Double Entry Book Keeping Ts Grewal Vol i 2017 Solutions for Class 12 Commerce Accountancy Chapter 5 Retirement/Death Of A Partner are provided here with simple step-by-step explanations. These solutions for Retirement/Death Of A Partner are extremely popular among class 12 Commerce students for Accountancy Retirement/Death Of A Partner Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Double Entry Book Keeping Ts Grewal Vol i 2017 Book of class 12 Commerce Accountancy Chapter 5 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Double Entry Book Keeping Ts Grewal Vol i 2017 Solutions. All Double Entry Book Keeping Ts Grewal Vol i 2017 Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 5.100:

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

24,000

Furniture

7,500

Provision for Doubtful Debts

2,500

Stock

6,400

 

 

Prepaid Advertisement Expenses

4,200

 

 

Loss transferred to:

 

 

 

X’s Capital A/c

4,200

 

 

 

Y’s Capital A/c

2,800

 

 

 

Z’s Capital A/c

1,400

8,400

 

26,500

 

26,500

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Current A/c

 

 

10,000

Balance b/d

2,40,000

1,60,000

80,000

Revaluation A/c

4,200

2,800

1,400

Current A/c

16,000

5,000

 

Z ’s Capital A/c

 

10,000

 

Reserve

30,000

20,000

10,000

Z ’s Capital A/c

 

34,000

 

Y ’s Capital A/c

 

 

34,000

Z’s Executors A/c

 

 

1,22,600

Y ’s Capital A/c

 

 

10,000

Balance c/d

2,81,800

1,38,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,86,000

1,85,000

1,34,000

 

2,86,000

1,85,000

1,34,000

 

 

 

 

 

 

 

 

                 

Z's Executor Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

Rs

Date

Particulars

J.F.

Amount

Rs

2016-17

 

 

 

2016-17

 

 

 

Dec. 31

Bank A/c (61,300 + 6,130)

 

67,430

Jun. 30

Z’s Capital A/c

 

1,22,600

Mar. 31

Balance c/d

 

62,832.5

Dec. 31

Interest (1,22,600×10100×612)

 

6,130

 

 

 

 

Mar.31

Interest (61,300×10100×312)

 

1,532.5

 

 

 

1,30,262.5

 

 

 

1,30,262.5

 

 

 

 

 

 

 

 

2017-18

 

 

 

2017-18

 

 

 

Jun. 30

Bank  (61,300 + 3,065)

 

64,365

April 01

Balance b/d

 

62,832.5

 

 

 

 

Jun. 30

Interest (61,300×10100×312)

 

1,532.5

 

 

 

64,365

 

 

 

64,365

 

 

 

 

 

 

 

 

                 

 

Working Notes:

WN1: Calculation of Profit & Loss Suspense

Profit & loss Suspense=8,16,000×1×36×12=Rs 34,000

WN2: Calculation of Gaining Ratio and Share of Goodwill

Gaining Ratio = New Ratio - Old RatioX's gain=1236=0Y's gain=1226=16X:Y=0:1Z's share of goodwill=60,000×16=Rs 10,000 should be given by Y

Note:
Z’s share of profit is adjusted through Y’s capital A/c because there is change in profit sharing ratio of remaining partners.

 



Page No 5.101:

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Machinery

13,600

Creditors

     1,000

Profit transferred to:

 

Stock

14,000

X                                                

5,000

 

Provision for Doubtful Debts

4,000

Y                                                  

3,000

 

Investment

2,200

Z                                                 

2,000

10,000

Bad Debts Recovered

200

 

 

Prepaid Insurance

2,200

 

23,600

 

23,600

 

 

 

 

             

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Goodwill

6,000

3,600

2,400

Balance b/d

1,35,000

95,000

74,000

Drawings

 

 

12,000

Revaluation

5,000

3,000

2,000

Profit & Loss A/c

75,000

45,000

30,000

IFR

3,500

2,100

1,400

X’s Capital A/c

 

8,750

 

Y’s Capital A/c

8,750

 

14,000

Z ’s Capital A/c

 

14,000

 

WCR

3,000

1,800

1,200

Loan to Z

 

 

1,000

 

 

 

 

Z’s Executors A/c

 

 

47,200

 

 

 

 

Balance c/d

74,250

30,550

 

 

 

 

 

 

1,55,250

1,01,900

92,600

 

1,55,250

1,01,900

92,600

 

 

 

 

 

 

 

 

                   

Z’s Executors  Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bank A/c

11,200

Z’s Capital A/c

47,200

Z’s Executors  Loan Account

36,000

 

 

 

 

 

 

 

57,000

 

57,000

 

 

 

 

           

Balance sheet 

as on April 01, 2017 after Z’s death

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

17,000

Patents

52,000

Z’s Executors Loan A/c

36,000

Machinery 

48,800

Workmen Compensation Claim

1,000

Stock

34,000

Capital A/cs:

 

Debtors

24,000

X

74,250

 

Prepaid Insurance

2,200

Y

30,550

1,04,800

 

 

Bank Overdraft (600 + 8,200-11,200 + 200)

2,200

 

 

 

1,61,000

 

1,61,000

 

 

 

 

 

Working Notes:

WN1: Calculation of Gaining Ratio and Share of Goodwill

Gaining Ratio = New Ratio - Old RatioX's gain=38510=540 (Sacrifice)Y's gain=58310=1340Z's share of goodwill=70,000×210=Rs 14,000 X's share of goodwill=70,000×540=Rs 8,750

WN2: Calculation of Goodwill

Goodwill=Average Profit×No. of years' Purchase               =28,000×2.5=Rs 70,000Average Profit=Total Profits of past years givenNumber of years                        =1,00,000+80,000+82,0001,50,0004=Rs 28,000



Page No 5.78:

Question 1:

A ,B and C were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of the remaining partners if C retires.

