Page 151 - DEBKVOL-1

6.18 Double Entry Book Keeping—CBSE XII
Illustration 17 (Treatment of Goodwill and Revaluation of Assets and Reassessment of Liabilities;
Amount due to Retiring Partner be Treated as Loan).
X, Y and Z were partners sharing profits and losses in the ratio of 1/2 : 1/3 : 1/6 respectively.
Balance Sheet of the firm as at 31st March, 2018 stood as follows:
Liabilities ` Assets `
Creditors 9,500 Cash at Bank 1,250
Bills Payable 2,500 Debtors 8,000
General Reserve 6,000 Less: Provision for Doubtful Debts 250 7,750
Capital A/cs: Stock 12,500
X 20,000 Delivery Vans 4,000
Y 15,000 Machinery 17,500
Z 12,500 47,500 Building 22,500
65,500 65,500
Y retired on 1st April, 2018 subject to the following terms:
(i) Goodwill of the firm be valued at ` 9,000 and Y’s share of the goodwill be adjusted in the
accounts of X and Z.
(ii) Machinery to be decreased by 10% and Delivery Vans by 15%.
(iii) Stock to be appreciated by 20% and Building by 10%.
(iv) Provision for Doubtful Debts to be increased by ` 975.
(v) Provision for Workmen Compensation to the extent of ` 825, to be created.
It was agreed that X and Z will share profits in future in the ratio of 3 : 2 respectively.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the New Firm.
Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 975 By Stock A/c 2,500
To Machinery A/c 1,750 By Building A/c 2,250
To Delivery Vans A/c 600
To Provision for Workmen Compensation A/c 825
To Gain (Profit) on Revaluation transferred to:
X’s Capital A/c 300
Y’s Capital A/c 200
Z’s Capital A/c 100 600
4,750 4,750

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars X (`) Y (`) Z (`) Particulars X (`) Y (`) Z (`)
To Y’s Capital A/c (Note 2) 900 ... 2,100 By Balance b/d 20,000 15,000 12,500
To Y’s Loan A/c (Note 1) ... 20,200 ... By Revaluation A/c 300 200 100
To Balance c/d 22,400 ... 11,500 —Gain (Profit)
By X’s Capital A/c (Note 2) ... 900 ...
By Z’s Capital A/c (Note 2) ... 2,100 ...
By General Reserve A/c 3,000 2,000 1,000
23,300 20,200 13,600 23,300 20,200 13,600