Question

Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3:2:1. On March 31, 2017, 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.

The following was agreed upon between the partners on Naman’s retirement:

(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 Revaluation Account.

Answer 1

Books of Himanshu and Gagan Journal
Date	Particulars		L.F.	Amount Rs	Amount Rs
	Building A/c	Dr.		20,000
	Investment A/c	Dr.		5,000
	To Revaluation A/c	Dr.			25,000
	(Value of Building and Investment increased at the time of Naman's retirement)
	Revaluation A/c	Dr.		7,000
	To Plant and Machinery A/c				4,000
	To Provision for Bad and Doubt Debts A/c				1,000
	To Stock A/c				2,000
	(Assets revalued and Provision for Bad and Doubtful Debts made at the time of Naman's retirement)
	Revaluation A/c	Dr.		18,000
	To Himanshu’s Capital A/c				9,000
	To Gagan’s Capital A/c				6,000
	To Naman’s Capital A/c				3,000
	(Profit on revaluation transferred to all Partners’ Capital Accounts in their old profit sharing ratio)

Revaluation Account
Dr.					Cr.
Particular			Amount Rs	Particular	Amount Rs
Plant and Machinery			4,000	Building	20,000
Stock			2,000	Investment	5,000
Provision for Bad and Doubtful Debts			1,000
Profit transferred to Capital Account:
Himanshu		9,000
Gagan		6,000
Naman		3,000	18,000
			25,000		25,000