Question -
Answer -
After revaluation has been done, the assets and liabilities appear at their current market values in the Balance Sheet of the reconstituted firm. This can be better explained with the help of the below explained example.
A and B shares profit and loss equally.
| Balance Sheet of A and B as on April 01, 2011 | |
| Liabilities | Amount Rs | Assets | Amount Rs |
| Sundry Creditors | 1,00,000 | Cash in Hand | 8,000 |
| Capital Accounts | | Cash at Bank | 28,000 |
| A 75,000 | | Debtors | 40,000 |
| B 75,000 | 1,50,000 | Stock | 36,000 |
| | | | | Furniture | 38,000 |
| | | | Plant and Machinery | 1,00,000 |
| | 2,50,000 | | 2,50,000 |
| | | | |
1) On that date C is admitted for 1/3rd share and brings 1,00,000 as capital.
2) The value of stock is increased by Rs 7,000.
3) A provision of Rs 2,000 has been created against Debtors.
4) Furniture revalued at Rs 35,000.
5) A machinery costing Rs 50,000 purchased is not recorded in books.
6) Rent outstanding Rs 2,000.
Prepare Revaluation Account, Partners’ Capital Account, Cash Account and Balance Sheet.
Sol:
| Revaluation Account |
| Dr. | | | Cr. |
| Particular | Amount Rs | Particular | Amount Rs |
| Rent Outstanding A/c | 2,000 | Stock | 7,000 |
| Provision for Debtors | 2,000 | Machinery | 50,000 |
| Furniture | 35,000 | | |
| Profit transferred: | | | |
| | A’s Capital A/c | 25,000 | | | |
| | B’s Capital A/c | 25,000 | 50,000 | | |
| | 57,000 | | 57,000 |
| | | | |
| A’s Capital Account |
| Dr. | | | | | | Cr. |
| Date | Particular | J.F. | Amount Rs | Date | Particular | J.F. | Amount Rs |
| | Balance c/d | | 1,00,000 | | Balance b/d | | 75,000 |
| | | | | | Revaluation A/c | | 25,000 |
| | | | 1,00,000 | | | | 1,00,000 |
| | | | | | | | |
| B’s Capital Account |
| Dr. | | | | | | | Cr. |
| Date | Particular | J.F. | Amount Rs | Date | Particular | J.F. | Amount Rs |
| | Balance c/d | | 1,00,000 | | Balance b/d | | 75,000 |
| | | | | | Revaluation A/c | | 25,000 |
| | | | 1,00,000 | | | | 1,00,000 |
| | | | | | | | |
| C’s Capital Account |
| Dr. | | | | | | | Cr. |
| Date | Particular | J.F. | Amount Rs | Date | Particular | J.F. | Amount Rs |
| | Balance c/d | | 1,00,000 | | Cash A/c | | 1,00,000 |
| | | | | | | | |
| | | | 1,00,000 | | | | 1,00,000 |
| | | | | | | | |
| Cash Account |
| Dr. | | | | | | | Cr. |
| Date | Particular | J.F. | Amount Rs | Date | Particular | J.F. | Amount Rs |
| | Balance b/d | | 8,000 | | Balance c/d | | 1,08,000 |
| | C’s Capital A/c | | 1,00,000 | | | | |
| | | | | | | | |
| | | | 1,08,000 | | | | 1,08,000 |
| | | | | | | | |
| Balance Sheet of A, B & C as at April |
| Liabilities | Amount Rs | Assets | Amount Rs |
| Sundry Creditors | 1,00,000 | Cash in hand | 1,08,000 |
| Rent Outstanding | 2,000 | Cash at Bank | 28,000 |
| | | Debtors | 40,000 | |
| | | Less: Provision | 2,000 | 38,000 |
| Capital Account | | | |
| A | 1,00,000 | | Stock | 43,000 |
| B | 1,00,000 | | Furniture | 35,000 |
| C | 1,00,000 | 3,00,000 | Plant and Machinery | 1,50,000 |
| | | | |
| | 4,02,000 | | 4,02,000 |
| | | | |