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A, B, and C were partners sharing profits and losses in the ratio of 2:2:1. C decided to retire on December 31, 2013. The following is the balance sheet of partnership firm

BALANCE SHEET

December 31, 2013

Liabilities

Rs.

Assets

Rs.

Sundry Creditors

10000

Stock of goods

10000

Reserve account

2000

Sundry Debtors

10000

Capital account A

24000

Bills receivable

4000

Capital account B

16000

Bank A/C

10000

Capital account C

12000

Land and building

30000

64000

64000

A and B decided to share profits and losses in the ratio of 3:2 in future. Goodwill is valued at Rs. 10000. Land and building was appreciated by Rs.6000 and stock by Rs.2000. There was bad debt loss of Rs.1000 but not recorded in books. A and B decided to bring sufficient cash to settle the account of C and to make their capital proportionate. They also decided to maintain Rs.15000 bank balances for meeting the day to day business expenses. Prepare necessary journal entries and prepare balance sheet of newly constituted firm.

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