Arjun and Kavya were partners in a firm sharing profits and losses in the ratio of $\displaystyle 3$ : 2. Their Balance Sheet as at 31st March, $\displaystyle 2025$ was as follows : Balance Sheet of Arjun and Kavya as at 31st March, $\displaystyle 2025$ Liabilities Amount Assets Amount ( ) ( ) Capitals : Building $\displaystyle 6,00,000$ Arjun $\displaystyle 4,80,000$ Investments $\displaystyle 2,80,000$ Kavya $\displaystyle 5,20,000$ $\displaystyle 10,00,000$ Stock $\displaystyle 3,76,000$ Debtors $\displaystyle 1,60,000$ Investment Less : Provision Fluctuation Reserve $\displaystyle 1,00,000$ for doubtful debts $\displaystyle 7,000$ $\displaystyle 1,53,000$ Creditors $\displaystyle 4,00,000$ Cash $\displaystyle 91,000$ $\displaystyle 15,00,000$ $\displaystyle 15,00,000$ $\displaystyle 1$ On 1st April, $\displaystyle 2025$, Raghav was admitted as a new partner for th $\displaystyle 4$ share in the profits of the firm on the following terms : (i) Raghav shall bring ₹ $\displaystyle 5,00,000$ as his capital. (ii) Goodwill of the firm was valued at ₹ $\displaystyle 4,00$,000. Raghav was unable to bring his share of goodwill premium in cash. (iii) Provision for doubtful debts was to be created @ $\displaystyle 10$% on debtors. (iv) Investments were valued at ₹ $\displaystyle 2,00,000$ and building was to be brought down to $\displaystyle 5,00$,000. (v) Capitals of Arjun and Kavya were to be adjusted on the basis of Raghav's capital in the business. Actual cash was to be paid off or brought in by the old partners as the case may be. Prepare Revaluation Account and Partners' Capital Accounts.

OR

Aarav, Kunal and Manav were partners in a firm sharing profits and losses in the ratio of $\displaystyle 5$ : $\displaystyle 3$ : 2. Their Balance Sheet as at 31st March, $\displaystyle 2025$ was as follows : Balance Sheet of Aarav, Kunal and Manav as at 31st March, $\displaystyle 2025$ Liabilities Amount Assets Amount ( ) ( ) Sundry Creditors $\displaystyle 70,000$ Cash $\displaystyle 2,30,000$ Workmen Compensation Reserve $\displaystyle 1,00,000$ Debtors $\displaystyle 90,000$ Less : Provision for doubtful debts $\displaystyle 10,000$ $\displaystyle 80,000$ Stock $\displaystyle 1,60,000$ Capitals : Machinery $\displaystyle 2,50,000$ Aarav ₹ $\displaystyle 3,00,000$ Building $\displaystyle 1,50,000$ Kunal ₹ $\displaystyle 2,50,000$ Manav $\displaystyle 1,50,000$ $\displaystyle 7,00,000$ $\displaystyle 8,70,000$ $\displaystyle 8,70,000$ Aarav retired on the above date and it was agreed that : (i) Kunal and Manav will share future profits in the ratio of $\displaystyle 1$ : 4. (ii) Goodwill of the firm be valued at ₹ $\displaystyle 6,00,000$ and the retiring partner's share would be adjusted through the capital accounts of the remaining partners. (iii) An unrecorded creditor of $\displaystyle 2$' $\displaystyle 20,000$ was to be taken into account. (iv) Debtors of ₹ $\displaystyle 15,000$ were to be written off as bad debts. (v) Liability on account of workmen compensation amounted to ₹ $\displaystyle 40$,000. (vi) Amount payable to Aarav was transferred to his loan account. Pass necessary journal entries for the above transactions in the books of the firm on Aarav's retirement.