Answer:

Old Ratio (A, B and C) = or 5 : 4 : 1

As we can see, no information is given as to how A and B are acquiring C's profit share after his retirement, so the new profit sharing ratio between A and B is calculated just by crossing out the C’s share. That is, the new ratio becomes 5 : 4.

∴ New Profit Ratio (A and B) = 5 : 4

Page No 5.78:

Question 2:

Ram, Mohan and Sohan were partners sharing profits in the ratio of 1/5, 1/3 and 7/15 respectively. Sohan retires and his share was taken by Ram and Mohan in the ratio of 3:2. Find out the new ratio.

Answer:

Old Ratio (Ram, Mohan and Sohan) = or 3 : 5 : 7

Sohan’s Profit Share =

Ram and Mohan decided to take his share in the ratio of 3 : 2

New Profit Share = Old Profit Share  +  Share taken from Sohan

∴ New Profit Ratio (Ram and Mohan) = 36 : 39 or 12 : 13

Page No 5.78:

Question 3:

From the following particulars, calculate new profit-sharing ratio of the partners:
(a)  Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5:5:4 . Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5:4:1. P retires from the firm.

Answer:

(a)

Old Ratio (Shiv, Mohan and Hari) = 5 : 5 : 4

Mohan’s Profit Share =

His share is divided between Shiv and Hari equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share  +  Share taken from Mohan

∴ New Profit Ratio (Shiv and Hari) = 15 : 13

(b)

Old Ratio (P, Q and R) = 5 : 4 : 1

P’s Profit Share =

As we can see, no information is given as to how Q and R are acquiring P's profit share after his retirement, so the new profit sharing ratio between Q and R is calculated just by crossing out the P’s share. That is, the new ratio becomes 4 : 1

∴New Profit Ratio (Q and R) = 4 : 1

Page No 5.78:

Question 4:

A, B and C were partners sharing profits in the ratio of 4:3:2 . A retires , assuming B and C will share profits in the ratio of 2:1. Determine the gaining ratio.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

New Ratio (B and C) = 2 : 1

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 3 : 1

Page No 5.78:

Question 5:

Kangli, Mangli and Sanvali are partners sharing profits in the ratio of 4:3:2 . Kangli retires . Assuming Mangli and Sanvali will share profits in the  future in the ratio of 5:3, determine the gaining ratio.

Answer:

Old Ratio (Kangli, Mangli and Sanvali) = 4 : 3 : 2

New Ratio (Mangli and Sanvali) = 5 : 3

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 21 : 11

Page No 5.78:

Question 6:

X, Y and Z are partners sharing profits in the ratio of 1/2, 3/10 , and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm.

Answer:

Calculation of Gaining Ratio

X:Y:ZOld Ratio=12:310:15=5:3:210

New Ratio after Y's retirement = 5 : 2

Gaining Share = New Share – Old Share

X's Gain=57-510=1570Z's Gain=27-210=670

Gaining Ratio = 15 : 6 or 5 : 2

Page No 5.78:

Question 7:

(a) W,X,Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3,and 1/6 respectively.Y retires and W, X and Z decide to share the profits and losses equally in future . Calculate gaining ratio.
(b) A ,B and C  are partners sharing profits and losses in the ratio of 4:3:2. C retires from the business. A is acquiring 4/9 of C's share and balance is acquired by B . Calculate the new profit-sharing ratio and  gaining ratio.

Answer:

(a)

Old Ratio (W, X, Y and Z) = or 2 : 1 : 2 : 1

New Ratio (W, X and Z) = 1 : 1 : 1

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 0 : 1 : 1

(b)

Old Ratio (A, B and C) = 4 : 3 : 2

C’s Profit Share =

A acquires 4/9 of C’s Share and remaining share is acquired by B.

New Profit Share = Old Profit Share +  Share acquired from C

∴ New Profit Ratio (A and B) = 44 : 37

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 8 : 10 or 4 : 5

Page No 5.78:

Question 8:

Sita, Geeta and Meeta were partners in a firm sharing profits in the ratio of 7:6:7. Geeta retired and her share was divided equally between Sita and Meeta. Calculate the new profit-sharing ratio of Sita and Meeta.

Answer:

Old Ratio (Sita, Geeta and Meeta) = 7 : 6 : 7

Geeta’s Profit Share =

Her share is divided between Sita and Meeta equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share  +  Share taken from Geeta

∴ New Profit Ratio (Sita and Meeta) = 20 : 20 or 1 : 1

Page No 5.78:

Question 9:

R, S and M are partners sharing profits in the ratio of 2/5,2/5 and 1/5 . M decides to retire from the business and his share is taken by R and S in the ratio of 1:2 . Calculate the new profit-sharing ratio.S

Answer:

Old Ratio (R, S and M) = 2 : 2 : 1

M retires from the firm.

His profit share = 15

M’s share taken by R and S in ratio of 1 : 2

Share taken by R: 15×13=115Share taken by S: 15×23=215

New Ratio = Old Ratio + Share acquired from M

R's New Share: 25+115=6+115=715S's New Share: 25+215=6+215=815

New Profit Ratio (R and S) = 7 : 8



Page No 5.79:

Question 10:

A, B, C  and D  were partners in a firm sharing profits in 5:3:2:2 ratio. B and C retired from the firm . B's share was acquired by D and C's share was acquired by A . Calculate new profit-sharing ratio of A and D .

Answer:

Old Ratio (A, B, C and D) = 5 : 3 : 2 : 2

B’s Profit Share =

C’s Profit Share =

B’s Share was acquired by D and C’s share was acquired by A.

∴ D’s New Share = D’s Old share + Share of B

A’s New Share = A’s Old Share + Share of C

∴ New Profit Ratio (A and D) = 7 : 5

Page No 5.79:

Question 11:

A, B, and C  were partners in a firm sharing profits in 8:4:3 . B  retires and his  share is taken up equally by A and C. Find the  new profit-sharing ratio .

