Question

A and B are partners sharing profits in the ratio of 2:1. C is admitted as a new partner and the new ratio is decided as 5:3:2. The assets and liabilities are revalued as:

(i) Building was appreciated by 25% (Book value of Building Rs 4,00,000).

(ii)The provision for doubtful debts was reduced from Rs 5,000 to Rs 3,000.

(iii) A provision for Rs 4,000 was to be made for an outstanding bill for repairs.

(iv) Unrecorded investments were worth Rs 10,000

(v) Unrecorded liability towards suppliers was Rs 12,000

Pass the necessary journal entries.

Answer 1

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Dr.(Rs)}& \text{Cr.(Rs)}\\ \left(i\right)& \text{Building A/c}Dr.& & 1,00,000& \\ & \text{To Revaluation A/c}& & & 1,00,000\\ & \text{(Increase in the value of building)}& & & \\ & \underset{–}{}& & & \\ \left(ii\right)& \text{Provision for Doubtful Debts A/c}Dr.& & 2,000& \\ & \text{To Revaluation A/c}& & & 2,000\\ & \text{(Reduction in provision for doubtful debts)}& & & \\ & \underset{–}{}& & & \\ \left(iii\right)& \text{Revaluation A/c}Dr.& & 4,000& \\ & \text{To Provision for Repairs A/c}& & & 4,000\\ & \text{(Provision made for outstanding repairs bill)}& & & \\ & \underset{–}{}& & & \\ \left(iv\right)& \text{Investments A/c}Dr.& & 10,000& \\ & \text{To Revaluation A/c}& & & 10,000\\ & \text{(Investments recorded in books)}& & & \\ & \underset{–}{}& & & \\ \left(v\right)& \text{Revaluation A/c}Dr.& & 12,000& \\ & \text{To Creditors A/c}& & & 12,000\\ & \text{(Liability towards suppliers recorded)}& & & \\ & \underset{–}{}& & & \\ & \text{Revaluation A/c}Dr.& & 96,000& \\ & \text{To A's Capital A/c}& & & 64,000\\ & \text{To B's Capital A/c}& & & 32,000\\ & \text{(Transfer of profit on revaluation to old partner's capital}& & & \\ & \text{accounts in old profit sharing ratio)}& & & \end{array}$

Note: Profit on revaluation = Rs 1,00,000 + Rs 2,000 - Rs 4,000 + Rs 10,000 - Rs 12,000 = Rs 96,000