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Page No 5.100:
Question 73:
A , B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1 . Their Balance Sheet as at 31st March, 2018 stood as follows :
Liabilities 
₹ 
Assets 
₹ 

Sundry Creditors 
2,60,000 
Cash in Hand 
42,500 

General Reserve 
1,20,000 
Cash at Bank 
2,14,500 

Capital A/cs: 
Debtors  1,63,000  
A 
2,00,000 
Stock  17,500  
B  1,20,000  Investments  1,32,500  
C 
80,000 
4,00,000 
Building  2,10,000  
7,80,000 
7,80,000 

B died on 30th June , 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
(c) His share of profits fro the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June , 2018 were as ₹ 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20% . The profit of the previous three years were: 1st Year: ₹ 82,000; 2nd year: ₹ 90,000; 3rd year ₹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.
Answer:
B’s Capital Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

B’s Executor A/c 
3,47,000 
Balance b/d 
1,20,000 



Interest on Capital A/c 
3,000 



General Reserve 
40,000 



Profit & Loss Suspense A/c 
40,000 



Goodwill A/c 
1,44,000 


3,47,000 

3,47,000 






B’s Executor Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Bank A/c 
3,47,000 
B’s Capital A/c 
3,47,000 


3,47,000 

3,47,000 






Working Notes:
WN 1: Calculation of Interest on Capital
WN 2: Calculation of Profit Share uptodeath
WN 3: Calculation of share of goodwill
Page No 5.100:
Question 74:
Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of ₹ 1,25,000 in Chetan's Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 201112 were ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.
Answer:
Chetan’s Capital A/c


Dr.

Cr.


Particulars

Amount
(Rs)

Particulars

Amount
(Rs)


Chetan’s Executor’s A/c

1,79,750

Capital

1,25,000




Interest on Capital
(for 6 months) 
3,750




Babita’s Share Capital A/c*

16,000




David’s Share Capital A/c*

8,000




Share of Reserve

12,000




P & L Suspense A/c**

15,000








1,79,750


1,79,750






Working Note: *
**Sales in the year 201112 = 4,00,000
Profit for year 201112 = 2,00,000 = 50% of Sales.
Therefore, Profit for the Period Apr 01 to 30^{th} Sep = 50% of Sales of the same period
Share of Profit to be divided = 50% of Rs 1,20,000 = Rs 60,000
Chetan’s Share of Profit = 1/4^{th} of Rs 60,000 = Rs 15,000
Page No 5.100:
Question 75:
Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:
Liabilities 
₹ 
Assets 
₹ 

Creditors 
10,000 
Plant and Machinery 
40,000 

General Reserve 
30,000 
Furniture 
15,000 

Capital A/cs: 
Investments  20,000  
Sunny 
30,000 
Debtors  20,000  
Honey  30,000  Stock  20,000  
Rupesh 
20,000 
80,000 
25,000  
1,20,000 
1,20,000 

Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.
Answer:
Honey’s Capital A/c 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Executor’s A/c 
81,350 
Balance b/d 
30,000 



Interest on Capital 
1,350 



Profit and Loss Suspense A/c 
40,000 



General Reserve 
10,000 


81,350 

81,350 





Working Notes:
WN1 Calculation of Interest on Honey’s Capital
WN2 Calculation of Honey’s share in profits
WN3 Calculation of Honey’s Share in General Reserve
Page No 5.101:
Question 76:
R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:
Liabilities 
₹ 
Assets 
₹ 

Sundry Creditors 
40,000 
Goodwill 
25,000 

Bills Payable 
15,000 
Leasehold 
1,00,000 

Workmen Compensation Reserve 
30,000 
Patents  30,000  
Capital A/cs: 
Machinery  1,50,000  
R  1,50,000  Stock  50,000  
S 
1,25,000 
Debtors  40,000  
T 
75,000 
3,50,000 
Cash at Bank  40,000  
4,35,000 
4,35,000 

T died on 1st August, 2018. It was agreed that:
(a) Goodwill be valued at ${2}^{\raisebox{1ex}{$1$}\!\left/ \!\raisebox{1ex}{$2$}\right.}$ years' purchase of average of last 4 years' profits which were:
201415: ₹ 65,000; 201516: ₹ 60,000; 201617: ₹ 80,000 and 201718: ₹ 75,000.
(b) Machinery be valued at ₹ 1,40,000; Patents be valued at ₹ 40,000; Leasehold be valued at ₹ 1,25,000 on 1st August, 2018.
(c) For the purpose of calculating T's share in the profits of 201819, the profits in 201819 should be taken to have accrued on the same scale as in 201718.
(d) A sum of ₹ 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal halfyearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's Executors' Account.
Answer:
Journal


Particulars

L.F.

Debit
Amount
Rs

Credit
Amount
Rs


Revaluation A/c

Dr.


10,000


To Machinery A/c



10,000


(Decrease in value of Machinery transferred to Revaluation Account)










Patents A/c

Dr.


10,000


Leasehold A/c

Dr.


25,000


To Revaluation A/c



35,000


(Increase in value Patents and Leasehold transferred to Revaluation Account)










Revaluation A/c

Dr.


25,000


To R’s Capital A/c



12,500


To S’s Capital A/c



7,500


To T’s Capital A/c



5,000


(Revaluation profit distributed among partners in their old ratio)










R’ Capital A/c

Dr.


12,500


S’s Capital A/c

Dr.


7,500


T’s Capital A/c

Dr.


