Question

Partners A, B and C running a partnership firm in the name of M/s. ABC LLC with their capitals of OMR 60,000, OMR 40,000 and OMR 30,000 and an agreed sharing the profits and losses in the ratio of 3:2:1.respectively on 31.3.2020. The firm’s various assets and liabilities in the books of accounts are –

Particular	OMR	Particular	OMR
Plant	60,000	Bank Overdraft	25,000
Buildings	100,000	Sundry Creditors	100,000
Furniture	25,000	Premises	40,000
Land	70,000	Machinery	40,000
6% Bonds	50,000	Stock	25,000
Bank Loan	40,000	Sundry Debtors	70,000
Profit & Loss A/c	25,000	Bills Receivable	25,000
General Reserve	50,000	Bills Payable	80,000

On 1.4.2020 they decided to admit D into the partnership for 1/5th of the future profits with the terms that D shall bring in a capital of OMR 50,000. The Goodwill of the firm being valued at OMR 40,000, Machinery, Land, Buildings and Plant are to be appreciated by 10%. Provision for Doubtful Debts @ 5% is to be created against Debtors. Stock, Furniture, Premises are to be depreciated by 5%. Discount on Creditors is to be made against Creditors @ 2.5%. Provision for outstanding liability is to be created at OMR 4,000 and Bank Loan is to be maintained in the books.
Q1. Journalize the above transactions with narrations and prepare the Revaluation Account. Give your comment with reasons about the values which are debited and credited in the Revaluation Account.

Q2. Prepare Partners’ Capital Accounts and Balance Sheet of the reconstituted partnership firm. Give your views about the changes in the balance sheet after reconstitution.

Answer 1

1)
Revaluation A/c
Particulars	Debit amount	Particulars	Credit amount
Prov for doubtful debts	3,500	Machinery	4,000
Stock	1,250	Land	7,000
Furniture	1,250	Building	10,000
Premises	2,000	Plant	6,000
Provision for Liability	4,000	Discount on creditors	2,500
Revaluation Profit	17,500
Total	29,500	Total	29,500

2)
Partner's Capital A/c
				Debit amount					Credit amount
Particulars	A	B	C	D	Particulars	A	B	C	D
					Bal b/d	60,000	40,000	30,000
					Revaluation Profit	8,750	5,833	2,917
					Goodwill premium	4,000	2,667	1,333
					Profit & Loss A/c	12,500	8,333	4,167
					General reserve	25,000	16,667	8,333
					Bank				50,000
Bal c/d	1,10,250	73,500	46,750	50,000
Total	1,10,250	73,500	46,750	50,000	Total	1,10,250	73,500	46,750	50,000

Balance sheet
Liabilities	amount	Assets	amount
Capital A/c		Machinery	44,000
A	1,10,250	Land	77,000
B	73,500	Building	1,10,000
C	46,750	Plant	66,000
D	50,000	Stock	23,750
		Furniture	23,750
Provision for Liability	4,000	Premises	38,000
6% Bonds	50,000	Bank	33,000
Bank Loan	40,000	Sundry debtors	70,000
Bank o/d	-	Prov for doubtful debts	-3,500
Sundry creditors	97,500	Bills receivables	25,000
Bills payables	80,000	other asset	45,000
		(difference in data provided)
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