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Page No 6.100:
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 profit-sharing 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: 2017-18: ₹ 24,000; 2016-17: ₹ 16,000; 2015-16: ₹ 20,000 and 2014-15: ₹ 10,000 and 2013-14: ₹ 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 2017-18 ( 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 6.100:
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 years' purchase of average of four completed years' profit which were:
Year | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
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
WN2: Calculation of Interest on Capital
WN3: Calculation of Profit & Loss Suspense
WN4: Calculation of Share in Goodwill
Page No 6.101:
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 half-yearly 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 |
|
2018-19 |
|
|
|
2018-19 |
|
|
|
|
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 |
|
6,130 |
|
|
|
|
|
Mar.31 |
Interest |
|
1,532.5 |
|
|
|
|
1,30,262.5 |
|
|
|
1,30,262.5 |
|
|
|
|
|
|
|
|
|
|
2019-20 |
|
|
|
2019-20 |
|
|
|
|
Jun. 30 |
Bank (61,300 + 3,065) |
|
64,365 |
April 01 |
Balance b/d |
|
62,832.5 |
|
|
|
|
|
Jun. 30 |
Interest |
|
1,532.5 |
|
|
|
|
64,365 |
|
|
|
64,365 |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Profit & Loss Suspense
WN2: Calculation of Gaining Ratio and Share of Goodwill
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 6.102:
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 years' purchase of average of four completed years' profits which were: 2014-15₹ 1,00,000; 2015-16₹ 80,000; 2016-17₹ 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 half-yearly 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 + 8,200-11,200 + 200) |
2,200 |
|
|
|
|
1,61,000 |
|
1,61,000 |
|
|
|
|
|
Working Notes:
WN1: Calculation of Gaining Ratio and Share of Goodwill
WN2: Calculation of Goodwill
Page No 6.102:
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
WN2: Calculation of Share in Goodwill
WN3: Calculation of Profit & Loss Suspense
Page No 6.77:
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 6.77:
Question 2:
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 6.77:
Question 3:
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.
Answer:
Old Ratio (R, S and M) = 2 : 2 : 1
M retires from the firm.
His profit share =
M’s share taken by R and S in ratio of 1 : 2
New Ratio = Old Ratio + Share acquired from M
∴ New Profit Ratio (R and S) = 7 : 8
Page No 6.77:
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 6.77:
Question 5:
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
New Ratio after Y's retirement = 5 : 2
Gaining Share = New Share – Old Share
Gaining Ratio = 15 : 6 or 5 : 2
Page No 6.77:
Question 6:
(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 6.78:
Question 7:
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 profit-sharing ratio and gaining ratio of the remaining partners.
Answer:
Gaining Ratio = 3:2 (as given in the question)
Page No 6.78:
Question 8:
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 profit-sharing ratio.
Answer:
Old Ratio (A, B and C) = 8 : 4 : 3
B retires from the firm.
His profit share =
B’s share taken by A and C in ratio of 1 : 1
New Ratio = Old Ratio + Share acquired from B
∴ New Profit Ratio (A and C) = 2 : 1
Page No 6.78:
Question 9:
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 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 =
C’s share is taken by A in entirety
New Ratio = Old Ratio + Share acquired from C
∴ New Profit Ratio (A and B) = 7 : 3
Page No 6.78:
Question 10:
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:
Page No 6.78:
Question 11:
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 profit-sharing ratio and gaining ratio of the remaining partners.
Answer:
Page No 6.78:
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 6.78:
Question 13:
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 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 6.78:
Question 14:
P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2019, S retired from the firm. On S's retirement, goodwill of the firm was valued at ₹ 4,20,000. New profit-sharing ratio among 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 (₹) |
|
2019 Jan.1 |
R’s Capital A/c |
|
|
||
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
Page No 6.78:
Question 15:
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
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
Page No 6.78:
Question 16:
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 6.79:
Question 17:
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 written-off 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
WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
Page No 6.79:
Question 18:
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 decided 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
WN2: Calculation of Retiring Partner’s Share of Goodwill
Page No 6.79:
Question 19:
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 6.79:
Question 20:
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
WN2: Calculation of Retiring Partner’s Share of Goodwill
Page No 6.79:
Question 21:
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
WN2: Calculation of Retiring Partner’s Share of Goodwill
Page No 6.79:
Question 22:
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
WN2: Calculation of Retiring Partner’s Share of Goodwill
Page No 6.79:
Question 23:
X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. Z retired and on the date of his retirement, 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 6.80:
Question 24:
A, B and C were partners, sharing profits and losses in the ratio of 2 : 2 : 1. B decides to retire on 31st March, 2019. On the date of his retirement, some of the assets and liabilities appeared in the books as follows:
Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of Raw Materials ₹ 20,000; Stock of Finished Goods ₹ 30,000 and Debtors ₹ 20,000.
