Question

P, Q and R are three partners in a partnership firm X retirement stock, Sunday debtors and provision for bad debts stand in the books of A/c at Rs. 50,000,Rs.45000 and Rs.4500 respectively. The partners decided to revalue assets as under. Stock-in-trade to be reduced to 90%, provision for bad debts to be brought to 15% of Sundry debtors. The entry for revaluation of stock-in-trade will be ________.

• A. Revaluations A/c Dr. Rs.5000,Stock in trade credit by Rs.5000.
• B. Profit and loss A/c Dr. Rs.5000,Stock in trade credit by Rs.5000
• C. Partners Capital A/c Rs.5000 to revaluation A/c Rs.5000
• D. Revaluation A/c Rs.45000, stock-in-trade Cr. Rs.45000.

Answer 1

The correct option is A Revaluations A/c Dr. Rs.5000,Stock in trade credit by Rs.5000.

Revaluation account is an account prepare at the time of retirement or death of a partner. In this account, increase in value of assets or decrease in liabilities is recorded at credit side and decrease in value of asset and increase in liabilities recorded at debit side. Difference between both sides is calculated and transfer to partner's capital account.

In the given question, revaluation of stock will be journalized as follows:

Revaluation A/c Dr. 5000

To Stock in trade A/c 5000

(being value of stock-in-trade decreased by 10%)