Answer:

Old Ratio (A, B and C) = 8 : 4 : 3

B retires from the firm.

His profit share = 415

B’s share taken by A and C in ratio of 1 : 1

Share taken by A: 415×12=215Share taken by C: 415×12=215

New Ratio = Old Ratio + Share acquired from B

A's New Share: 815+215=1015=23C's New Share: 315+215=515=13

 New Profit Ratio (A and C) = 2 : 1

Page No 5.79:

Question 12:

A, B and C are partners in a firm sharing profits and losses in the ratio of 4:3:2 . B decides to retire from the firm. Calculate new profit-sharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C .
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3:1.
(d) If B gives his share to A only.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

B retires from the firm.

His profit share =

Case (a) B gives his share to A and C in their original ratio.

Original Share (A and C) = 4 : 2



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 36 : 18 or 2 : 1

Case (b) B gives his share to A and C in equal proportion.



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 11 : 7

Case (c) B gives his to A and C in the ratio 3 : 1.



New Ratio = Old Ratio + Share acquired from B



∴ New Profit Ratio (A and C) = 25 : 11

Case (d) B gives his share to A only.

A’s New Share = A’s Old Share + Share of B
C’s Share
∴ New Profit Ratio (A and C) = 7 : 2

Page No 5.79:

Question 13:

A, B, and C  are partners sharing profits in  the ratio of 5:3:2 . C  retires and his  share is taken up by A . Calculate new profit-sharing ratio of A and B  .

Answer:

Old Ratio (A, B and C) = 5 : 3 : 2

C retires from the firm.

His profit share = 210

C’s share is taken by A in entirety

New Ratio = Old Ratio + Share acquired from C

A's New Share: 510+210=710B's New Share: 310+0=310

 New Profit Ratio (A and B) = 7 : 3

Page No 5.79:

Answer:

Old Profit Sharing Ratio amongst Partner’s (A, B and C) - 5 : 3 : 2

B retires and his share was taken by A and C in ratio of 2 : 1

Gaining Ratio of A and C is 2 : 1




New Ratio between A and C is 21 : 9 or 7 : 3

After this D is admitted for 25% share

Half of this 25% was gifted by A and remaining half was provided by A and C equally

It means 75% (50% + ½ of remaining 50%) of 25% (given to D) was actually given by A and rest 25% was given by C.




Page No 5.79:

Question 15:

P, Q and R are partners sharing profits in the ratio of 7:5:3. P retires and it is decided that profit-sharing ratio between Q and R will be same as existing between P and Q . Calculate New profit-sharing ratio and Gaining Ratio.

Answer:

Calculation of Gaining RatioP :Q :R=7:5:3(Old ratio)Q :R=7:5 (New ratio, same as between P & Q)Gaining Ratio = New Ratio - Old RatioQ's Gain=712515=352060=1560R's Gain=512315=251260=1360Q :R=15:13

Page No 5.79:

Answer:

Journal
Particulars
L.F.
Date
Amount
Rs
Credit
amount
Rs
L’s Capital A/c
Dr.
 
13,000
 
O’s Capital A/c
Dr.
 
11,000
 
To M’s Capital A/c
 
 
24,000
(Adjustment M’s share of goodwill made)
 
 
 
 
 
 
 

Working Note:

WN 1 Calculation of Gaining Ratio

Old Ratio (L, M and O) = 4 : 3 : 2

M retires from the firm.

New Ratio (L and O) = 5 : 3

Gaining RatioNew Ratio − Old Ratio



∴ Gaining Ratio = 13 : 11

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 72,000



This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).

Page No 5.79:

Answer:

Journal

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

A’s Capital A/c

Dr.

 

1,950

 

C’s Capital A/c

Dr.

 

1,650

 

To B’s Capital A/c

 

 

3,600

(Adjustment B’s share of goodwill made)

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (A, B and C) = 4 : 3 : 2

B retires from the firm.

New Ratio (A and C) = 5 : 3

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 13 : 11

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 10,800

This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).

Page No 5.79:

Question 18:

A , B and C are partners sharing profits in the ratio of 3 : 2 : 1 . B retired and the new profit-sharing ratio between A and C was 2 : 1 . On B's retirement , the goodwill of the firm was valued at ₹ 90,000 . Pass necessary journal entry for the treatment of goodwill on B's retirement .

Answer:

Journal

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

A’s Capital A/c

Dr.

 

15,000

 

C’s Capital A/c

Dr.

 

15,000

 

To B’s Capital A/s

 

 

30,000

(Adjustment B’s share of goodwill made)

 

 

 

Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (A, B and C) = 3 : 2 : 1

B retires from the firm.

New Ratio (A and C) = 2 : 1

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 1 : 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 90,000

B’s share of goodwill

This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 1 : 1).

Page No 5.79:

Question 19:

X , Y and Z are partners sharing profits in the ratio of 3 : 2 ; 1 . Goodwill is appearing  in the books at a value of ₹ 60,000. Y retires  and at the time of Y's retirement , goodwill is valued at ₹ 84,000. X and Z decide to share future profits in the ratio of 2 : 1 .Pass the necessary journal entries through Goodwill Account .

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

X’s Capital A/c

Dr.

 

30,000

 

 

Y’s Capital A/c

Dr.

 

20,000

 

 

Z’s Capital A/c

Dr.

 

10,000

 

 

     To Goodwill A/c

 

 

 

60,000

 

(Goodwill written off)

 

 

 

 

 

 

Dr.

 

14,000

 

 

X’s Capital A/c

Dr.

