Question

Pass journal entries to record the following transactions on the admission of a new partner:

1. Land and building are undervalued by ₹ 2,00,000.
2. Stock is overvalued by 20% (Book Value of Stock ₹ 60,000).
3. Provision to be made for compensation of ₹ 20,000 to an ex-employee.
4. Sundry Debtors appeared in the books at ₹ 1,50,000. They are estimated to produce not more than ₹ 1,30,000.
5. Creditors include an amount of ₹10,000 received as commission.
6. A bill of exchange of ₹ 40,000 which was previously discounted with the banker was dishonoured on 31st March, 2024, but no entry has been passed for it.
7. Value of Machinery is to be decreased to ₹ 1,20,000 (Book Value ₹ 2,00,000).
8. Value of Machinery is to be decreased by ₹ 1,20,000 (Book Value ₹ 2,00,000).
9. Expenses on revaluation amount to ₹ 8,000 have been paid by partner X.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
i.	Land and Building A/c   ...Dr.		2,00,000
	To Revaluation A/c			2,00,000
	(Land and building revalued upwards)
ii.	Revaluation A/c   ...Dr.		10,000
	To Stock A/c			10,000
	(Stock value reduced due to overvaluation)
iii.	Revaluation A/c   ...Dr.		20,000
	To Provision for Compensation A/c			20,000
	(Provision for compensation to ex-employee created)
iv.	Revaluation A/c   ...Dr.		20,000
	To Provision for Doubtful Debts A/c			20,000
	(Sundry debtors’ value reduced)
v.	Creditors A/c   ...Dr.		10,000
	To Revaluation A/c			10,000
	(Creditors’ balance reduced due to commission received)
vi.	Sundry Debtor A/c   ...Dr.		40,000
	To Bank A/c			40,000
	(Dishonour of a bill discounted with the bank)
vii.	Revaluation A/c   ...Dr.		80,000
	To Machinery A/c			80,000
	(Machinery value decreased to ₹ 1,20,000)
viii.	Revaluation A/c   ...Dr.		1,20,000
	To Machinery A/c			1,20,000
	(Machinery value decreased by ₹ 1,20,000)
ix.	Revaluation A/c   ...Dr.		8,000
	To Partner X’s Capital A/c			8,000
	(Revaluation expenses paid by partner X)

Working Note:

Actual value of Stock = `60,000 xx 100/120`

= 50,000

Difference in Book Value and Actual Value = 60,000 − 50,000

= 10,000