| Balance Sheet of A and B as on December 31, 2016 |
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Sundry creditors | 41,500 | Cash at Bank | 26,500 |
| Reserve fund | 4,000 | Bills Receivable | 3,000 |
| Capital Accounts | | Debtors | 16,000 |
| | A | 30,000 | Stock | 20,000 |
| | B | 16,000 | Fixtures | 1,000 |
| | | Land & Building | 25,000 |
| | 91,500 | | 91,500 |
| | | | |
On Jan. 1, 2017, C was admitted into partnership on the following terms:
(a) That C pays ₹ 10,000 as his capital.
(b) That C pays ₹ 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 Half of this sum is to be withdrawn by A and B.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 ₹ 1,000 should be created.
(f) An item of ₹ 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.