Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2023:
| Liabilities | ₹ | Assets | ₹ |
| Capital A/cs: A B Sundry Creditors |
15,000 10,000 32,950 |
Building Plant and Machinery Stock Sundry Debtors Cash in Hand |
25,000 17,500 10,000 4,850 600 |
| 57,950 | 57,950 |
They admit C into partnership on 1st April, 2023 on the following terms:
(a) C was to being ₹ 7,500 as his capital and ₹ 3,000 as goodwill for 1/4th share in the firm.
(b) values of the stock and Plant and Machinery were to be reduced by 5%.
They admit C into partnership on 1st April, 2023 on the following terms:
(c) A Provision for Doubtful Debts was to be created on respect of Sundry Debtors ₹ 375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit & Loss Adjustment Account (or Revaluation Account), Partner’s Capital Accounts and Balance Sheet of the new firm.
[Ans.: Revaluation Gain (Profit) – ₹ 750; Capital A/cs: A – ₹ 17,500; B – ₹ 11,250; C – ₹ 7,500; Balance Sheet Total – ₹ 69,200.]
Solution :
