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प्रश्न
Why is there need for the revaluation of assets and liabilities on the admission of a partner?
उत्तर
At the time of admission of a new partner, it becomes very necessary to revalue the assets and liabilities of a partnership firm for ascertaining its true and fair values. This is done because the value of assets and liabilities may have increased or decreased and consequently their corresponding figures in the old balance sheet may either be understated or overstated. Moreover, it may also be possible that some of the assets and liabilities are left unrecorded. Thus, in order to record the increase and decrease in the market value of the assets and liabilities, Revaluation Account is prepared and any profits or losses associated with this increase or decrease are distributed among the old partners of the firm.
APPEARS IN
संबंधित प्रश्न
Name any two items that are shown under the head’ Other Current Liabilities’ and any two items that are shown under the head ‘Other Current Assets’ in the Balance Sheet of a company as per schedule III of the Companies Act, 2013.
Following is the Balance Sheet of R.S. Ltd. as at 31st March, 2016 :
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R.S. Ltd. Balance Sheet as at 31-3-2016 |
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Particulars |
NoteNo. |
31-03-2016 (Rs) |
31-03-2015 (Rs) |
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I. Equity and Liabilities : (1) Shareholder's Funds |
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(a) Share Capital |
9,00,000 |
7,00,000 |
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(b) Reserves and Surplus |
1 |
2,50,000 |
1,00,000 |
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(2) Non-current Liabilities |
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Long-term borrowings |
2 |
4,50,000 |
3,50,000 |
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(3) Current Liabilities |
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(a) Short-term borrowings |
3 |
1,50,000 |
75,000 |
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(b) Short-term provisions |
4 |
2,00,000 |
1,25,000 |
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Total |
19,50,000 |
13,50,000 |
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II. Assets |
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(1) Non-current Assets |
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(a) Fixed Assets |
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(i) Tangible |
5 |
14,65,000 |
9,15,000 |
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(ii) Intangible |
6 |
1,00,000 |
1,50,000 |
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(b) Non-current Investments |
1,50,000 |
1,00,000 |
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(2) Current Assets |
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(a) Current Investments |
|
40,000 |
70,000 |
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(b) Inventories |
7 |
1,22,000 |
72,000 |
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(c) Cash and Cash Equivalents |
73,000 |
43,000 |
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Total |
19,50,000 |
13,50,000 |
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Note No. |
Particulars |
31-03-2016 (Rs) |
31-03-2015 (Rs) |
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(1) |
Reserves and Surplus |
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|
|
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(Surplus i.e. Balance in Statement of Profit and Loss) |
2,50,000 |
1,00,000 |
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2,50,000 |
1,00,000 |
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(2) |
Long-term borrowings |
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|
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12% Debentures |
4,50,000 |
3,50,000 |
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4,50,000 |
3,50,000 |
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|
|
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(3) |
Short-term borrowings |
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|
|
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Bank overdraft |
1,50,000 |
75,000 |
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1,50,000 |
75,000 |
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(4) |
Short-term provisions |
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Proposed Dividend |
2,00,000 |
1,25,000 |
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2,00,000 |
1,25,000 |
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(5) |
Tangible Assets |
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Machinery |
16,75,000 |
10,55,000 |
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Accumulated Depreciation |
(2,10,000) |
(1,40,000) |
|
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|
14,65,000 |
9,15,000 |
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(6) |
Intangible Assets |
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Goodwill |
1,00,000 |
1,50,000 |
|
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|
1,00,000 |
1,50,000 |
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(7) |
Inventories |
|
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Stock in trade |
1,22,000 |
72,000 |
|
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|
1,22,000 |
72,000 |
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Additional Information :
(1) Rs 1,00,000, 12% Debentures were issued on 31-3-2016.
(2) During the year a piece of machinery costing Rs 80,000 on which accumulated depreciation was Rs 40,000 was sold at a loss of Rs 10,000.
Prepare a Cash Flow Statement.
Why is 'Realisation Account' prepared?
At what figures the value of assets and liabilities appear in the books of the firm after revaluation has been done? Show with the help of an imaginary balance sheet.