5,000


To Goodwill A/c



25,000


(Goodwill written off among partners in their old ratio)










R’s Capital A/c

Dr.


21,875


S’s Capital A/c

Dr.


13,125


To T’s Capital A/c



35,000


(T’s share of goodwill adjusted)










Profit and Loss Suspense A/c

Dr.


5,000


To T’s Capital A/c



5,000


(T’s share of profit transferred to his capital account)










Workmen’s Compensation Reserve A/c

Dr.


30,000


To R’s Capital A/c



15,000


To S’s Capital A/c



9,000


To T’s Capital A/c



6,000


(Workmen’s Compensation Reserve distributed among partners in their old ratio )










T’s Capital A/c

Dr.


1,21,000


To T’s Executors A/c



1,21,000


(Amount due to T after all adjustments transferred to his Executor’s Account)










T’s Executor’s A/c

Dr.


21,000


To Bank A/c



21,000


(Amount paid to T’s Executor)









T’s Executor’s Account


Dr.


Cr.


Date

Particulars

Amount
Rs

Date

Particulars

Amount
Rs

2018



2018



Aug. 01

Cash A/c

21,000

Aug. 01

T’s Capital A/c

1,21,000

2019  2019  
Jan. 31

Cash A/c (25,000 + 5,000)

30,000

Jan. 31

Interest (1,00,000 ×10% for 6 months)

5,000

Mar. 31

Balance c/d

76,250

Mar. 31

Interest (75,000 ×10% for 2 months)

1,250



1,27,250



1,27,250

2019



2019



Aug. 01

Cash A/c (25,000 + 1,250 + 2,500)

28,750

Apr. 01

Balance b/d

76,250

2020



Aug. 01

Interest (75,000 × 10% for 4 months)

2,500

Jan. 31  Cash A/c (25,000 + 2,500)  27,500  2020  
Mar. 31

Balance c/d

25,417

Jan. 31

Interest (50,000 × 10% for 6 months)

2,500




Mar. 31

Interest (25,000 × 10% for 2 months)

417



81,667



81,667

2020



2020



Aug. 01

Cash A/c (25,000 + 417 + 833)

26,250

Apr. 01

Balance b/d

25,417




Aug. 01

Interest (25,000 × 10% for 4 months)

833



26,250



26,250







Working Notes:
WN 1 Calculation of Goodwill
Goodwill = Average Profit × Number of Year’s Purchase
∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 2.5 = Rs 1,75,000
WN 2 Adjustment of Goodwill
Old Ratio (R, S and T) = 5 : 3 : 2
T died.
∴ New Ratio (R and S) = 5 : 3 and
Gaining Ratio = 5 : 3
T’s Share in Goodwill =
This share of goodwill is to be distributed between R and S in their gaining ratio (i.e. 5 : 3).
WN 3 Calculation of T’s Share of Profit
Profit for 201718 = Rs 75,000
T's Share of Profit for 201819 =$75,000\times \frac{2}{10}\times \frac{4}{12}=Rs.5,000$
WN 4
Revaluation Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs


Machinery

10,000

Patents

10,000


Profit transferred to:


Leasehold

25,000


R’s Capital A/c

12,500




S’s Capital A/c

7,500




T’s Capital A/c

5,000

25,000




35,000


35,000






WN 5
T’s Capital Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs

Goodwill

5,000

Balance b/d

75,000

T’s Executor’s A/c

1,21,000

Workmen’s Compensation Reserve

6,000



Profit and Loss Suspense A/c

5,000



R’s Capital A/c

21,875



S’s Capital A/c

13,125



Revaluation A/c (Profit)

5,000


1,26,000


1,26,000





Page No 5.101:
Question 77:
Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:
Liabilities 
₹ 
Assets 
₹ 

Trade Creditors 
40,000 
Building 
2,00,000 

General Reserve 
45,000 
Plant and Machinery 
80,000 

Capital A/cs: 
Stock  35,000  
Akhil 
1,95,000 
Debtors  80,000  
Nikhil  1,20,000  Cash at Bank  85,000  
Sunil 
80,000 
3,95,000 

4,80,000 
4,80,000 

Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) ₹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 201415 − ₹ 80,000 Profit; 201516 − ₹ 1,00,000 Loss; 201617 − ₹ 1,20,000 Profit; 201718 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account.
Answer:
Journal


Particulars

L.F.

Debit
Amount
Rs

Credit
Amount
Rs


General Reserve A/c

Dr.


45,000


To Akhil’s Capital A/c



15,000


To Nikhil’s Capital A/c



15,000


To Sunil’s Capital A/c



15,000


(General Reserve distributed among partners in their old ratio)










Akhil’s Capital A/c

Dr.


35,000


Nikhil’s Capital A/c

Dr.


35,000


To Sunil’s Capital A/c



70,000


(Sunil’s share of goodwill adjusted)










Interest on Capital A/c

Dr.


1,600


To Sunil’s Capital A/c



1,600


(Interest allowed on Sunil’s Capital)










Profit and Loss Suspense A/c

Dr.


20,000


To Sunil’s Capital A/c



20,000


(Sunil’s profit share transferred to his capital account)










Sunil’s Capital A/c

Dr.


1,86,600


To Sunil’s Executor’s A/c



1,86,600


(Amount due to Sunil after all adjustments transferred to his Executor’s Account)










Sunil’s Executor’s A/c

Dr.