 

14,000

 

 

Z’s Capital A/c

 

 

 

28,000

 

     To Y’s Capital A/c

 

 

 

 

 

(Adjustment of Y’s share of goodwill)

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1:Calculation of Gaining Ratio

X :Y :Z=3:2:1(Old ratio)X :Z = 2:1(New ratio)Gaining Ratio = New Ratio - Old RatioX's Gain=2336=16Z's Gain=1316=16X:Z=1:1


WN2: Calculation of Retiring Partner’s Share of Goodwill

Y's share of goodwill=84,000×26=Rs 28,000Y's share of goodwill will be brought by X and Z in their gaining ratio1:1Therefore, X's Capital A/c will be debited with 28,000×12=Rs 14,000And, Y's Capital A/c will be debited with 28,000×12=Rs 14,000

 

Page No 5.79:

Question 20:

A, B and C are partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A and C agreed to pay him ₹ 1,50,000 in full settlement of his claim . Record necessary journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5 : 3 .

Answer:

Journal
 
Date
Particulars
L.F.
Debit
Amount
Rs
Credit Amount
Rs
 
A’s Capital A/c
Dr.
 
5,850
 
 
C’s Capital A/c
Dr.
 
4,950
 
 
    To B’s Capital A/c
 
 
 
10,800
 
(Adjustment of B’s share of goodwill)
 
 
 
 

Working Notes

i. Calculation of B’s share of goodwill

A, B and C are sharing profits in ratio 4/9 : 3/9 : 2/9

B retires from the firm. Remaining partners agreed to pay him Rs 1,50,000

B’s capital after making necessary adjustments Rs 1,39,200

Therefore, Hidden Goodwill is Rs (1,50,000 – 1,39,200) i.e. Rs 10,800

ii Gaining Ratio

New profit sharing ratio between A and B is 5:3






Thus, B’s share of goodwill will be brought in by A and C in the gaining ratio 13:11 i.e.



Page No 5.80:

Question 21:

M, N and O are partners in a firm sharing profits in the ratio of 3 : 2 : 1 . Goodwill has been valued at ₹ 60,000. On N's retirement , M and O agree to share profits equally. Pass the necessary journal entry for treatment of N's share of goodwill.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

O’s Capital A/c

Dr.

 

20,000

 

 

     To N’s Capital A/c

 

 

 

20,000

 

(Adjustment of N’s share of goodwill)

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1:Calculation of Gaining Ratio

M :N :O=3:2:1(Old ratio)M :O =1:1(New ratio)Gaining Ratio = New Ratio - Old RatioM's Gain =1236=336=0O's Gain=1216=316=26


WN2: Calculation of Retiring Partner’s Share of Goodwill

N's share of goodwill=60,000×26=Rs 20,000N's share of goodwill will be brought by O only.Therefore, O's Capital A/c will be debited with Rs 20,000


 

Page No 5.80:

Question 22:

A , B , C and D are partners in a firm sharing profits in the ratio of 2 : 1 : 2 : 1 . On the retirement of C , Goodwill was valued ₹ 1,80,000. A, B and D decide to share future profits equally . Pass the necessary journal entry for the treatment of goodwill.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

B’s Capital A/c

Dr

 

30,000

 

 

D’s Capital A/c

Dr.

 

30,000

 

 

     To C’s Capital A/c

 

 

 

60,000

 

(Adjustment of C’s share of goodwill)

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1:Calculation of Gaining Ratio

A :B :C :D=2:1:2:1(Old ratio)A :B :D =1:1:1(New ratio)Gaining Ratio = New Ratio - Old RatioA's Gain =1326=226=0B's Gain =1316=216=16D's Gain =1316=216=16A:B:D=0:1:1


WN2: Calculation of Retiring Partner’s Share of Goodwill
C's share of goodwill=1,80,000×26=Rs 60,000C's share of goodwill will be brought by B and D in their gaining ratio1:1Therefore, B's Capital A/c will be debited with 60,000×12=Rs 30,000And, D's Capital A/c will be debited with 60,000×12=Rs 30,000

Page No 5.80:

Question 23:

A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4 . Their capitals were A₹ 1,00,000; B₹ 80,000 and C₹ 60,000 respectively . On 1st April, 2009 , A retired from the firm and the new  profit sharing ratio between B and C was decided as 1 : 4 . On A's retirement , the goodwill of the firm was valued at ₹ 1,80,000. Showing your calculations clearly , pass the necessary journal entry  for the treatment of goodwill on A's retirement.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

C’s Capital A/c

Dr.

 

96,000

 

 

     To A’s Capital A/c

 

 

 

72,000

 

     To B’s Capital A/c

 

 

 

24,000

 

(Adjustment of A’s and B’s share of goodwill)

 

 

 

 

 

 

 

 

 


Working Notes:

WN1: Calculation of Gaining Ratio

A :B :C=6:5:4(Old ratio)B :C=1:4 (New ratio)Gaining Ratio = New Ratio - Old RatioB's Gain =15515=3515=215(Sacrifice)C's Gain =45415=12415=815


WN2: Calculation of Retiring Partner’s Share of Goodwill

A's share of goodwill=1,80,000×615=Rs 72,000B's share of goodwill=1,80,000×215=Rs 24,000A's and B's share of goodwill be brought by C only.Therefore, C's Capital A/c will be debited with 72,000+24,000 = Rs 96,000

Page No 5.80:

Question 24:

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2 . Z retires and on the date of his retirement, the following adjustments were agreed upon:
(a) The value of Furniture is to be increased by ₹ 12,000.
(b) The value of stock to be decreased by ₹ 10,000.
(c) Machinery of the book value of ₹ 50,000 is to be depreciated by 10%.
(d) A Provision for Doubtful Debts @ 5% is to be created on debtors of book value of ₹ 40,000.
(e) Unrecorded Investment worth ₹ 10,000.
(f) An item of ₹ 1,000 included in bills payable is not likely to be claimed , hence should be written back.
Pass necessary journal entries.