Sanjana and Alok were partners in firm sharing profits and losses in the ratio 3: 2. On 31st March 2018 their Balance Sheet was as follows:
Balance Sheet of Sanjana and Alok as on 31.3.2018
| Liabilities |
Amount (₹) |
Assets | Amount (₹) |
| Creditors | 60,000 | Cash | 1,66,000 |
| Work men's Compensation Fund | 60,000 | Debtors - 1,46,000 | |
| Less: Provision for doubtful debts - 2,000 | 1,44,000 | ||
| Capitals: | Stock | 1,50,000 | |
| Sanjana - 5,00,000 | Investments | 2,60,000 | |
| Alok - 4,00,000 | 9,00,000 | Furniture | 3,00,000 |
| 10,20,000 | 10,20,000 |
On 1st April 2018, they admitted Nidhi as a new partner for 1/4th share in the profits on the following terms:
(a) Goodwill of the firm was valued at ₹ 4,00,000 and Nidhi brought the necessary amount in cash for her share of goodwill premium, half of which was withdrawn by the old partners.
(b) Stock was to be increased by 20% and furniture was to be reduced to 90%.
(c) Investments were to be valued at ₹ 3,00,000. Alok took over investments at this value.
(d) Nidhi brought ₹ 3,00,000 as her capital and the capitals of Sanjana and Alok were adjusted in the new profit sharing ratio.
Prepare Revaluation Account, Partners Capital Accounts, and the Balance Sheet of the reconstituted firm on Nidhi's admission.
Revaluation A/c is also known as ______ account.
Rohan, Rohit, and Sachin are partners in a firm sharing profit and losses in the proportion 3:1:1 respectively. Their balance sheet as on 31st March 2018 is as shown below
| Balance Sheet as on 31st March 2018 | |||||
| Liabilities | Amount ₹ | Assets | Amount ₹ | ||
| Creditors | 40,000 | Bank | 12,500 | ||
| General Reserve | 50,000 | Debtors | 60,000 | ||
| Bills payable | 25,000 | Live Stock | 50,000 | ||
| Capital Accounts : | Building | 75,000 | |||
| Rohan | 1,25,000 | Plant and Machinery | 35,000 | ||
| Rohit | 1,00,000 | Motor Truck | 1,00,000 | ||
| Sachin | 50,000 | Goodwill | 57,500 | ||
| 3,90,000 | 3,90,000 | ||||
On 1st April 2018, Sachin retired and the following adjustments have been agreed upon.
1. Goodwill was revalued at ₹ 50,000
2. Assets and Liabilities were revalued as follows. Debtors ₹ 50,000, Live Stock, ₹ 45,000; Building ₹ 1,25000, Plant and Machinery ₹ 30,000, Motor Truck ₹ 95,000 and Creditors ₹ 30,000
3. Rohan and Rohit contributed additional capital through Net Banking of ₹ 50,000 and ₹ 25,000 respectively.
4. Balance of Sachin’s Capital Account is transferred to his Loan Account
Give Journal entries in the books of new firm.
Shah, Lodha, and Dhole were partners sharing profits and losses in the ratio of 4:3:3. Their Balance Sheet as on 31st March 2019 is a given below.
| Balance Sheet as on 31st March, 2019 | |||||||
| Liabilities | Amount ₹ | Amount ₹ | Assets | Amount ₹ | Amount ₹ | ||
| Sundry Creditors | 20,000 | Cash | 9,000 | ||||
| Bills payable | 4,000 | Sundry Debtors | 10,000 | ||||
| Capital Account: | (−) R.D.D. | 1,000 | 9,000 | ||||
| Shah | 45,000 | Furniture | 25,000 | ||||
| Lodha | 35,000 | Computers | 43,000 | ||||
| Dhole | 27,000 | Vehicles | 45,000 | ||||
| 1,31,000 | 1,31,000 | ||||||
On 1st April 2019, Mr. Lodha retired from the firm on the following terms.
1. Goodwill is to be valued at average Profits and Losses of the last five years which were as follows.
| Years | Profit/Loss |
| 2015 | ₹ 35,000 |
| 2016 | ₹ 20,000 |
| 2017 | ₹ 30,000 |
| 2018 | ₹ 20,000 |
| 2019 | ₹ 25,000 |
2. Computers to be depreciated by 10%
3. Furniture to be revalued at ₹ 27,500
4. Vehicles appreciated by 20%
5. R.D.D. was no longer necessary
6. Shah and Dhole will share the future profits and losses in the ratio of 2:1
7. It was decided that goodwill should not appear in the books of a new firm and amount payable to Lodha is to be transferred to his Loan A/c
Prepare: Profit and Loss adjustment A/c, Partners capital accounts, Balance sheet of new firm.
