Question

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. Following is their Balance Sheet as at 31st March, 2019:

Liabilities		₹	Assets	₹
Capital A/cs:			Building	35,000
A	50,000		Machinery	25,000
B	30,000	80,000	Stock	15,000
Creditors		20,000	Debtors	15,000
			Investments	5,000
			Bank	5,000
		1,00,000		1,00,000

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C is admitted as a partner on 1st April, 2019 on the following terms:
(a) C is to pay ₹ 20,000 as capital for 1/4th share. He also pays ₹ 5,000 as premium for goodwill.
(b) Debtors amounted to ₹ 3,000 is to be written off as bad and a Provision of 10% is created against Doubtful Debts on the remaining amount.
(c) No entry has been passed in respect of a debt of ₹ 300 recovered by A from a customer, which was previously written off as bad in previous year. The amount is to be paid by A.
(d) Investments are taken over by B at their market value of ₹ 4,900 against cash payment.
You are required to prepare Revaluation Account, Partner's Capital Accounts and new Balance Sheet.

Answer 1

Revaluation Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Bad Debts	3,000	A's Capital A/c	300
Provision for Doubtful Debts	1,200	Loss transferred to
Investment (5,000 – 4,900)	100	A Capital	2,400
		B Capital	1,600
	4,300		4,300

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	2,400	1,600		Balance b/d	50,000	30,000
Revaluation	300			Bank			20,000
				Premium for Goodwill	3,000	2,000
Balance c/d	50,300	30,400	20,000
	53,000	32,000	20,000		53,000	32,000	20,000

Balance Sheet as on April 01, 2019 after C’s admission
Liabilities		Amount (₹)	Assets		Amount (₹)
Capital A/cs:			Buildings		35,000
A	50,300		Machinery		25,000
B	30,400		Stock		15,000
C	20,000	1,00,700	Debtors	15,000
Creditors		20,000	Less: Bad Debts	3,000
				12,000
			Less: 10% Provision for Doubtful Debts	1,200	10,800
			Bank		34,900
		1,20,700			1,20,700

Bank Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	5,000
C’s Capital	20,000
Premium for Goodwill	5,000
Investments	4,900	Balance c/d	34,900
	34,900		34,900

Working Notes:

WN1


WN2
Distribution of Premium for Goodwill


WN3
Sale of Investments

Bank A/c	Dr.	4,900
Revaluation A/c	Dr.	100
To Investment			5,000

WN4

Bad debt Recovered

A's Capital A/c	Dr.	300
To Revaluation A/c			300