Neha and Tara are partners in a firm sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet on 31st March, 2012. stood as follows :
They agreed to admit Prachi into partnership for 1/5th share of profits on 1st April. 2012 on the following terms :
(a) All debtors to be considered as good and therefore the provision for doubtful debts to be written back.
(b) Value of land and building to be increased to Rs 18,000.
(c) Value of plant and machinery’ to be reduced by Rs 2,000.
(d) The liability against Workmen’s Compensation Fund is determined at Rs 2,000 which is to be paid later in the year.
(e) Prachi to bring in her share of Goodwill of Rs 10,000 in cash.
(f) She will further bring in cash so as to make her capital equal to 20% of the total capital of the new firm. (Show your workings clearly)
You are required to prepare:
(i) Revaluation Account
(ii) Partners’ Capital Accounts.
(iii) Balance Sheet of the reconstituted firm.