Excess of the credit side over the debit side of the revaluation account.
Profit or loss on revaluation is borne by:
When the balance sheet is prepared after the new partnership agreement, the assets and liabilities are recorded at:
A decrease in the value of liability will be recorded on the ____________ side of the revaluation account.
An increase in the value of liability will be recorded on the ____________ side of the revaluation account.
At the time of admission of a new partner, general reserve appearing in the old Balance Sheet is transferred to:
State the ‘true’ statement:
The opening balance of Partner’s Capital Account is credited with:
Angle and Circle ware partners in a firm. Their Balance Sheet showed Furniture at ₹2,00,000; Stock at ₹1,40,000; Debtors at ₹1,62,000 and Creditors at ₹60,000. Square was admitted and new profit-sharing ratio was agreed at 2:3:5. Stock was revalued at ₹1,00,000, Creditors of ₹15,000 are not likely to be claimed, Debtors for ₹2,000 have become irrecoverable and Provision for doubtful debts to be provided @10%.
Angle’s share in loss on revaluation amounted to ₹30,000. Revalued value of Furniture will be?
Revaluation account is also called ______ account.
Vedesh Ltd. purchased a running business of Vibhu Enterprises for a sum of ₹ 12,00,000. Vedesh Ltd. paid ₹ 60,000 by drawing a promissory note in favour of Vibhu Enterprises., ₹1,90,000 through bank draft and balance by issue of 8% debentures of ₹ 100 each at a discount of 5%. The assets and liabilities of Vibhu Enterprises consisted of Fixed Assets valued at ₹ 17,30,000 and Trade Payables at ₹ 3,20,000. You are required to pass necessary journal entries in the books of Vedesh Ltd.
Arun and Vijay are partners in firm sharing profits and losses in the ratio of 5 : 1.
| Balance Sheet (Extract) | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Machinery | 40,000 | ||
If the value of machinery in the balance sheet is undervalued by 20%, then at what value will machinery be shown in a new balance sheet?
Ajay, Vijay and Sanjay were partners sharing profits and losses in the ratio of 3 : 3 : 2. Their Balance Sheet as on 31st March 2020 is as follows:
| Balance Sheet as on 31st March, 2020 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 32,700 | Bank | 19,800 |
| Reserve Fund | 12,000 | Stock | 19,800 |
| Capital Accounts: | Debtors | 15,000 | |
| Ajay | 33,000 | Livestock | 30,000 |
| Vijay | 45,000 | Plant and Machinery | 62,100 |
| Sonjay | 24,000 | ||
| 1,46,700 | 1,46,700 | ||
On 1st April 2020 Sanjay retired from the firm on the following terms:
- R.D.D. is to be maintained at 10% on debtors.
- ₹ 300 to be written off from creditors.
- Goodwill of the firm is to be valued at ₹ 12,000. however only Sanjay's share in it is to be raised in the books and written off immediately.
- Assets to be revalued as: Stock ₹ 18,900, Plant and machinery ₹ 60,000, Live Stock ₹ 30,600.
- The amount payable to Sanjay is to be transferred to his Loan account after retirement:
Prepare:
- Revaluation Account
- Partners' Capitol Account
- Balance Sheet of the New firm.
Following is the Balance Sheet of the firm of Nana, Nani and Sona who share Profits and Losses in the ratio of their Capital.
| Balance Sheet as on 31st March, 2019 |
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| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/c: | Machinery | 20,000 | ||
| Nana | 50,000 | Building | 55,000 | |
| Nani | 20,000 | Stock | 12,000 | |
| Sona | 30,000 | Debtors | 12,000 | 11,000 |
| Creditors | 10,000 | Less: RDD | 1,000 | |
| Bills Payable | 5,000 | Cash | 17,000 | |
| 1,15,000 | 1,15,000 | |||
Sona retires from the business on 1st April 2019 and the following Adjustment were agreed.
- Stock is to be valued at 92% of its Book Value.
- RDD is to be maintained at 10% on debtors.
- The value of Building is to be appreciated by 20%.
- The Goodwill of the firm be fixed at ₹ 12000. Sona’s share in the same be adjusted in the accounts of continuing partners in gaining Ratio.
