Question

$X,Y$ and $Z$ are partners sharing profit and losses in the ratio of $5:3:2$. $Z$ retires, and on the date of his retirement, the following adjustments were agreed upon:
(a) The value of Furniture is to be increased by $Rs.12,000$.
(b) The value of stock to be decreased by $Rs.10,000$
(c) Machinery of the book value of $Rs.50,000$ is to be depreciated by $10\%$
(d) A Provision for Doubtful Debts @ 5% is to be created on debtors of book value of $Rs.40,000$.
(e) Unrecorded investment worth $Rs.10,000$.
(f) An item of $Rs.1,000$ included in bills payable is not likely to be claimed, hence should be written back.
Pass necessary Journal entries.

Answer 1

Revaluation Account

r				Cr.
Particulars		Rs.	Particulars	Rs.
To Stock A/c		10,000	By Furniture A/c	12,000
To Machinery A/c		5,000	By Investment A/c	10,000
To Provision for Doubtful Debts A/c		2,000	By Bills Payable A/c	1,000
To Profit transferred to:
X’s Capital A/c	3,000
Y’s Capital A/c	1,800
Z’s Capital A/c	1,200	6,000
		23,000		23,000

Journal

Date	Particulars	L.F.	Debit	Credit
(a)	Furniture A/c Dr.		12,000
	To Revaluation A/c			12,000
	(Being increase in value transferred to Revaluation Account)
(b)	Revaluation A/c Dr.		10,000
	To Stock A/c			10,000
	(Being decrease in stock transferred to Revaluation)
(c )	Revaluation A/c Dr.		5,000
	To Machinery A/c			5,000
	(Being decrease in value of machinery transferred to Revaluation Account)
(d)	Revaluation A/c Dr.		2,000
	To Provision for Doubtful Debts A/c			2,000
	(Being increase in liabilities to Revaluation Account)
(e)	Investment A/c Dr.		10,000
	To Revaluation A/c			10,000
	(Being increase in value transferred to Revaluation Account)
(f)	Bills Payable A/c Dr.		1,000
	To Revaluation A/c			1,000
	(Being decrease in liabilities transferred to Revaluation Account)
(g)	Revaluation A/c Dr.		6,000
	To X’s Capital A/c			3,000
	To Y’s Capital A/c			1,800
	To Z’s Capital A/c			1,200
	(Being Revaluation profit transferred to Partner’s Capital Account)