Suresh and Ramesh are partners in a business sharing profits and Losses in the ratio of 2:1 respectively. Their Balance Sheet as on 31st March, 2013 is as follows:

Balance Sheet as on 31^st March, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital A/c			Building		30000
Suresh	50000		Machinery		10000
Ramesh	24000	74000	Furniture		9500
Creditors		57000	Debtors	40000
Bills Payable		20000	(-) R.D.D.	-1000	39000
Reserve Fund		9000	Stock		30000
			Bills Receivable		7600
			Cash at Bank		33900
		160000			160000

They admitted Kailash on 1^st April, 2013 as a partner on the following terms:

1. Kailash will bring Rs. 30,000 as his capital for ¼ th share in future profit and Rs. 12000 as goodwill which will be withdrawn by old partners.

2. Stock and Machinery are to be depreciated by 10%.

3. R.D.D. is to be maintained at 5% on debtors.

4. Building is to be appreciated by 20% and furniture is revalued at Rs. 10,000.

Prepare Profit & Loss Adjustment Account, Partners Capital Account and Balance Sheet of the New firm.

Solution:

In the books of new Partnership firm.

Profit and Loss Adjustment Account.

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Machinery A/c		1000	By Building A/c		6000
To Stock A/c		3000	By Furniture A/c		500
To R.D.D. A/c		1000
To Partners' Capital A/c (Profit of Revaluation)
Suresh	1000
Ramesh	500	1500
		6500			6500

Partner's capital Accounts

Particulars	Suresh	Ramesh	Kailash	Particulars	Suresh	Ramesh	Kailash
To Bank A/c	8000	4000		By Balance b/d	50000	24000
To Balance c/d	57000	27500	30000	By Reserve Fund	6000	3000
				By Bank A/c			30000
				By Goodwill A/c	8000	4000
				By Profit & Loss Adjustment A/c	1000	500
	65000	31500	30000		65000	31500	30000

Balance Sheet as on 1^st April, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Partners' Capital Account			Building	30000
Suresh	57,000		(+) Appreciation @ 20%	6000	36000
Ramesh	27,500		Machinery	10000
Kailash	30,000	114500	(-) Depreciation @ 10%	-1000	9000
Creditors		57000	Furniture	9500
Bills Payable		20000	(+) Appreciation	500	10000
			Stock	30000
			(-) Reduction in value by 10%	-3000	27000
			Bills Receivable		7600
			Debtors	40000
			(-) R.D.D.	-2000	38000
			Cash at Bank		63900
		191500			191500