Following was agreed among the partners on B's retirement:
(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be reduced by 10%.
(c) A Provision of 5% on Debtors to be created for Doubtful Debts.
(d) Stock of Raw Materials to be valued at ₹ 18,000 and Finished Goods at ₹ 35,000.
(e) An Old Computer previously written off was sold for ₹ 2,000 as scrap.
(f) Firm had to pay ₹ 5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the Revaluation Account.
Answer:
Revaluation Account
|
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Dr.
|
|
Cr.
|
||||
Particulars
|
Amount
(₹)
|
Particulars
|
Amount
(₹)
|
|||
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:
|
|
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|
|||
A’s Capital A/c
|
6,000
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B’s Capital A/c
|
6,000
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C’s Capital A/c
|
3,000
|
15,000
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27,000
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27,000
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Journal
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||||
Particulars
|
L.F.
|
Debit
Amount
(₹)
|
Credit
Amount
(₹)
|
|
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)
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Revaluation A/c
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Dr.
|
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12,000
|
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To Plant and Machinery A/c
|
|
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4,000
|
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To Provision for Doubtful Debts A/c
|
|
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1,000
|
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To Stock of Raw Material A/c
|
|
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2,000
|
|
To Workmen’s Compensation Claim A/c
|
|
|
5,000
|
|
(Decrease in value of Assets and increase in Liabilities transferred to Revaluation Account)
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Revaluation A/c
|
Dr.
|
|
15,000
|
|
To A’s Capital A/c
|
|
|
6,000
|
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To B’s Capital A/c
|
|
|
6,000
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To C’s Capital A/c
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3,000
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(Revalution Profit transferred to Partners’ Capital accounts)
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Page No 6.80:
Question 25:
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) |
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Page No 6.80:
Question 26:
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, 2019. 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
(₹)
|
Credit
Amount
(₹)
|
|
2019
Mar.31 |
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)
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X’s Capital A/c
|
Dr.
|
|
15,000
|
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Y’s Capital A/c
|
Dr.
|
|
10,000
|
|
|
Z’s Capital A/c
|
Dr.
|
|
5,000
|
|
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To Profit and Loss A/c
|
|
|
|
30,000
|
|
(Debit balance in Profit and Loss A/c distributed among partners in old ratio)
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Page No 6.80:
Question 27:
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-sharing 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) | |||||
Page No 6.81:
Question 28:
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) |
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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
WN2: Calculation of Retiring Partner’s Share of Goodwill
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 6.81:
Question 29:
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 profit 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 11/2 times the average profit of the three preceding completed years.
C 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. Profits for the three preceding completed years ended 31st March, were: 2015 − ₹ 2,800; 2016 − ₹ 2,200 and 2017 − ₹ 1,600. What amount is due to C as per 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 |
||
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|
|
|
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 6.81:
Question 30:
X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2019 was:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
Creditors | 49,000 | Cash | 8,000 | |
Reserve | 18,500 | Debtors | 19,000 | |
Capital A/cs: X | 82,000 | Stock | 42,000 | |
Y | 60,000 | Building | 2,07,000 | |
Z | 75,500 | 2,17,500 | Patents | 9,000 |
2,85,000 | 2,85,000 | |||
Y retired on 1st April, 2019 on the following terms:
(a) Goodwill of the firm was valued at ₹ 70,000 and was not to appear in the books.
(b) Bad Debts amounted to ₹ 2,000 were to be written off.
(c) Patents were considered as valueless.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of X and Z after Y's retirement.
Answer:
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
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 |