Question

A and B, who are partners in a firm, sharing profits in the ratio of 3 : 2 on 31st December, 2017. The balance sheet was as follows :

They agreed to admit C into partnership for 1/5th share of profits on the following terms :

1. Provision for doubtful debts be increased by Rs 2,000.
2. The value of stock be increased by Rs 4,000 and land and building be increased to Rs 18,000.
3. The liability against workmen compensation fund is determined at Rs 2,000.
4. C brought in as his share of goodwill Rs 10,000 in cash,
5. C would bring cash as would make his capital equal to 20% of combined capital of A and B, after the above revaluation and adjustments are carried out.

Prepare Revaluation Account, Partners’ Capital Account and the Balance Sheet of the firm after C’s admission.

Answer 1

Working Note: Sacrifice ratio of A and B = 3:2