T.S. Grewal Class 12 Chapter 5 Q.25 - Retirement of a Partner

Question 25

Leena, Madan and Naresh were partners sharing profits and losses in the ratio of 2 : 2 : 1. Madan retired on 31st March, 2024. On that date the following was agreed: (a) Building to be appreciated by 20% (book value ₹1,00,000). (b) Plant and Machinery to be reduced by 10% (book value ₹40,000). (c) A Provision of 5% for Doubtful Debts to be created on debtors of ₹20,000. (d) Stock of Raw Materials to be valued at ₹18,000 (book value ₹20,000) and Finished Goods at ₹35,000 (book value ₹30,000). (e) An old computer previously written off was sold for ₹2,000 as scrap. (f) The firm had to pay ₹5,000 to an injured employee. Prepare the Revaluation Account.

Solution

REVALUATION ACCOUNT

Particulars	₹	Particulars	₹
To Plant and Machinery A/c	4,000	By Building A/c	20,000
To Provision for Doubtful Debts A/c	1,000	By Stock of Finished Goods A/c	5,000
To Stock of Raw Materials A/c	2,000	By Computer A/c (scrap)	2,000
To Workmen’s Compensation Claim A/c	5,000
To Profit transferred to:
Leena’s Capital A/c 6,000
Madan’s Capital A/c 6,000
Naresh’s Capital A/c 3,000	15,000
Total	27,000	Total	27,000

Revaluation profit ₹15,000 is shared by all partners in the old ratio 2 : 2 : 1.