Question

Raghav, Meeta and Pranav were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their balance sheet as at 31st March, 2025, was as follows:

Balance Sheet of Raghav, Meeta and Pranav as on 31st March, 2025
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capitals:		6,00,000	Plant and Machinery		4,30,000
Raghav	2,50,000		Furniture		1,60,000
Meeta	2,00,000		Stock		90,000
Pranav	1,50,000		Debtors	80,000	78,000
General Reserve		40,000	Less provision for doubtful debts	2,000
Bills payable		30,000	Cash		32,000
Creditors		1,20,000
		7,90,000			7,90,000

On 1st April, 2025, Pranav retired on the following terms:

1. Plant and Machinery was found to be undervalued by ₹ 20,000.
2. Furniture was revalued at ₹ 1,62,000.
3. The provision for doubtful debts on debtors was to be created @ 5%.
4. Goodwill of the firm was valued at ₹ 4,00,000, and the same was to be adjusted through the capital accounts of the remaining partners.
5. Pranav was paid in cash brought in by Raghav and Meeta in such a way as to make the capital proportionate to the new profit-sharing ratio.

Prepare Revaluation Account and Partners’ Capital Accounts.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Provision for Doubtful Debts		2,000	By Plant & Machinery	20,000
To Profit transferred to:		20,000	By Furniture (1,62,000 − 1,60,000)	2,000
Raghav	10,000
Meeta	6,000
Pranav	4,000
		22,000		22,000

 

Dr.	Partners’ Capital Accounts						Cr.
Particulars	Raghav	Meeta	Pranav	Particulars	Raghav	Meeta	Pranav
To Pranav’s Capital A/c (Gains)	50,000	30,000		By Bal b/d	2,50,000	2,00,000	1,50,000
To Cash			2,42,000	By General Reserve	20,000	12,000	8,000
To Bal c/d	4,12,500	2,47,500		By Reval Profit	10,000	6,000	4,000
				By Raghav & Meeta Capital A/c (Goodwill)			80,000
				By Cash	1,82,500	59,500
	4,62,500	2,77,500	2,42,000		4,62,500	2,77,500	2,42,000

Working Note:

1. Provision for Doubtful Debts:

New Provision required = `80,000 xx 5/100`

= 4,000

Existing Provision = 2,000

Increase in Provision = 2,000 (Loss)

2. Pranav’s Share of Goodwill:

Firm’s Goodwill = 4,00,000

Pranav’s share = `4,00,000 xx 2/100`

= 80,000

3. Contributed by Raghav & Meeta in 5 : 3 (Gaining Ratio).

Raghav = `80,000 xx 5/8`

= 50,000

Meeta = `80,000 xx 38`

= 30,000