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

Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `

To Provision for Doubtful Debts A/c 2,000 By Land and Building A/c 10,000
To Gain (Profit) transferred to: By Stock A/c 4,000
A’s Capital A/c 7,200
B’s Capital A/c 4,800 12,000
14,000 14,000

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars A B C Particulars A B C
` ` ` ` ` `
To Profit and Loss A/c 3,000 2,000 ... By Balance b/d 10,000 10,000 ...
To Balance c/d 34,000 26,000 15,000 By Premium 6,000 4,000 ...
(Balancing Figure) for Goodwill A/c
By Revaluation A/c 7,200 4,800 ...
By General Reserve A/c 9,000 6,000 ...
By Workmen’s Compensa-
tion Reserve A/c 4,800 3,200 ...
By Cash A/c (WN) ... ... 15,000
37,000 28,000 15,000 37,000 28,000 15,000

BALANCE SHEET OF M/s A, B AND C
as at 1st April, 2018
Liabilities ` Assets `

Capital A/cs: Land and Building 18,000
A 34,000 Plant and Machinery 10,000
B 26,000 Debtors 12,000
C 15,000 75,000 Less: Provision for Doubtful Debts 3,000 9,000
Liability for Workmen’s Compensation 2,000 Stock 16,000
Creditors 10,000 Cash [` 9,000 + ` 25,000 (WN)] 34,000
87,000 87,000

Working Note:
Computation of C’s Capital: `
Capital of A after all adjustments 34,000
Capital of B after all adjustments 26,000
Combined capital of A and B for 4/5th share 60,000
∴ Total capital of new firm = ` 60,000 × 5/4
C’s share in capital = ` 60,000 × 5/4 × 1/5 = ` 15,000.
Total cash paid by C = Capital (` 15,000) + Share of goodwill (` 10,000)
= ` 25,000.