Question

Ashish, Aakash and Amit are partners sharing profits and losses equally. The Balance Sheet as at $31st$ March, $2018$ was as follows :

Liabilities	Rs.	Assets	Rs.
Sundry Creditors	75,000	Cash in Hand	24,000
General Reserve	90,000	Cash at Bank	1,40,000
Capital A/c's:		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	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, $2018$ . They also decided that :
(i) Value of stock to be reduced to Rs. $1,25,000$ .
(ii) Value of machinery to be decreased by $10\%$ .
(iii) Land and Building to be appreciated by Rs. $62,000$ .
(iv) Provision for Doubtful Debts to be made $@5\%$
(v) Aakash was to carry out reconstruction of the firm at a remuneration of Rs. $10,000.$
Pass necessary Journal entries to give effect to the above.

Answer 1

Journal entries:

1. Revaluation A/c Dr. 15000

To Stock A/c 15000

(Being Value of stock to be reduced to Rs.1,25,000)

2. Revaluation A/c Dr. 25000

To machinery A/c 25000

(Being Value of machinery to be decreased by10%)

3. Land and Building A/c Dr. 62000

To Revaluation A/c 62000

(Being Value of machinery to be decreased by10%)

4. Revaluation A/c Dr. 4000

To Provision for Doubtful Debts A/c 4000

(Being Provision for Doubtful Debts is created @ 5% on debtors)

5. Revaluation A/c Dr. 10000

To Akash's capital A/c 10000

(Being remuneration for carry out reconstruction paid)

6. Revaluation A/c Dr. 8000

To Ashish's capital A/c 2666

To Aakash's capital A/c 2666

To Amit's capital A/c 2668

(Being profit on revaluation is distributed among partners in their old ratio)

7. General Reserver A/c Dr. 90000

To Ashish's capital A/c 2666

To Aakash's capital A/c 2666

To Amit's capital A/c 2668

(Being general reserve is distributed among partners in their old ratio)

10% . 10% . 1,25,00