Dinesh and Ramesh are partners in a firm sharing profits and losses in the ratio of 3 : 2. They decided to admit Vasu as a partner with 1/5 share in the profits. Their Balance Sheet as on March 31, 2022 was as follows :
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Sundry Creditors | 1,50,000 | Cash at Bank | 40,000 |
| General Reserve | 80,000 | Bills Receivables | 50,000 |
| Bank O.D. | 70,000 | Debtors | 60,000 |
| Partners' Capital : | Stock | 1,20,000 | |
| Dinesh - 1,00,000 | Fixed Assets | 2,80,000 | |
| Ramesh - 1,50,000 | 2,50,000 | ||
| 5,50,000 | 5,50,000 |
It was also decide that :
(1) The fixed assets should be valued at ₹ 3,31,000.
(2) A provision of 5% on sundry debtors to be made for doubtful debts.
(3) The value of stock be reduced to ₹ 1,12,000.
(4) Vasu brings ₹ 75,000 as capital and ₹ 15,000 as Goodwill.
Prepare the revised Balance Sheet of the firm after admission of the partners.
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Start your 14-day free trial to unlock the full solution →Revalue the firm, then rebuild the Balance Sheet. Fixed assets rise by ₹51,000; a 5% provision on debtors (₹3,000) and a ₹8,000 fall in stock are losses, giving a revaluation profit of ₹40,000 shared 3:2. The ₹80,000 General Reserve and Vasu's ₹15,000 goodwill also go to the old partners 3:2. Vasu brings ₹75,000 capital + ₹15,000 goodwill in cash, so Cash at Bank becomes ₹1,30,000 and the revised Balance Sheet totals ₹6,80,000.
This is a standard AP Inter 2nd-year (Commerce) admission-of-a-partner question; the same revaluation-and-reconstitution method is used across the NCERT/CBSE-aligned commerce syllabus.
Step 1 — Revaluation Account
Increase in an asset is a gain (credit); a fall in an asset or a new provision is a loss (debit).
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Provision for Doubtful Debts (5% of 60,000) | 3,000 | By Fixed Assets (3,31,000 − 2,80,000) | 51,000 |
| To Stock (1,20,000 − 1,12,000) | 8,000 | ||
| To Profit transferred to Capitals: Dinesh 24,000; Ramesh 16,000 | 40,000 | ||
| Total | 51,000 | Total | 51,000 |
Profit on revaluation = 51,000 − (3,000 + 8,000) = ₹40,000, shared 3:2 → Dinesh ₹24,000, Ramesh ₹16,000.
Step 2 — Partners' Capital computation
General Reserve ₹80,000 and goodwill ₹15,000 belong to the old partners only, shared 3:2 (Reserve → Dinesh 48,000, Ramesh 32,000; Goodwill → Dinesh 9,000, Ramesh 6,000).
| Particulars | Dinesh (₹) | Ramesh (₹) | Vasu (₹) |
|---|---|---|---|
| Opening capital | 1,00,000 | 1,50,000 | — |
| Add: General Reserve (3:2) | 48,000 | 32,000 | — |
| Add: Revaluation profit (3:2) | 24,000 | 16,000 | — |
| Add: Goodwill brought by Vasu (3:2) | 9,000 | 6,000 | — |
| Add: Cash brought in as capital | — | — | 75,000 |
| Closing capital | 1,81,000 | 2,04,000 | 75,000 |
Step 3 — Cash at Bank
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