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.

Answer 1

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)