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Read the following information and answer the given questions:
Abha and Vibha are partners, who share profits and losses in the ratio of 2 : 1. From the 1st January 2021, the partners decided to change their profit - sharing ratio to 3 : 2 and agreed upon the following :
(i) Goodwill of the firm valued at ₹ 45,000.
(ii) Creditors of ` 8,000 are not likely to be claimed hence should be written off.
(iii) Land and Building is overvalued by 10%.
(iv) Provision for doubtful debts to be reduced to ₹ 3,000 The partners neither want to record the goodwill nor to distribute the general reserve.
Which account will be opened to transfer the amount of creditors to be written off?
- a)Realisation Account
- b)Revaluation Account
- c)Both (A) and (B)
- d)Neither (A) nor (B)
Correct answer is option 'B'. Can you explain this answer?
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Read the following information and answer the given questions:Abha an...
Revaluation account is a nominal account, which is prepared for the distribution and transfer of profits and losses arising due to the increase and decrease of the book value of assets and liabilities during change in profit sharing ratio, admission of a partner, retirement of a partner and death of a partner.
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Read the following information and answer the given questions:Abha an...
Answer:
To transfer the amount of creditors to be written off, the partners will open a Revaluation Account.
Reasoning:
The Revaluation Account is opened when there is a change in the profit-sharing ratio among the partners. In this case, Abha and Vibha have decided to change their profit-sharing ratio from 2:1 to 3:2, which indicates a change in the partnership agreement.
The Revaluation Account is used to adjust the values of assets and liabilities to their current market values after considering any changes in the partnership agreement. In this case, the following adjustments need to be made:
(i) Goodwill: The value of goodwill is ₹45,000. Since the partners do not want to record the goodwill, it will not be considered in the revaluation.
(ii) Creditors: The partners have agreed to write off ₹8,000 of creditors that are not likely to be claimed. This amount will be transferred to the Revaluation Account.
(iii) Land and Building: The land and building is overvalued by 10%. The value of the land and building will be reduced by 10% and the adjustment will be made in the Revaluation Account.
(iv) Provision for doubtful debts: The provision for doubtful debts is to be reduced to ₹3,000. The excess provision will be reversed and the adjustment will be made in the Revaluation Account.
After making these adjustments, the Revaluation Account will show the revised values of assets and liabilities. Any profit or loss arising from these adjustments will be distributed among the partners in their new profit-sharing ratio.
Therefore, the correct answer is option 'B' - Revaluation Account.
To transfer the amount of creditors to be written off, the partners will open a Revaluation Account.
Reasoning:
The Revaluation Account is opened when there is a change in the profit-sharing ratio among the partners. In this case, Abha and Vibha have decided to change their profit-sharing ratio from 2:1 to 3:2, which indicates a change in the partnership agreement.
The Revaluation Account is used to adjust the values of assets and liabilities to their current market values after considering any changes in the partnership agreement. In this case, the following adjustments need to be made:
(i) Goodwill: The value of goodwill is ₹45,000. Since the partners do not want to record the goodwill, it will not be considered in the revaluation.
(ii) Creditors: The partners have agreed to write off ₹8,000 of creditors that are not likely to be claimed. This amount will be transferred to the Revaluation Account.
(iii) Land and Building: The land and building is overvalued by 10%. The value of the land and building will be reduced by 10% and the adjustment will be made in the Revaluation Account.
(iv) Provision for doubtful debts: The provision for doubtful debts is to be reduced to ₹3,000. The excess provision will be reversed and the adjustment will be made in the Revaluation Account.
After making these adjustments, the Revaluation Account will show the revised values of assets and liabilities. Any profit or loss arising from these adjustments will be distributed among the partners in their new profit-sharing ratio.
Therefore, the correct answer is option 'B' - Revaluation Account.
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Read the following information and answer the given questions:Abha and Vibha are partners, who share profits and losses in the ratio of 2 : 1. From the 1st January 2021, the partners decided to change their profit - sharing ratio to 3 : 2 and agreed upon the following :(i) Goodwill of the firm valued at ₹ 45,000.(ii) Creditors of ` 8,000 are not likely to be claimed hence should be written off.(iii) Land and Building is overvalued by 10%.(iv) Provision for doubtful debts to be reduced to ₹ 3,000 The partners neither want to record the goodwill nor to distribute the general reserve.Which account will be opened to transfer the amount of creditors to be written off?a)Realisation Accountb)Revaluation Accountc)Both (A) and (B)d)Neither (A) nor (B)Correct answer is option 'B'. Can you explain this answer?
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Read the following information and answer the given questions:Abha and Vibha are partners, who share profits and losses in the ratio of 2 : 1. From the 1st January 2021, the partners decided to change their profit - sharing ratio to 3 : 2 and agreed upon the following :(i) Goodwill of the firm valued at ₹ 45,000.(ii) Creditors of ` 8,000 are not likely to be claimed hence should be written off.(iii) Land and Building is overvalued by 10%.(iv) Provision for doubtful debts to be reduced to ₹ 3,000 The partners neither want to record the goodwill nor to distribute the general reserve.Which account will be opened to transfer the amount of creditors to be written off?a)Realisation Accountb)Revaluation Accountc)Both (A) and (B)d)Neither (A) nor (B)Correct answer is option 'B'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following information and answer the given questions:Abha and Vibha are partners, who share profits and losses in the ratio of 2 : 1. From the 1st January 2021, the partners decided to change their profit - sharing ratio to 3 : 2 and agreed upon the following :(i) Goodwill of the firm valued at ₹ 45,000.(ii) Creditors of ` 8,000 are not likely to be claimed hence should be written off.(iii) Land and Building is overvalued by 10%.(iv) Provision for doubtful debts to be reduced to ₹ 3,000 The partners neither want to record the goodwill nor to distribute the general reserve.Which account will be opened to transfer the amount of creditors to be written off?a)Realisation Accountb)Revaluation Accountc)Both (A) and (B)d)Neither (A) nor (B)Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following information and answer the given questions:Abha and Vibha are partners, who share profits and losses in the ratio of 2 : 1. From the 1st January 2021, the partners decided to change their profit - sharing ratio to 3 : 2 and agreed upon the following :(i) Goodwill of the firm valued at ₹ 45,000.(ii) Creditors of ` 8,000 are not likely to be claimed hence should be written off.(iii) Land and Building is overvalued by 10%.(iv) Provision for doubtful debts to be reduced to ₹ 3,000 The partners neither want to record the goodwill nor to distribute the general reserve.Which account will be opened to transfer the amount of creditors to be written off?a)Realisation Accountb)Revaluation Accountc)Both (A) and (B)d)Neither (A) nor (B)Correct answer is option 'B'. Can you explain this answer?.
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