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Partnership Revaluation of Assets.

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Presentation on theme: "Partnership Revaluation of Assets."— Presentation transcript:

1 Partnership Revaluation of Assets

2 Introduction Assets should be revalued when there is a change in the partnership, such as: Admission of new partner Retirement/ withdrawal of partners Change in the profit sharing ratio

3 Dr Assets Cr Revaluation With decrease in value of assets Dr Revaluation Cr Assets With increase in value of assets Cr Provision for bad debts With increase in provision for bad debts Cr Capital With profit on revaluation (sharing among partners, according to old profit-sharing ratio Dr Capital With loss on revaluation (shared among partners, according to the old profit-sharing ratio)

4 Example 1

5 Tang, Wong and Fong were in partnership, sharing profits and losses equally.
On 1 April 1996, tang decided to retire from the business and Lee joined as a new partner. The new profit-sharing ratio among Wong, Fong and Lee became 2:2:1 respectively No entry has been made for the change of partnership. Balance sheet as at 1 April 1996 Fixed assets Premises Furniture & fitting Motor vehicles Current assets Stock Debtors Cash Capital: Tang Wong Fong Current:Tang Wong Fong Liabilities Creditors

6 Additional information: Goodwill is to be revalued at $60000
The assets are revalued as follows: Premises $ Furniture $191000 Motor vehicles $350000 Provision for bad debts 10% of debtors Tang took out cash $ and left the balance to the business as a loan Lee introduced $ cash and a vehicle of $ into the business

7 Provision for bad debts 45000 Goodwill 60000
Revaluation Decrease in value: Premises Increase in value: Furniture Motor vehicles Provision for bad debts Goodwill Tang Wong Fong Goodwill Bal b/f Revaluation Capital Tang Wong Fong Lee Tang Wong Fong Lee Cash Bal b/f Loan Revaluation Bal c/f Current Cash Vehicle

8 Balance sheet as at 1 April 1996
Wong, Fong and Lee Balance sheet as at 1 April 1996 Fixed assets Goodwill Premises Furniture Motor vehicles ( ) Current assets Stock Debtors Less provision for bad debts Cash ( ) Less: Current liabilities Creditors (145000) New values

9 Capital: Wong Fong Lee Current: Wong Fong Long term liabilities Loans from Tang

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