Question

A and B are partners, sharing profits in the ratio of A 1/2, B 1/3 and transfer to reserve 1/6. Their balance sheet as at 31st March, 2017 was as follows :

B retires on 1st April, 2016. The terms were :

1. Goodwill is to be valued at Rs 50,000.
2. Value of patent is to be increased by Rs 3,000 but plant was found over valued by Rs 15,000.
3. Provision for doubtful debts should be 5% on debtors and provision for discount should also be made on debtors and creditors at 3%.
4. Out of insurance which was entirely debited to profit and loss account Rs 870 be carried forward as unexpired insurance.
5. Investments were revalued at Rs 16,000. Half of these investments were taken over by B.
6. There is a claim for workmen compensation to the extent of Rs 5,000. B was paid off in full.

A borrowed the necessary money from the bank on the security of plant and stock to pay off B. Prepare Revaluation account, Capital accounts and the Balance Sheet of A.

Answer 1

Revaluation Account