Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Accounting for Partnerships: Goodwill and Partnership businesses: Revaluation of Partnership Assets
- As already pointed out in another post, sometimes it is necessary for a partnership to revalue its assets
- We have already looked at the entries necessary to record these changes in value
- Now we will look at an example of how these entries are recorded in the books of the partnership
Example Question
Below is the Statement of Financial Position for Pedzisai, Rateyiwa and Sauramba as at 31 December 20×8
$ | $ | |
Buildings at cost | 80 000 | |
Motor vehicles (at NBV) | 16 500 | |
Office fittings (at NBV) | 1 800 |
|
98 300 | ||
Inventory | 6 100 | |
Trade Receivables | 7 400 | |
Bank | 800 | |
14 300 | ||
112 600 |
||
Capitals: | Pedzisai | 60 000 |
Rateyiwa | 30 000 | |
Sauramba | 22 600 | |
112 600 |
The above partners have always shared profits and losses in the ratio: Pedzisai 4: Rateyiwa 2: Sauramba 1. From 1 January the assets were to be revalued as the profit sharing ratios are to be altered soon.
The following assets are to be revalued to the figures shown:
- Buildings $106 000;
- Motor vehicles $13 000;
- Inventory $4 894;
- Office fittings $1 450
Required:
- You are required to show all the ledger accounts necessary to record the revaluation.
- Draw up a balance sheet as at 1 January 20X9.
Solution
- The Revaluation Entries
Pedzisai | Rateyiwa | Sauramba | Capital Accounts | Pedzisai | Rateyiwa | Sauramba | ||
Details | $ | $ | $ | Details | $ | $ | $ | |
Balance c/d | 71 968 | 35 984 | 25 592 | Balance b/d | 60 000 | 30 000 | 22 600 | |
Profit on revaluation | 11 968 | 5 984 | 2 992 | |||||
71 968 | 35 984 | 25 592 | 71 968 | 35 984 | 25 592 |
|||
Building Account | ||||||||
Details | Amount($) | Details | Amount($) | |||||
Balance b/d | 80 000 | Balance c/d | 106 000 | |||||
Revaluation: Increase | 26 000 | |||||||
106 000 | 106 000 | |||||||
Motor Vehicles Account | ||||||||
Details | Amount($) | Details | Amount($) | |||||
Balance b/d | 16 500 | Revaluation: Reduction | 3 500 | |||||
Balance c/d | 13 000 | |||||||
16 500 | 16 500 | |||||||
Inventory Account | ||||||||
Details | Amount($) | Details | Amount($) | |||||
Balance b/d | 6 100 | Revaluation: Reduction | 1 206 | |||||
Balance c/d | 4 894 | |||||||
6 100 | 6 100 | |||||||
Office Fittings Account | ||||||||
Details | Amount($) | Details | Amount($) | |||||
Balance b/d | 1 800 | Revaluation: Reduction | 350 | |||||
Balance c/d | 1 450 | |||||||
Amount($) | 1 800 | |||||||
Revaluation Account | ||||||||
Details | Amount($) | Details | Amount($) | |||||
Motor Vehicles | 3 500 | Buildings | 26 000 | |||||
Inventory | 1 206 | |||||||
Office Fittings | 350 | |||||||
Pedzisai | 11 968 | |||||||
Rateyiwa | 5 984 | |||||||
Sauramba | 2 992 | |||||||
26 000 | 26 000 |
- The Statement of Financial Position as at 1 January 20×9
Non Current Assets | $ | $ |
Buildings at Valuation | 106 000 | |
Motor Vehicles at Valuation | 13 000 | |
Office Fittings at Valuation | 1 450 |
|
120 450 | ||
Current Assets | ||
Inventory at valuation | 4 894 | |
Trade Receivables | 7 400 | |
Bank | 800 | |
13 094 | ||
133 544 |
||
Capitals | ||
Pedzisai | 71 968 | |
Rateyiwa | 35 984 | |
Sauramba | 25 592 | |
133 544 |
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.