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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:

Liabilities Assets
Capital A/cs:

Neha

Tara

General Reserve

Workmen Compensation Fund

Creditors

8,000

10,000

12,000

5,000

15,000

Plant and Machinery

Land and Building

Debtors
Less: Provision for Doubtful Debts

Stock

Cash

 

 

19,000
4,000

12,000

14,000

15,000

6,000

3,000

50,000 50,000

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 and Land and Building to be increased to ₹ 18,000.

(c) Value and Plant and Machinery to be reduced by ₹ 2,000.

(d) The liability against Workmen Compensation Fund is determined at ₹ 2,000 which is to be paid later in the year.

(e) Prachi to bring in her share of Goodwill of ₹ 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) Partner’s Capital Accounts and

(iii) Balance Sheet of the Reconstituted firm.

Anurag Pathak Changed status to publish July 17, 2023
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