| Liabilities | Amount (Rs.) | Assets | Amount (Rs.) |
| Creditors | 2,00,000 | Building | 2,00,000 |
| Employees’ Provident Fund | 1,50,000 | Machinery | 3,00,000 |
| General Reserve | 36,000 | Furniture | 1,10,000 |
| Investment Fluctuation Reserve | 14,000 | Investment (Market value Rs. 86,000) | 1,00,000 |
| Capital A/c : | Debtors | 80,000 | |
| X – 3,00,000 | Cash at Bank | 1,90,000 | |
| Y – 2,50,000 | Advertisement Suspense | 1,20,000 | |
| Z – 1,50,000 | 7,00,000 | ||
| 11,00,000 | 11,00,000 |
X died on 1st October, 2020 and Y and Z decide to share future profits in the ratio of 7: 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 2 ½ years’ purchase of average of four completed years’ profit which were:
| Year | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Profits (Rs.) | 1,70,000 | 1,80,000 | 1,90,000 | 1,80,000 |
(ii) X’s share of profit from the closure of last accounting year till date of death be calculated on the basis of last years’ profit.
(iii) Building undervalued by Rs. 2,00,000; Machinery overvalued by Rs. 1,50,000 and Furniture overvalued by Rs. 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net Amount payable to X’s executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X’s Capital Account and X’s Executor’s Account as on 1st October, 2020.
SOLUTION
