Q. R, M and L were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Partner R died on 20th February 2011. The Balance Sheet of the firm On that date was as follows : 
Liabilities Amount Assets Amount
R's Capitals
M's Capitals
L's Capitals
Loan from R
General Reserve
Creditors
12,000 
16,000 
10,000 
  7,000
20,000
19,000
Machinery 
Furniture 
Stock 
Debtors 
Cash 
Profit and Loss Account 
41,000 
  6,000 
  9,000 
15,000 
  3,000 
10,000 
  84,000   84,000

According to the partnership Deed, on the death of a partner, the 
executor of the deceased partner will be entitled to 
(i )Balance in Capital Account; 
(ii ) His share in profit/loss on revaluation Of assets and reassessment of liabilities which were follows : 
(a) Machinery is revalued at 45,000 and furniture at 7,000. 
(b) A provision of 10% was to be created for doubtful debts. 
(iii) The net amount payable to R was transferred to his executor loan account which was to be paid later.
 
Prepare Revaluation Account, Partners' Capital Accounts, R's Executor's A/c and the Balance Sheet of L and M who decided to continue the business keeping their capital balances in their new profit sharing ratio. Any surplus or deficit was to be transferred to current accounts of the partners.

 

Dear Student
 
Revaluation A/c
Date Particulars Amount (in Rs) Date   Particulars Amount (in Rs)
  Provision for Doubtful Debt 1,500   Furniture 1,000
        Machinery 4,000
           
           
  Profit transferred in 5:3:2        
  R 1,750      
  M 1,050      
  L 700      
           
    5,000     5,000

Partner's Capital A/c
Particulars R M L Particulars R M L
Profit and Loss A/c 5,000 3,000 2,000 Balance b/d 12,000 16,000 10,000
Current A/c     419 Revaluation A/c 1,750 1,050 700
R's Executors A/c 25,750     Loan From R 7,000    
        General Reserve 10,000 6,000 4,000
Bal C/d 0 20,469 12,281 Current A/c   419  
               
               
               
               
  30,750 23,469 14,700   30,750 23,469 14,700
 
Balance sheet
  Liabilities Amount (in Rs)   Assets Amount (in Rs)
  Provision for Doubtful debt 1,500   Machinery 45,000
  Creditors 19,000   Furniture 7,000
  R's Executor's A/c 25,750   Stock 9,000
        Debtors 15,000
  Capital A/c     Cash 3,000
  20,469      
  L 12,281   M's Current A/c 419
           
  L's Current A/c 419      
           
           
           
    79,419     79,419

R's Executors A/c
Date Particulars Amount (in Rs) Date   Particulars Amount (in Rs)
           
        R's Capital A/c 25,750
           
           
           
  Bal C/d 25,750      
           
           
           
    25,750     25,750
 
 Capital Adjustment
Capital of M after all adjustment                20,050
Capital of L after all adjustment                12,700
Total                 32,750
New PSR between M and L    5:3 
Proportionate Capital of M  32,750 x 5/8              20,469
Current Account Debited 20,469 - 20,050                    419
     
Proportionate Capital of L 32,750 x 3/8              12,281
Current Account Credited 12,700 - 12,281                    419

Please note that R's loan was transferred to his capital a/c as no info regarding the payment of the same was given.


Regards

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