Question

P and Q are partners sharing profits in the ratio of 3 : 2. Following is their Balance Sheet as at 31st March, 2024:

Liabilities	₹	₹	Assets	₹	₹
Sundry Creditors		1,45,000	Land and Building		9,50,000
General Reserve		1,80,000	Stock		2,00,000
Workmen Compensation Reserve		25,000	Investments (Market Value ₹ 1,00,000)		1,20,000
Investment Fluctuation Reserve		50,000	Sundry Debtors	3,00,000	2,70,000
Capital Accounts:		12,00,000	Less: Provision for Doubtful Debts	30,000
P	8,00,000		Cash at Bank		10,000
Q	4,00,000		Advertisement Suspense A/c		50,000
		16,00,000			16,00,000

On 1st April, 2024, they agreed to take R as a partner on the following terms:

1. P sacrifices `1/4`th of his share and Q sacrifices `1/20` from his share in favour of R.
2. Goodwill of the firm is valued at ₹ 2,00,000.
3. C brings ₹ 2,50,000 as his capital but brings only 60% of his share of goodwill in cash.
4. Land and Building is undervalued by ₹ 50,000 and stock is overvalued by ₹ 40,000.
5. Claim on account of Workmen Compensation is ₹ 40,000.
6. There is an unrecorded asset worth ₹ 30,000 and the Provision for Doubtful Debts be reduced to ₹ 20,000.
7. Expenses debited in the Profit & Loss Account include a sum of ₹ 25,000 paid for P’s personal life insurance policy.
8. General Reserve is to appear at its original figure in the Balance Sheet of the new firm.

Prepare the Revaluation Account, Partner’s Capital Accounts and Balance Sheet of the new firm.

Hints:

(i)	Sacrifice Ratio 3 : 1; New Ratio 9 : 7 : 4
(ii)	Adjustment Entry for Workmen compensation Claim:
	Workmen Compensation Reserve A/c   ...Dr.	25,000	-
	Revaluation A/c   ...Dr.	15,000	40,000
(iii)	Adjustment Entry for Investment Fluctuation Reserve:
	Investment Fluctuation Reserve A/c   ...Dr.	50,000	-
	To Investments A/c	-	20,000
	To P’s Capital A/c	-	18,000
	To Q’s Capital A/c	-	12,000
(iv)	Advertisement Suspense is to be debited to the Capital Accounts of P and Q in the ratio of 3 : 2.

Answer 1

Coming Soon.