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M.130 An Aid to Accountancy—CBSE XII

16. P and Q are partners in a firm sharing profits and losses in the ratio of 5 : 3. On
31st March, 2018, their Balance Sheet was as under:
Liabilities ` Assets `
Bills Payable 5,000 Cash 15,000
Creditors 39,000 Stock 45,000
General Reserve 16,000 Debtors 49,000
Capital A/cs: Less: Provision for Doubtful Debts 1,000 48,000
P 2,00,000 Plant and Machinery 1,02,000
Q 1,50,000 3,50,000 Land and Building 2,00,000
4,10,000 4,10,000
On 1st April, 2018, R is admitted as a partner in the firm on the following terms:
(i) R brings ` 1,00,000 as capital for 1/4th share in the profits. The new profit-sharing
ratio will be 2 : 1 : 1.
(ii) Goodwill of the firm on R’s admission was valued at ` 1,20,000. R could not bring
his share of goodwill in cash. Both P and Q agreed to grant time of 2 years to
R to either adjust against share of profit or bring the amount in the firm.
(iii) Stock was valued at ` 40,500 and Provision for Doubtful Debts was raised by ` 1,500.
(iv) Machinery was depreciated by ` 2,000 and Land and Building was appreciated by 2%.
(v) Creditors include ` 1,000 which were not likely to be paid.
(vi) Firm had to pay ` 15,000 for settling a dispute with an ex-employee.
(vii) An old computer previously written off was sold for ` 15,000.
Prepare Revaluation Account, Partners’ Capital Accounts, Cash Account and the
Balance Sheet of the firm on R’s Admission.
Or
X, Y and Z were partners in a firm sharing profits in the ratio of 1/2 : 1/3 : 1/6
respectively. The Balance Sheet of the firm on 31st March, 2018 stood as:
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 Machinery 21,500
Y 15,000 Building 22,500
Z 12,500 47,500
65,500 65,500

Y retired from the firm on the above date subject to the following conditions:
(i) Goodwill of the firm be valued at ` 9,000. Y’s share is to be adjusted in the accounts
of X and Z.
(ii) Although the value of machinery was ` 15,000 yet they agreed that Machinery
would be reduced to ` 19,150.
(iii) Stock would be appreciated by 20% and Building by 10%.
(iv) Provision for Doubtful Debts would be increased by ` 975.
(v) Liability for Workmen’s Compensation Claim to the extent of ` 825 would be created.
(vi) It was agreed that X and Z would share profits in future in the ratio of 3 : 2 respectively.
You are required to prepare Revaluation Account, Partners’ Capital Accounts and the
Balance Sheet of the firm after the retirement of Y. (8)