Question

7. Given below is the Balance Sheet of Varghese and Sanu who are sharing profits i ratio of 3:2 as on March 31, 2012 Liabilities Sundry Creditors Capital Accounts: Varghese 50,000 Sanu Amount ₹ 35,000 50,000 1,00,000 Assets Cash at Bank Sundry Debtors: Less: P.D.D Plant & Machinery Stock 21,000 1,000 Amount ₹ 7,000 20,000 50,000 58,000 1,35,000 1,35,000 Motty is admitted as a new partner on the above date on the following terms (a) Motty will bring 1,00,000 for his capital and the necessary amount of premium 2th in cash for share in future profits. The goodwill of the firm is valued at * 1,40,000 7 (b) Stock revalued at 70,000. (c) Write down Plant and Machinery by 10%. (d) Provision for bad and doubtful debts should be increased to 3,000. (e) Unexpired insurance of 1,500 should be brought into record. Prepare Revaluation Account and Capital Accounts of Partners after admission of Motty [HSE August 2015

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Answer 1

To prepare the Revaluation Account and Capital Accounts of Partners after the admission of Motty, you need to consider the changes in assets and liabilities. Follow the steps mentioned in the detailed answer to adjust the values and record the changes properly.

Step-by-step explanation:

To prepare the Revaluation Account and Capital Accounts of Partners after the admission of Motty, we need to consider the changes in assets and liabilities due to the admission. Here are the steps:

1. Revalue the stock at ₹70,000. This means reducing the stock value by ₹8,000 (₹50,000 - ₹70,000) and recording the revaluation loss.
2. Write down the Plant and Machinery by 10%. This means reducing the value of Plant and Machinery by ₹5,800 (₹58,000 x 10%). Record this as a reduction in the value of the asset and a decrease in the overall value of the firm.
3. Increase the Provision for Bad and Doubtful Debts to ₹3,000. This means increasing the value of the Provision for Bad and Doubtful Debts by ₹1,000 (₹2,000 - ₹3,000). Record this as an increase in the liability.
4. Bring the Unexpired Insurance of ₹1,500 into the record. This means adding ₹1,500 to the assets and adjusting the liability accordingly.

Once these adjustments are made, we can prepare the Revaluation Account and Capital Accounts of Partners to reflect the changes in the firm's financial position after the admission of Motty.