Question

Financial Accounting

Aru Math and Chathura were partners in a firm and in their partnership de provided that Profits and losses are shared at the ratio of 3:2:1 as between Aruna. Bhathiya and Chathura Partners shall be entitled to 10% interest on capital at the opening balance of each year Aruna, Bhathiya and Chathura are entitled to salary of Rs. 50,000, Rs. 75,000 and Rs. 60.000 respectively.

Answer 1

Income Statement -

Sales	15,00,000
COGS ( See Note)	2,50,000
Gross Profit	12,50,000

Gross Profit	12,50,000
Admin Expenses	220000
Selling and Distribution expense	147000
Depreciation (See note 2)	120000
Net profit before tax	7,63,000

Note
Opening Stock	3,00,000
Purchase	2,00,000
Closing Stock	2,50,000
COGS	2,50,000

Note 2
Depreciation @ 10% on building	40000
Depreciation @ 20% on Machine	80000
Total depr.	120000

Revaluation Gain is always recognized in Equity (Unless the gain reverses revaluation losses on the same asset that were previously recognized in the income statement). The Accounting Entry are as follows:

Non-Current Asset Cost ( Difference between valauation and Original Cost)	Dr
Accumulated Depreciation ( with any historical cost accumulated Depreciation)	Dr
Revaluation Gain/Reserve	Cr

Revaluation Loss Treatment:

Revaluation loss should be charged against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of the same asset. Any additional loss should be charged as an expenses in the statement of profit or loss.

Journal Entry:

Revaluation Reserve ( maximum original gain)	Dr
Income Statement (any residual losses)	Dr
Non-Current Assets (loss on revaluation)	Cr