Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2019:
They admit C into partnership on the following terms:
(a) C was bring RS.7,500 as his capital and RS.3,000 as goodwill for 1/4th share in the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry Debtors RS.375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare Profit and Loss Adjustment Account (or Revaluation Account), Partners' Capital Accounts and Balance Sheet of the new firm.

Explanation

Revaluation Gain (Profit)-RS.750, Capital A/cs,-RS.11,250, C-RS.7,500, Balance Sheet Total-RS.69,200.