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Model Test Papers M.507

BALANCE SHEET (After D’s Admission)
as at 31st March, 2018
Liabilities ` Assets `
Capital A/cs: Building 2,50,000
A 3,83,300 Machinery 2,00,000
B 3,38,800 Furniture (` 1,50,000 – ` 40,000) 1,10,000
C 2,24,400 Stock 1,00,000
D 2,50,000 11,96,500 Debtors (` 1,50,000 + ` 20,000) 1,70,000
Creditors 1,00,000 Less: Provision for Doubtful Debts 8,500 1,61,500
Bills Payable 50,000 Bills Receivable 1,00,000
Bank ` (50,000 + 2,00,000 + 1,89,000
– 20,000: Dishonour of Bills Receivable) 4,19,000
Advertisement Expenditure A/c 6,000
13,46,500 13,46,500

Working Notes:
1. Contingent liability for bills discounted ` 60,000.
2. Debtors after adjustment of bills dishonoured = ` 1,70,000.
Provision for doubtful debts is to be created @ 5% of ` 1,70,000 = ` 8,500.
Accounting Entry for Dishonour of Bill: ` `
Debtor’s A/c ...Dr. 20,000
To Bank A/c 20,000
3. Capital brought in cash = ` 2,00,000 (i.e., ` 2,50,000 – ` 50,000).
4. For sale of furniture, the actual rectifying entry will be:
Sales A/c ...Dr. 25,000
Loss on Sale of Furniture A/c ...Dr. 15,000
To Furniture A/c 40,000
As all the Nominal Accounts (i.e., Revenue and Expenses Accounts) have been closed at the time of preparing
Final Accounts for 2017–18, the rectifying entry is passed through Revaluation Account. Thus, entry will be as
under: ` `
Revaluation A/c ...Dr. 40,000
To Furniture A/c 40,000
Alternatively,
A’s Capital A/c ...Dr. 20,000
B’s Capital A/c ...Dr. 13,333
C’s Capital A/c ...Dr. 6,667
To Furniture A/c 40,000
Or
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Stock A/c 2,500 By Office Equipments A/c (WN 1) 1,900
To Furniture A/c 2,000 By Building A/c 25,000
To Investments A/c 500 By Provision for Doubtful Debts A/c 750
To Gain (Profit) transferred to: (` 1,500 – 5% of ` 15,000)
A’s Capital A/c 11,325
B’s Capital A/c 7,550
C’s Capital A/c 3,775 22,650
27,650 27,650