Question

A, B and C were partners in a firm. Their Balance Sheet as at 31^st March, 2019 was a follows:

Balance Sheet of A, B and C as at 31st March, 2019
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Bill payable		20,000	Bank		20,000
Creditors		40,000	Furniture		28,000
General Reserve		30,000	Stock		20,000
Workman Compensation Reserve		6,000	Debtors	45,000	40,000
Capitals:		1,32,000	Less: Provision for doubtful debts	5,000
A	60,000		Land & Building		1,20,000
B	40,000
C	32,000
		2,28,000			2,28,000

B retired on 1^st April, 2019. A and C decided to share profits in the ratio of 2 : 1. The following terms were agreed upon:

1. Goodwill of the firm was valued at ₹ 30,000.
2. Bad-debts ₹ 4,000 were written off. The provision for doubtful debts was to be maintained 10% on debtors.
3. Land and Building was to be increased to ₹ 1,32,000.
4. Furniture was sold for ₹ 20,000 and the payment was received by cheque.
5. Liability towards Workmen Compensation was estimated at ₹ 1,500.
6. B was to be paid ₹ 20,000 through a cheque and the balance was transferred to his loan account.

Prepare Revaluation Account, Partner’s Capital Accounts and Bank Account.

Answer 1

Books of A and C
Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Provision for Doubtful Debts A/c		3,100	By Land and Building A/c	12,000
To Furniture A/c		8,000
To Gain on Revaluation transferred to Capital A/c		900
A	300
B	300
C	300
		12,000		12,000

 

Dr.	Partner’s Capital Accounts						Cr.
Particulars	A (₹)	B (₹)	C (₹)	Particulars	A (₹)	B (₹)	C (₹)
To B’s Capital A/c (Goodwill)	10,000	-	-	By Balance b/d	60,000	40,000	32,000
To B’s Loan A/c	-	31,800	-	By Revaluation A/c (Gain)	300	300	300
To Bank A/c (Balancing Figure)	-	20,000	-	By Capital A/c (Goodwill)	-	10,000	-
To Balance c/d	51,800	-	33,800	By Workmen Compensation A/c	1,500	1,500	1,500
	61,800	51,800	33,800		61,800	51,800	33,800

 

Dr.	Bank Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	20,000	By B’s capital A/c	20,000
To Furniture A/c (Sale)	20,000	By Balance c/d	20,000
	40,000		40,000

Working Note:

(1) Calculation of gaining ratio

A’s gain = `2/3-1/3=1/3`

C’s gain = `1/3-1/3=0`

(2) Treatment of goodwill 

B’s share in goodwill = `30,000xx1/3` = ₹ 10,000

A’s capital A/c    ...Dr.	10,000	-
To B’s capital A/c	-	10,000