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They decided to admit \( C \) as a new partner and \( P \) - ₹4,20,000 in the ratio of 2:1:1. For this purpose, they decided that:

a. Fixed assets were to be depreciated by \( 10 \% \). A provision of \( 6 \% \) be made on debtors for doubtful debts.
b. Stock be valued at ₹1,90,000. An amount of ₹3,700 included in creditors is not likely to be claimed.
c. Investment has proved to be ₹48,000 and it has been taken by \( A \) and \( B \) equally.

Partners decided to record the revised values in the books. However, they do not want to disturb the reserve.

You are required to prepare the Journal Entries, Capital Accounts of the partners, and the Balance Sheet.

\( X \) and \( Y \), sharing profits in the ratio of \( 3:2 \), had the following Balance Sheet as on March 31, 2008:

a. A provision of [tex]\( 5 \% \)[/tex] is to be created on debtors.



Answer :

GinnyAnswer
To solve this problem, we need to make the necessary adjustments to the values of assets and liabilities as described, and prepare journal entries, capital accounts, and the revised balance sheet. Let's break this down step-by-step:

### Original Balance:
1. The initial value of fixed assets is \( 4,20,000 \).

### Adjustments:
1. Depreciation of Fixed Assets:
- Fixed assets need to be depreciated by \( 10\% \).
- Depreciation amount = \( 4,20,000 \times 10\% = 42,000 \)
- Revised value of fixed assets = \( 4,20,000 - 42,000 = 3,78,000 \)

2. Provision for Doubtful Debts on Debtors:
- There is no initial amount given for debtors, so the provision for doubtful debts = \( 0 \)
- Provision for Doubtful Debts = \( 0 \times 6\% = 0 \)

3. Revaluation of Stock:
- Stock is to be valued at Rs. \( 1,90,000 \).

4. Adjustment of Creditors:
- An amount of Rs. \( 3,700 \) included in creditors is not likely to be claimed.
- Revised value of creditors = \( 0 - 3,700 = -3,700 \)

5. Investment Taken by Partners A and B:
- Investment is worth Rs. \( 48,000 \) and it is taken equally by partners A and B.
- Amount taken by each partner = \( 48,000 \div 2 = 24,000 \)

### Journal Entries:
1. Depreciation on Fixed Assets:
- Dr. Depreciation \( 42,000 \)
- Cr. Fixed Assets \( 42,000 \)

2. Provision for Doubtful Debts:
- As the debtors' initial value is zero, the provision will also be zero.
- Dr. Provision for Doubtful Debts \( 0 \)
- Cr. Debtors \( 0 \)

3. Adjustment for Stock Value:
- Dr. Stock \( 1,90,000 \)
- Cr. Revaluation Reserve \( 1,90,000 \)

4. Reduction in Creditors:
- Dr. Creditors \( 3,700 \)
- Cr. Revaluation Reserve \( 3,700 \)

5. Investment Taken by Partners A and B:
- Dr. Investment \( 48,000 \)
- Cr. Partner A \( 24,000 \)
- Cr. Partner B \( 24,000 \)

### Capital Accounts:
Assuming initial amounts for C are 0 (they are admitted newly):
- Capital Account of Partner C: \( 4,20,000 \)
- Capital Account of Partner A: \( 24,000 \)
- Capital Account of Partner B: \( 24,000 \)

### Revised Balance Sheet:
1. Assets:
- Fixed Assets = \( 3,78,000 \)
- Debtors (after provision) = \( 0 \)
- Stock = \( 1,90,000 \)

2. Liabilities:
- Creditors = \( -3,700 \)

3. Capital Accounts:
- \( \text{C} : 4,20,000 \)
- \( \text{A} : 24,000 \)
- \( \text{B} : 24,000 \)

Putting it all together, we have:

### Journal Entries:
| Description | DR Amount | CR Amount |
|------------------------------------|-----------|-----------|
| Depreciation on Fixed Assets | 42,000 | 42,000 |
| Provision for Doubtful Debts | 0 | 0 |
| Stock Value | 1,90,000 | 1,90,000 |
| Reduction in Creditors | 3,700 | 3,700 |
| Investment taken by Partners A & B | 48,000 | 48,000 |

### Capital Accounts:
| Partner | Amount (Rs) |
|---------|-------------|
| C | 4,20,000 |
| A | 24,000 |
| B | 24,000 |

### Revised Balance Sheet:
| Item | Amount (Rs) |
|-----------------------------|-------------|
| Fixed Assets | 3,78,000 |
| Debtors (after provision) | 0 |
| Stock | 1,90,000 |
| Creditors | -3,700 |
| Capital Accounts | |
| - C | 4,20,000 |
| - A | 24,000 |
| - B | 24,000 |

Thus, all the necessary adjustments and updated accounts have been provided to admit C as a new partner and reflect the revised values in the accounting books.