Revaluation of Assets and Liabilities of the firm

  1. Abdulla and Bader are partners sharing profit and losses in the ratio 3:2. From the following Trial Balance and adjustments;  prepare the following:

 

  1. Adjusting Entries (2.5 marks)
  2. Income Statement for the year ended March 31, 2019 (2.5)
  3. Profit and Loss Appropriation Account (3.0)
  4. Partners’ Capital Accounts (2.5)
  5. Balance Sheet (2.5)

 

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Trial Balance as on 31st March, 2019

 

Debit Balances Amt. Credit Balances Amt.
Opening stock 20,000 Capital A/cs -Abdulla

Bader

40,000

30,000

Purchases 30,000 Sales 70,000
Debtors 12,000 Sundry Creditors 21,000
Wages 5,000 Bills payable 20,000
Salaries 10,000 Discount 5,000
Land and Building 30,000 Outstanding Rent 1,500
Plant and Machinery 25,000    
Furniture 16,000    
Advertisement 6,000    
Bills Receivable 8,000    
Insurance 2,000    
Drawings – Saleh

Ammar

2,000

3,000

   
Cash in hand 5,500    
Rent 10,000    
Power and fuel 3,000    
  1,87,500   1,87,500

Adjustments:

  • Stock on hand on 31st March, 2019 was at OMR 35,000.
  • Provision for doubtful debts at 5% on
  • Depreciate Land and Building at 5% and Machinery at 10%.
  • Outstanding expenses were wages OMR 2,000 and salary OMR 1,000.
  • Prepaid advertising is OMR 1,200.
  • The following were agreed upon:
  1. Both partners are entitled to a salary of OMR 500 each per month.
  2. Interest on drawing is 5% p. a.
  3. Interest on capital is 8% p.a.

 

 

  1. Admission of a Partner (2 marks)

 

1)  Explain the following adjustments required at the time of admission of a partner:

  1. Revaluation of Assets and Liabilities of the firm.
  2. Adjustment of Accumulated Reserves and Profits /Losses.

2)  Why is there admission of a new partner in a partnership?

 

 

From the above Trial Balance and adjustments prepare Trading and Profit and Loss Account for the year ended 31st March, 2012 and Balance Sheet as on that date.

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