Question

X, Y and Z were partners in a firm sharing profits in the ratio of `1/2 : 1/3 : 1/6` respectively. The Balance Sheet of the firm as at 31st March, 2022 stood as follows:

Liabilities	₹	₹	Assets	₹	₹
Creditors		9,500	Cash at Bank		1,250
Bills Payable		2,500	Debtors	8,000
Reserve Fund		6,000	Less: Provision for Doubtful Debts	250	7,750
Capitals:			Stock		12,500
X	20,000		Motor Vans		4,000
Y	15,000		Machinery		17,500
Z	12,000		Buildings		22,500
		65,500			65,500

Y retired from the firm on 1st April, 2022 subject to the following conditions:

1. Goodwill of the firm be valued at ₹ 9,000.
2. Machinery would be depreciated by 10% and motor vans by 15%.
3. Stock would be appreciated by 20% and Buildings by 10%.
4. The provision for doubtful debts would be increased by ₹ 975.
5. Liability for workmen's compensation to the extent of ₹ 825 would be created.

It was agreed that X and Z would share profits in future in the ratio of 3 : 2 respectively.

You are required to prepare the Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the firm after the retirement of Y.

Answer 1

Revaluation Account
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Machinery A/c (10% of 17,500)		1,750	By Stock A/c (20% of 12,500)	2,500
To Motor Vans A/c (15% of 4,000)		600	By Buildings A/c (10% of 22,500)	2,250
To Provision for Doubtful Debts A/c		975
To Provision for Doubtful Debts A/c		825
To Profit transferred to Capital A/cs:
X (3/6)	300
Y (2/6)	200
Z (1/6)	100	600
Total		4,750	Total	4,750

 

Partners' Capital Accounts
Partners' Capital Accounts	X (₹)	Y (₹)	Z (₹)	Partners' Capital Accounts	X (₹)	Y (₹)	Z (₹)
To Y's Capital A/c (Goodwill)	900	-	2,100	By Balance b/d	20,000	15,000	12,500
To Y's Loan A/	-	20,200	-	By Reserve Fund (3 : 2 : 1)	3,000	2,000	1,000
To Balance c/d	22,400	-	11,500	By Revaluation A/c (Profit)	300	200	100
				By X's Capital A/c	-	900	-
				By Z's Capital A/c	-	2,100	-
Total	23,300	20,200	13,600	Total	23,300	20,200	13,600

 

Balance Sheet of X and Z (as on 1st April, 2022)
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		9,500	Cash at Bank		1,250
Bills Payable		2,500	Debtors	8,000
Workmen's Compensation Claim		825	Less: Provision (250 + 975)	1,225	6,775
Y's Loan Account		20,200	Stock (12,500 + 2,500)		15,000
Capital Accounts:			Motor Vans (4,000 − 600)		3,400
X =	22,400		Machinery (17,500 − 1,750)		15,750
Z =	11,500	33,900	Buildings (22,500 + 2,250)		24,750
Total		66,925	Total		66,925