Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2019:

Liabilities   Amount
Assets   Amount
Capital A/c : Building25,000
A- 15,000Plant and Machinery17,500
B – 10,00025,000Stock10,000
Sundry Creditors32,950Sundry Debtors4,850
  Cash in Hand600

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.


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