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Question
Vinoth, Karthi and Pranav are partners sharing profits and losses in the ratio of 2:2:1. Pranav retires from partnership on 1st April 2018. The following adjustments are to be made:
- Increase the value of land and building by ₹ 18,000
- Reduce the value of machinery by ₹ 15,000
- A provision would also be made for outstanding expenses for ₹ 8,000.
Give journal entries and prepare a revaluation account.
Solution
| Dr. | Revaluation Account | Cr. | ||
| Particulars | ₹ | Particulars | ₹ | |
| To Machinery A/c | 15,000 | By Buildings A/c | 18,000 | |
| To Outstanding exp. A/c |
8,000 | By Revaluation loss | ||
| Vinoth | 2,000 | |||
| Karthi | 2,000 | |||
| Pranav | 1,000 | 5,000 | ||
| 23,000 | 23,000 | |||
Journal entry
| Particulars | Debit | Credit |
| Revaluation A/c Dr. To Machinery A/c To Outstanding Expenses A/c (Decrease in value of asset) |
23,000 | 15,000 8,000 |
| Building's A/c Dr. To Revaluation A/c (Value of Buildings) |
18,000 | 18,000 |
| Vinoth's Capital A/c Dr. Karthi's Capital A/c Dr. Pranav's Capital A/c Dr. To Revaluation A/c (Loss on revaluation A/c) |
2,000 2,000 1,000 |
5,000 |
Working note:
Profit/loss sharing ratio- 2:2:1
`5,000 xx 2/5 = 2000`
`5,000 xx 2/5 = 2000`
`5,000 xx 1/5 = 1000`
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RELATED QUESTIONS
Roja, Neela and Kanaga are partners sharing profits and losses in the ratio of 4:3:3. On 1st April 2017, Roja retires and on retirement, the following adjustments are agreed upon:
- Increase the value of building by ₹ 30,000.
- Depreciate stock by ₹ 5,000 and furniture by ₹ 12,000.
- Provide an outstanding liability of ₹ 1,000.
Pass journal entries and prepare revaluation account.
Chandru, Vishal and Ramanan are partners in a firm sharing profits and losses equally. Their balance sheet as on 31st March, 2018 is as follows:
| Liabilities | ₹ | Assets | ₹ | ||
| Capital accounts: | Furniture | 60,000 | |||
| Chandru | 60,000 | 2,00,000 | Machinery | 1,20,000 | |
| Vishal | 70,000 | Sundry debtors | 33,000 | 30,000 | |
| Ramanan | 70,000 | Less: Provision for doubtful debts | 3,000 | ||
| Bills payable | 80,000 | Bills receivable | 50,000 | ||
| Cash at bank | 20,000 | ||||
| 2,80,000 | 2,80,000 |
Ramanan retired on 31 st March 2019 subject to the following conditions:
- Machinery is valued at ₹ 1,50,000
- Value of furniture brought down by ₹ 10,000
- Provision for doubtful debts should be increased to ₹ 5,000
- Investment of ₹ 30,000 not recorded in the books is to be recorded now.
Pass necessary journal entries and prepare revaluation account and capital account of partners.