Books of Arjun, Kavya and Raghav Dr. Revaluation A/c Cr. Particulars Amount Particulars Amount (₹) (₹) To Provision for doubtful debts A/c $\displaystyle 9,000$ By Loss transferred to capital $\displaystyle 1$/$\displaystyle 2$ A/c: Arjun $\displaystyle 65,400$ To Building A/c $\displaystyle 1,00,000$ Kavya $\displaystyle 43,600$ $\displaystyle 1,09,000$ $\displaystyle 1,09,000$ $\displaystyle 1,09,000$ Dr. Partner’s Capital Accounts Cr. Particulars Arjun Kavya Raghav Particulars Arjun Kavya Raghav To $\displaystyle 65,400$ $\displaystyle 43,600$ By Balance Revaluation b/d $\displaystyle 4,80,000$ $\displaystyle 5,20,000$ (Loss) $\displaystyle 1$/$\displaystyle 2$ By Cash/Bank $\displaystyle 5,00,000$ A/c By Investment Fluctuation $\displaystyle 12,000$ $\displaystyle 8,000$ Reserve $\displaystyle 1$ By Raghav’s Current a/c $\displaystyle 60,000$ $\displaystyle 40,000$ $\displaystyle 1$ To Balance By Cash A/c $\displaystyle 4,13,400$ $\displaystyle 75,600$ c/d $\displaystyle 1$/$\displaystyle 2$ $\displaystyle 9,00,000$ $\displaystyle 6,00,000$ $\displaystyle 5,00,000$ $\displaystyle 1$ $\displaystyle 9.65.400$ $\displaystyle 6.43.600$ $\displaystyle 5,00,000$ $\displaystyle 9,65,400$ $\displaystyle 6,43,600$ $\displaystyle 5,00,000$ Working Note: Raghav’s Capital = ₹ $\displaystyle 5,00,000$ Raghav’s share = ¼ Remaining share = $\displaystyle 1$- ¼ = ¾ Arjun’s new share = ¾ x $\displaystyle 3$/$\displaystyle 5$ = $\displaystyle 9$/$\displaystyle 20$ Kavya’s new share = ¾ x $\displaystyle 2$/$\displaystyle 5$ = $\displaystyle 6$/$\displaystyle 20$ New Profit-sharing ratio = $\displaystyle 9$:$\displaystyle 6$:$\displaystyle 5$ Total capital of the new firm = ₹ $\displaystyle 5,00,000$ X $\displaystyle 4$/$\displaystyle 1$ = ₹ $\displaystyle 20,00,000$ Arjun’s New Capital = $\displaystyle 9$/$\displaystyle 20$ x ₹ $\displaystyle 20,00,000$ = ₹ $\displaystyle 9,00,000$ Kavya’s New Capital = $\displaystyle 6$/$\displaystyle 20$ x ₹ $\displaystyle 20,00,000$ = ₹ $\displaystyle 6,00,000$ Q (b). Aarav, Kunal and Manav were partners……………….. Ans. Books of Aarav, Kunal and Manav Journal Date Particulars L. Dr. Cr. F. Amount Amount (₹) (₹) $\displaystyle 2025$ March $\displaystyle 31$ Manav’s Capital A/c Dr. $\displaystyle 3,60,000$ To Aarav’s Capital A/c $\displaystyle 3,00,000$ To Kunal’s Capital A/c $\displaystyle 60,000$ (Adjustment for goodwill on Aarav’s retirement) March $\displaystyle 31$ Revaluation A/c Dr. $\displaystyle 20,000$ To Creditors A/c $\displaystyle 20,000$ (Unrecorded creditors taken into account) March $\displaystyle 31$ Bad debts A/c Dr. $\displaystyle 15,000$ To Debtors A/c $\displaystyle 15,000$ (Bad debts written off) March $\displaystyle 31$ Provision for Doubtful Debts A/c Dr. $\displaystyle 10,000$ Revaluation A/c Dr. $\displaystyle 5,000$ To Bad Debts A/c $\displaystyle 15,000$ (Bad debts charged to provision for doubtful debts and balance to revaluation account) March $\displaystyle 31$ Workmen Compensation Reserve A/c Dr. $\displaystyle 1,00,000$ To Claim for Workmen Compensation A/c $\displaystyle 40,000$ To Aarav’s Capital A/c $\displaystyle 30,000$ To Kunal’s Capital A/c $\displaystyle 18,000$ To Manav’s Capital A/c $\displaystyle 12,000$ (Workmen Compensation Reserve transferred to Claim for workmen compensation account and balance distributed among partners) Or Workmen Compensation Reserve A/c Dr. $\displaystyle 40,000$ To Claim for Workmen Compensation A/c $\displaystyle 40,000$ (Workmen Compensation Reserve transferred to Claim for workmen compensation account) Workmen Compensation Reserve A/c Dr $\displaystyle 60,000$ To Aarav’s Capital A/c $\displaystyle 30,000$ To Kunal’s Capital A/c $\displaystyle 18,000$ To Manav’s Capital A/c $\displaystyle 12,000$ (Balance Workmen Compensation Reserve distributed in old profit-sharing ratio) $\displaystyle 11$ March $\displaystyle 31$ Aarav’s Capital A/c Dr. $\displaystyle 12,500$ Kunal’s Capital A/c Dr. $\displaystyle 7,500$ Manav’s Capital A/c Dr. $\displaystyle 5,000$ To Revaluation A/c $\displaystyle 25,000$ (Revaluation loss borne by partners) March $\displaystyle 31$ Aarav’s Capital A/c Dr. $\displaystyle 6,17,500$ To Aarav’s Loan A/c $\displaystyle 6,17,500$ (Amount due to Aarav transferred to his loan account)