R and S were partners in a firm sharing profits and losses in the ratio of 3: 2. Their Balance Sheet as at 31st March,2020 was as follows:

Balance Sheet of R and S as at 31st March, 2020

Liabilities Amount ₹ Assets Amount ₹
Capitals: Cash at Bank 10,000
R 60,000 Debtors 65,000
S 40,000 1,00,000 Less: Provision for
Doubtful Debts 5,000

General Reserve 20,000 Stock 20,000
Creditors 20,000 Machinery 50,000
Bills payable 20,000 Land and Building 20,000
1,60,000 1,60,000

M was admitted on the above date as a new partner for 1/5th share in the profits of the firm.  The terms of agreement were as follows:

  1. M will bring 80,000 as his capital and 60,000 as his share of goodwill premium.
  2. Machinery was revalued at 45,000
  3. Stock will be reduced by l0% and Land and Building will be appreciated by 40%.

Prepare Revaluation Account and Partners’ Capital Accounts.

Marks-8, CBSE:2020-21/Compartment/Q-21*

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