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3.18 Double Entry Book Keeping (Section A)—ISC XII

(ii) The assets are to be revalued as under:
Plant ` 32,000; Stock ` 18,000.
(iii) A Provision for Bad Debts at 5% on Debtors has to be created.
(iv) A sum of ` 1,400 included in Creditors is not to be paid. There is an unrecorded liability
for ` 5,000 which is to be recorded in the books.
(v) Gopal is to bring in ` 20,000 as capital. The capitals of other partners are to be adjusted
in new profit-sharing ratio. For this purpose Current Accounts are to be opened.
Prepare:
(a) the Capital Accounts of Angad, Vivek and Gopal.
(b) the Balance Sheet of the new firm. (ISC 2007 )
Solution:
Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Angad Vivek Gopal Particulars Angad Vivek Gopal
` ` ` ` ` `
To Revaluation A/c 2,700 1,800 ... By Balance b/d 30,000 25,000 ...
(Loss) (WN 1) By General
To Angad’s Current A/c 3,300 ... ... Reserve A/c 6,000 4,000 ...
(Bal. Fig.—Transfer) By Cash A/c ... ... 20,000
To Vivek’s Current A/c ... 7,200 ... By Premium for
(Bal. Fig.— Transfer) Goodwill A/c 6,000 4,000 ...
To Balance c/d 36,000 24,000 20,000
(WN 3)
42,000 33,000 20,000 42,000 33,000 20,000

BALANCE SHEET OF THE NEW FIRM as at 1st January, 2005
Liabilities ` Assets `
Creditors (` 15,000 – ` 1,400) 13,600 Debtors 18,000
Unrecorded Liability 5,000 Less: Provision for Bad Debts 900 17,100
Current A/cs: Stock (` 20,000 – ` 2,000) 18,000
Angad 3,300 Furniture 10,000
Vivek 7,200 10,500 Plant (` 30,000 + ` 2,000) 32,000
Capital A/cs: Cash 32,000
Angad 36,000
Vivek 24,000
Gopal 20,000 80,000
1,09,100 1,09,100

Working Notes:
1. Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Stock A/c 2,000 By Plant A/c 2,000
To Provision for Bad Debts A/c 900 By Creditors A/c 1,400
To Unrecorded Liability A/c 5,000 By Loss on Revaluation transferred to:
Angad’s Capital A/c (` 4,500 × 3/5) 2,700
Vivek’s Capital A/c (` 4,500 × 2/5) 1,800
7,900 7,900