- The entire Capital of the new firm be fixed at ₹ 1,60,000 between Nana and Nani in their New Profit sharing ratio which is fixed at 3:1 making adjustment in Cash.
- Amount payable to Sona paid in cash.
Prepare: Revaluation Account, Partnership Capital Account and Balance Sheet of the reconstituted firm.
On the reconstitution of a firm the value of furniture increased from ₹ 7,00,000 to ₹ 8,00,000 and stock reduced to ₹ 4,00,000 from ₹ 4,20,000. Gain or loss on revaluation will be ______.
On admission of a new partner, the old partners share the gain or loss on revaluation of assets and reassessment of liabilities in which of the following ratio :
Mita, Geeta and Mohit were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. With effect from 1st April 2022, they mutually agreed to share profits and losses in the ratio of 2:2:1. It was agreed that:
- Goodwill of the firm was valued at ₹ 1,40,000.
- Profit on revaluation of assets and re-assessment of liabilities amounted to ₹ 1,20,000.
Pass necessary journal entries for the above transactions in the books of the firm. Show your working notes clearly.
On reconstitution of a firm, the value of machinery was depreciated by ₹1,00,000 and investments increased to ₹70,000 from ₹20,000. Gain or loss on revaluation will be ______.
On the reconstitution of a firm, the value of the land was appreciated by ₹ 2,00,000 and plant and machinery reduced to ₹ 7,00,000 from ₹ 10,00,000. Gain or loss on revaluation will be ______.
Decrease in the value of assets should be ______ to Profit and Loss Adjustment Account.
The Balance Sheet of M, N and 0 who shared profits and Josses as 4 : 3 : 3 respectively.
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Creditors | 14,000 | Cash on Hand | 9,000 | ||
| Bank Loan | 10,000 | Sundry Debtors | 10,000 | 9,000 | |
| General Reserve | 12,500 | Less: R.D .D | 1,000 | ||
| Capital Accounts : | Livestock | 25,000 | |||
| M | 40,000 | Motor Car | 8,000 | ||
| N | 30,000 | Furniture | 35,000 | ||
| O | 24,500 | Plant and Machinery | 45,000 | ||
| 1,31,000 | 1,31,000 | ||||
N retires on 1st April, 2023 on the following terms:
(1) The share of N in Goodwill of the firm is valued at ₹ 5,400.
(2) Furniture to be depreciated by 10% and Motor Car by 12.5%.
(3) Livestock to be appreciated by 10% and Plant by 20%.
(4) A provision of ₹ 4,000 to be made for a claim of compensation.
(5) R.D.D. is no longer necessary.
(6) The amount payable to N should be transferred to his Loan A/c.
Prepare Profit and Loss Adjustment Ne, Partner's Capital Ncs and Balance Sheet of the new firm.
The Balance Sheet of Snehal, Samir and Shera is as follows and the partners are sharing profits and losses in the proportion of 2 : 2 : 1 respectively.
| Balance Sheet as on 31st March, 2023 | |||||
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
| Creditors | 12,000 | Bank | 7,500 | ||
| Bills Payable | 3,000 | Debtors | 30,000 | 28,500 | |
| General Reserve | 7,500 | Less: R.D.D. | 1,500 | ||
| Capital Accounts: | Furniture | 22,500 | |||
| Snehal | 60,000 | Machinery | 6,000 | ||
| Samir | 45,000 | Freehold Property | 40,500 | ||
| Shera | 22,500 | Goodwill | 45,000 | ||
| 1,50,000 | 1,50,000 | ||||
Shera retires from the firms on 1st April, 2023 on the following terms:
(1) The assets are to be revalued as: Freehold Property ₹ 45,000, Machinery ₹ 7,500 Furniture ₹ 18,000, All debtors are good.
(2) Goodwill of the firm be valued at thrice the average profit of given below : Profits of the firm for five years.
| 2018-19 | ₹ 1,500 |
| 2019 - 20 | ₹ 15,750 |
| 2020-21 | ₹ 15,000 |
| 2021-22 | ₹ 24,000 |
| 2022-23 | ₹ 15,000 |
(3) Shera should be paid ₹ 4,500 by cheque.
(4) The Balance of Shera's Capital Ale should be kept in the business as his loan.
Prepare Profit and Loss Adjustment A/c, Capital Accounts of Partners, Balance Sheet of the new firm.
Decrease in the value of assets should be ______ to Profit and Loss Adjustment Account.
