L, M and N were partners in a firm sharing profit & losses in the ratio of 2:2:3. On 31st March 2023, their Balance Sheet was as follows:

Liabilities Amount
Assets Amount
Creditors 80,000 Land and Building 5,00,000
Bank overdraft 22,000 Machinery 2,50,000
Long term debts 2,00,000 Furniture 3,50,000
Capital Accounts: Investments 1,00,000
L 6,25,000 Stock 4,00,000
M 4,00,000 Debtors 2,00,000
N 5,25,000 15,50,000 Bank 20,000
Employees provident fund
Deferred Advertisement Expenditure
18,90,000 18,90,000

On 31st March 2023, M retired from the firm and remaining partners decided to carry on business. It was decided to revalue assets and liabilities as under: 

  1. a) Land and Building be appreciated by 2,40,000 and Machinery be depreciated 10%. 
  2. b) 50% of investments were taken by the retiring partner at book value. 
  3. c) Provision for doubtful debts was to be made at 5% on debtors.
  4. d) Stock will be valued at market price which is 1,00,000 less than the book value. 
  5. e) Goodwill of the firm be valued at 5,60,000. L and N decided to share future profits and losses in the ratio of 2:3. 
  6. f) The total capital of the new firm will be 32,00,000 which will be in proportion of profit – sharing ratio of L and N. 
  7. g) Gain on revaluation account amounted to 1,05,000. 

Prepare Partner’s Capital accounts and Balance sheet of firm after M’s retirement.

Marks-6, CBSE:2023-24/Sample/Q-24*

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