| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
| Capital A/c : | Building | 25,000 | |
| A- 15,000 | Plant and Machinery | 17,500 | |
| B – 10,000 | 25,000 | Stock | 10,000 |
| Sundry Creditors | 32,950 | Sundry Debtors | 4,850 |
| Cash in Hand | 600 | ||
| 57,950 | 57,950 |
They admit C into partnership on the following terms:
(a) C was to bring Rs. 7,500 as his capital and Rs. 3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtor Rs. 375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Partners’ Capital Accounts and Balance Sheet of the new firm.
Solution
