Question

A and B were partners in a firm sharing profits and losses in the ratio of 3 : 1. On 31.03.2022, their Balance Sheet was as follows:

BALANCE SHEET OF A AND B as at 31st March, 2022
Liabilities	₹	₹	Assets	₹	₹
Outstanding Expenses		3,000	Bank		40,000
Bills Payable		20,000	Stock		60,000
Sundry Creditors		1,40,000	Bills Receivable		70,000
General Reserve		80,000	Debtors	1,00,000
Capitals:			Less: Provision for Doubtful Debts	5,000	95,000
A	2,00,000		Furniture		85,000
B	3,00,000	5,00,000	Machinery		1,10,000
			Land and Building		2,83,000
Total		7,43,000	Total		7,43,000

On the above date, C was admitted as a new partner for `1/5` share in the profits on the following terms:

1. C will bring ₹ 2,00,000 as her capital and ₹ 1,60,000 as her share of goodwill premium.
2. Stock will be appreciated by ₹ 1,500.
3. Debtors of ₹ 5,000 will be written off as bad debts and a provision of 10% for bad and doubtful debts will be maintained.

Prepare Revaluation Account and Partner’s Capital Accounts.

Hint:

(i)	Bad Debts A/c   ...Dr.	5,000
	To Debtors A/c		5,000
(ii)	Provision for Doubtful Debts A/c   ...Dr.	5,000
	To Bad debts A/c		5,000
(iii)	Revaluation A/c   ...Dr.	9,500
	To Provision for Doubtful Debts A/c (10 % of ₹ 95,000)		9,500
(iv)	Bad Debts of ₹ 25,000 have been met from Provision for Doubtful Debts. As such, bad debts will not affect Revaluation Account.

Answer 1

Revaluation Account
Particulars	Amount (₹)	Particulars		Amount (₹)
To Bad Debts written off	5,000	By Stock (Appreciated)		1,500
To Provision for Doubtful Debts (New)*	9,500	By Provision for Doubtful Debts (Old)		5,000
		By Loss transferred to Capital A/cs:
		– A (8,000 × 3/4)	6,000
		– B (8,000 × 1/4)	2,000	8,000
Total	14,500	Total		14,500

 

Partners' Capital Accounts
Particulars	A (₹)	B (₹)	C (₹)	Particulars	A (₹)	B (₹)	C (₹)
To Revaluation A/c (Loss)	6,000	2,000	-	By Balance b/d	2,00,000	3,00,000	-
To Balance c/d	3,74,000	3,58,000	2,00,000	By General Reserve (3 : 1)	60,000	20,000	-
				By Premium for Goodwill	1,20,000	40,000	-
				By Bank A/c	-	-	2,00,000
Total	3,80,000	3,60,000	2,00,000	Total	3,80,000	3,60,000	2,00,000