50,000


To Bank A/c



50,000


(Amount paid to Sunil’s Executor)









Sunil’s Capital Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs



Balance b/d

80,000



Interest on Capital A/c

1,600



General Reserve

15,000



Profit and Loss Suspense A/c

20,000



Akhil’s Capital A/c (Goodwill)

35,000

Sunil’s Executor’s A/c

1,86,600

Nikhil’s Capital A/c (Goodwill)

35,000


1,86,600


1,86,600





Sunil’s Executor’s Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs

Bank A/c

50,000

Sunil’s Capital A/c

1,86,600

Balance c/d

1,36,600




1,86,600


1,86,600





Working Notes:
WN 1 Calculation of Sunil’s Share of Profit
Profit for 201718 = Rs 1,80,000
WN 2 Calculation of Goodwill
Goodwill = Average Profit × Number of Year’s Purchase
∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 3 = Rs 2,10,000
WN 3 Adjustment of Goodwill
Old Ratio = 1 : 1 : 1
Sunil died.
∴ New Ratio = 1 : 1 and
Gaining Ratio = 1 : 1
Sunil’s Share in Goodwill =
This share of goodwill is to be distributed between Akhil and Nikhil in their gaining ratio (i.e. 1 : 1).
WN 4 Calculation of Interest on Sunil’s Capital
Sunil’s Capital Balance = Rs 80,000
∴ Interest on Capital (for 4 months)
Page No 5.102:
Question 78:
B, C and D were partners in a firm sharing profits in the ratio of 5 :3 : 2. On 31st December, 2008, their Balance Sheet was as follows:
Liabilities 
Amount (₹) 
Assets 
Amount 

Creditors 
43,000 
Cash 
10,200 

Bills Payable 
17,000 
Stock 
24,500 

General Reserve 
70,000 
Debtors  27,300  
Capital A/cs: 
Land and Building  1,40,000  
B  40,000  Profit and Loss A/c  70,000  
C 
50,000 

D 
52,000 
1,42,000 

2,72,000 
2,72,000 

B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years' purchase of the average profit of last 5 years. The profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005, and 31st December, 2004 were ₹ 70,000; ₹ 60,000; ₹ 50,000 and ₹ 40,000 respectively.
(b) B's share of profit or loss till the date of his death was to be calculated on the basis of the profit or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B's share of goodwill at the time of his death.
(ii) B's share in the profit or loss of the firm till the date of his death.
(iii) Prepare B's Capital Account at the time of his death to be presented to his Executors.
Answer:
(i) Calculation of Goodwill
Goodwill = Average Profit × Number of Year’s Purchase
∴ Goodwill = Average Profit × Number of Years’ Purchase
= 30,000 × 3 = Rs 90,000
Old Ratio (B, C and D) = 5 : 3 : 2
B Died.
New Ratio (C and D) = 3 : 2
B’s Share in Goodwill =
This share of goodwill is to be distributed between C and D in their gaining ratio (i.e. 3 : 2).
(ii) Calculation of B’s Share of Profit or Loss
Loss for the Year (2008) = Rs 70,000
(iii)
B’s Capital Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs

Profit and Loss A/c

35,000

Balance b/d

40,000

Profit and Loss Suspense A/c

8,750

General Reserve

35,000



C’s Capital A/c (Goodwill)

27,000

B’s Executor’s A/c

76,250

D’s Capital A/c (Goodwill)

18,000


1,20,000


1,20,000





Page No 5.102:
Question 79:
The Balance Sheet of X, Y and Z as at 31st March, 2018 was:
Liabilities 
Amount (₹) 
Assets 
Amount (₹) 

Bills Payable 
2,000 
Cash at Bank 
5,800 

Employees' Provident Fund 
5,000 
Bills Receivable 
800 

Workmen Compensation Reserve 
6,000 
Stock  9,000  
General Reserve  6,000  Sundry Debtors  16,000  
Loans  7,100  Furniture  2,000  
Capital A/cs: 
Plant and Machinery  6,500  
X  22,750  Building  30,000  
Y 
15,250 
Advertising Suspense  6,000  
Z 
12,000 
50,000 

76,100 
76,100 

The profitsharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 201718: ₹ 24,000; 201617: ₹ 16,000; 201516: ₹ 20,000 and 201415: ₹ 10,000 and 201314: ₹ 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock ₹ 10,000; Debtors ₹ 15,000; Furniture ₹ 1,500; Plant and Machinery ₹ 5,000; Building ₹ 35,000. A Bill Receivable for ₹ 600 was found worthless.
(d) A Sum of ₹ 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.
Answer:
Journal


Particulars

L.F.

Debit
Amount
Rs

Credit
Amount
Rs


Workmen’s Compensation Reserve

Dr.


6,000


To X’s Capital A/c



3,000


To Y’s Capital A/c



2,000


To Z’s Capital A/c



1,000


(Workmen’s Compesation Reserve distributed among partners in their old ratio)










General Reserve A/c

Dr.


6,000


To X’s Capital A/c



3,000


To Y’s Capital A/c



2,000


To Z’s Capital A/c



1,000


(General Reserve distributed among partners in their old ratio)










X’s Capital A/c

Dr.


3,000


Y’s Capital A/c

Dr.


2,000


Z’s Capital A/c

Dr.


1,000


To Advertisement Suspense A/c



6,000


(Advertisement suspense written off among partners in their old ratio)










X’s Capital A/c

Dr.


4,500


Y’s Capital A/c

Dr.


3,000


To Z’s Capital A/c



7,500


(Z’s share of goodwill adjusted)










Revaluation A/c

Dr.


3,600


To Sundry debtors A/c

Dr.



