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Question

Following is the Balance Sheet of X, Y and Z as at 31st March, 2019. They shared profits in the ratio of 3 : 3 : 2:

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Sundry Creditors

2,50,000

Cash at Bank 50,000
General Reserve 80,000 Bills Receivable 60,000
Partners' Loan A/cs:

Debtors

80,000

X

50,000

Less: Provision for Doubtful Debts

4,000

76,000

Y 40,000 Stock 1,24,000
Capital A/cs: Fixed Assets 3,00,000
X 1,00,000 Advertisement Suspense A/c 16,000
Y

60,000

Profit and Loss A/c 4,000
Z

50,000

2,10,000

6,30,000

6,30,000


On 1st April, 2019, Y decided to retire from the firm on the following terms:
(a) Stock to be reduced by ₹ 12,000.
(b) Advertisement Suspense Account to be written off.
(c) Provision for Doubtful Debts to be increased to ₹ 6,000.
(d) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm, valued at ₹ 80,000 and the amount due to the retiring partners be adjusted in X's and Z's Capital Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet to give effect to the above.

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Solution

Revaluation Account
Dr.

Cr.

Particulars
Amount
(₹)
Particulars
Amount
(₹)
Stock
12,000
Fixed Assets (3,00,000 × 10%)
30,000
Provision for Doubtful Debts (6,000 – 4,000)
2,000
Profit transferred to:
X’s Capital A/c
6,000
Y’s Capital A/c
6,000
Z’s Capital A/c
4,000
16,000
30,000
30,000

Partners’ Capital Account

Dr.

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Profit and Loss A/c

1,500

1,500

1,000

Balance b/d

1,00,000

60,000

50,000

Advertise Suspense A/c

6,000

6,000

4,000

General Reserve

30,000

30,000

20,000

Y’s Capital A/c

18,000

12,000

Revaluation A/c

6,000

6,000

4,000

Y’s Loan A/c

1,58,500

X’s Capital A/c

18,000

Balance c/d

1,10,500

57,000

Z’s Capital A/c

12,000

1,36,000

1,26,000

74,000

1,36,000

1,26,000

74,000

Balance Sheet

as on April 01, 2019 (after Y’s Retirement)

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Sundry Creditors

2,50,000

Cash at Bank

50,000

X’s Loan

50,000

Bills Receivable

60,000

Y’s Loan

1,58,500

Debtors

80,000

Capital A/c :

Less: Prov. For D.D.

(6,000)

74,000

X

1,10,500

Stock (1,24,000 – 12,000)

1,12,000

Z

57,000

1,67,500

Fixed Assets

3,30,000

(3,00,000 + 30,000)

6,26,000

6,26,000

Y’s Loan Account

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Balance b/d

40,000

Balance c/d

1,58,500

Y’s Capital A/c

1,18,500

1,58,500

1,58,500


Working Notes:

WN 1 Adjustment of Goodwill



WN 2 Distribution of General Reserve



WN3 Writing-off Advisement Suspense



WN4 Writing-off Profit and Loss (Loss)


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