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Question
Answer in one sentence only.
What is revaluation account?
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Solution 1
Revaluation Account is an account that is opened at the time of admission, retirement and death of a partner. This account records the effect of every increase or decrease in the value of assets and liabilities. The balance of this account (which may be either profit or loss) is transferred to the Old Partners’ Capital Accounts, as the new partner has no right over such profits earned prior to his/her admission.
Solution 2
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RELATED QUESTIONS
Ramesh and Umesh were partners in a firm sharing profits in the ratio of their capitals. On 31st March, 2013 their Balance Sheet was as follows:On the above data the firm was dissolved.
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Balance Sheet of Ramesh and Umesh as on 31st March, 2013 |
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Liabilities |
Amount Rs |
Assets |
Amount Rs |
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Creditors |
1,70,000 |
Bank |
1,10,000 |
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Workmen’s Compensation Fund |
2,10,000 |
Debtors |
2,40,000 |
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General Reserve |
2,00,000 |
Stock |
1,30,000 |
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Ramesh’s Current Account |
80,000 |
Furniture |
2,00,000 |
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Capitals: |
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Machinery |
9,30,000 |
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Ramesh |
7,00,000 |
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Umesh’s Current Account |
50,000 |
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Umesh |
3,00,000 |
10,00,000 |
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16,60,000 |
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16,60,000 |
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(i) Ramesh took over 50% of stock at Rs 10,000 less than book value. The remaining stock was sold at a loss of Rs 15,000. Debtors were realised at a discount of 5%.
(ii) Furniture was taken over by Umesh for Rs 50,000 and machinery was sold for Rs 4,50,000.
(iii) Creditors were paid in full.
(iv) There was an unrecorded bill for repairs for Rs 1,60,000 which was settled at Rs 1,40,000.
Prepare Realisation Account.
The gradual and permanent decrease in the value of fixed assets due to any cause.
Write the word/term or phrase which can substitute the following statement.
Account which is opened to record the gains and losses on revaluation.
Select the most appropriate answer from the alternative given below and rewrite the sentence.
Account is debited when unrecorded liability is brought into business.
State 'True' or 'False'
Profit on revaluation account is distributed between the old partners on admission of a partner.
State 'True' or 'False'.
The credit balance of revaluation account means loss on revaluation account.
Answer the following question in one sentence.
What shows credit balance of revaluation account ?
Shanti, Samadhan and Sangarsh were sharing profits and losses in the ratio of 7: 5: 4. Their balance sheet as on 31st .03.2013 was as follows:
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Liabilities
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Amount
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Assets
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Amount
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Capitals:
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Furniture
|
17000
|
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Shanti
|
23000
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Machinery
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18000
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Samadhan
|
15000
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Building
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16000
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Sangharsh
|
12000
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Cash
|
37000
|
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Bills Payable
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4000
|
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Creditors
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8000
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Loan
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10000
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General Reserve
|
16000
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88000
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88000
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______ is credited when an unrecorded asset is brought into the business.
If the asset is taken over by the partner ______ account is debited.
Write a word/phrase/term which can substitute the following statement.
Profit and Loss Account balance appearing on the liability side of the Balance Sheet.
Find the Odd one.
Find the Odd one.
A and B are partners in a firm sharing profits and losses in the ratio of 1:1. C is admitted. A surrenders `1/4`th share and B surrenders `1/5`th of his share in favor of C. Calculate the new profit sharing ratio.
Pramod and Vinod are partners sharing profits and losses in the ratio of 3:2. After the admission of Ramesh the new ratio of Pramod, Vinod and Ramesh is 4:3:2. Find out the sacrifice ratio.
What does the excess of debit over credits in the Profit and Loss Adjustment Account indicate?
_____________ =`"Total profit"/"Number of years"`
Complete the following Table:
Normal Profit = __________ `xx "NRR"/ 100`
The stock showed in Balance Sheet → Stock undervalued by 20% → Cost of Stock
₹1,60,000 → __________→ __________
Vikram and Pradnya share profits and losses in the ratio 2:3 respectively. Their balance sheet as on 31st March 2018 was as under.
