Karim Rehman and Navel are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2022 was as follows:
Karim Rehman and Navel are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2022 was as follows:
| Liabilities | ₹ | Assets | ₹ |
| Capital A/cs:
Karim Rehman Naval General Reserve Investments Fluctuation Reserve Sundry Creditors |
2,50,000 2,50,000 2,00,000 60,000 30,000 90,000 |
Building
Machinery Computers Investments (Market Value ₹ 90,000) Sundry Debtors Cash in Hand Cash at Bank Advertisement Suspense |
3,50,000 2,40,000 70,000 1,00,000 50,000 10,000 55,000 5,000 |
| 8,80,000 | 8,80,000 |
They decided to share profits equally w.e.f. 1st April, 2022. They also agreed that:
(i) Value of Building be decreased by 5%.
(ii) Value of Machinery be increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at ₹ 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, ₹ 10,000 is not payable. Hence, is to be written back.
(vi) Goodwill is to be valued at 2 years’ purchase of last 3 years’ profits. Profits being for year ended 31s March, 2022 – ₹ 50,000 (Loss); 2021 – ₹ 2,50,000 and 2020 – ₹ 2,50,000.
(vii) Naval was to carry out the work for reconstituting the firm at a remuneration (including expenses) of ₹ 5,000. Expenses came to ₹ 3,000.
Pass Journal entries and prepare Revaluation Account.
[Ans.: Gain (profit) on Revaluation – ₹ 17,000.]
Anurag Pathak Changed status to publish July 30, 2023
