A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:

A and B share profits in the proportions of 3/4 and 1/4. Their Balance Sheet on March 31, 2016 was as follows:

Balance Sheet of A and B as at March 31, 2016

Liabilities	₹	Assets	₹
Sundry Creditors	41,500	Cash at Bank	26,500
Reserve Fund	4,000	Bills Receivable	3,000
Capital Accounts: A B	30,000 16,000	Debtors	16,000
		Stock	20,000
		Fixtures	1,000
		Land & Building	25,000
	91,500		91,500

on April 1, 2017, C was admitted into partnership on the following terms: (a) That C pays Rs. 10,000 as his capital. (b) That C pays Rs. 5,000 for goodwill. Half of this sum is to be withdrawn by A and B. (c) That stock and fixtures be reduced by 10% and a 5%, provision for doubtful debts be created on Sundry Debtors and Bills Receivable. (d) That the value of land and buildings be appreciated by 20%. (e) There being a claim against the firm for damages, a liability to the extent of Rs. 1,000 should be created. (f) An item of Rs. 650 included in sundry creditors is not likely to be claimed and hence should be written back. Record the above transactions (journal entries) in the books of the firm assuming that the profit sharing ratio between A and B has not changed. Prepare the new Balance Sheet on the admission of C. [Ans : Gain on Revaluation Rs. 1600. Balance Sheet Total Rs. 1,05,950]