Following is the Balance Sheet of Dhiraj and Niraj who shared profits and losses equally:


Balance Sheet as on 31st March, 2013

Liabilities
Amount
Assets
Amount
Capitals

Plant and Machinery
45000
Dhiraj
125000
Land and Building
84000
Niraj
35000
Patents
3400
Creditors
86200
Stock
47800
Bills Payable
28000
Furniture
10600
General Reserve
6800
Debtors
80000


Cash
10200

281000

281000
On 1st April, 2013 they agreed to admit Suraj on the following terms and conditions:

i. Suraj to bring for  1/3 rd share in future profit in cash Rs. 90,000 towards his capital.

ii. The firm's goodwill should be raised to Rs. 90,000 and it is to be written off after Suraj admission in new profit ratio.

iii. Plant and Machinery was found undervalued by 10% and Land and Building was found overvalued by 20%.

iv. Stock is to be increased by Rs. 2,200 and furniture to be reduced to Rs. 10,000.

v. Out of creditors Rs. 1200 is no more payable.

vi. The Capital Accounts to be adjusted in new profit sharing ratio by opening the current accounts.

Prepare Revaluation Account, Capital Accounts and New Balance Sheet.

Solution:

In the books of Partnership firm.

Profit and Loss Adjustment Account

Particulars
Rs.
Rs.
Particulars
Rs.
Rs.
To Land & Buildings A/c
(Overvaluation )

14000
By Plant & Machinery A/c
(Undervaluation)

5000
To Furniture A/c
(Depreciation )

600
By Stock A/c
(Increase in value)

2200



By Creditors A/c
[Claim waived]

1200



By Partner's Capital A/c





Dhiraj
3100




Niraj
3100
6200


14600


14600


Partner's Capital Accounts

Particulars
Dhiraj
Niraj
Suraj
Particulars
Dhiraj
Niraj
Suraj
To Goodwill A/c
[Written off]
30000
30000
30000
By Balance b/d
125000
35000
-
To Profit & Loss Adjustment A/c
3100
3100
-
By General Reserve
3400
3400
-
To Balance C/d
90000
90000
90000
By Cash A/c
-
-
90000
To Partner's Current A/c
50300
-
-
By Goodwill A/c
45000
45000
-




By Partners' Current A/c
-
39700
30000









173400
123100
120000

173400
123100
12000


Balance Sheet as on 1st April, 2013

Liabilities
Amount
Amount
Assets
Amount
Amount
Partners' Capital A/c


Land & Building
84000

Dhiraj
90000

(-) Overvaluation by 20%
(14000)
70000
Niraj
90000

Plant & Machinery
45000

Suraj
90,000
270000
(+) Under valuation by 10%
5000
50000
Dhiraj's Current A/c

50300
Furniture
10600

Bills Payable

28000
(-) Depreciation
-600
10000
Creditors
86200

Patents

3400
(-) Claim waived by creditors
-1200
85000
Stock
47800




(+) Increase in value
2200
50000



Debtors

80000



Cash

100200



Current A/c





Niraj
39700




Suraj
30000
69700


433300


433300