Balance Sheet as on 31st March 2018
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 1,05,000 | Cash | 7,500 |
| Capitals: | Land & Building | 37,500 | |
| Vikram | 75,000 | Plant | 45,000 |
| Pradnya | 75,000 | Furniture | 3,000 |
| Stock | 75,000 | ||
| Debtors | 87,000 | ||
| 2,55,000 | 2,55,000 |
They agreed to admit Avani as a partner on 1st April 2018 on the following terms:
- Avani shall have 1/4th share in future profits.
- He shall bring ₹ 37,500 as his capital and ₹ 30,000 as his share of goodwill.
- Land and building to be valued at ₹ 45,000 and furniture to be depreciated by 10%.
- Provision for bad and doubtful debts is to be maintained at 5% on the Sundry Debtors.
- Stocks to be valued ₹ 82,500.
The capital A/c of all partners to be adjusted in their new profit and loss ratio and excess amount be transferred to their loan accounts.
Prepare Profit and Loss Adjustment Account, Capital Accounts, and New Balance Sheet.
Amalendu and Sameer share profits and losses in the ratio 3:2 respectively Their balance sheet as on 31st March 2017 was as under.
Balance Sheet as on 31st March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Sundry Creditors | 10,000 | Cash at bank | 12,000 |
| Amlendu capital | 60,000 | Sundry debtors | 24,000 |
| Sameer capital | 40,000 | Land & Building | 50,000 |
| General reserve | 20,000 | Stock | 16,000 |
| Plant and machinery | 20,000 | ||
| Furniture & fixture | 8,000 | ||
| 1,30,000 | 1,30,000 |
On 1st April 2017, they admit Paresh into partnership. The term being that:
- He shall pay ₹16,000 as his share of Goodwill 50% amount of Goodwill shall be withdrawn by the old partners.
- He shall have to bring in ₹ 20,000 as his Capital for 1/4 share in future profits.
- For the purpose of Paresh’s admission, it was agreed that the assets would be revalued as follows.
A) Land and Building is to be valued at ₹ 60,000
B) Plant and Machinery to be valued at ₹ 16,000
C) Stock valued at ₹ 20,000 and Furniture and Fixtures at ₹ 4,000.
D) A Provision of 5% on Debtors would be made for Doubtful Debts.
Pass the necessary Journal Entries in the Books of a New Firm.
Vrushali and Leena are equal partners in the business. Their Balance sheet as on 31 March 2018 stood as under.
| Balance Sheet as on 31 March 2018 | |||||
| Liabilities | Amt. (₹) | Amt. (₹) | Assets | Amt. (₹) | Amt. (₹) |
| Sundry Creditors | 90,000 | 90,000 | Cash in Bank | 62,000 | |
| Capitals: | Debtors | 31,000 | |||
| Vrushali | 45,000 | 75,000 | Less: R.D.D | 1,000 | 30,000 |
| Leena | 30,000 | Building | 55,000 | ||
| General Reserves | 18,000 | Machinery | 24,000 | ||
| Bills Receivable | 12,000 | ||||
| 1,83,000 | 1,83,000 | ||||
They decided to admit Aparna on 1st April 2018 on the following terms:
1. The Machinery and Building be depreciated by 10%. Reserve for Doubtful Debts to be increased by ₹ 5,000
2. Bills Receivable are taken over by Vrushali at the discount of 10%
3. Aparna should bring Rs. 60,000 as capital for her 1/4th share in future profits.
4. The capital accounts of all the partners be adjusted in proportion to the new profit-sharing ratio by opening the current accounts of the partners.
Prepare Profit and Loss Adjustment A/c, Partner’s Capital A/c, Balance sheet of the new firm.
