N, S and B were partners in a firm sharing profits and losses in proportion of ½, 1/6, and 1/3 respectively. The Balance Sheet of the firm as at 31st March, 2017 was as follows:
B retired from the business on the above date and the partners agreed to the following:
(i) Freehold premises and stock were to be appreciated by 20% and 15% respectively.
(ii) Machinery and furniture were to be depreciated by 10% and 7% respectively.
(iii) Provision for bad debts was to be increased by Rs. 1,500.
(iv) On B’s retirement goodwill of the firm was valued at Rs. 21,000.
(v) The continuing partners decided to adjust their capitals in their new profit-sharing ratio after retirement of B. Surplus/deficit, if any, in their capital accounts was to be adjusted through their current accounts.
Prepare Realisation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.
Balance Sheet of N, S and B as at 31.3.2017
|Liabilities||Amount (Rs.)||Assets||Amount (Rs.)|
|Bills Payable||12,000||Sundry Debtors 20,000|
|General Reserve||12,000||Less: Provision for Bad Debts 1,000||19,000|