Aarav, Nirav and Purav are partners sharing profits and losses in the ratio of 3:2:1 Their Balance Sheet as on 31st March, 2020 was as follows:…

In The Books of Aarav Nirav and Purav Revaluation A/c Particulars ₹ Particulars ₹ To RDD 3,250 By building 10,000 To Machinery 6,750 By Loss on revaluation To Stock 9,000 Aarav 4,500 Nirav 3,000 Purav 1,500 9,000 19,000 19,000 Partners Capital A/c Particulars Aarav Nirav Purav Particulars Aarav Nirav Purav To Loss on Revaluation 4,500 3,000 1,500 By Balance b/d 80,000 50,000 35,000 To cash 59,500 By General Reserve 30,000 20,000 10,000 To Purav capital 9,600 6,400 By Aarav, Nirav capital 16,000 To Balance C/d 1,30,900 85,600 By Cash 35,000 25,000 1,45,000 95,000 61,000 1,45,000 95,000 61,000 Cash A/c Particulars ₹ Particulars ₹ To Balance b/d 12,500 By Purav’s Capital 59,500 To Aarav’s Capital 35,000 To Nirav’s Capital 25,000 By Balance c/d 13,000 72,500 72,500 Balance Sheet as on 1st April, 2020 Liabilities ₹ Assets ₹ Capital : Aarav 1,30,900 Building 60,000 Nirav 85,600 2,16,500 Machinery 60,750 Trade Creditors 50,000 Debtors 65,000 Less: RDD 3,250 61,750 Stock 71,000 Cash in hand 13,000 2,66,500 2,66,500 Working note : Valuation of Goodwill 31 st March, 201839,000 31 st March, 201950,000 31 st March, 202055,000 Total - 1,44,000 Average profit = 1,44,000/3 = 48,000 Goodwill =2 years purchase = 2 x 48,000 = 96,000 Purav’s share = 1/6th = 96,000/6 = 16,000 Journal entry for adjustment of goodwill Aarav capital A/c Dr.9,600 Nirav capital Dr.6,400 To Purav capital - 16,000