Deepak, Lalit and Nimish are partners sharing profits and losses in the ratio of 3:1:1. Their Balance Sheet is as follows:
Balance Sheet as on 31 December, 2014
| Liabilities |
Amount (Rs.) |
Assets |
Amount (Rs.) |
| Sundry Creditors |
20,000 |
Cash |
10,000 |
| Capital accounts: |
|
Sundry Debtors |
20,000 |
| Deepak |
40,000 |
Buildings |
40,000 |
| Lalit |
20,000 |
Plant |
25,000 |
| Nimish |
15,000 |
|
|
|
95,000 |
|
95,000 |
Nimish retires on this date. The following arrangement is agreed upon: (i) The value of the firm’s goodwill is Rs.20,000. Nimish’s share is to be adjusted in the accounts of Deepak and Lalit.
(ii) The assets are revalued as follows:
Buildings Rs.45,000
Plant Rs.32,000
Plant Rs.32,000
(iii) A provision for bad debts is to be created @10% of debtors.
(iv) Theamount due to Nimish is to be transferred to his loan account. You are required to prepare the Profit & Loss Adjustment Account, Capital Accounts of the Partners and Balance Sheet of the new firm when:
(a) Assets and Liabilities have to be shown in the books at the revised values.
(b) Assets and Liabilities have to continue in the books at the old values.
