

`5,000 xx 2/5 = 2000`

`5,000 xx 2/5 = 2000`

`5,000 xx 1/5 = 1000`