A, B and C are in partnership sharing profits and losses in the ratio of 3 : 2 : 5 respectively. The following are the particulars of the personal accounts of the partners :

The partnership firm earned a profit of ~ 1,200 in the year 2017. A retired from 31.12.2017 and it was agreed to settle his accounts on the following terms :

(a) Accounts for the year 2017 should be thoroughly scrutinised and rectified. Accordingly, the following discrepancies were found out during the scrutiny:

(i) An amount of ₹100 paid towards life insurance of A was wrongly debited to Taxes and Insurance Account of the firm.

(ii) Goods worth  ₹200 taken by B were not recorded in the books of accounts.

(iii) Wages paid ₹420 for extension of office building were treated as wages. The depreciation of building was charged at 2%.

(iv) Bad debts of ₹300 were omitted while preparing the Profit and Loss Account.

(b) The share of A should be distributed in the ratio of 3 : 5 between B and C.

(c) The following assets should be revalued :

(i) Stock to be depreciated by ₹1,000; (ii) Machinery to be depreciated by ₹2,500; (iii) Building to be appreciated by ₹5,500.

(d) Interest on capital to be charged at 6% and no interest on Current Accounts.

(e) Goodwill to be estimated at ₹6,000 and to be adjusted accordingly.

Prepare Profit and Loss Appropriation Account, Revaluation Account, Partners’ Capital and Current Accounts.

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1. Capital Accounts (1.1.2017) 2. Current Accounts (1.1.2017) 3. Drawings during the year 2017 4. Interest on drawings (Cr.) 20,000 4,000 2,400 300 12,000 (Dr.) 1,000 3,800 500 35,000 (Cr.) 6,000 4,600 600