Question

Hari, Madhavan and Kesavan are partners, sharing profits and losses in the ratio of 5 : 3 : 2. As from 1^st April 2017, Vanmathi is admitted into the partnership and the new profit sharing ratio is decided as 4 : 3 : 2 : 1. The following adjustments are to be made.

1. Increase the value of premises by ₹ 60,000.
2. Depreciate stock by ₹ 5,000, furniture by ₹ 2,000 and machinery by ₹ 2,500.
3. Provide for an outstanding liability of ₹ 500.

Pass journal entries and prepare a revaluation account.

Answer 1

Journal Entries

Date	Particulars	L.F.	Debit ₹	Credit ₹
	Revaluation A/c ................Dr. To Stock A/c To Furniture A/c To Machinery A/c To Outstanding liability (Loss items entered is debited)		10,000 - - - -	- 5,000 2,000 2,500 500
	Premises A/c ......................Dr. To Revaluation A/c (Profit items entered is credited)		60,000 -	- 60,000
	Revaluation A/c .............Dr. To Hari's Capital A/c To Madhavan's Capital A/c To Kesavan's Capital A/c (Profit on revaluation A/c transferred to old partners old ratio)		50,000 - - -	- 25,000 15,000 10,000

 

Dr.	Revaluation Account			Cr.
Particulars		₹	Particulars	₹
To Stock A/c		5,000	By Premises A/c	60,000
To Furniture A/c		2,000
To Machinery A/c		2,500
To Outstanding liability		500
To Hari's Cap A/c	25,000
To Madhavan's Cap A/c	15,000
To Kesavan's Cap A/c	10,000	50,000
		60,000		60,000