12th | Retirement of a Partner | Question No.  31 To 35 | Ts Grewal Solution 2022-2023

Question 31:

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, 2022 was:

Liabilities( `)Assets( `)
Reserve18,500Debtors                   19,000
Capital A/cs:   X82,000 Stock42,000
Y60,000 Building2,07,000
 2,85,000 2,85,000

Y retired on 1st April, 2022 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.



Revaluation Account
Dr. Cr.
Particulars ( `)Particulars ( `)
Bad Debts2,000Loss transferred to: 
Patents9,000X’s Capital A/c4,400 
  Y’s Capital A/c4,400 
  Z’s Capital A/c2,20011,000
 11,000 11,000
Partners’ Capital Accounts
Dr. Cr.
Revaluation A/c (Loss)4,4004,4002,200Balance b/d82,00060,00075,500
Y’s Capital A/c (Goodwill)18,6679,333Reserve (Old Ratio)7,4007,4003,700
Y’s Loan A/c91,000X’s Capital A/c  (Goodwill)18,667
Balance c/d66,33367,667Z’s Capital A/c (Goodwill)9,333
 89,40095,40079,200 89,40095,40079,200
Balance Sheet as on March 31, 2022 (after Y’s Retirement)
Liabilities ( `)Assets ( `)
Y’s Loan91,000Debtors (19000-2000)17,000
Capital A/cs: Stock42,000
X66,333 Building2,07,000
 2,74,000 2,74,000

Working Notes:

WN 1 Calculation of Gaining Ratio

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

Y retires from the firm.

∴Gaining Ratio = 2 : 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = ` 70,000

Y’s Share of Goodwill = 70,000×2/5=28,000

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

X‘s share= 28,000×2/3=18,667

Z‘s share= 28,000×1/3=9,333

DateParticularsL.F.Debit  ( `)Credit  ( `)
April 1

X’s Capital A/c

 Z’s Capital A/cDr. 9,333 
 To Y’s Capital A/c  28,000
 (Adjustment of goodwill made on Y’s retirement)   

Question 32:

Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2016, their Balance Sheet was as under:

Liabilities( `)Assets( `)
Trade creditors53,000Bank60,000
Employees’ Provident Fund47,000Debtors60,000
Kanika’s Capital2,00,000Stock1,00,000
Disha’s Capital1,00,000Fixed assets2,40,000
Kabir’s Capital80,000Profit and Loss A/c20,000
 4,80,000 4,80,000

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years’ purchase of average profits of three completed years preceding the date of retirement. The profits for the year:
      2013-14 were  ` 1,00,000 and for 2014-15 were  ` 1,30,000.
(b) Fixed Assets were to be increased to  ` 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
 Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.  

(AI 2017 C)



Revaluation Account
Revaluation Profit Fixed Assets60,000
  Kanika’s Capital40,000 Stock20,000
  Disha’s Capital20,000   
  Kabir’s Capital20,00080,000  
 80,000 80,000
Partners’ Capital Account 
Profit & Loss A/c10,0005,0005,000Balance b/d2,00,0001,00,00080,000
Kanika’s Capital A/c 35,00035,000Disha’s Capital A/c35,000  
Kanika’s Loan A/c3,00,000  Kabir’s Capital A/c35,000  
Balance c/d 80,00060,000Revaluation40,00020,00020,000
 3,10,0001,20,0001,00,000 3,10,0001,20,0001,00,000
Balance Sheet as on March 31, 2016
Liabilities ( `)Assets ( `)
Employees’ Provident Fund47,000Bank60,000
Trade Creditors53,000Sundry Debtors60,000
Kanika’s Loan A/c3,00,000Stock1,20,000
Capitals Fixed Assets3,00,000
 5,40,000 5,40,000

Working Notes:
WN1: Calculation of Goodwill

Goodwill=Average Profits×Number of Years’ Purchase

Average Profits=Total ProfitsNumber of Years=1,00,000+1,30,000−20,000/3=2,10,000/3=` 70,000

Goodwill=70,000×2=` 1,40,000

Kanika’s share=1,40,000×2/4=70,000 (to be borne by gaining partners in gaining ratio)

Note: Since no information is given about the share of gain, it is assumed that the old partners are gaining in their old profit sharing ratio.

