Question

A, B and C were partners, sharing profits and losses in the ratio of 2 : 2 : 1. B decides to retire on 31st March, 2019. On the date of his retirement, some of the assets and liabilities appeared in the books as follows:
Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of Raw Materials ₹ 20,000; Stock of Finished Goods ₹ 30,000 and Debtors ₹ 20,000.
Following was agreed among the partners on B's retirement:
(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be reduced by 10%.
(c) A Provision of 5% on Debtors to be created for Doubtful Debts.
(d) Stock of Raw Materials to be valued at ₹ 18,000 and Finished Goods at ₹ 35,000.
(e) An Old Computer previously written off was sold for ₹ 2,000 as scrap.
(f) Firm had to pay ₹ 5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the Revaluation Account.

Answer 1

Revaluation Account

Dr.						Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
Plant and Machinery (40,000 × 10%)			4,000	Building (1,00,000 × 20%)	20,000
Provision for Doubtful Debts			1,000	Stock of Finished Goods	5,000
Stock of Raw Materials			2,000	Computer	2,000
Workmen’s Compensation Claim			5,000
Profit transferred to:
A’s Capital A/c		6,000
B’s Capital A/c		6,000
C’s Capital A/c		3,000	15,000
			27,000		27,000

 

Journal

Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
Building A/c	Dr.		20,000
Stock of Finished Good A/c	Dr.		5,000
Computer A/c	Dr.		2,000
To Revaluation A/c				27,000
(Increase in value Assets transferred to Revaluation Account)
Revaluation A/c	Dr.		12,000
To Plant and Machinery A/c				4,000
To Provision for Doubtful Debts A/c				1,000
To Stock of Raw Material A/c				2,000
To Workmen’s Compensation Claim A/c				5,000
(Decrease in value of Assets and increase in Liabilities transferred to Revaluation Account)
Revaluation A/c	Dr.		15,000
To A’s Capital A/c				6,000
To B’s Capital A/c				6,000
To C’s Capital A/c				3,000
(Revalution Profit transferred to Partners’ Capital accounts)