Following is the Balance Sheet of Aruna, Karuna and Varuna as at 31st March, 2023, who have agreed to share profits and losses in proportion of their capitals

Following is the Balance Sheet of Aruna, Karuna and Varuna as at 31st March, 2023, who have agreed to share profits and losses in proportion of their capitals:

On 1st April, 2023, Aruna retired from the firm and the continuing partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on the following basis:

(i) Land and Building be written up by ₹ 60,000.

(ii) Machinery be depreciated by 20%.

(iii) There were bad debts of ₹ 17,000.

(iv) The claim on account of Workmen’s Compensation was estimated at ₹ 8,000.

(v) Goodwill of the firm was valued at ₹ 1,40,000 and Aruna’s share of Goodwill be adjusted against the Capital Accounts of the continuing partners Karuna and Varuna who have decided to share future profits in the ratio of 4 : 3 respectively.

(vi) Capital of the new firm in total will be the same as before the retirement of Aruna and will be in the new profit-sharing ratio of the continuing partners.

(vii) Amount due to Aruna be settled by paying ₹ 50,000 in cash and the balance by transferring to her Loan Account which will be paid later on.

Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the firm after Aruna’s retirement.