Karim, Rehman and Navel are partners sharing profits and losses in the ratio of 5: 3: 2. Their Balance Sheet as at 31st March, 2022 stood as follows:

LiabilitiesAmount (Rs.)AssetsAmount
Capital A/c:Land and Building2,40,000
Rehman2,50,000Computers Investments (Market value Rs. 90,000)1,00,000
Navel2,00,0007,00,000Sundry Debtors50,000
General Reserve 60,000Cash in Hand10,000
Investments Fluctuation Reserve 30,000Cash at Bank55,000
Sundry Creditors 90,000Advertisement Suspense5,000
  8,80,000 8,80,000

They decided to share profits equally w.e.f. 1st April, 2022. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at Rs. 20,000 was unrecorded and is now to be recorded in the books.
(v) Out of Sundry Creditors, Rs. 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years’ purchase of last 3 years profits. Profits being for 2022 – Rs.  50,000 (Loss); 2021 – Rs. 2,50,000 and 2020 − Rs. 2,50,000.
(vii) Navel was to carry out the work for reconstituting the firm at a remuneration (including expenses) of Rs. 5,000. Expenses came to Rs. 3,000.
Pass Journal entries and prepare Revaluation Account.


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