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Here is the solution for Question 2:

i) Revaluation Account

The Revaluation Account records gains or losses arising from the revaluation of assets and liabilities.

• Building appreciated by $20\%$: ₹$35,000 \times 20\% = ₹7,000$ (Gain)
• Stock depreciated by $10\%$: ₹$25,000 \times 10\% = ₹2,500$ (Loss)
• Provision for doubtful debts at $5\%$ on debtors: ₹$20,000 \times 5\% = ₹1,000$ (Loss)
• Outstanding expense: ₹1,000 (New liability, Loss)

$$\begin{array}{|l|r|l|r|} \hline \textbf{Particulars} & \textbf{Amount (₹)} & \textbf{Particulars} & \textbf{Amount (₹)} \\ \hline \text{To Stock A/c} & 2,500 & \text{By Building A/c} & 7,000 \\ \text{To Provision for Doubtful Debts A/c} & 1,000 & & \\ \text{To Outstanding Expenses A/c} & 1,000 & & \\ \text{To Profit transferred to Capital A/cs:} & & & \\ \quad \text{A} & 1,500 & & \\ \quad \text{B} & 1,000 & & \\ \hline \textbf{Total} & \textbf{7,000} & \textbf{Total} & \textbf{7,000} \\ \hline \end{array}$$

Revaluation Profit = ₹$7,000 - (₹2,500 + ₹1,000 + ₹1,000) = ₹2,500$
This profit is distributed between the old partners (A and B) in their old profit-sharing ratio ($3:2$).
A's share = ₹$2,500 \times \frac{3}{5} = ₹1,500$
B's share = ₹$2,500 \times \frac{2}{5} = ₹1,000$
Revaluation Profit: ₹2,500

ii) Partners' Capital Accounts

The Partners' Capital Accounts record their opening balances, reserves, new partner's capital and goodwill, and revaluation profit/loss.

• Opening Balances: A ₹50,000, B ₹40,000
• General Reserve (₹10,000) distributed in $3:2$ ratio:
  • A: ₹$10,000 \times \frac{3}{5} = ₹6,000$
  • B: ₹$10,000 \times \frac{2}{5} = ₹4,000$
• C brings ₹30,000 as capital.
• C brings ₹10,000 as goodwill. This is distributed to the old partners (A and B) in their sacrificing ratio (which is the old ratio $3:2$).
  • A: ₹$10,000 \times \frac{3}{5} = ₹6,000$
  • B: ₹$10,000 \times \frac{2}{5} = ₹4,000$
• Revaluation Profit: A ₹1,500, B ₹1,000

$$\begin{array}{|l|r|r|r|l|r|r|r|} \hline \textbf{Particulars} & \textbf{A (₹)} & \textbf{B (₹)} & \textbf{C (₹)} & \textbf{Particulars} & \textbf{A (₹)} & \textbf{B (₹)} & \textbf{C (₹)} \\ \hline \text{To Balance c/d} & 63,500 & 49,000 & 30,000 & \text{By Balance b/d} & 50,000 & 40,000 & - \\ & & & & \text{By General Reserve A/c} & 6,000 & 4,000 & - \\ & & & & \text{By Bank A/c (Capital)} & - & - & 30,000 \\ & & & & \text{By Premium for Goodwill A/c} & 6,000 & 4,000 & - \\ & & & & \text{By Revaluation A/c} & 1,500 & 1,000 & - \\ \hline \textbf{Total} & \textbf{63,500} & \textbf{49,000} & \textbf{30,000} & \textbf{Total} & \textbf{63,500} & \textbf{49,000} & \textbf{30,000} \\ \hline \end{array}$$

Capital Account Balances: A ₹63,500, B ₹49,000, C ₹30,000

iii) New Balance Sheet of the Firm as on 01.04.2026

$$\begin{array}{|l|r|l|r|} \hline \textbf{Liabilities} & \textbf{Amount (₹)} & \textbf{Assets} & \textbf{Amount (₹)} \\ \hline \text{Creditors} & 15,000 & \text{Cash at Bank} & 55,000 \\ \text{Bills Payable} & 10,000 & \text{Debtors} & 20,000 \\ \text{Outstanding Expenses} & 1,000 & \quad \text{Less: Provision for Doubtful Debts} & 1,000 \\ \text{Capital Accounts:} & & \quad & 19,000 \\ \quad \text{A} & 63,500 & \text{Stock} & 22,500 \\ \quad \text{B} & 49,000 & \text{Machinery} & 30,000 \\ \quad \text{C} & 30,000 & \text{Building} & 42,000 \\ \quad \textbf{Total Capital} & \textbf{1,42,500} & & \\ \hline \textbf{Total Liabilities} & \textbf{1,68,500} & \textbf{Total Assets} & \textbf{1,68,500} \\ \hline \end{array}$$

Details of Assets:

• Cash at Bank: Opening balance ₹15,000 + C's Capital ₹30,000 + C's Goodwill ₹10,000 = ₹55,000
• Debtors: ₹20,000
• Less: Provision for Doubtful Debts: ₹1,000 (5% of ₹20,000). Net Debtors = ₹19,000
• Stock: ₹25,000 - Depreciation ₹2,500 = ₹22,500
• Machinery: ₹30,000 (No change)
• Building: ₹35,000 + Appreciation ₹7,000 = ₹42,000

New Balance Sheet Total: ₹1,68,500