The balance sheet of Medha and Radha who share profit and loss in the ratio 3: 1 is as follows:
| Balance Sheet as on 31 March 2018 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Sundry Creditors | 80,000 | Cash | 78,000 |
| Bills Payable | 20,000 | Sundry debtors | 64,000 |
| Bank overdraft | 20,000 | Stock | 40,000 |
| Capital A/c: | Plant and Machinery | 60,000 | |
| Medha | 1,20,000 | Furniture | 22,000 |
| Radha | 40,000 | Land and Building | 32,000 |
| General reserve | 16,000 | ||
| 2,96,000 | 2,96,000 | ||
They decided to admit Krutika on 1st April 2018 on the following terms:
- Krutika is taken as partner on 1st April 2017. She will pay 40,000 as her capital for 1/5th share in future profits and Rs. 2,500 as goodwill.
- A 5% provision for bad and doubtful debt be created on debtors.
- Furniture be depreciated by 20%.
- Stocks be appreciated by 5% and plant and machinery by 20%.
- The Capital accounts of all partners be adjusted in their new profit sharing ratio by adjusting the amount through current account.
- The new profit sharing ratio will be 3/5:1/5:1/5 respectively.
You are required to prepare profit and loss adjustment A/c, Partner’s Capital A/c, Balance Sheet of the new firm.
The Balance Sheet of Sahil and Nikhil who share profits in the ratio of 3: 2 as on 31st March 2017
| Balance Sheet as on 31st March 2017 | |||||
| Liabilities | Amt. (₹) | Amt. (₹) | Assets | Amt. (₹) | Amt. (₹) |
| Creditors | 60,000 | Furniture | 60,000 | ||
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capitals: |
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Building |
72,000 |
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Sahil |
80,000 |
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Debtors | 40,000 | |
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Nikhil |
1,00,000 |
1,80,000 |
Closing Stock | 48,000 | |
| Cash in Hand | 20,000 | ||||
| 2,40,000 | 2,40,000 | ||||
Varad admitted on 1St April 2017 on the following terms :
1. Varad was to pay 1,00,000 for his share of capital.
2. He was also to pay 40,000 as his share of goodwill.
3. The new profit sharing ratio was 3:2:3
4. Old partners decided to revalue the assets as follows:
Building 1,00,000, Furniture- 48,000, Debtors - 38,000 (in view of likely bad debts)
5. It was found that there was a liability for 3,000 for goods in March 2017 but recorded on 2nd April 2017.
You are required to prepare:
a) Profit and Loss adjustment accounts
b) Capital accounts of the partners
c) Balance sheet after the admission of Varad
On revaluation, the increase in the value of assets leads to _________.
What is meant by the revaluation of assets and liabilities?
How are accumulated profits and losses distributed among the partners at the time of admission of a new partner?
State whether the following will be debited or credited in the revaluation account.
- Depreciation on assets
- Unrecorded liability
- Provision for outstanding expenses
- Appreciation of assets
Seenu and Siva are partners sharing profits and losses in the ratio of 5 : 3. In view of Kowsalya admission, they decided
- To increase the value of building by ₹ 40,000.
- To bring into record investments at ₹ 10,000, which have not so far been brought into account.
- To decrease the value of machinery by ₹ 14,000 and furniture by ₹ 12,000.
- To write off sundry creditors by ₹ 16,000.
Pass journal entries and prepare a revaluation account.
Sai and Shankar are partners, sharing profits and losses in the ratio of 5 : 3. The firm’s balance sheet as on 31st December, 2017, was as follows:
| Liabilities | ₹ | ₹ | Assets | ₹ | ₹ |
| Capital accounts: | Building | 34,000 | |||
| Sai | 48,000 | Furniture | 6,000 | ||
| Shankar | 40,000 | 88,000 | Investment | 20,000 | |
| Creditors | 37,000 | Debtors | 40,000 | ||
| Outstanding wages | 8,000 | Less: Provision for bad debts | 3,000 | 37,000 | |
| Bills receivable | 12,000 | ||||
| Stock | 16,000 | ||||
| Bank | 8,000 | ||||
| 1,33,000 | 1,33,000 |
On 31st December, 2017 Shanmugam was admitted into the partnership for 1/4 share of profit with ₹ 12,000 as capital subject to the following adjustments.
- Furniture is to be revalued at ₹ 5,000 and building is to be revalued at ₹ 50,000.
- Provision for doubtful debts is to be increased to ₹ 5,500
- An unrecorded investment of ₹ 6,000 is to be brought into account
- An unrecorded liability ₹ 2,500 has to be recorded now.
