Prem, Kumar and Aarti were partners sharing profits in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2019 was as under:
Balance Sheet of Prem, Kumar and Aarti as at 31st March, 2019
On the above date, Kumar retired. The terms of retirement were:
(i) Kumar sold his share of goodwill to Prem for Rs. 8,000 and to Aarti for Rs. 4,000.
(ii) Stock was found to be undervalued by Rs. 1,000 and building by Rs. 7,000.
(iii) Investments were sold for Rs. 11,000.
(iv) There was an unrecorded creditor of Rs. 7,000.
(v) An amount of Rs. 30,000 was paid to Kumar in cash which was contributed by Prem and Aarti in the ratio of 2 : 1. The balance amount of Kumar was settled by accepting a Bill of Exchange in favour of Kumar.
Prepare the Revaluation Account, Capital Accounts of partners and the Balance Sheet of the reconstituted firm.
|Liabilities||Amount (Rs.)||Assets||Amount (Rs.)|
|Prem 30,000||Plant and Machinery||15,000|
|Investment Fluctuation Reserve||2,000||Cash||25,000|