Answer:

Revaluation Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Stock A/c
10,000
Furniture A/c 
12,000
Machinery A/c
5,000
Investments A/c
10,000
Provision for Doubtful Debts A/c
2,000
Bills Payable A/c
1,000
Profit transferred to:
 
 
 
  X’s Capital A/c
3,000
 
 
 
Y’s Capital A/c
1,800
 
 
 
Z’s Capital A/c
1,200
6,000
 
 
 
23,000
 
23,000
 
 
 
 
 
Journal
Date Particulars L.F. Debit
Amount
(Rs)
Credit
Amount
(Rs)
(a) Furniture A/c Dr.   12,000  
              To Revaluation A/c       12,000
  (Increase in value transferred to Revaluation Account)        
           
(b) Revaluation A/c Dr.   10,000  
              To Stock A/c       10,000
  (Decrease in Stock transferred to Revaluation Account)        
           
(c) Revaluation A/c Dr.   5,000  
              To Machinery A/c       5,000
  (Decrease in value of machinery transferred to Revaluation Account)        
           
(d) Revaluation A/c Dr.   2,000  
              To Provision for Doubtful Debts A/c       2,000
  (Increase in liabilities to Revaluation Account)        
           
(e) Investments A/c Dr.   10,000  
              To Revaluation A/c       10,000
  (Increase in value transferred to Revaluation Account)        
           
(f) Bills Payable A/c Dr.   1,000  
              To Revaluation A/c       1,000
  (Decrease in liabilities transferred to Revaluation Account)        
           
(g) Revaluation A/c Dr.   6,000  
              To X’s Capital A/c       3,000
              To Y’s Capital A/c       1,800
              To Z’s Capital A/c       1,200
  (Revaluation profit transferred to Partners’ Capital Accounts)        
         

Page No 5.80:

Answer:

Revaluation Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Plant and Machinery (40,000 × 10%)
4,000
Building (1,00,000 × 20%)
20,000
Provision for Doubtful Debts
1,000
Stock of Finished Goods
5,000
Stock of Raw Materials
2,000
Computer
2,000
Workmen’s Compensation Claim
5,000
 
 
Profit transferred to:
 
 
 
  A’s Capital A/c
6,000
 
 
 
B’s Capital A/c
6,000
 
 
 
C’s Capital A/c
3,000
15,000
 
 
 
27,000
 
27,000
 
 
 
 
 
Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Building A/c     
Dr.
 
20,000
 
Stock of Finished Good A/c
Dr.
 
5,000
 
Computer A/c
Dr.
 
2,000
 
To Revaluation A/c
 
 
27,000
(Increase in value Assets transferred to Revaluation Account)
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
12,000
 
To Plant and Machinery A/c
 
 
4,000
To Provision for Doubtful Debts A/c
 
 
1,000
To Stock of Raw Material A/c
 
 
2,000
To Workmen’s Compensation Claim A/c
 
 
5,000
(Decrease in value of Assets and increase in Liabilities transferred to Revaluation Account)
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
15,000
 
To A’s Capital A/c
 
 
6,000
To B’s Capital A/c
 
 
6,000
To C’s Capital A/c
 
 
3,000
(Revalution Profit transferred to Partners’ Capital accounts)
 
 
 
 
 
 
 



Page No 5.81:

Question 26:

Ramesh wants  to retire from the firm . The gain (profit) on revaluation on that date was ₹ 12,000. Mohan and Rahul want to share this in their new profit-sharing ratio of 3 : 2 . Ramesh wants this to be shared equally . How is the profit to be shared ? Give reasons.

Answer:

Revaluation of assets and liabilities is made at the time of Ramesh’s retirement and not after his retirement. Therefore, profits on revaluation will be distributed among all the partners in their old profit sharing ratio. In the absence of partnership deed, profits are distributed equally among all the partners.

Therefore, Profit Share of each Partner =

Journal

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

Revaluation A/c

Dr.

 

12000

 

To Ramesh’s Capital A/c

 

 

4000

To Mohan’s Capital A/c

 

 

4000

To Rahul’s Capital A/c

 

 

4000

(Revaluation profit distributed among all the partners in their old ratio)

 

 

 

 

 

 

 

Page No 5.81:

Question 27:

X, Y and Z  are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1 . Z retires from the firm on 31st March, 2018 . On the date of Z's retirement , the following balances appeared in the books of the firm:
   General Reserve ₹ 1,80,000
   Profit and Loss Account (Dr.) ₹ 30,000
   Workmen Compensation Reserve ₹ 24,000 which was no more required
   Employees' Provident Fund ₹ 20,000.
 Pass necessary journal entries for the adjustment of these items on Z's retirement .

Answer:

Journal
Date
Particulars
L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
 
General Reserve A/c
Dr.
 
1,80,000
 
 
Workmen Compensation Reserve A/c
Dr.
 
24,000
 
 
  To X’s Capital A/c
 
 
 
1,02,000
 
  To Y’s Capital A/c
 
 
 
68,000
 
  To Z’s Capital A/c
 
 
 
34,000
 
(Accumulated profits distributed among partners in old ratio)
 
 
 
 
 
 
 
 
 
 
 
X’s Capital A/c
Dr.
 
15,000
 
 
Y’s Capital A/c
Dr.
 
10,000
 
 
Z’s Capital A/c
Dr.
 
5,000
 
 
  To Profit and Loss A/c
 
 
 
30,000
 
(Debit balance in Profit and Loss A/c distributed among partners in old ratio)
 
 
 
 

 

 

 

 

 

 
Working Notes:
WN1: Calculation of Share in Credit Balance of Reserves
Total Credit Balance of Reserves = General Reserve + WCF
                                                 = 1,80,000 + 24,000 = 2,04,000
 
WN2: Calculation of Share in Debit Balance of Profit and Loss A/c
Note: Employees’ Provident Fund will not be distributed as it is a liability and not accumulated profit.

Page No 5.81:

Question 28:

Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2 . Goodwill appeared in their books at a value of ₹ 80,000 and General Reserve at ₹ 40,000. Naveen decided to retire from the firm. On the date of his retirement , goodwill of the firm was valued at ₹ 1,20,000 . The new profit ratio decided among Asha and Shalini is 2 : 3 .
Record necessary journal entries on Naveen's retirement.

