Question

Rajan and Selva are partners sharing profits and losses in the ratio of 3 : 1. Their balance sheet as on 31^st March 2017 is as under:

Liabilities	₹	₹	Assets	₹
Capital accounts:			Building	25,000
Rajan	30,000		Furniture	1,000
Selva	16,000	46,000	Stock	20,000
General reserve		4,000	Debtors	16,000
Creditors		37,500	Bills receivable	3,000
			Cash at bank	12,500
			Profit and loss account	10,000
		87,500		87,500

On 1.4.2017, they admit Ganesan as a new partner on the following arrangements:

1. Ganesan brings ₹ 10,000 as capital for 1/5 share of profit.
2. Stock and furniture is to be reduced by 10%, a reserve of 5% on debtors for doubtful debts is to be created.
3. Appreciate buildings by 20%.

Prepare revaluation account, partners’ capital account and the balance sheet of the firm after admission.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars		₹	Particulars	₹
To Furniture		100	By Building	5,000
To Stock		2,000
To Prov. for bad and doubtful		800
To Rajan's Cap	1,575
To Selva's Cap	525	2,100
		5,000		5,000

 

Dr.	Capital Account						Cr.
Particulars	Rajan	Selva	Ganesan	Particulars	Rajan	Selva	Ganesan
To Profit and Loss A/c	7,500	2,500	-	By Balance b/d	30,000	16,000	-
To Balance c/d	27,075	15,025	10,000	By General Reser	3,000	1,000	-
				By Bank A/c	-	-	10,000
				By Revaluation	1,575	525	-
	34,575	17,525	10,000		34,575	17,525	10,000
				By Balance b/d	34,575	17,525	10,000

Balance Sheet

Liabilities		₹	Assets		₹
Sundry Credit		37,500	Building 25,000	25,000
Capital			(+) Revaluation	5,000	30,000
Rajan	27,075		Furniture	1,000
Selva	15,025		(−) Revaluation	100	900
Ganesan	10,000	52,000	Stock	20,000
			(+) Revalued	2,000	18,000
			Debtors	16,000
			(−) Provision 5%	800	15,200
			Bills Receivable		3,000
			Bank	12,500
			(+) Ganesan Cap	10,000	22,500
		89,600			89,600