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Total Capital = ₹2,17,100 (as of October 2005)

They agreed to admit Ashwini as a new partner on 1st April 2020 on the following terms:
1. She shall have a [tex]$ \frac{1}{4}$[/tex] share in the profits.
2. She shall bring ₹8,000 as her capital.
3. She shall bring ₹4,000 as her goodwill.
4. The motor van is to be depreciated by 10%, and stock is revalued at ₹7,000.
5. Plant and machinery are to be appreciated by 20%.
6. An amount of ₹1,200 included in creditors is no longer a liability and hence needs to be properly adjusted.

Prepare the following:
1. Profit and Loss Adjustment A/c
2. Partners' Capital A/c's
3. Balance Sheet of the new firm



Answer :

GinnyAnswer
Sure, let’s go through the steps required to achieve the solution step-by-step. Here’s how we proceed:

### Step 1: Adjustments to the Valuations
1. Motor Van Depreciation (10%):
- Depreciation = ₹ 2,17,100 10% = ₹ 21,710

2. Stock Revaluation:
- Stock is revalued at ₹ 7,000 (given but not directly used in calculations)

3. Plant and Machinery Appreciation (20%):
- Appreciation = ₹ 2,17,100 20% = ₹ 43,420

4. Creditors Adjustment:
- Adjustment = ₹ 1,200 (liability removed)

### Step 2: Adjusting the Original Total Capital
1. Original Total Capital: ₹ 2,17,100

2. Incorporate Adjustments:
- Deduct Motor Van Depreciation: ₹ 2,17,100 - ₹ 21,710 = ₹ 1,95,390
- Add Plant and Machinery Appreciation: ₹ 1,95,390 + ₹ 43,420 = ₹ 2,38,810
- Deduct Creditor Adjustment: ₹ 2,38,810 - ₹ 1,200 = ₹ 2,37,610

### Step 3: New Firm's Total Capital After Ashwini's Additions
1. Ashwini’s Capital Contribution: ₹ 8,000
2. Ashwini’s Goodwill Contribution: ₹ 4,000

3. New Total Capital:
- Adjusted Capital = ₹ 2,37,610
- Add Ashwini's Contributions: ₹ 2,37,610 + ₹ 8,000 + ₹ 4,000 = ₹ 2,49,610

### Step 4: Compilation of Final Results
Based on the above calculations:
1. Motor Van Depreciation: ₹ 21,710
2. Plant and Machinery Appreciation: ₹ 43,420
3. Adjusted Capital (after revaluation and removal of creditor liability): ₹ 2,37,610
4. New Total Capital (after including Ashwini's capital and goodwill): ₹ 2,49,610

### Preparation of Accounts and Final Balance Sheet
1. Profit and Loss Adjustment Account:
- Debit:
- Motor Van Depreciation: ₹ 21,710
- Credit:
- Plant and Machinery Appreciation: ₹ 43,420
- Creditors Adjustment: ₹ 1,200

2. Partners’ Capital Account: Includes initial capitals of old partners, Ashwini’s capital, and goodwill.

3. Balance Sheet of the New Firm:
- Newly adjusted values for motor van, plant and machinery, stock, and creditors are reflected.
- New total capital figure including Ashwini's contributions.

With these steps, we should now be able to compile detailed accounts and the final balance sheet reflecting all adjustments related to Ashwini joining the partnership.

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