Following is the Balance Sheet of Dhiraj and Niraj who shared profits and losses equally:

Balance Sheet as on 31^st March, 2013

Liabilities	Amount	Assets	Amount
Capitals		Plant and Machinery	45000
Dhiraj	125000	Land and Building	84000
Niraj	35000	Patents	3400
Creditors	86200	Stock	47800
Bills Payable	28000	Furniture	10600
General Reserve	6800	Debtors	80000
		Cash	10200
	281000		281000

On 1^st April, 2013 they agreed to admit Suraj on the following terms and conditions:

i. Suraj to bring for  1/3 rd share in future profit in cash Rs. 90,000 towards his capital.

ii. The firm's goodwill should be raised to Rs. 90,000 and it is to be written off after Suraj admission in new profit ratio.

iii. Plant and Machinery was found undervalued by 10% and Land and Building was found overvalued by 20%.

iv. Stock is to be increased by Rs. 2,200 and furniture to be reduced to Rs. 10,000.

v. Out of creditors Rs. 1200 is no more payable.

vi. The Capital Accounts to be adjusted in new profit sharing ratio by opening the current accounts.

Prepare Revaluation Account, Capital Accounts and New Balance Sheet.

Solution:

In the books of Partnership firm.

Profit and Loss Adjustment Account

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Land & Buildings A/c (Overvaluation )		14000	By Plant & Machinery A/c (Undervaluation)		5000
To Furniture A/c (Depreciation )		600	By Stock A/c (Increase in value)		2200
			By Creditors A/c [Claim waived]		1200
			By Partner's Capital A/c
			Dhiraj	3100
			Niraj	3100	6200
		14600			14600

Partner's Capital Accounts

Particulars	Dhiraj	Niraj	Suraj	Particulars	Dhiraj	Niraj	Suraj
To Goodwill A/c [Written off]	30000	30000	30000	By Balance b/d	125000	35000	-
To Profit & Loss Adjustment A/c	3100	3100	-	By General Reserve	3400	3400	-
To Balance C/d	90000	90000	90000	By Cash A/c	-	-	90000
To Partner's Current A/c	50300	-	-	By Goodwill A/c	45000	45000	-
				By Partners' Current A/c	-	39700	30000
	173400	123100	120000		173400	123100	12000

Balance Sheet as on 1^st April, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Partners' Capital A/c			Land & Building	84000
Dhiraj	90000		(-) Overvaluation by 20%	(14000)	70000
Niraj	90000		Plant & Machinery	45000
Suraj	90,000	270000	(+) Under valuation by 10%	5000	50000
Dhiraj's Current A/c		50300	Furniture	10600
Bills Payable		28000	(-) Depreciation	-600	10000
Creditors	86200		Patents		3400
(-) Claim waived by creditors	-1200	85000	Stock	47800
			(+) Increase in value	2200	50000
			Debtors		80000
			Cash		100200
			Current A/c
			Niraj	39700
			Suraj	30000	69700
		433300			433300