1,000

To Furniture A/c



500


To Plant and Machinery A/c



1,500


To Bills Receivable A/c



600


(Decrease in value of Assets transferred to Revaluation Account)










Stock A/c

Dr.


1,000


Building A/c

Dr.


5,000


To Revaluation A/c



6,000


(Increase in value of Assets transferred to Revaluation Account)










Revaluation A/c

Dr.


2,400


To X’ Capital A/c



1,200


To Y’s Capital A/c



800


To Z’s Capital A/c



400


(Revaluation profit distributed among partners in their old ratio)










Profit and Loss Suspense A/c

Dr.


1,333


To Z’s Capital A/c



1,333


(Z’s share of profit transferred his capital account)










Z’s Capital A/c

Dr.


22,233


To Z’s Executor’s A/c



22,233


(Amount due to Z transferred to his Executor’s Account)










Z’s Executor’s A/c

Dr.


12,333


To Bank A/c



12,333


(Amount paid to Z’s Executor)









Z’s Executor’s Account


Dr.


Cr.


Date

Particulars

Amount
Rs

Date

Particulars

Amount
Rs

2018



2018



July 31

Bank A/c

12,233

July 31

Z’s Capital A/c

22,233

2019  2019  
Mar. 31

Balance c/d

10,667

Mar. 31

Interest (10,000 × 10% for 8 months)

667



22,900



22,900

2019



2019



July 31

Bank A/c (5,000 + 667 + 333)

6,000

Apr. 01

Balance b/d

10,667




July 31

Interest (10,000 × 10% for 4 months )

333

2020  2020  
Mar.31

Balance c/d

5,333

Mar. 31

Interest (5,000 × 10% for 8 months)

333



11,333



11,333

2020



2020



July 31

Bank A/c (5,000 + 333 + 167)

5,500

Apr. 01

Balance b/d

5,333




July 31

Interest (5,000 × 10% for 4months)

167



5,500



5,500







Working Notes:
WN1 Calculation of Goodwill
Goodwill = Average Profit × Number of Year’s Purchase
∴ Goodwill = Average Profit × Number of Years’ Purchase
= 15,000 × 3 = Rs 45,000
WN2 Adjustment of Goodwill
Old Ratio = 3 : 2 : 1
Z died.
∴ New Ratio (X and Y) = 3 : 1 and
Gaining Ratio = 3 : 2
Z’s Share in Goodwill =
This share of goodwill is to be distributed between X and Y in their gaining ratio (i.e. 3 : 1).
WN3 Calculation Z’s Share of Profit
Profit for 201718 ( Immediate Previous Year) = Rs 24,000
∴ Z’s Profit Share
WN4
Revaluation Account


Dr.


Cr.


Particulars

Amount
Rs

Particulars

Amount
Rs


Sundry Debtors

1,000

Stock

1,000


Furniture

500

Building

5,000


Plant and Machinery

1,500




Bills Receivable

600




Profit transferred to:





X’s Capital A/c

1,200




Y’s Capital A/c

800




Z’s Capital A/c

400

2,400




6,000


6,000






Page No 5.103:
Question 80:
X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:
Liabilities 
Amount (₹) 
Assets 
Amount (₹) 

Creditors 
2,00,000 
Building 
2,00,000 

Employees' Provident Fund 
1,50,000 
Machinery 
3,00,000 

General Reserve 
36,000 
Furniture  1,10,000  
Investment Fluctuation Reserve  14,000  Investment (Market value ₹ 86,000)  1,00,000  
Capital A/cs: 
Debtors  80,000  
X 
3,00,000 
Cash at Bank  1,90,000  
Y  2,50,000  Advertisement Suspense  1,20,000  
Z 
1,50,000 
7,00,000 

11,00,000 
11,00,000 

X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at ${2}^{\raisebox{1ex}{$1$}\!\left/ \!\raisebox{1ex}{$2$}\right.}$ years' purchase of average of four completed years' profit which were:
Year  201415  201516  201617  201718 
Profits (₹)  1,70,000  1,80,000  1,90,000  1,80,000 
(ii) X's share of profit from the closure of last accounting year till date of death be calculated on the basis of last years' profit.
(iii) Building undervalued by ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furniture overvalued by ₹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X's executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.
Answer:
Revaluation Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Machinery 
1,50,000 
Building 
2,00,000 

Furniture 
46,000 



Provision for Doubtful Debts 
4,000 









2,00,000 

2,00,000 






X’s Capital Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Advertisement Suspense A/c 
50,000 
Balance b/d 
3,00,000 

X’s Executors A/c 
5,05,000 
General Reserve 
15,000 



Y’s Capital A/c 
1,12,500 



Z’s Capital A/c 
75,000 



Profit & Loss Suspense 
37,500 



Interest on Capital 
15,000 







5,55,000 

5,55,000 






X’s Executors Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Bank A/c 
2,52,500 
X’s Capital A/c 
5,05,000 