Pass journal entries and prepare the Revaluation Account and capital account of partners after admission.
Sundar and Suresh are partners sharing profits in the ratio of 3 : 2. Their balance sheet as on 1st January, 2017 was as follows:
| Liabilities | ₹ | ₹ | Assets | ₹ |
| Capital accounts: | Buildings | 40,000 | ||
| Sundar | 30,000 | Furniture | 13,000 | |
| Suresh | 20,000 | 50,000 | Stock | 25,000 |
| Creditors | 50,000 | Debtors | 15,000 | |
| General reserve | 10,000 | Bills receivable | 14,000 | |
| Workmen compensation fund | 15,000 | Bank | 18,000 | |
| 1,25,000 | 1,25,000 |
They decided to admit Sugumar into partnership for 1/4 share in the profits on the following terms:
- Sugumar has to bring in ₹ 30,000 as capital. His share of goodwill is valued at ₹ 5,000. He could not bring cash towards goodwill.
- That the stock be valued at ₹ 20,000.
- That the furniture be depreciated by ₹ 2,000.
- That the value of building be depreciated by 20%.
Prepare necessary ledger accounts and the balance sheet after admission.
At the time of admission of a partner, what will be the effect of the following information?
Balance in Workmen compensation reserve ₹40,000. Claim for workmen compensation ₹45,000.
What would be the journal entry of when excess capital was withdrawn by the partner?
A revaluation account is operated to find out the gain or loss at the time of ______
Ravi and Gaurav are partners in a firm. They want to admit Dhruv for `1/4`th share in profit. For this, they revalued their machinery from ₹ 30,000 to ₹ 40,000 and creditors from ₹ 1,10,000 to ₹ 1,00,000. What journal entry will be passed:
Balance in the Investment Fluctuation Reserve, after meeting the loss on revaluation of Investments, at the time of admission of a partner will be transferred to:
Which account will be prepared to record the adjusting amount of assets and liabilities?
Karan and Saran are partners in a partnership. They admitted Mohit as a new partner for `1/4`th share in profits.
| Balance Sheet [Extract] | |||
| Liabilities | Amount (₹) |
Assets | Amount (₹) |
| Creditors | 25,000 | ||
If 5% of creditors are not likely to claim their dues, what amount of creditors will be shown in the Balance Sheet on Mohit's admission?
Assertion (A): At the time of admission of a partner if there is any General Reserve, Reserve Fund or the balance of Profit & Loss Account appearing in the balance sheet, it should be transferred to old partners' capital/current accounts in their old profit sharing ratio.
Reason (R): The General reserve, Reserve Fund or the Balance of Profit and Loss Account are the result of the past profits when the new partner was not admitted.
Ram and Shyam were in partnership sharing profits and Losses in the proportion of 3 : 1 respectively. Their Balance sheet as on 31st March, 2020 stood as follows:
| Balance Sheet as on 31st March, 2020 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Sundry Creditors | 80,000 | Cash | 80,000 | |
| Bills Payable | 42,000 | Sundry Debtors | 64,000 | |
| Capital Accounts: | Land and Building | 32,000 | ||
| Ram | 1,20,000 | 1,60,000 | Stock | 40,000 |
| Shyam | 40,000 | Plant and Machinery | 60,000 | |
| General Reserve | 16,000 | Furniture | 22,000 | |
| 2,98,000 | 2,98,000 | |||
They admit Bharat into partnership on 1st April 2020. The term is that
- He shall have to bring in cash ₹ 40,000 as his Capital for 1/5th share in future profit and ₹ 20,000 as his share of Goodwill.
- A provision for 5% doubtful debts to be created on sundry debtors.
- Stock should be appreciated by 5% and Land and Building be appreciated by 20%.
- Furniture to be depreciated by 20%.
- Capital Accounts of all partners be adjusted in their new profit-sharing ratio through Cash Account.
Prepare:
- Profit and Loss Adjustment Account
- Partners' Capital Account
- Balance Sheet of the new firm.
