A, B and C were partner's in a firm sharing profit and losses in the Ratio of 5 : 3 : 2 . They admitted D into partnership for 1/5 share of profit whi - Accountancy MCQ CUET Accountancy 2022 23 Aug Shift 2 PYQs 2026 | ExamTest.live

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A, B and C were partner's in a firm sharing profit and losses in the Ratio of 5 : 3 : 2 . They admitted D into partnership for 1/5 share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash. Capital brought in by is Rs. 50, 000 . On the date of admission the Balance Sheet of A, B and C was as follows :Balance Sheet as on 31st March, 2021 Goodwill is to be valued at 3 years purchase of average profit of last 4 years which were Rs. 60, 000 (2017-18), Rs. 60, 000 (18-19), Rs. 30, 000 (19-20). On revaluation it was found that all debtors are good.What would be the effect of the line "All Debtors are good".

Solution & Step-by-step Explanation

The statement "All debtors are good" implies that there is no expectation of bad debts anymore. Therefore, the existing Provision for Doubtful Debts of Rs. 5, 000 is no longer required and needs to be written back. Decreasing a liability/provision results in a gain, which is recorded by crediting the Revaluation Account.

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A, B and C were partner's in a firm sharing profit and losses in the Ratio of 5 : 3 : 2 . They admitted D into partnership for 1/5 share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash. Capital brought in by is Rs. 50, 000 . On the date of admission the Balance Sheet of A, B and C was as follows :Balance Sheet as on 31st March, 2021 Goodwill is to be valued at 3 years purchase of average profit of last 4 years which were Rs. 60, 000 (2017-18), Rs. 60, 000 (18-19), Rs. 30, 000 (19-20). On revaluation it was found that all debtors are good.What would be the effect of the line "All Debtors are good".

Provision for Doubtful debt is Debited to old partner Capital A/c

Provision for Doubtful Debt is Debited to Revaluation Account

Provision for Doubtful Debt is Credited to old partner's Capital A/c

Provision for Doubtful Debt is Credited to Revaluation Account

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