Principles of Accounting: Example revaluation of partnership assets

////Principles of Accounting: Example revaluation of partnership assets

Principles of Accounting: Example revaluation of partnership assets

ZIMSEC O Level Principles of Accounting: 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 cost80 000
Motor vehicles (at NBV)16 500
Office fittings (at NBV)

1 800

98 300
Inventory6 100
Trade Receivables7 400
Bank

800

14 300

112 600

Capitals:Pedzisai60 000
Rateyiwa30 000
Sauramba22 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:

  1. You are required to show all the ledger accounts necessary to record the revaluation.
  2. Draw up a balance sheet as at 1 January 20X9.

Solution

  1. The Revaluation Entries
PedzisaiRateyiwaSaurambaCapital AccountsPedzisaiRateyiwaSauramba
Details$$$Details$$$
Balance c/d71 96835 98425 592Balance b/d60 00030 00022 600
Profit on revaluation11 9685 9842 992

71 968

35 984

25 592

71 968

35 984

25 592

Building Account
DetailsAmount($)DetailsAmount($)
Balance b/d80 000Balance c/d106 000
Revaluation: Increase26 000

106 000

106 000

Motor Vehicles Account
DetailsAmount($)DetailsAmount($)
Balance b/d16 500Revaluation: Reduction3 500
Balance c/d13 000

16 500

16 500

Inventory Account
DetailsAmount($)DetailsAmount($)
Balance b/d6 100Revaluation: Reduction1 206
Balance c/d4 894

6 100

6 100

Office Fittings Account
DetailsAmount($)DetailsAmount($)
Balance b/d1 800Revaluation: Reduction350
Balance c/d1 450
Amount($)

1 800

Revaluation Account
DetailsAmount($)DetailsAmount($)
Motor Vehicles3 500Buildings26 000
Inventory1 206
Office Fittings350
Pedzisai11 968
Rateyiwa5 984
Sauramba2 992

26 000

26 000

  1. The Statement of Financial Position as at 1 January 20×9
Non Current Assets$$
Buildings at Valuation106 000
Motor Vehicles at Valuation13 000
Office Fittings at Valuation

1 450

120 450
Current Assets
Inventory at valuation4 894
Trade Receivables7 400
Bank

800

13 094

133 544

Capitals
Pedzisai71 968
Rateyiwa35 984
Sauramba

25 592

133 544

To access more topics go to the Principles of Accounts Notes.

 

By |2018-04-16T08:35:57+00:00April 16th, 2018|Notes, Ordinary Level Notes, Principles of Accounts Notes|Comments Off on Principles of Accounting: Example revaluation of partnership assets

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.
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