X’s Executors Loan Account 
2,52,500 









57,000 

57,000 






Working Notes:
WN1: Calculation of Share in General Reserve
$\text{Reserve}=\frac{36,000\times 5}{12}=\text{Rs15,000}$
WN2: Calculation of Interest on Capital
$\text{Interestoncapital}=\frac{3,00,000\times 10\times 6}{100\times 12}=\text{Rs15,000}$
WN3: Calculation of Profit & Loss Suspense
$\text{ProfitLossSuspense}=\frac{1,80,000\times 5\times 6}{12\times 12}=\text{Rs37,500}$
WN4: Calculation of Share in Goodwill
$\begin{array}{l}\begin{array}{l}\text{GainingRatio=NewRatioOldRatio}\\ \text{Y'sGain=}\frac{7}{12}\frac{4}{12}=\frac{74}{12}=\frac{3}{12}\\ \text{Z'sGain=}\frac{5}{12}\frac{3}{12}=\frac{53}{12}=\frac{2}{12}\\ \text{Goodwill}=\text{AverageProfit}\times \text{No.ofyears'Purchase}\\ \text{}=1,80\text{,000}\times 2.\text{5}=\text{Rs4,50,000}\\ \text{X'sshareinGoodwill=4,50,000}\times \frac{5}{12}=\text{Rs1,87,500,shouldbecontributedbyYZingainingratioi.e.3:2}\end{array}\end{array}$
Page No 5.104:
Question 81:
X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z died on 30th June, 2018. The Balance Sheet of the firm as at that 31st March, 2018 is as follows:
BALANCE SHEET as at 31st March, 2018  
Liabilities  Amount (₹) 
Assets  Amount (₹) 

X's Capital A/c  2,40,000 
Machinery 
2,40,000  
Y's Capital A/c  1,60,000  Furniture  1,50,000  
Z's Capital A/c 
80,000  4,80,000  Investments  40,000  
X's Current A/c  16,000  Stock  64,000  
Y's Current A/c  5,000  Sundry Debtors  50,000  
Reserve  60,000  Bills Receivable  22,000  
Bills Payable  34,000  Cash at Bank  37,000  
Sundry Creditors  40,000  Cash in Hand  22,000  
Z's Current A/c  10,000  
6,35,000  6,35,000  
The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
(c) Advertising Expenses ₹ 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
(d) Goodwill of the firm is valued at ₹ 60,000.
(e) X and Y are to share profits and losses equally in future.
(f) Profit for the year ended 31st March, 2018 was ₹ 8,16,000 and Z's share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March, 2018.
(g) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners' Capital Accounts.
Prepare the Revaluation Account, Partners' Capital Accounts and prepare C's Executors's Account to show that C's Executors were paid in two halfyearly instalments plus interest of 10% p.a. on the
unpaid balance. The first instalment was paid on 31st December, 2018.
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 

201819 



201819 




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 $(1,22,600\times \frac{10}{100}\times \frac{6}{12})$ 

6,130 





Mar.31 
Interest $(61,300\times \frac{10}{100}\times \frac{3}{12})$ 

1,532.5 




1,30,262.5 



1,30,262.5 










201920 



201920 




Jun. 30 
Bank (61,300 + 3,065) 

64,365 
April 01 
Balance b/d 

62,832.5 





Jun. 30 
Interest $(61,300\times \frac{10}{100}\times \frac{3}{12})$ 

1,532.5 




64,365 



64,365 










Working Notes:
WN1: Calculation of Profit & Loss Suspense
$\text{ProfitlossSuspense}=\frac{8,16,000\times 1\times 3}{6\times 12}=\text{Rs34,000}$
WN2: Calculation of Gaining Ratio and Share of Goodwill
$\begin{array}{l}\text{GainingRatio=NewRatioOldRatio}\\ \text{X'sgain}=\frac{1}{2}\frac{3}{6}=0\\ \text{Y'sgain}=\frac{1}{2}\frac{2}{6}=\frac{1}{6}\\ \text{X:Y}=\text{0:1}\\ \text{Z'sshareofgoodwill=60,000}\times \frac{1}{6}=\text{Rs10,000shouldbegivenbyY}\end{array}$
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 5.104:
Question 82:
X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2018 was as follows:
Liabilities  Amount (₹) 
Assets  Amount (₹) 

Sundry Creditors  18,000  Goodwill  12,000  
Investments Fluctuation Reserve  7,000  Patents  52,000  
Workmen Compensation Reserve  7,000  Machinery  62,400  
Capital A/cs:  Investment  6,000  
X  1,35,000  Stock  20,000  
Y  95,000  Sundry Debtors  24,000  
Z 
74,000  3,04,000  Less: Provision for Doubtful Debts  4,000  20,000 
Loan to Z  1,000  
Cash at Bank  600  
Profit and Loss A/c  1,50,000  
Z's Drawings  12,000  
3,36,000  3,36,000 
Z died on 1st April, 2018, X and Y decide to share future profits and losses in ratio of 3 : 5. It was agreed that:
(i) Goodwill of the firm be valued ${2}^{\raisebox{1ex}{$1$}\!\left/ \!\raisebox{1ex}{$2$}\right.}$ years' purchase of average of four completed years' profits which were: 201415$\u2014$₹ 1,00,000; 201516$\u2014$₹ 80,000; 201617$\u2014$₹ 82,000.
(ii) Stock is undervalued by ₹ 14,000 and machinery is overvalued by ₹ 13,600.
(iii) All debtors are good. A debtor whose dues of ₹ 400 were written off as bad debts paid 50% in full settlement.
(iv) Out of the amount of insurance premium debited to Profit and Loss Account, ₹ 2,200 be carried forward as prepaid insurance premium.
(v) ₹ 1,000 included in Sundry Creditors is not likely to arise.
(vi) A claim of ₹ 1,000 on account of Workmen Compensation to be provided for.
(vii) Investment be sold for ₹ 8,200 and a sum of ₹ 11,200 be paid to executors of Z immediately. The balance to be paid in four equal halfyearly instalments together with interest @ 8% p.a. at half year rest.
Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm.
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, 2018 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 + 8,20011,200 + 200) 
2,200 




