Question

The following is the balance sheet of A and B, who are sharing profit in the proportion of 3 : 1 on 31st March, 2017.

They agreed to take C in partnership on 1st April, 2017 on the following terms :

1. C will pay Rs 14,000 as his capital and goodwill for 1/5th share in the future profits.
2. That the goodwill of the firm be valued at Rs 20,000.
3. The stock and furniture will be reduced by 10% and the provision for doubtful debts will be created @ 5% on debtors,
4. Value of Land and Building be appreciated by 20%.
5. That the capital account of the partners will be readjusted on the basis of new partners capital and any excess or deficiency transferred to their current accounts.

Prepare Revaluation Account, Partners’ Capital Account and Balance Sheet of the new firm.

Answer 1

Working Note: 1. Remaining profit after C'S Share