Page 78 - DEBKVOL-1

4.10 Double Entry Book Keeping—CBSE XII
(v) Outstanding liabilities were no longer payable.

(vi) Goodwill is to be valued at 3 years’ purchase of average profit of last 5 years. The
profits for the last 5 years were 2017–18—` 1,00,000; 2016–17—` 90,000; 2015–16—
` 20,000 (Loss); 2014–15—` 60,000 and 2013–14—` 60,000.

(vii) Aqsa was to carry out the reconstitution of the firm at a remuneration of ` 5,000, including
expenses. Expenses came to ` 2,000.

Pass the Journal entries and prepare Revaluation Account.

Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

2018
April 1 Revaluation A/c ...Dr. 45,000
To Buildings A/c 20,000
To Machinery A/c 15,000
To Provision for Doubtful Debts A/c 10,000
(Fall in value of buildings and machinery recorded and provision for
doubtful debts made)

Computers A/c ...Dr. 15,000
Outstanding Liabilities A/c ...Dr. 5,000
To Revaluation A/c 20,000
(Unrecorded asset accounted and liability not payable written off)

Revaluation A/c ...Dr. 5,000
To Aqsa’s Capital A/c 5,000
(Remuneration of Aqsa credited to her account)
Neha’s Capital A/c ...Dr. 12,000
Anita’s Capital A/c ...Dr. 12,000
Aqsa’s Capital A/c ...Dr. 6,000
To Revaluation A/c 30,000
(Loss of Revaluation Account debited to Partners’ Capital Accounts in
their old profit-sharing ratio)

Investments Fluctuation Reserve A/c ...Dr. 50,000
To Investments A/c 40,000
To Neha’s Capital A/c 4,000
To Anita’s Capital A/c 4,000
To Aqsa’s Capital A/c 2,000
(Fall in value of investments adjusted against reserve and the balance
reserve credited to Partners’ Capital Accounts)
Aqsa’s Capital A/c ...Dr. 23,200
To Neha’s Capital A/c 11,600
To Anita Capital A/c 11,600
(Adjustment of goodwill made by debiting Aqsa (gaining partner) and
crediting Neha and Anita (sacrificing partners))