Answer:

Journal
Date Particulars L.F. Debit
Amount
(Rs)
Credit
Amount
(Rs)
  Asha’s Capital A/c Dr.   40,000  
  Naveen’s Capital A/c Dr.   24,000  
  Shalini’s Capital A/c Dr.   16,000  
              To Goodwill A/c       80,000
  (Existing goodwill written off amongst existing partners in old ratio)        
           
  General Reserves A/c Dr.   40,000  
              To Asha’s Capital A/c       20,000
              To Naveen’s Capital A/c       12,000
              To Shalini’s Capital A/c       8,000
  (General Reserves distributed among all partners in old ratio)        
           
  Shalini’s Capital A/c Dr.    48,000  
              To Asha’s Capital A/c        12,000
              To Naveen’s Capital A/c        36,000
  (Goodwill adjusted by debiting gaining partner and crediting sacrificing partner and retiring partner)        
         


Calculation of Gaining Ratio:Gain of a Partner=New Share - Old ShareAsha's Gain (Sacrifice): 25-510=4-510=(-)110Shalini's Gain (Sacrifice): 35-210=6-210=410Therefore, Both Asha and Naveen would be compensated by Shalini in the ratio of 1:3Asha's Sacrifice for 110th Share=1,20,000×110=12,000Naveen's Sacrifice for 310th Share= 1,20,000×310=36,000

Page No 5.81:

Question 29:

Ram , Laxman and Bharat are partners sharing profits in the ratio of 3 : 2 ; 1 . Goodwill is appearing in the books at a value of ₹ 1,80,000. Laxman retires and at the time of his retirement , goodwill is valued at ₹ 2,52,000. Ram and Bharat decided to share future profits in the ratio of 2 : 1 . The Profit for the first year  after Laxman's retirement amount to ₹ 1,20,000 . Give the necessary journal entries to record goodwill  and to distribute the profit. Show your calculations clearly. 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Ram’s Capital A/c

Dr.

 

90,000

 

 

Laxman’s Capital A/c

Dr.

 

60,000

 

 

Bharat’s Capital A/c

Dr.

 

30,000

 

 

     To Goodwill A/c

 

 

 

1,80,000

 

(Goodwill written off)

 

 

 

 

 

 

Dr.

 

42,000

 

 

Ram’s Capital A/c

Dr.

 

42,000

 

 

Bharat’s Capital A/c

 

 

 

84,000

 

     To Laxman’s Capital A/c

 

 

 

 

 

(Adjustment of Laxman’s share of goodwill)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

1,20,000

 

 

           To Ram’s Capital A/c

 

 

 

80,000

 

           To Bharat’s Capital A/c

 

 

 

40,000

 

(Profit on revaluation transferred to Partners’ Capital A/c)

 

 

 

 

Working Notes:

WN1:Calculation of Gaining Ratio

Ram :Laxman :Bharat=3:2:1(Old ratio)Ram :Bharat = 2:1(New ratio)Gaining Ratio = New Ratio - Old RatioRam's Gain =2336=436=16Bharat's Gain =1316=216=16Ram:Bharat=1:1


WN2: Calculation of Retiring Partner’s Share of Goodwill
Laxman's share of goodwill=2,52,000×26=Rs 84,000Laxman's share of goodwill will be brought by Ram and Bharat in their gaining ratio1:1Therefore, Ram's Capital A/c will be debited with 84,000×12=Rs 42,000And, Bharat's Capital A/c will be debited with 84,000×12=Rs 42,000

Note: The entry for distributing profit as given in the book is wrong. The profit will be distributed between Ram & Bharat and not Ram and Laxman (since Laxman has retired)

Page No 5.81:

Question 30:

The Partnership Deed of C and D , who are equal partners , has a clause that any partner may retire from the firm on the following terms by giving a six-month notice in writing :
The retiring partner  shall be paid
(a) the amount  standing to the credit of his Capital Account and Current Account .
(b) His share of profits to the date of retirement , calculated  on the basis of the average profit of the three preceding completed years .
(c) half the amount of the goodwill  of the firm calculated at 112 times the average  profit of the three preceding completed years .
      gave a notice on 31st March, 2017 to retire on 30th September , 2017 , when the balance of his Capital  Account was ₹ 6,000  and his Current Account (DR.) ₹ 500. The profits for the three preceding completed years were : year ended 31st March, 2015 ₹ 2,800; year ended 31st March, 2016 ₹ 2,200 and year ended 31st March, 2017 ₹ 1,600. What amount is due to C  in accordance with the partnership  agreement ? 

Answer:

C’s Capital Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

C’s Loan A/c

7,700

Balance b/d

6,000

 

 

C’s Current A/c

1,700

 

7,700

 

7,700

 

 

 

 

 

C’s Current Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

500

Profit and Loss Suspense A/c (Share of profit) (WN 1)

550

C’s Capital A/c (balancing figure)

1,700

D’s Current A/c (Share of goodwill) (WN 2)

1,650

 

2,200

 

2,200

 

 

 

 


Working Notes:

WN 1 Calculation of Profit (from April 01, 2017 to Sept. 30, 2017)



WN 2 Calculation of Goodwill 

Goodwill = Average Profit × 1.5

= 2,200 × 1.5 = Rs 3,300

C’s Share of Goodwill



Page No 5.82:

Answer:

Revaluation Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bad Debts

2,000

Loss transferred to:

 

Patents

9,000

X’s Capital A/c

4,400

 

 

 

Y’s Capital A/c

4,400

 

 

 

Z’s Capital A/c

2,200

11,000

 

11,000

 

11,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Revaluation A/c (Loss)

4,400

4,400

2,200

Balance b/d

82,000

60,000

75,500

Y’s Capital A/c (Goodwill)

18,667

9,333

Reserve

(Old Ratio)

7,400

7,400

3,700

Y’s Loan A/c

91,000

X’s Capital A/c  (Goodwill)

18,667

Balance c/d

66,333

67,667

Z’s Capital A/c

(Goodwill)

9,333

 

89,400

95,400

79,200

 

89,400

95,400

79,200

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2017 (after Y’s Retirement)

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

49,000

Cash

8,000

Y’s Loan

91,000

Debtors (19000-2000)

17,000

Capital A/cs:

 

Stock

42,000

X

66,333

 

Building

2,07,000

Z

67,667

1,34,000

 

 

 

2,74,000

 

2,74,000

 

 

 

 

Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (X, Y and Z) = 2 : 2 : 1

Y retires from the firm.

