Question

Ajay, Vijay and Sanjay were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Ajay died on 20th February, 2026. The balance sheet of the firm on that date was as follows:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		19,000	Machinery	41,000
General Reserve		20,000	Furniture	6,000
Loan by Ajay		7,000	Stock	9,000
Capital A/cs:		38,000	Sundry Debtors	15,000
Ajay	12,000		Cash	3,000
Vijay	16,000		Profit & Loss A/c	10,000
Sanjay	10,000
		84,000		84,000

According to the Partnership Deed, on the death of a partner, the executor of the deceased partner will be entitled to:

1. Balance in Capital Account.
2. His share in profit/loss on revaluation of assets and reassessment of liabilities which were as follows:
   1. Machinery is to be revalued at 45,000 and furniture at 7,000.
   2. A provision of 10% was to be created for Doubtful Debts.
3. The amount payable to Ajay was transferred to his Executors’ Loan Account which was to be paid later.

Prepare the Revaluation Account, Partners’ Capital Accounts, Ajay’s Executors’ Account and the Balance Sheet of Vijay and Sanjay who decided to continue the business, keeping their capital balances in their new profit-sharing ratio. Surplus or deficit was to be transferred to Current Accounts of the partners.

Answer 1

Dr.	Revaluation Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Provision for Doubtful Debts A/c	1,500	By Machinery A/c (45,000 − 41,000)	4,000
To Profit on Revaluation transferred to:		By Furniture A/c (7,000 − 6,000)	1,000
Ajay’s Capital A/c	1,750
Vijay’s Capital A/c	1,050
Sanjay’s Capital A/c	700
	5,000		5,000

 

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Ajay (₹)	Vijay (₹)	Sanjay (₹)	Particulars	Ajay (₹)	Vijay (₹)	Sanjay (₹)
To Profit & Loss A/c	5,000	3,000	2,000	By Balance b/d	12,000	16,000	10,000
To Ajay’s Executors’ Loan A/c	25,750			By Loan by Ajay A/c	7,000
To Partner’s Current A/c		400		By General Reserve A/c	10,000	6,000	4,000
To Balance c/d		19,650	13,100	By Revaluation A/c	1,750	1,050	700
				By Partner’s Current A/c			400
	30,750	23,050	15,100		30,750	23,050	15,100

 

Dr.	Ajay’s Executors’ Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance c/d	25,750	By Ajay’s Capital A/c	25,750
	25,750		25,750

 

Balance Sheet of the New Firm
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Accounts:		32,750	Machinery		45,000
Vijay	19,650		Furniture		7,000
Sanjay	13,100		Stock		9,000
Vijay’s Current Account		400	Sundry Debtors	15,000	13,500
Ajay’s Executors’ Loan Account		25,750	Less: Provision	1,500
Sundry Creditors		19,000	Cash		3,000
			Sanjay’s Current Account		400
		77,900			77,900

Working Note:

General Reserve (₹ 20,000) divided in (5 : 3 : 2) ratio:

Ajay’s share = `20,000 xx 5/10`

= ₹ 10,000

Vijay’s share = `20,000 xx 3/10`

= ₹ 6,000

Sanjay’s share = `20,000 xx 2/10`

= ₹ 4,000

Profit & Loss Account (₹ 10,000) divided in (5 : 3 : 2) ratio:

Ajay’s share = `10,000 xx 5/10`

= ₹ 5,000

Vijay’s share = `10,000 xx 3/10`

= ₹ 3,000

Sanjay’s share = `10,000 xx 2/10`

= ₹ 2,000