The value of creditors is Rs. 20,000. Create a discount on creditors. What is the effect is Revaluation Account and Balance Sheet?

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Solution

Dear Student

Discount on creditors is benefit for the organisation, The journal entry for discount on creditors through revaluation account is :

Journal in the books

Date Particulars Debit Credit

Discount on Creditors A/c Dr. xxx

To Revaluation A/c xxx

(Being Discount on creditors)

From this discount, we can see that discount on creditors would appear in the credit side of revaluation account.
In the balance sheet, this discount would be shown as a deduction from creditors.

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Q. A Trial Balance contains the following information: Discount received Rs. 2,000, Provision for discount on creditors Rs.1,600. It is desired to maintain a provision for discount on creditors at Rs. 1,100. The amount to be credited to the Profit and Loss Account is __________.

Asertain the appropriate missing figures by preparing Total Creditors Account from the following information :
Creditors as on March 31, 2018 Rs. 6,000,
Creditors as on March 31, 2017 Rs. 36,000,
Cash paid to creditors Rs. 1,04,400,
Discount allowed by creditors Rs 2,000,
Purchase return Rs. 2,000,
Bills payables accepted Rs. 34,000,
Cheques issued to creditors Rs. 20,000,
Bills receivables endorsed in favour of creditors Rs. 40,000 out of which $25 %$ bills were dishonoured.

Following is the Balance Sheet of A, B and C as at 31st March, 2011. They shared profits in the ratio of 2 : 2 : 1.

$\begin{matrix} Capital and Liabilities & Rs & Assets & Rs Sundry Creditors & 5, 00, 000 & Cash at Bank & 10, 000 General Reserve & 2, 50, 000 & Debtors & 6, 00, 000 Partners Loan A/cs : & Less : Provision for B & 1, 80, 000 & Doubtful Debts & (25, 000) - -------- - & 5, 75, 000 C & 1, 20, 000 - -------- - & 3, 00, 000 & Stock & 3, 40, 000 Capital A/cs : & Land & Buildings & 10, 00, 000 A & 5, 00, 000 & Advertisement Suspense A/c & 60, 000 B & 3, 00, 000 & Profit and Loss A/c & 15, 000 C & 1, 50, 000 - -------- - & 9, 50, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 20, 00, 000 - --------- - - --------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 20, 00, 000 - --------- - - --------- - \end{matrix}$

B retires on 1st April, 2011 on the following terms :

(i) Stock is overvalued by Rs 20,000 and land & buildings are undervalued by Rs 1,00,000.

(ii) Provision for doubtful debts is to be increased to Rs 30,000.

(iii) Old credit balances of Sundry Creditors Rs 40,000 be written off.

(iv) A computer purchased on 1st October, 2010 for Rs 50,000 debited to Office Expenses Account is to be brought into account charging depreciation @ 20% p.a.

(v) Goodwill of the firm is valued at Rs 1,50,000 and the amount due to B be adjusted in the capital accounts of A and C.

Prepare the Revaluation Account, Capital Accounts and the new Balance Sheet.

From the following trial balance, prepare trading account, profit and loss account for the year ended 31st December, 2016.

$\begin{matrix} Particulars & Amt. (Rs.) & Particulars & Amt. (Rs.) Opening Stock & 10, 000 & Sales & 5, 20, 000 Purchases & 3, 00, 000 & Purchases Returns & 10, 000 Debtors & 1, 40, 000 & Creditors & 1, 00, 000 Drawings & 20, 000 & Provision for Bad Debts & 4, 000 Sales Returns & 16, 000 & Bills Payable & 30, 000 Wages & 24, 000 & Bank Overdraft & 20, 000 Salaries & 40, 000 & Capital & 7, 20, 000 Repairs & 12, 000 Bad Debts & 8, 000 Carriage & 4, 000 Discount & 6, 000 Land and Building & 4, 00, 000 Plant and Machinery & 3, 00, 000 Furniture and Fixtures & 80, 000 Cash & 4, 000 Goodwill & 40, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 14, 04, 000 - --------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 14, 04, 000 - --------- - \end{matrix}$

Adjustments:

(i) Closing stock Rs. 40,000

(ii) Further bad debts Rs. 6,000.

(iii) Create a provision for doubtful debts @ 5%.

(iv) Create a provision for discount on debtors and creditors @ 2%.

(v) Change depreciation on plant and machinery and furniture and fixtures @ 10% per annum.

Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31.12.2016. A and B share profits and losses in the ratio of 2:1.

Balance Sheet of A and B as on December 31, 2016
Liabilites			Amount (Rs)	Assets	Amount (Rs)
Bills Payable			10,000	Cash in Hand	10,000
Creditors			58,000	Cash at Bank	40,000
Outstanding			2,000	Sundry Debtors	60,000
Expenses				Stock	40,000
Capitals:				Plant	1,00,000
	A	1,80,000		Buildings	1,50,000
	B	1,50,000	3,30,000
			4,00,000		4,00,000

C is admitted as a partner on the date of the balance sheet on the following terms:

(i) C will bring in Rs 1,00,000 as his capital and Rs 60,000 as his share of goodwill for 1/4 share in the profits.

(ii) Plant is to be appreciated to Rs 1,20,000 and the value of buildings is to be appreciated by 10%.

(iii) Stock is found over valued by Rs 4,000.

(iv) A provision for bad and doubtful debts is to be created at 5% of debtors.

(v) Creditors were unrecorded to the extent of Rs 1,000.

Pass the necessary journal entries, prepare the revaluation account and partners’ capital accounts, and show the Balance Sheet after the admission of C.

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Journal in the books
Date	Particulars		Debit	Credit

	Discount on Creditors A/c	Dr.	xxx
	To Revaluation A/c			xxx
	(Being Discount on creditors)