1,61,000 

1,61,000 





Working Notes:
WN1: Calculation of Gaining Ratio and Share of Goodwill
$\begin{array}{l}\text{GainingRatio=NewRatioOldRatio}\\ \text{X'sgain}=\frac{3}{8}\frac{5}{10}=\frac{5}{40}\text{(Sacrifice)}\\ \text{Y'sgain}=\frac{5}{8}\frac{3}{10}=\frac{13}{40}\\ \text{Z'sshareofgoodwill=70,000}\times \frac{2}{10}=\text{Rs14,000}\\ \text{X'sshareofgoodwill=70,000}\times \frac{5}{40}=\text{Rs8,750}\end{array}$
WN2: Calculation of Goodwill
$\begin{array}{l}\text{Goodwill}=\text{AverageProfit}\times \text{No.ofyears'Purchase}\\ \text{}=28\text{,000}\times 2.\text{5}=\text{Rs70,000}\end{array}\phantom{\rule{0ex}{0ex}}\begin{array}{l}\text{AverageProfit}=\frac{\text{TotalProfitsofpastyearsgiven}}{\text{Numberofyears}}\\ \text{}=\frac{1,00,000+80,000+82,0001,50,000}{4}=\text{Rs28,000}\end{array}$
Page No 5.105:
Question 83:
X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:
Liabilities 
Amount (₹) 
Assets 
Amount (₹) 

Trade Creditors 
1,20,000 
Cash at Bank 
1,80,000 

Bills Payable 
80,000 
Stock 
1,40,000 

General Reserve 
60,000 
Sundry Debtors  80,000  
Capital A/cs: 
Building  3,00,000  
X 
7,00,000 
Advance to Y  7,00,000  
Y  7,00,000  Profit and Loss A/c  3,20,000  
Z 
60,000 
14,60,000 

17,20,000 
17,20,000 

Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.
Answer:
Y’s Capital Account 

Dr. 

Cr. 

