Page 93 - DEBKVOL-1

Chapter 5 Admission of a Partner 5.9
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(vii) Revaluation A/c ...Dr. 5,000
To Outstanding Rent A/c 5,000
(Liability for rent outstanding recorded)
(viii) Revaluation A/c ...Dr. 2,000
To Outstanding Electricity Expenses A/c 2,000
(Liability for electricity charges recorded)
(ix) (a) Revaluation A/c ...Dr. 3,000
To Machinery A/c 3,000
(Decrease in the value of machinery recorded)
(` 80,000 – ` 40,000 – ` 37,000 = ` 3,000)
(b) Y’s Capital A/c ...Dr. 40,000
To Machinery A/c 40,000
(Half of machinery taken over by Y at the book value)
(x) (a) Machinery A/c ..Dr. 5,000
To Revaluation A/c 5,000
(Increase in the value of machinery recorded)
(b) Y’s Capital A/c ...Dr. 70,000
To Machinery A/c 70,000
(Machinery taken over by Y at the revalued figure)
(xi) Prepaid Insurance Premium A/c ...Dr. 5,000
To Revaluation A/c 5,000
(Prepaid insurance premium recorded)
(xii) Revaluation A/c ...Dr. 15,000
To Provision against Claim for Damages A/c 15,000
(Provision against claim for damages recorded)
(xiii) Sundry Creditors A/c ...Dr. 10,000
To Revaluation A/c 10,000
(Decrease in the amount of sundry creditors recorded)

(xiv) Accrued Income A/c ...Dr. 12,000
To Revaluation A/c 12,000
(Unrecorded accrued income recorded)
Explanation:
(i) The value of furniture is to be increased by ` 10,000. It means, furniture will appear
in the Balance Sheet of reconstituted firm at ` 60,000 (i.e., ` 50,000 + ` 10,000).
(ii) The value of furniture is to be increased to ` 50,000. It means, there is an increase of
value of ` 10,000 and furniture will appear in the Balance Sheet of reconstituted firm
at ` 50,000.
(iii) The value of furniture is to be increased to 120% of its book value of ` 20,000.
It means, there is an increase of ` 4,000 and furniture will appear in the Balance Sheet
of reconstituted firm at ` 24,000 (i.e., 120% of ` 20,000).
Precaution: Be careful about the language of adjustment, e.g., there exists difference
between ‘ Furniture increased by 40%’ and ‘Furniture increased
to 40%’.