Question 33:

N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016 their Balance Sheet was as under:

Liabilities ( `)Assets ( `)
General Reserve90,000 Debtors1,35,000 
Capitals:  Less: Provision15,0001,20,000
 N2,25,000 Stock1,50,000
 S3,75,000 Machinery4,50,000
   Profit and Loss Account75,000
 13,05,000 13,05,000

G retired on the above date and it was agreed that:
(a) Debtors of  ` 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building will be depreciated by 5%. 
(c) An unrecorded creditor of  ` 30,000 will be taken into account. 
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G’s retirement was valued at  ` 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G’s retirement. (Foreign 2017)


DateParticularsL.F.Debit  ( `)Credit  ( `)
 General Reserve A/cDr. 90,000 
     To N’s Capital A/c   18,000
     To S’s Capital A/c   27,000
     To G’s Capital A/c   45,000
 (Balance in reserve distributed among all partners in old ratio)    
  N’s Capital A/cDr. 15,000 
  S’s Capital A/cDr. 22,500 
  G’s Capital A/cDr. 37,500 
      To Profit & Loss A/c   75,000
 (Debit balance P&L A/c written off among all partners in old ratio)    
  N’s Capital A/cDr. 18,000 
  S’s Capital A/cDr. 27,000 
      To G’s Capital A/c   45,000
 (Goodwill adjusted in gaining ratio)    
 Revaluation A/cDr. 1,65,000 
    To Patent A/c   90,000
    To Stock A/c   7,500
    To Machinery  A/c    22,500
    To Building A/c   15,000
    To Creditors A/c   30,000
 (Decrease in assets and increase in liabilities debited to Revaluation A/c)    
 Provision for Doubtful Debts A/cDr. 2,550 
     To Revaluation A/c   2,550
 (Excess provision written back)    
  N’s Capital A/cDr. 32,490 
  S’s Capital A/cDr. 48,735 
  G’s Capital A/cDr. 81,225 
      To Revaluation A/c   1,62,450
 (Loss on revaluation debited to partners’ capital accounts in old ratio)    
 G’s Capital A/cDr. 4,21,275 
    To G’s Loan A/c   4,21,275
 (Amount due to G transferred to his loan A/c)    

Working Notes:

WN1: Calculation of G’s Share of Goodwill

G’s share=Firm’s Goodwill×G’s Profit Share

G’s share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)

WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio
N’s gain=2/5−2/10=2/10

S’s gain=3/5−3/10=3/10Gaining Ratio=2:3

N’s share=45,000×2/5=18,000

S’s share=45,000×3/5=27,000

WN2: Calculation of Excess/Deficit Provision for Doubtful Debts

Required Provision @5%=1,35,000−6,000×5100=6,450

Existing Provision after writing bad-debts= 9,000

Excess Provision to be written back=2,550 9,000−6,450

WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits

= 4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
= ` 4,21,275


Question 34: Ashok, Bhaskar and Chaman are partners in a firm, sharing profits and losses as Ashok 1/3, Bhaskar 1/2, and Chaman 1/6 respectively. The Balance Sheet of the firm as at 31st March, 2022 was

Capital A/cs:  Building 5,00,000
Ashok3,00,000 Plant and Machinery 4,00,000
Bhaskar4,00,000 Furniture 1,00,000
Chaman2,50,0009,50,000Stock 2,50,000
General Reserve 2,20,000Debtors1,80,000 
Sundry Creditors 2,50,000Less: Provision for Doubtful Debts5,0001,75,000
Loan Payable 1,50,000Cash in Hand 85,000
   Advertisement Suspense Account 60,000
  15,70,000  15,70,000

Chaman retired on 1st April, 2022 subject to the following adjustments:

(a) Goodwill of the firm be valued at `2,40,000. Chaman’s share of goodwill be adjusted into the Capital Accounts of Ashok and Bhaskar who will share future profits in the ratio of 3:2.

(6) Plant and Machinery to be reduced by 10% and Furniture by 5%.

(c) Stock to be increased by 15% and Building by 10%.

(d) Provision for Doubtful Debts to be raised to `20,000.

Prepare Revaluation Account, Capital Account of Chaman and the Balance Sheet of the firm after Chaman’s retirement.



Profit and loss adjustment a/c
Dr.  Cr.
To  Plan and machinery To Furniture To Prov. for doubtful debts To capital a/c (profit transferred to) Ashok =27,500×2/6= 9,167 Bhaskar=27,500×3/6=13,750 Chaman =27,500×1/6=4,58340,000 5,000 15,000         27,500By stock By factory building37,500 50,000
 87,500 87,500