∴Gaining Ratio = 2 : 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 70,000

Y’s Share of Goodwill =

This share of goodwill is to be distributed between X and Z in their gaining ratio (i.e. 2 : 1).

Journal

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

X’s Capital A/c

Dr.

 

18,667

 

Z’s Capital A/c

Dr.

 

9,333

 

To Y’s Capital A/c

 

 

28,000

(Adjustment of goodwill made on Y’s retirement)

 

 

 

 

 

 

 

Page No 5.82:

Question 32:

The Balance Sheet of X, Y and who were sharing profits in proportion to their capitals stood as follows at 31st March, 2018:
 

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Sundry Creditors

13,800

Cash at Bank 11,000
Capital A/cs:   Sundry Debtors 10,000 25,000
  X

45,000

 

  Less: Provision for D. Debts 200 9,800
  Y 30,000   Stock 16,000
  Z

15,000

90,000

Plant and Machinery

17,000

 

 

 

Land and Building

50,000

 

1,03,800

 

1,03,800

 

 

 

 


Y retires on 1st April, 2018 and the following readjustments were agreed upon:
(a) Out of insurance premium which was debited to the Profit and Loss Account , ₹ 1,500 be carried forward as Unexpired Insurance.
(b) The Provision for Doubtful Debts be brought up to 5% o Debtors .
(c) The Land and Building be appreciated by 20%.
(d) A provision of ₹ 4,000 be made in respect of outstanding bills for repairs.
(e) The goodwill of the entire firm be fixed at ₹ 21,600.
Y's share of goodwill be adjusted to that of X and Z whoa re going to share in future profits in the ratio of 3 : 1 . 
Pass necessary journal entries  and give the Balance Sheet after Y's retirement.

Answer:

Journal
Particulars
L.F.
Debit
Amount
Rs
Credit
Amount
Rs
Revaluation A/c
Dr.
 
4,300
 
To Provision for Doubtful Debts A/c
 
 
300
To Provision for Outstanding Repair Bills  A/c
 
 
4,000
(Provisions transferred to Revaluation Account)
 
 
 
 
 
 
 
Prepaid Insurance A/c
Dr.
 
1,500
 
Land and Building A/c
Dr.
 
10,000
 
To Revaluation A/c
 
 
11,500
(Increase in value of Assets transferred to Revaluation Account)
 
 
 
 
 
 
 
Revaluation A/c
Dr.
 
7,200
 
To X’s Capital A/c
 
 
3,600
To Y’s Capital A/c
 
 
2,400
To Z’s Capital A/c
 
 
1,200
(Revaluation profit distributed among X, Y and Z in their old ratio)
 
 
 
 
 
 
 
X’s Capital A/c
Dr.
 
5,400
 
Z’s Capital A/c
Dr.
 
1,800
 
To Y’s Capital A/c
 
 
7,200
(Y’s share of goodwill adjusted)
 
 
 
 
 
 
 
Y’s Capital A/c
Dr.
 
39,600
 
To Y’s loan A/c
 
 
39,600
(Y’s capital balance after all adjustment transferred to his Loan Account)
 
 
 
 
 
 
 
 
Balance Sheet
as on March 31, 2017 (after Y’s Retirement)
Liabilities
Amount
Rs
Assets
Amount
Rs
Sundry Creditors
13,800
Cash at Bank
11,000
Provision for Outstanding Repair Bills
4,000
Sundry Debtors
10,000
 
 
 
Less: Provision for Doubtful Debts
 
(500)
 
9,500
Y’s Loan
39,600
Stock
16,000
Capital A/cs:
 
Prepaid Insurance
1,500
X
43,200
 
Plant and Machinery
17,000
Z
14,400
57,600
Land and Building
60,000
 
1,15,000
 
1,15,000
 
 
 
 

Working Notes:

WN 1
Revaluation Account
Dr.
 
Cr.
Particulars
Amount
Rs
Particulars
Amount
Rs
Provision for Doubtful Debts
 
Prepaid Insurance
1,500
(500 – 200)
300
Land And Building
(50,000 × 20%)
10,000
Provision For Outstanding Repairs Bills
4,000
 
 
Profit transferred to:
 
 
 
X’s Capital A/c
3,600
 
 
 
Y’s Capital A/c
2,400
 
 
 
Z’s Capital A/c
1,200
7,200
 
 
 
11,500
 
11,500
 
 
 
 

WN 2
 
Partners' Capital Accounts
Dr.
 
Cr.
Particulars
X
Y
Z
Particulars
X
Y
Z
Y’s Capital A/c
5,400
 
1,800
Balance b/d
45,000
30,000
15,000
 
 
 
 
Revaluation A/c
3,600
2,400
1,200
Y’s Loan
 
39,600
 
X’s Capital A/c
 
5,400
 
Balance c/d
43,200
 
14,400
Z’s Capital A/c
 
1,800
 
 
48,600
39,600
16,200
 
48,600
39,600
16,200
 
 
 
 
 
 
 
 

WN 3 Calculation of Ratios



∴ Old Ratio (X, Y and Z) = 3 : 2 : 1

Y retires from the firm.

