Preparation of Revaluation Account, Capital Accounts, Bank Account and the Balance Sheet of the reconstituted partnership firm

Preparation of Revaluation Account, Capital Accounts, Bank Account and the Balance Sheet of the reconstituted partnership firm :

Illustration :

Lalitha, Jothi and Kanaga were partners of a firm sharing profit and losses in the ratio of 3:2:3. Set out below was their balance sheet as on 31st March 2003

Balance Sheet

Liabilities	Rs.	Assets	Rs.
Bills payable	32,000	Cash in Hand	750
Sundry Creditors	62,500	Cash at Bank	2,04,500
Capitals:		Book-debts	89000
Lalitha 2,00,000		Stock	1,11,500
Jothi 1,25,000		Furniture	17,500
Kanaga 1,50,000____	4,75,000	Plant & Machinery	48,750
Profit & Loss A/c	22,000	Building	1,20,000
Outstanding expenses	500
	5,92,000		5,92,000

Lalitha retired from the partnership on 1st April 2004 on the following terms:

1. Goodwill of the firm was to be valued at Rs.30,000

2. The assets are to be valued as under: Stock Rs.1,00,000; Furniture Rs.15,000; Plant and Machinery Rs.45,000; Building Rs.1,00,000.

3. A provision for doubtful debts be created at Rs.4,250.

4. Lalitha was to be paid off immediately.

Show the journal entries, prepare revaluation account, capital accounts, Bank account and balance sheet of the reconstituted partnership.

Date	Particulars	L.F.	Debit Rs.	Credit Rs.
	Revaluation A/c Dr.		42,000
	To Stock A/c			11,500
	To Furniture A/c			2,500
	To Plant and machinery A/c			3,750
	To Building			20,000
	To Provision for doubtful debts A/c			4,250
	(Loss items transferred)
	Lalitha’s Capital A/c Dr		15,750
	Jothi’s Capital A/c Dr		10,500
	Kanaga’s Capital A/c Dr		15,750
	To Revaluation A/c			42,000
	(Loss on revaluation transferred to partners capital A/c)
	Goodwill A/c Dr		30,000
	To Lalitha’s Capital A/c			11,250
	To Jothi’s Capital A/c			7,500
	To Kanaga’s Capital A/c			11,250
	(Goodwill raised & transferred to partners capital A/c)

Profit and Loss A/c Dr	22,000
To Lalitha’s Capital A/c		8,250
To Jothi’s Capital A/c		5,500
To Kanaga’s Capital A/c		8,250
(Undistributed profit transferred to Partners capital A/c)
Lalitha’s Capital A/c Dr	2,03,750
To Bank A/c		2,03,750
(The amount due to Lalitha is paid off immediately)

Revaluation Account
Dr. Cr.

Particulars	Rs.	Particulars	Rs.
To Stock A/c	11,500	By Loss transferred to
To Furniture A/c	2,500	Lalitha’s Capital A/c 15,750
To Plant & Machinery A/c	3,750	Jothi’s Capital A/c 1 0,500
To Building A/c	20,000	Kanaga’s Capital A/c 15,750	42,000
To Provision for doubtful debts A/c	4,250
	42,000		42,000

Capital Accounts
Dr. Cr.

Particulars	Lalitha Rs.	Jothi Rs.	Kanaga Rs.	Particulars	Lalitha Rs.	Jothi Rs.	Kanaga Rs.
To Revaluation A/c	15,750	10,500	15,750	By Balance b/d	2,00,000	1,25,000	1,50,000
To Cash A/c	2,03,750	—	—
To Balance c/d	—	1,27,500	1,53,750	By Profit & Loss A/c	8,250	5,500	8,250
				By Goodwill A/c	11,250	7,500	11,250
	2,19,500	1,38,000	1,69,500		2,19,500	1,38,000	1,69,500

Bank Account
Dr. Cr.

Particulars

Rs.

Particulars

Rs.

To Balance b/d

2,04,500

By L’s Capital A/c

By Balance c/d

2,03,750

750

2,04,500

Balance Sheet of Jothi and Kanaga as on 1.4.2004

Liabilities	Rs.	Assets	Rs.
Bills Payable	32,000	Cash in Hand	750
Sundry Creditors	62,500	Cash at Bank	750
Capital A/cs:		Book debts 89,000
Jothi 1,27,500		Less: Provision for
Kanaga 1,53,750	2,81,250	doubtful debts A/c 4,250	84,750
Outstanding Expenses	500	Stock	1,00,000
		Furniture	15,000
		Plant & Machinery	45,000
		Building	1,00,000
		Goodwill	30,000
	3,76,250		3,76,250

Illustration :

Pallavan, Pandian and Chozhan were carrying on partnership business sharing profits in the ratio of 3 : 2: 1. On March 31, 2005, the Balance Sheet of the firm stood as follows:

Liabilities	Rs.	Assets	Rs.
Creditors	30,000	Bank	65,000
General Reserve	15,000	Debtors	40,000
Capitals:		Stock	80,000
Pallavan 2,00,000		Building	2,50,000
Pandian 1,20,000		Profit and Loss A/c	30,000
Chozhan 1,00,000	4,20,000
	4,65,000		4,65,000

Chozhan retired on April 1, 2005 on the following terms:

Building to be appreciated by Rs. 15,000
Provision for doubtful debts to be made at 6% on debtors
Goodwill of the firm is valued at Rs.18,000.
50,000 to be paid to chozhan immediately and the balance transferred to his loan account.

Prepare Revaluation Account, Capital Accounts, Bank Account and the Balance Sheet after Chozhan’s retirement.

Solution:

Revaluation Account
Dr. Cr.

Particulars	Rs.	Particulars	Rs.
To Provision for doubtful debts	2,400	By Building A/c	15,000

To Gain transferred to
Pallavan 6,300
Pandian 4,200
Chozhan 2,100	12,600
	15,000		15,000

Particulars	Pallavan Rs.	Pandian Rs.	Chozhan Rs.	PartCiculars	Pallavan Rs.	Pandian Rs.	Chozhan Rs.
To Profit & Loss A/c	15,000	10,000	5,000	By Balance b/d	2,00,000	1,20,000	1,00,000
To Bank A/c			50,000	By Goodwill A/c	9,000	9,000	3,000
To Chozhan’s loan A/c			52,600	By Revalue -tion A/c	6,300	4,200	2,100
To Balance c/d	2,07,800	1,25,200	—	By Reserve	7,500	5,000	2,500
	2,22,800	1,35,200	1,07,600		2,22,800	1,35,200	1,07,600

Bank Account
Dr. Cr.

Particulars

Rs.

Particulars

Rs.

To Balance b/d

65,000

By Chozhan’s capital A/c

By Balance c/d

50,000

15,000

65,000

Balance Sheet of Pallavan and Pandian as on 1.4.2005

Liabilities	Rs.	Assets	Rs.
Creditors	30,000	Bank	15,000
Chozhan’s Loan A/c	52,600	Debtors 40,000
Capitals:		Loss: Provision for
Pallavan 2,07,800		doubtful debts 2 ,400	37,600
Pandian 1,25,200	3,33,000	Stock	80,000
		Building	2,65,000
		Goodwill	18,000
	4,15,600		4,15,600

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