Particulars 
Amount Rs 
Particulars 
Amount Rs 

Profit & Loss A/c 
1,28,000 
Balance b/d 
7,00,000 

Profit & Loss Suspense (Share of Loss) 
32,000 
General Reserve 
24,000 

Advance to Y 
7,00,000 
X’s Capital A/c 
64,000 



Y’s Executors A/c 
40,000 







8,20,000 

8,20,000 






Working Notes:
WN1: Calculation of Share in General Reserve
$\text{Reserve}=\frac{60,000\times 2}{5}=\text{Rs24,000}$
WN2: Calculation of Share in Goodwill
$\begin{array}{l}\text{Goodwill}=\text{AverageProfit}\times \text{No.ofyears'Purchase}\\ \text{}=1,20\text{,000}\times 2=\text{Rs2,40,000}\\ \text{Y'sshareinGoodwill}=\text{2,40,000}\times \frac{2}{5}=\text{Rs96,000,shouldbecontributedbyXZin2:1}\end{array}\phantom{\rule{0ex}{0ex}}\begin{array}{l}\text{AverageProfit}=\frac{\text{TotalProfitsofpastyearsgiven}}{\text{Numberofyears}}\\ \text{}=\frac{1,00,000+1,60,000+2,20,000+4,40,0003,20,000}{5}=\text{Rs1,20,000}\end{array}$
WN3: Calculation of Profit & Loss Suspense
$\text{ProfitlossSuspense(Loss)}=\frac{3,20,000\times 2\times 3}{5\times 12}=\text{Rs32,000}$
Page No 5.80:
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 5.80:
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 5.80:
Question 3:
From the following particulars, calculate new profitsharing 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 5.80:
Question 4:
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 profitsharing 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 5.80:
Question 5:
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 profitsharing ratio.
Answer:
Old Ratio (R, S and M) = 2 : 2 : 1
M retires from the firm.
His profit share = $\frac{1}{5}$
M’s share taken by R and S in ratio of 1 : 2
$SharetakenbyR:\frac{1}{5}\times \frac{1}{3}=\frac{1}{15}\phantom{\rule{0ex}{0ex}}SharetakenbyS:\frac{1}{5}\times \frac{2}{3}=\frac{2}{15}\phantom{\rule{0ex}{0ex}}\phantom{\rule{0ex}{0ex}}\phantom{\rule{0ex}{0ex}}$
New Ratio = Old Ratio + Share acquired from M
$R\text{'}sNewShare:\frac{2}{5}+\frac{1}{15}=\frac{6+1}{15}=\frac{7}{15}\phantom{\rule{0ex}{0ex}}S\text{'}sNewShare:\frac{2}{5}+\frac{2}{15}=\frac{6+2}{15}=\frac{8}{15}\phantom{\rule{0ex}{0ex}}$
∴ New Profit Ratio (R and S) = 7 : 8
Page No 5.80:
Question 6:
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 5.80:
Question 7:
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 5.80:
Question 8:
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
$\begin{array}{ccccccc}& & \mathrm{X}& :& \mathrm{Y}& :& \mathrm{Z}\\ \mathrm{Old}\mathrm{Ratio}& =& \frac{1}{2}& :& \frac{3}{10}& :& \frac{1}{5}\\ & =& \frac{5:3:2}{10}& & & & \end{array}$
New Ratio after Y's retirement = 5 : 2
Gaining Share = New Share – Old Share
$\mathrm{X}\text{'}\mathrm{s}\mathrm{Gain}=\frac{5}{7}\frac{5}{10}=\frac{15}{70}\phantom{\rule{0ex}{0ex}}\mathrm{Z}\text{'}\mathrm{s}\mathrm{Gain}=\frac{2}{7}\frac{2}{10}=\frac{6}{70}$
Gaining Ratio = 15 : 6 or 5 : 2
Page No 5.80:
Question 9:
(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 profitsharing 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 5.81:
Question 10:
Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profitsharing ratio and gaining ratio of the remaining partners.
Answer:
$\begin{array}{l}\mathrm{Kumar}\text{'}s\mathrm{share}=\frac{3}{10}\left(\mathrm{acquired}\mathrm{by}\mathrm{Lakshya}\mathrm{and}\mathrm{Manoj}\mathrm{in}3:2\right)\\ \mathrm{Share}\mathrm{acquired}\mathrm{by}\mathrm{Lakshya}=\frac{3}{10}\times \frac{3}{5}=\frac{9}{50}\\ \mathrm{Share}\mathrm{acquired}\mathrm{by}\mathrm{Manoj}=\frac{3}{10}\times \frac{2}{5}=\frac{6}{50}\\ \mathrm{Lakshya}\text{'}\mathrm{s}\mathrm{New}\mathrm{Share}=\frac{2}{10}+\frac{9}{50}=\frac{19}{50}\\ \mathrm{Manoj}\text{'}\mathrm{s}\mathrm{New}\mathrm{Share}=\frac{1}{10}+\frac{6}{50}=\frac{11}{50}\\ \mathrm{Naresh}\text{'}\mathrm{s}\mathrm{share}(\mathrm{as}\mathrm{retained})=\frac{4}{10}\mathrm{or}\frac{20}{50}\\ \mathrm{New}\mathrm{Profit}\mathrm{Sharing}\mathrm{Ratio}=19:11:20\end{array}$
Gaining Ratio = 3:2 (as given in the question)
Page No 5.81:
Question 11:
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 profitsharing 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 5.81:
Question 12:
A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profitsharing ratio.
Answer:
Old Ratio (A, B and C) = 8 : 4 : 3
B retires from the firm.
His profit share = $\frac{4}{15}$
B’s share taken by A and C in ratio of 1 : 1
$SharetakenbyA:\frac{4}{15}\times \frac{1}{2}=\frac{2}{15}\phantom{\rule{0ex}{0ex}}SharetakenbyC:\frac{4}{15}\times \frac{1}{2}=\frac{2}{15}\phantom{\rule{0ex}{0ex}}\phantom{\rule{0ex}{0ex}}\phantom{\rule{0ex}{0ex}}$
New Ratio = Old Ratio + Share acquired from B
$A\text{'}sNewShare:\frac{8}{15}+\frac{2}{15}=\frac{10}{15}=\frac{2}{3}\phantom{\rule{0ex}{0ex}}C\text{'}sNewShare:\frac{3}{15}+\frac{2}{15}=\frac{5}{15}=\frac{1}{3}\phantom{\rule{0ex}{0ex}}$
∴ New Profit Ratio (A and C) = 2 : 1
Page No 5.81:
Question 13:
A, B, and C are partners sharing profits in the ratio of 5 : 3 : 2. C retires and his share is taken by A. Calculate new profitsharing ratio of A and B.
Answer:
Old Ratio (A, B and C) = 5 : 3 : 2
C retires from the firm.
His profit share = $\frac{2}{10}$
C’s share is taken by A in entirety
New Ratio = Old Ratio + Share acquired from C
$A\text{'}sNewShare:\frac{5}{10}+\frac{2}{10}=\frac{7}{10}\phantom{\rule{0ex}{0ex}}B\text{'}sNewShare:\frac{3}{10}+0=\frac{3}{10}\phantom{\rule{0ex}{0ex}}$
∴ New Profit Ratio (A and B) = 7 : 3
Page No 5.81:
Question 14:
P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that profitsharing ratio between Q and R will be same as existing between P and Q. Calculate New profitsharing ratio and Gaining Ratio.
Answer:
$\begin{array}{l}\text{CalculationofGainingRatio}\\ \text{P:Q:R}=7\text{:5:3}\left(\text{Oldratio}\right)\\ \text{Q:R=7:5(Newratio,sameasbetweenPQ)}\\ \text{GainingRatio=NewRatioOldRatio}\\ \text{Q'sGain=}\frac{7}{12}\frac{5}{15}=\frac{3520}{60}=\frac{15}{60}\\ \text{R'sGain=}\frac{5}{12}\frac{3}{15}=\frac{2512}{60}=\frac{13}{60}\\ \text{Q:R}=15:13\\ \end{array}$
Page No 5.81:
Question 15:
Murli, Naveen and Omprakash are partners sharing profits in the ratio of 3/8, 1/2 and 1/8. Murli retires and surrenders 2/3rd of his share in favour of Naveen and remaining share in favour of Omprakash. Calculate new profitsharing ratio and gaining ratio of the remaining partners.
Answer:
$\begin{array}{l}\mathrm{Old}\mathrm{Ratio}=\mathrm{3:4:1}\\ \mathrm{Murli}\text{'}s\mathrm{share}=\frac{3}{8}\\ \mathrm{Share}\mathrm{acquired}\mathrm{by}\mathrm{Naveen}=\frac{3}{8}\times \frac{2}{3}=\frac{2}{8}\\ \mathrm{Remaining}\mathrm{Share}=\frac{3}{8}\frac{2}{8}=\frac{1}{8}\left(\mathrm{acquired}\mathrm{by}\mathrm{Omprakash}\right)\\ \mathrm{Gaining}\mathrm{Ratio}=\frac{2}{8}:\frac{1}{8}=2:1\\ \mathrm{Naveen}\text{'}s\mathrm{New}\mathrm{Share}=\frac{4}{8}+\frac{2}{8}=\frac{6}{8}\\ \mathrm{Omprakash}\text{'}s\mathrm{New}\mathrm{Share}=\frac{1}{8}+\frac{1}{8}=\frac{2}{8}\\ \mathrm{New}\mathrm{Profit}\mathrm{Sharing}\mathrm{Ratio}=3:1\end{array}$
Page No 5.81:
Question 16:
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 profitsharing 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 5.81:
Question 17:
L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at ₹ 72,000. Calculate M's share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.
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 5.81:
Question 18:
P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2017, S retired from the firm. On S's retirement the goodwill of the firm was valued at ₹ 4,20,000. The new profitsharing ratio between P, Q and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S's retirement.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit Amount (₹) 
Credit Amount (₹) 