Navya and Radhey were partners sharing profits and losses in the ratio of 3 : 1. Shreya was admitted for 1/5th share in the profits. Shreya was unable to bring her share of goodwill premium in cash. The journal entry recorded for goodwill premium is given below:
| Date | Particulars | LF | Debit (₹) | Credit (₹) |
| Shreya’s Current A/c ...Dr. | 24,000 | |||
| To Navya’s Capital A/c | 8,000 | |||
| To Radhey’s Capital A/c | 16,000 | |||
| (Being entry for goodwill treatment passed) |
The new profit-sharing ratio of Navya, Radhey and Shreya will be ______.
Ganga and Jamuna are partners sharing profits in the ratio of 2 : 1. They admit Saraswati for 1/5th share in future profits. On the date of admission, Ganga’s capital was ₹ 1,02,000 and Jamuna’s capital was ₹ 73,000. Saraswati brings ₹ 25,000 as her share of goodwill and she agrees to contribute proportionate capital to the new firm. How much capital will be brought by Saraswati?
A, B and C who were sharing profits and losses in the ratio of 4:3:2 decided to share the future profits and losses in the ratio to 2:3:4 with effect from 1st April 2023. An extract of their Balance Sheet as at 31st March 2023 is:
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Workmen Compensation Reserve | 65,000 |
At the time of reconstitution, a certain amount of Claim on workmen compensation was determined for which B’s share of loss amounted to ₹ 5,000. The Claim for workmen compensation would be:
The following is the Balance Sheet of Vivaan and Vihaan sharing Profits and Losses in the ratio of 3 : 2 as on 31 March, 2023.
| Balance Sheet as on 31st March, 2023 | ||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Capital Accounts: | Building | 1,08,000 | ||
| Vivaan | 1,20,000 | Plant and Machinery | 90,000 | |
| Vihaan | 1,50,000 | Stock | 72,000 | |
| Sundry Creditors | 90,000 | Debtors | 63,000 | 60,000 |
| Bank Overdraft | 15,000 | Less: R.D .D. | 3,000 | |
| Bank | 30,000 | |||
| Investments | 15,000 | |||
| 3,75,000 | 3,75,000 | |||
On 1-4-2023, Prihaan is admitted on the following terms:
(1) He is to pay ₹ 1,50,000 as his capital and ₹ 60,000 as his share of Goodwill.
(2) The new profit sharing ratio is to be 5 : 3 : 2.
(3) The assets are to be revalued as under:
Building ₹ 1,50,000, Plant and Machinery ₹ 72,000.
(4) R.D.D. to be increased up to ₹ 6,000
(5) The old partners decided to keep half of the amount of goodwill in the business.
(6) Sundry creditors are to be revalued at ₹ 99,000.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of new [um.
Seeta and Geeta share profits and losses in the ratio of 3:2 in Partnership Firm. Their Balance Sheet as on 31st March, 2020 was as under:
Balance Sheet as on 31st March, 2020
| Liabilities | Amount (₹) | Assets | Amount (₹) | ||
| Capitals: | 40,500 | Bank | 11,250 | ||
| Seeta | 22,500 | Bills Receivable | 5,700 | ||
| Geeta | 18,000 | Debtors | 31,200 | 30,000 | |
| Creditors | 18,750 | (-) R.D.D. | 1,200 | ||
| Biil Payable | 15,000 | Stock | 18,000 | ||
| Bank Loan | 24,000 | Furniture | 7,050 | ||
| General Reserve | 3,750 | Machinery | 7,500 | ||
| Building | 22,500 | ||||
| 1,02,000 | 1,02,000 |
On 1st April, 2020 they admitted Reeta on the following terms:
- For half (1/2) share in future profit Reeta should bring ₹ 15,000 as capital and ₹ 7,500 for goodwill in cash.
- Furniture should be appreciated up to ₹ 8,025 and building be appreciated by 20%.
- R.D.D. is to be maintained at ₹ 1,500.
- The stock is to be reduced by 10% and machinery depreciated by 5%.
- Half of amount of goodwill is withdrawn by old partners.
Pass the necessary Journal Entries in the books of the firm.