Partners’ Capital Account 
B’s Capital A/c24,000Balance b/d3,00,0004,00,0002,50,000
C’s Capital A/c40,000A’s Capital A/c24,00040,000
Advertisement sus. a/c C’s loan a/c20,000  30,00010,000   3,21,250Profit and loss adjustment a/c General reserve a/c9,167   73,33313,750   1,10,0004,583   36,667
Balance c/d2,98,5005,17,750
 3,82,5005,47,7503,31,250 3,82,5005,47,7503,31,250
 Balance Sheet
 as on April 01, 2022 (after C’s Retirement)
 LiabilitiesAmount ( `)AssetsAmount ( `)
 Sundry Creditors2,50,000Factory building5,50,000
 Loan Payable1,50,000Plant and machinery3,60,000
 C’s Loan3,21,250Furniture95,000
 Capital A/c Debtors     1,80,000
 Ashok2,98,500 Less; prov.           20,000  1,60,000
 Bhaskar5,17,7503,54,000Cash     85,000
  15,37,500 15,37,500
DateParticularsL.F.Debit  ( `)Credit  ( `) 
 Ashok’s Capital A/cDr. 64,000  
     To Bhaskar’s Capital A/c   24,000 
     To Chaman’s Capital A/c   40,000 
 (Being goodwill adjusted for compensating bhaskar, Chaman)    
  Profit and loss adjustment a/cDr. 60,000  
    To Plant and machinery A/c 40,000  
    To  Furniture A/c  5,000 
    To Prov. for doubtful debts  A/c   15,000 
 (Decrease in assets and increase in liabilities debited to Revaluation A/c)     
  N’s Capital A/cDr. 18,000  
  S’s Capital A/cDr. 27,000  
      To G’s Capital A/c   45,000 
 (Goodwill adjusted in gaining ratio)     
 Stock A/cDr. 37,500 
 Factory building  A/cDr. 50,000 
 To P&L adjustment  A/c 87,500 
 (Decrease in assets debited to Revaluation A/c)  

Working notes;

Old ratio of Ashok : Bhaskar : chaman=1/3:1/2:1/6




New ratio of Ashok and Bhaskar= 3:2

Gaining ratio= New ratio – old ratio

Ashok = 3/5-2/6=18-10/30=8/30

Bhaskar= 2/5-3/6=12-15/30= -3/30

Goodwill of firm= 2,40,000

Bhaskar will get =2,40,000×3/30=24,000

Chaman’s share of goodwill = 2,40,000×1/6=40,000

Ashok will give Bhaskar and  chaman 24,000, 40,000 respectively.

Question 35: Chintan, Ayush and Sudha were partners in a firm sharing profits and losses in the ratio of 5: 3:2. On 31st March, 2019, their Balance Sheet was as follows:

Capitals: Plant and Machinery 90,000
Chintan90,000 Furniture 60,000
Ayush60,000 Stock 30,000
Provident Fund 30,000Less: Provision for Doubtful Debts5,00055,000
General Reserve 20,000Cash at Bank 15,000
Creditors 10,000   
  2,50,000  2,50,000

Chintan retired on the above date and it was agreed that:

(a) Debtors of `5,000 were to be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts was to be created.

(b) Goodwill of the firm on Chintan’s retirement was valued at `1,00,000 and Chintan’s share of the same will be adjusted by debiting the Capital Accounts of Ayush and Sudha.

(c) Stock was revalued at `36,000.

(d) Furniture was undervalued by `9,000.

(e) Liability for Workmen’s Compensation of `2,000 was to be created.

(f) Chintan was to be paid `20,000 by cheque and the balance was to be transferred to his loan account.

Pass the necessary Journal entries in the books of the firm on Chintan’s retirement.

(CBSE 2020)


DateParticularsL.F.Dr. (`)Cr. (`)
 Stock A/c Furniture A/c Provision A/c   To Revolution  A/c (Being Decrease in the Value of Liabilities and increase in the value of Assets)Dr. Dr. Dr. 6,000 9,000 2,250      17,250
 Revaluation A/c   To Bad debts A/c   To Liabilities for Worker compensation A/c (Being Decrease in the Value of Assets and increase in the value of Liabilities)Dr. 7,000  5,000 2,000
 Revaluation A/c   To Chintan’s Capital A/c   To Ayush’s Capital A/c   To Sudha’s Capital A/c (being gain of revaluation Account transferred to Capital accounts)Dr. 10,250  5,125 3,075 2,050
 General Reserve A/c   To Chintan’s Capital A/c   To Ayush’s Capital A/c   To Sudha’s Capital A/c (being gain of General Reserves transferred to Capital accounts)Dr. 20,000  10,000 6,000 4,000
 Ayush’s Capital A/c Sudha’s Capital A/c   To Chintan’s Capital A/c (Being Retiring Partner compensated)Dr. Dr. 30,000 20,000    50,000
 Chintan’s Capital A/c   To Bank A/c (Being Chintan was paid `20,000 through cheque)Dr. 20,000  20,000
 Chintan’s Capital A/c   To  Chintan’s  Loan A/c (Being balance of Capital transferred to His loan Account)Dr. 1,35,125  1,35,125

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