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Question

Ashish, Aakash and Amit are partners sharing profits and losses equally. The Balance Sheet as at 31st March, 2019 was as follows:

Liabilities

Amount
(₹)

Assets

Amount
(₹)

Sundry Creditors 75,000 Cash in Hand 24,000
General Reserve 90,000 Cash at Bank 1,40,000
Capital A/cs: Sundry Debtors

80,000

Ashish

3,00,000

Stock 1,40,000
Aakash 3,00,000 Land and Building 4,00,000
Amit

2,75,000

8,75,000 Machinery 2,50,000
Advertisement Suspense 6,000
10,40,000 10,40,000


​The partners decided to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2019. They also decided that:
(i) Value of stock to be reduced to ₹ 1,25,000.
(ii) Value of machinery to be decreased by 10%.
(iii) Land and Building to be appreciated by ₹ 62,000.
(iv) Provision for Doubtful Debts to be made @ 5% on Sundry Debtors.
(v) Aakash was to carry out reconstitution of the firm at a remuneration of ₹ 10,000.
Pass necessary Journal entries to give effect to the above.

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2019

April 1

General Reserve A/c

Dr.

90,000

To Ashish’s Capital A/c

30,000

To Akash’s Capital A/c

30,000

To Amit’s Capital A/c

30,000

(Reserve distributed)

April 1

Ashish’s Capital A/c

Dr.

2,000

Akash’s Capital A/c

Dr.

2,000

Amit’s Capital A/c

Dr.

2,000

To Advertisement Suspense A/c

6,000

(Advertisement Suspense distributed)

April 1

Revaluation A/c

Dr.

54,000

To Stock A/c

15,000

To Machinery A/c

25,000

To Provision for Doubtful Debts A/c

4,000

To Akash’s Capital A/c (Remuneration)

10,000

(Assets revalued)

April 1

Land & Building A/c

Dr.

62,000

To Revaluation A/c

62,000

(Assets revalued)

April 1

Revaluation A/c

Dr.

8,000

To Ashish’s Capital A/c

2,666

To Akash’s Capital A/c

2,666

To Amit’s Capital A/c

2,667

(Profit made)


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