Question

A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2026 is as under:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		2,00,000	Premises	3,00,000
General Reserve		1,20,000	Machinery	1,80,000
Capitals:			Stock	1,20,000
A	3,00,000		Debtors	2,50,000
B	1,50,000		Bank	20,000
C	1,00,000	5,50,000
		8,70,000		8,70,000

From 1st April, 2026, the partners agreed to share future profits in the ratio of 4 : 3 : 3 and make the following adjustments:

1. Premises will be appreciated by 10% and stock by ₹ 10,000.
2. A provision for doubtful debts is to be made on debtors @ 4%.
3. Sundry Creditors be reduced by ₹ 15,000.
4. Machinery will be depreciated by 5%.
5. Goodwill of the firm is valued at ₹ 48,000.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

Hint: A Sacrifices `3/10`, B Sacrifices `1/30` and C gains `4/30`th share.

Answer 1

Revaluation Account
Particulars	₹	Particulars	₹
To Provision for Doubtful Debts A/c	10,000	By Premises A/c	30,000
To Machinery A/c	9,000	By Stock A/c	10,000
To A's Capital A/c	18,000	By Sundry Creditors A/c	15,000
To B's Capital A/c	12,000
To C's Capital A/c	6,000
Total	55,000	Total	55,000

Working note:

Premises appreciated by 10%:

₹ 3,00,000 × 10% = ₹ 30,000​

Stock increased by:

₹ 10,000​

Provision for doubtful debts @ 4% on Debtors ₹ 2,50,000:

₹ 2,50,000 × 4% = ₹ 10,000​

Sundry Creditors reduced by:

₹ 15,000​

Machinery depreciated by 5%:

₹ 1,80,000 × 5% = ₹ 9,000​

Profit on Revaluation:

₹ 30,000 + ₹ 10,000 + ₹ 15,000 − ₹ 10,000 − ₹ 9,000 = ₹ 36,000​

Distributed in old ratio 3 : 2 : 1:

A = ₹ 36,000 × `3/6` = ₹ 18,000

B = ₹ 36,000× `2/6` = ₹ 12,000

C = ₹ 36,000× `1/6` = ₹ 6,000

Partners' Capital Accounts
Particulars	A ₹	B ₹	C ₹	Particulars	A ₹	B ₹	C ₹
To Balance c/d	3,82,800	2,03,600	1,19,600	By Balance b/d	3,00,000	1,50,000	1,00,000
To A & B's Capital A/c – Goodwill	,	,	6,400	By General Reserve A/c	60,000	40,000	20,000
				By Revaluation A/c	18,000	12,000	6,000
				By C's Capital A/c – Goodwill	4,800	1,600	,
Total	3,82,800	2,03,600	1,26,000	Total	3,82,800	2,03,600	1,26,000

Working note:

General Reserve = ₹ 1,20,000

Distributed in old ratio 3 : 2 : 1:

A = ₹ 1,20,000 × `3/6` = ₹ 60,000

A = ₹ 1,20,000 × `2/6` = ₹ 40,000

B = ₹ 1,20,000 × `1/6` = ₹ 20,000

Goodwill Adjustment

Old ratio:

3 : 2 : 1

New ratio:

4 : 3 : 3 

A:

`3/6 - 4/10 = 1/2 - 2/5 = 1/10` Sacrifice

B:

`2/6 - 3/10 = 1/3 - 3/10 = 1/30` Sacrifice

C gains:

`3/10 - 1/6 = 2/15`

Goodwill = ₹ 48,000

A’s sacrifice:

₹ 48,000 × `1/10` = ₹ 4,800

B’s sacrifice:

₹ 48,000 × `1/30` = ₹ 1,600

C’s gain:

₹ 48,000 × `2/15` = ₹ 6,400

Final Capitals

A: ₹ 3,00,000 + ₹ 60,000 + ₹ 18,000 + ₹ 4,800 = ₹ 3,82,800​

B: ₹ 1,50,000 + ₹ 40,000 + ₹ 12,000 + ₹ 1,600 = ₹ 2,03,600​

C: ₹ 1,00,000 + ₹ 20,000 + ₹ 6,000 − ₹ 6,400 = ₹ 1,19,600

Balance Sheet
Liabilities	₹	Assets	₹
Sundry Creditors	1,85,000	Premises	3,30,000
Capital A/cs:		Machinery	1,71,000
A	3,82,800	Stock	1,30,000
B	2,03,600	Debtors ₹ 2,50,000 less Provision ₹ 10,000	2,40,000
C	1,19,600	Bank	20,000
Total	8,91,000	Total	8,91,000

Working note:

Sundry Creditors

₹ 2,00,000 − ₹ 15,000 = ₹ 1,85,000​

Premises

₹ 3,00,000 + ₹ 30,000 = ₹ 3,30,000​

Machinery

₹ 1,80,000 − ₹ 9,000 = ₹ 1,71,000​

Stock

₹ 1,20,000 + ₹ 10,000 = ₹ 1,30,000​

Debtors

₹ 2,50,000 − ₹ 10,000 = ₹ 2,40,000​