Madhu and Amar are partners in a firm sharing profits and losses in the proportion of 3/5 and 2/5 respectively. Their Balance Sheet as on 31st March, 2012 was as follows:

Madhu and Amar are partners in a firm sharing profits and losses in the proportion of 3/5 and 2/5 respectively. Their Balance Sheet as on 31st March, 2012 was as follows:

Balance sheet as on 31.03.2012

Liabilities	Rs.	Assets	Rs.
Madhu's Capital	35000	Sundry Debtors	45000
Amar's Capital	35000	Land and Building	25000
Sundry Creditors	62000	Stock	20500
		Cash at Bank	5000
		Plant and Machinery	35000
		furniture and Fixtures	1500
	132000		132000

They have admitted Vasant into Partnership.  the terms being that:

1. He shall pay Rs. 5000 as his share of goodwill, the amount of goodwill retained into business.

2. He shall bring Rs. 15000 as his capital for ¼ share in future profits.

3. For the purpose of Vasant's admission, it was agreed that the assets would be revalued as follows:

a. Land and Building to be taken at Rs. 30,000.

b. Plant and Machinery to be valued at Rs. 32000.

c. A provision of 5% on debtors would be made against doubtful debts.

d. The value of stock at Rs. 25000.

Prepare Profit and Loss Adjustment Account. Partners Capital Account and Balance Sheet of the new firm.

Ans. Profit and Loss Adjustment  A/c: Profit  = 4250

Balance Sheet Total = 156250

Bank A/c Bal. = 25000

Capital A/c : Madhu = Rs. 40,550

Amar = 38700

Vasant = 15000