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

(iii) Creditors ` 10,000 will not be claimed.
(iv) There was an outstanding bill for repair ` 2,000.
(v) Goodwill of the firm was valued at ` 75,000. Barun’s share of goodwill is to be adjusted
in the accounts of Arpit and Binay.
(vi) Barun was to be paid ` 20,000 in cash and balance was to be transferred to his Loan Account.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of Arpit and
Binay after Barun’s retirement.
Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 5,000 By Building A/c 27,000
(` 7,000 – ` 2,000) By Creditors A/c 10,000
To Outstanding Repairs A/c 2,000
To Gain (Profit) on Revaluation trfd. to:
Arpit’s Capital A/c 18,000
Barun’s Capital A/c 6,000
Binay’s Capital A/c 6,000 30,000
37,000 37,000
Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Arpit Barun Binay Particulars Arpit Barun Binay
` ` ` ` ` `

To Profit and Loss A/c 12,000 4,000 4,000 By Balance b/d 1,50,000 1,00,000 99,000
To Barun’s Capital A/c 11,250 ... 3,750 By Revaluation A/c 18,000 6,000 6,000
(Goodwill) (Note 1) (Gain)
To Bank A/c ... 20,000 ... By Workmen Com. Reserve A/c 30,000 10,000 10,000
To Barun’s Loan A/c ... 1,07,000 ... By Arpit’s Capital A/c (Goodwill) ... 11,250 ...
To Balance c/d 1,74,750 ... 1,07,250 By Binay’s Capital A/c ... 3,750 ...
(Goodwill)
1,98,000 1,31,000 1,15,000 1,98,000 1,31,000 1,15,000

BALANCE SHEET OF THE NEW FIRM as at 1st April, 2020
Liabilities ` Assets `

Creditors 30,000 Bank (` 31,000 – ` 20,000) 11,000
Bills Payable 30,000 Debtors 70,000
Outstanding Repairs 2,000 Less: Provision for Doubtful Debts 7,000 63,000
Barun’s Loan 1,07,000 Stock 80,000
Capital A/cs: Building 2,97,000
Arpit 1,74,750
Binay 1,07,250 2,82,000
4,51,000 4,51,000

Notes: 1. Barun’s Share of Goodwill = ` 75,000 × 1/5 = ` 15,000, which is contributed by Arpit and Binay in
Gaining Ratio, i.e., 3 : 1.
2. Liability does not exist against Workmen Compensation Reserve. Therefore, it is distributed among
the partners in their old profit-sharing ratio.