New Ratio (X and Z) = 3 : 1

Gaining Ratio = New Ratio − Old Ratio



∴ Gaining Ratio = 3 : 1

WN 4 Adjustment of Goodwill

Goodwill of the firm = 21,600

Y’s Share of Goodwill =

This share of goodwill is to be distributed between X and Z in their gaining ratio (i.e. 3 : 1).



Page No 5.83:

Question 33:

A, B and C are partners in a firm, sharing profits and losses as A 1/3, B 1/2 and C 1/6 respectively. The Balance Sheet of the firm as at 31st March, 2018 was:

 

Liabilities

Assets

Capital A/cs:

 

Factory Building

50,000

A

30,000

 

Plant ad Machinery

40,000

     B 40,000   Furniture 10,000
    C     25,000  95,000 Stock    25,000

 

   

 

 

 

General Reserve   16,000 Debtors                18,000  

Sundry Creditors

  25,000

Less: Prov. for Doubtful Debts

500

17,00

 

 

Cash in Hand

8,500

 

 

 

 

       

 

 

 

 

 

1,51,000

 

1,51,000

 

 

 

 

 
 ​C retires on 1st April, 2018 subject to the following adjustments:

(a) Goodwill of the firm be valued at ₹ 24,000. C's share of goodwill be adjusted into the account of A and B who are going to share in future in the ratio of 3 : 2 .
(b) Plant and Machinery to be depreciated by 10% and Furniture by 5%.
(c) Stock to be appreciated by 15% and Factory Building by 10%.
(d) Provision for Doubtful Debts to be raised to ₹ 2,000.
You are required to pass journal entries to record the above transactions in the books of the firm and show the Profit and Loss Adjustment Account , Capital Account of C and the Balance Sheet of the firm after C's retirement.

Answer:

Journal

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Profit and Loss Adjustment A/c

Dr.

 

6,000

 

To Plant and Machinery A/c

 

 

4,000

To Provision for Doubtful Debts A/c

 

 

1,500

To Furniture A/c

 

 

500

(Decrease in value of Assets and provision for doubtful debts transferred to Profit and Loss Adjustment Account)

 

 

 

 

 

 

 

Stock A/c

Dr.

 

3,750

 

Factory Building A/c

Dr.

 

5,000

 

To Profit and Loss Adjustment A/c

 

 

8,750

( Increase in value of Assets transferred to Profit and Loss Adjustment Account)

 

 

 

 

 

 

 

Profit and Loss Adjustment A/c

Dr.

 

2,750

 

To A’s Capital A/c

 

 

917

To B’s Capital A/c

 

 

1,375

To C’s Capital A/c

 

 

458

(Profit distributed among A, B and C in their old ratio)

 

 

 

 

 

 

 

A’s Capital A/c

Dr.

 

6,400

 

To B’s Capital A/c

 

 

2,400

To C’s Capital A/c

 

 

4,000

(C’s share of goodwill and B’s gain in goodwill adjusted)

 

 

 

 

 

 

 

C’s Capital A/c

Dr.

 

32,125

 

To C’s Loan A/c

 

 

32,125

(C’s capital balance after all adjustment transferred to his Loan Account)

 

 

 

 

 

 

 

Reserve Fund A/c

Dr.

 

16,000

 

To A’s Capital A/c

 

 

5,333

To B’s Capital A/c

 

 

8,000

To C’s Capital A/c

 

 

2,667

(Reserve Fund distributed among partners in their old ratio)

 

 

 

 

 

 

 

 

Profit and Loss Adjustment Account

Dr.

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Plant and Machinery

 

Stock (25,000 × 15%)

3,750

(40,000 × 10%)

4,000

Factory Building (50,000 × 10%)

5,000

Furniture (10,000 × 5%))

500

 

 

Provision for Doubtful Debts

 

 

 

(2,000 – 500)

1,500

 

 

Profit transferred to:

 

 

 

A’s Capital A/c

917

 

 

 

B’s Capital A/c

1,375

 

 

 

C’s Capital A/c

458

2,750

 

 

 

 

 

 

 

8,750

 

8,750

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

B’s Capital A/c (Goodwill)

2,400

 

 

Balance b/d

30,000

40,000

25,000

C’s Capital A/c (Goodwill)

4,000

 

 

Reserve Fund

5,333

8,000

2,667

C’s Loan A/c

 

 

32,125

Revaluation A/c (Profit)

917

1,375

458

Balance c/d

29,850

51,775

 

A’s Capital A/c (Goodwill)

 

2,400

4,000

 

36,250

51,775

32,125

 

36,250

51,775

32,125

 

 

 

 

 

 

 

 

 

Balance Sheet

as on March 31, 2017 (after C’s Retirement)

Liabilities

Amounts

Rs

Assets

Amounts

Rs

Sundry Creditors

25,000

Factory Building

55,000

Loan Payable

15,000

Plant and Machinery

36,000

C’s Loan

32,125

Furniture

9,500

Capital A/cs:

 

Stock

28,750

A

29,850

 

Debtors

18,000

 

B

51,775

81,625

Less: Provision for Doubtful Debts

(2,000)

16,000

 

 

Cash in Hand

8,500

 

1,53,750

 

1,53,750

 

 

 

 


Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (A, B and C) = or 2 : 3 : 1

C retires from the firm.

New Ratio (A and B) = 3: 2

Gaining RatioNew Ratio − Old Ratio



WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 24,000

C’s Share of Goodwill =


 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

C’s Capital A/c (Goodwill)

1,600

2,400

 

Balance b/d

30,000

40,000

25,000

 

 

 

 

Reserve Fund

5,333

8,000

2,667

B’s Loan A/c

 

 

32,125

Revaluation A/c (Profit)

917

1,375

458

Balance c/d

34,650

46,975

 

A’s Capital A/c (Goodwill)

 

 

4,000

 

36,250

49,375

32,125

 

36,250

49,375

32,125