A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new partner from 1st April, 2019. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as at 31st March, 2019 is given below:

LiabilitiesAmount (Rs.)AssetsAmount
A’s Capital – 1,76,000 Goodwill34,000
B’s Capital –  2,54,0004,30,000    Land and Building60,000
Workmen Compensation Reserve20,000Investment (Market value Rs. 45,000)50,000
Investments Fluctuation Reserve 10,000 Debtors – 1,00,000
Employee’s Provident Fund34,000Less: Provision for Doubtful Debts – (10,000)90,000
 C’s Loan3,00,000Stock3,00,000
 Bank Balance2,50,000
 Advertising Suspense A/c10,000
 7,94,000 7,94,000

Terms of C’s admission are as follows:
(i) C contributes proportionate capital and 60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years’ purchase of super profit of last three completed years. Profits for the years ended 31st March were:
2017 − Rs. 4,80,000; 2018 − Rs. 9,30,000; 2019 − Rs. 13,80,000.
The normal profit is Rs. 5,30,000 with same amount of capital invested in similar industry.
(iii) Land and Building was found undervalued by Rs. 1,00,000.
(iv) Stock was found overvalued by Rs. 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is Rs. 11,000.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet.


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