Question

$A$ and $B$ are partners sharing profits in the ratio of $4:3$ . Their Balance Sheet as at $31st$ March, $2018$ stood as :

Liabilities	Rs.	Assets	Rs.
Sundry Creditors	28,000	Cash	20,000
Reserve	42,000	Sundry Debtors	1,20,000
Capital A/cs $A$ 2,40,000 $B$ 1,20,00	3,60,000	Stock	1,40,000
		Fixed Assets	1,50,000
	4,30,000		4,30,000

They decided that with effect from $1st$ April, $2018$ , they will share profits and losses in the ratio of $2:1$ . For this purpose they decided that :
(i) Fixed Assets are to be depreciated by $10\%$
(ii) A Provision for Doubtful Debts of $6\%$ be made on Sundry Debtors.
(iii) Stock be valued at Rs. $1,90,000$
(iv) An amount of Rs. $3,700$ included in Creditors is not likely to be claimed.
Partners decided to record the revised values in the books. However, They do not want to disturb the Reserve. You are required to pass Journal entries, prepare Capital Accounts of Partners and the revised Balance Sheet.

Answer 1

Journal entries

Date	Particulars		Amt.(Dr.)	Amt.(Cr.)
	Revaluation A/c To Fixed assets A/c (being fixed assets revalued) Revaluation A/c To Provision on debtors a/c (being provision on debtors created) Stock a/c To Revaluation a/c (being stock revalued) Creditors a/c To Revaluation a/c (being creditors written off) Revaluation a/c To A’s capital a/c To B’s capital a/c (being revaluation profit shared in old ratio) A’s capital a/c To B’s capital a/c (being adjustment for reserves in gaining ratio)	Dr. Dr. Dr. Dr. Dr. Dr.	15000 7200 50000 3700 31500 4000	15000 7200 50000 3700 18000 13500 4000

Particulars	A	B	Particulars	A	B
To B ’s capital a/c (Reserves)	4000		By bal b/d	240000	120000
To bal c/d	254000	137500	By revaluation a/c	18000	13500
			By A’s capital a/c (Reserves)		4000
	258000	137500		258000	137500

Revised Balance Sheet

Liabilities	Rs.	Assets	Rs.
Sundry Creditors	24300	Cash	20,000
Reserve	42,000	Sundry Debtors 120000	1,12800
Capital A/cs A 2,54,000 B 137500	391500	Less:P/B/D 7200 Stock	1,90,000
		Fixed Assets	1,35,000
	4,57800		4,57800

Workings:

1. Calculation of gain and sacrifice:

A: 2/3 -4/7 = 2/21

B: 1/3 – 3/7 = (2/21)