Question

Chandru, Vishal and Ramanan are partners in a firm sharing profits and losses equally. Their balance sheet as on 31st March, 2018 is as follows:

Liabilities		₹	Assets		₹
Capital accounts:			Furniture		60,000
Chandru	60,000	2,00,000	Machinery		1,20,000
Vishal	70,000		Sundry debtors	33,000	30,000
Ramanan	70,000		Less: Provision for doubtful debts	3,000
Bills payable		80,000	Bills receivable		50,000
			Cash at bank		20,000
		2,80,000			2,80,000

Ramanan retired on 31 st March 2019 subject to the following conditions:

1. Machinery is valued at ₹ 1,50,000
2. Value of furniture brought down by ₹ 10,000
3. Provision for doubtful debts should be increased to ₹ 5,000
4. Investment of ₹ 30,000 not recorded in the books is to be recorded now.

Pass necessary journal entries and prepare revaluation account and capital account of partners.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars		₹	Particulars	₹
To Furniture A/c		10,000	By Buildings A/c	30,000
To Provision for doubtful debts  A/c		2,000	By Investment A/c	30,000
By Revaluation Profit
Chandru	16,000	48,000
Vishal	16,000
Ramanan	16,000
		60,000		60,000

 

Dr.	Capital Account						Cr.
Particulars	Chandru ₹	Vishal ₹	Ramanan ₹	Particulars	Chandru ₹	Vishal ₹	Ramanan ₹
To Balance c/d	76,000	86,000	86,000	By Balance b/d	60,000	70,000	70,000
				By Revaluation Profit	16,000	16,000	16,000
	76,000	86,000	86,000		76,000	86,000	86,000
				By Balance b/d	76,000	86,000	86,000

journal entries

Particulars	Debit ₹	Credit ₹
Machinery A/c   Dr. Investment A/c  Dr.     To Revaluation A/c     (Increase in value of assets)	30,000 30,000	60,000
Revaluation A/c  Dr.    To Furniture A/c    To Provision for doubtful       debts A/c (Decrease in assets recorded)	12,000	10,000 2,000
Revaluation A/c  Dr.   To Chandru's Capital A/c   To Vishal's Capital A/c   To Ramanan's Capital A/c (Profit on revaluation account)	48,000	16,000 16,000 16,000