R’s Capital A/c 
Dr. 
84,000 

To P’s Capital A/c 
42,000 

To S’s Capital A/c 
42,000 

(Goodwill adjusted)  
Working Notes:
Gaining Ratio = New Ratio – Old Ratio
$\begin{array}{l}\mathrm{P}=\frac{4}{10}\frac{5}{10}=\frac{1}{10}\left(\mathrm{sacrifice}\right)\\ \mathrm{Q}=\frac{3}{10}\frac{3}{10}=0\\ \mathrm{R}=\frac{3}{10}\frac{1}{10}=\frac{2}{10}\end{array}$
$\begin{array}{l}\mathrm{P}\text{'}s\mathrm{share}=4,20,000\times \frac{1}{10}=42,000\\ \mathrm{R}\text{'}s\mathrm{share}=4,20,000\times \frac{2}{10}=84,000\\ \mathrm{S}\text{'}s\mathrm{share}=4,20,000\times \frac{1}{10}=42,000\end{array}$
Page No 5.81:
Question 19:
Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retired and goodwill of the firm is valued at ₹ 1,80,000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary Journal entries.
Answer:
Journal 

Date 
Particulars 
L.F. 
Amount (₹) 
Amount (₹) 

Aparna’s Capitals A/c 
Dr. 
18,000 

Sonia’s Capital A/c 
Dr. 
42,000 

To Manisha’s Capital A/c 
60,000 

(Manisha’s share of goodwill adjusted to Aparna’s and Sonia’s Capital Account in their gaining ratio) 
Working Notes:
WN1: Calculation of Manisha’s Share in Goodwill
$\begin{array}{l}\mathrm{Manisha}\text{'}s\mathrm{share}=\mathrm{Firm}\text{'}s\mathrm{Goodwill}\times \mathrm{Manisha}\text{'}s\mathrm{Profit}\mathrm{Share}\\ \mathrm{Manisha}\text{'}s\mathrm{share}=1,80,000\times \frac{1}{3}=60,000\end{array}$
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
$\begin{array}{l}\text{Aparna'sgain}=\frac{3}{5}\frac{3}{6}=\frac{3}{30}\\ \text{Sonia'sgain}=\frac{2}{5}\frac{1}{6}=\frac{7}{30}\\ \text{GainingRatio=3:7}\end{array}$
$\mathrm{Aparna}\text{'}s\mathrm{share}=60,000\times \frac{3}{10}=18,000\phantom{\rule{0ex}{0ex}}\mathrm{Sonia}\text{'}s\mathrm{share}=60,000\times \frac{7}{10}=42,000$
Page No 5.81:
Question 20:
Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at ₹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit Amount (₹) 
Credit Amount (₹) 


Hanny’s Capital A/c 
Dr. 
30,000 



Pammy’s Capital A/c 
Dr. 
20,000 



Sunny’s Capital A/c 

10,000 



To Goodwill A/c 


60,000 


(Old goodwill writtenoff in old ratio) 










Hanny’s Capital A/c 
Dr. 
14,000 



Sunny’s Capital A/c 
Dr. 
14,000 



To Pammy’s Capital A/c 


28,000 


(Adjustment for goodwill in gaining ratio) 



Working Notes:
WN1: Calculation of Pammy’s Share in Goodwill
$\begin{array}{l}\mathrm{Pammy}\text{'}s\mathrm{share}=\mathrm{Firm}\text{'}\mathrm{s}\mathrm{Goodwill}\times \mathrm{Pammy}\text{'}s\mathrm{Profit}\mathrm{Share}\\ \mathrm{Pammy}\text{'}s\mathrm{share}=84,000\times \frac{2}{6}=28,000\left(\mathrm{to}\mathrm{be}\mathrm{borne}\mathrm{by}\mathrm{gaining}\mathrm{partners}\mathrm{in}\mathrm{gaining}\mathrm{ratio}\right)\end{array}$
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
$\begin{array}{l}\mathrm{Hanny}\text{'}s\mathrm{gain}=\frac{2}{3}\frac{3}{6}=\frac{1}{6}\\ \mathrm{Sunny}\text{'}s\mathrm{gain}=\frac{1}{3}\frac{1}{6}=\frac{1}{6}\\ \mathrm{Gaining}\mathrm{Ratio}=\mathrm{1:1}\end{array}$
Page No 5.82:
Question 21:
A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profitsharing 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 