Page 166 - DEBKVOL-1

7.8 Double Entry Book Keeping—CBSE XII
Illustration 5.
A, B and C were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. C died on
30th June, 2017. Balance Sheet of the firm as at 31st March, 2017 is as follows:
BALANCE SHEET as at 31st March, 2017
Liabilities ` Assets `
A’s Capital 1,20,000 Plant and Machinery 1,20,000
B’s Capital 80,000 Furniture 75,000
C’s Capital 40,000 2,40,000 Investments 20,000
A’s Current A/c 8,000 Stock-in-Trade 32,000
B’s Current A/c 2,500 10,500 Sundry Debtors 25,000
General Reserve 30,000 Bills Receivable 11,000
Bills Payable 17,000 Cash at Bank 18,500
Sundry Creditors 20,000 Cash in Hand 11,000
C’s Current A/c 5,000
3,17,500 3,17,500
Following decisions were taken by the surviving partners:
(i) Goodwill of the firm is valued at ` 30,000.
(ii) A Provision for Doubtful Debts is to be raised @ 5% on Debtors.
(iii) While Plant and Machinery is to be depreciated by 10%, Furniture and Stock-in-Trade
are to be appreciated by 5% and 10% respectively.
(iv) Advertising Expenses ` 2,100 are to be carried forward to the next accounting year and,
therefore, it is to be adjusted through the Revaluation Account.
(v) A and B are to share profits and losses equally in future.
(vi) Profit for the year ended 31st March, 2017 was ` 4,08,000 and C‘s share in profit is to be
determined on the basis of profit for the year ended 31st March, 2017.
(vii) The Fixed Capital Accounts Method is to be converted into the Fluctuating Capital
Accounts Method by transferring Current Account balances to the respective Partners’
Capital Accounts.
Prepare Revaluation Account, Capital Accounts of the three Partners, showing the necessary
adjustments at C’s death; and prepare C’s Executors’ Account to show that C’s Executors were
paid in two half-yearly equal instalments plus the interest of 10% p.a. on the unpaid balance;
the first instalment was paid on 31st December, 2017.

Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 1,250 By Furniture A/c 3,750
To Plant and Machinery A/c 12,000 By Stock-in-Trade A/c 3,200
By Advertising Expenses A/c 2,100
By Loss on Revaluation transferred to:
A’s Capital A/c 2,100
B’s Capital A/c 1,400
C’s Capital A/c 700 4,200
13,250 13,250