Question

Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3 : 2 : 1. On March 31, 2007, Naman retires. The various assets and liabilities of the firm on the date were as follows Cash Rs. 10,000, Building Rs. 1,00,000, Plant and Machinery Rs. 40,000, Stock Rs. 20,000, Debtors Rs. 20,000 and Investments Rs.30,000.

(i) Building to be appreciated by 20 %.

(ii) Plant and Machinery to be depreciated by 10 %.

(iii) A provision of 5 % on debtors to be created for bad and doubtful debts.

(iv) Stock was to be valued at Rs. 18,000 and Investment at Rs. 35,000.

Record the necessary journal entries to the above effect and prepare the revalution account.

Answer 1

$\begin{array}{ccc}& & \\ & \text{Journal Entries}& \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ & \text{Building A/c}& \text{Dr}& & 20,000& \\ & \text{Investment A/c}& \text{Dr}& & 5,000& \\ & \text{To Revaluation A/c}& & & & 25,000\\ & \text{(Increasing value of assets adjusted in}& & & & \\ & \text{Revaluation account)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Revaluation A/c}& \text{Dr}& & 7,000& \\ & \text{To Plant and Machinery A/c}& & & & 4,000\\ & \text{To Stock A/c}& & & & 2,000\\ & \text{To Provision for Bad debts A/c}& & & & 1,000\\ & \text{(Assets adjusted and provision made for}& & & & \\ & \text{bad debts)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Revaluation A/c}& \text{Dr}& & 18,000& \\ & \text{To Himanshu}& & & & 9,000\\ & \text{To Gagan}& & & & 6,000\\ & \text{To Naman}& & & & 3,000\\ & \text{(Profit transferred to partners' capital}& & & & \\ & \text{accounts in 3:2:1 ratio)}& & & & \end{array}$

$\begin{array}{ccc}& & \\ \text{Dr}& \text{Revaluation Account}& \text{Cr}\end{array}\begin{array}{ccccc}\text{Particulars}& & \text{Amt.(Rs)}& \text{Particulars}& \text{Amt.(Rs)}\\ \text{Plant and Machinery}& & \text{4,000}& \text{Building}& \text{20,000}\\ \text{Stock}& & \text{2,000}& \text{Investment}& \text{5,000}\\ \text{Provision for Bad Debts}& & \text{1,000}& & \\ \text{Profit Transferred to Capital A/c}& & & & \\ \text{Himanshu}& 9,000& & & \\ \text{Gagan}& 6,000& & & \\ \text{Naman}& \underset{–}{3,000}& \underset{–}{18,000}& & \\ & & \underset{–}{\underset{–}{25,000}}& & \underset{–}{\underset{–}{\overline{25,000}}}\end{array}$