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12th | Retirement of a partner  | Question No. 41 To 45 | Ts Grewal Solution 2024-2025

Question 41: Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2019, their Balance Sheet was as follows:


BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2019

Liabilities

 

`

Assets

`

Trade Creditors

 

1,60,000

Land and Building

10,00,000

Bills Payable

 

2,44,000

Machinery

12,00,000

Employees' Provident Fund

 

76,000

Stock

10,00,000

Capitals:

 

 

Sundry Debtors

4,00,000

Lisa 14,00,000

14,00,000

 

Bank

40,000

Monika

3,60,000

31,60,000

 

 

Nisha

 

 

 

 

 

 

36,40,000

 

36,40,000

On 31st March, 2019, Monika retired from the firm and the remaining partners decided to carry on the business. It was agreed that:

(I) Land and building be appreciated by `2,40,000 and machinery be depreciated by 10%

(ii) 50% of the stock was taken over by the retiring partner at book value.

(iii) Provision for doubtful debts was to be made at 5% on debtors

(iv) Goodwill of the firm be valued at `3,00,000 and Monika's share of goodwill be adjusted in the accounts of Lisa and Nisha.

(v) The total capital of the new firm be fixed at `27,00,000 which will be in the proportion of the new profit Sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the partners were to be opened.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on Monika's retirement. (CBSE 2019)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

To provision for doubtful debts

20,000

By land and building

2,40,000

To Machinery a/c

1,20,000

To capital a/c

Lisa’s =1,00,000×2/5=40,000

Monika’s =1,00,000×2/5=40,000

Nisha’s =1,00,000×1/5=20,000

(In old ratio)

 

 

 

1,00,000

 

 

 

 

 

2,40,000

2,40,000

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

 

Dr.

 

Cr.

 

Particulars

Lisa

Monika

Nisha

Particulars

Lisa

Monika

Nisha

To Monika’s capital a/c

To stock

To Monika’s loan a/c

To balance c/d

80,000

 

 

13,60,000

 

5,00,000

10,60,000

40,000

 

 

3,40,000

By Balance b/d

By Lisa’s capital a/c

By Nisha’s capital a/c

By revaluation a/c

14,00,000

 

 

40,000

14,00,000

80,000

40,000

40,000

3,60,000

 

 

20,000

14,40,000

15,60,000

3,80,000

14,40,000

15,60,000

3,80,000

 To balance c/d

18,00,000

9,00,000

By Balance b/d

By current a/c

13,60,000

4,40,000 

 

3,40,000 

5,60,000

18,00,000

9,00,000

18,00,000

9,00,000

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2019 after Monika’s retirement

Liabilities

 (`)

Assets

 (`)

Trade creditors

Bills payables

Employees provident fund

Capital a/c

Lisa= 18,00,000

Nisha= 9,00,000

1,60,000

2,44,000

76,000

 

 

27,00,000

Land and building

Machinery

Stock

Sundry debtors     4,00,000

Less; Provision           20,000

for Doubtful debts

Bank

Lisa’s current a/c

Nisha’s current a/c

12,40,000

10,80,000

5,00,000

 

3,80,000

 

40,000

4,40,000

5,60,000

Monika’s loan

10.,60,000

42,40,000

42,40,000

 

 

Working notes;

WN -1

Calculation of gaining and sacrificing ratio

 

Lisa

 

Monika

 

Nisha

Old ratio =

2

:

2

:

1

New ratio =

2

 

:

 

1

Gaining ratio = New ratio – Old ratio

Lisa’s gain = 2/3-2/5=10-6/15=4/15

Nisha’s gain = 1/3-1/5=5-3/15=2/15

Gaining ratio of Lisa and Nisha = 4:2=2:1

 

WN-2 Treatment of goodwill;

Firm’s goodwill =3,00,000

Monika will be compensated = 1,20,000×2/5=1,20,000

Lisa will compensate =1,20,000×2/3 = 80,000

Nisha will compensate =1,20,000×1/3 = 40,000

Condition for goodwill remaining partner to retiring partner

 

WN -3

Lisa’s capital = 27,00,000×2/3=18,00,000

Nisha’s capital = 27,00,000×1/3=9,00,000

 

Question 42:  On 31st March, 2024, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:


Liabilities

 

`

Assets

 

`

Creditors

 

10,800

Cash at Bank

 

13,000

Bills Payable

 

5,000

Debtors

10,000

 

Capital A/cs:

 

 

Less: Provision for Doubtful Debts

200

9,800

A

45,000

 

Stock

 

9,000

B

15,000

 

Machinery

 

24,000

C

30,000

90,000

Freehold Premises

 

50,000

 

 

1,05,800

 

 

1,05,800

B retired on 1st April, 2024 and following adjustments were agreed to determine the amount payable to B:

(a) Out of the amount of insurance premium debited to Profit and Loss Account, `1,000 be carried forward as prepaid Insurance.

(b) Freehold Premises be appreciated by 10%.

(c) Provision for Doubtful Debts is brought up to 5% on Debtors.

(d) Machinery be reduced by 5%.

(e) Liability for Workmen Compensation to the extent of `1,500 would be created.

(f) Goodwill of the firm be fixed at `18,000 and B's share of the same be adjusted into the Capital Accounts of A and C, who will share future profits in the ratio of 3/4th and 1/4th.

(g)Total capital of the firm as newly constituted be fixed at `60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.

(h) B be paid `5,000 in cash and the balance be transferred to his Loan Account.

Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

 

Answer:


Revaluation a/c

Dr.                                                                                                                                                Cr.

Particulars

`

Particulars

`

To provision for doubtful debts

300

By unexpired insurance

1,000

To Machinery

1,200

By freehold premises

5,000

To workers’ compensation liabilities

1,500

 

 

To capital a/c -profit transferred to :

 

 

 

A=3,000×3/6=1,500

 

 

 

B=3,000×2/6=1,000

 

 

 

C=3,000×1/6=500

3,000

 

 

 

6,000

 

6,000

 

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

To B’s capital a/c

4,500

1,500

By Balance b/d

45,000

30,000

15,000

To cash a/c

5,000

By A’s capital

4,500

To B’s loan a/c

32,000

By C’s Capital

1,500

To balance c/d

42,000

14,000

By Revaluation a/c

1,500

1,000

500

46,500

37,000

15,500

46,500

37,000

15,500

 To balance c/d

45,000 

 

15,000 

 By Balance b/d

42,000

14,000

By Bank a/c

3,000

1,000

 

 45,000

 

 15,000

 

 45,000

 

 15,000

 

 

Balance Sheet

as on April 01, 2024 after Z’s retirement

Liabilities

 (`)

Assets

 (`)

Creditors

10,800

Cash at bank

12,000

Bills payables

5,000

Debtors                      10,000

Workers’ Compensation liabilities

1,5000

Less; prov. For D.D.      500

9,500

Capital a/c

A

45,000

C

15,000

60,000

Stock

9,000

B’s loan

32,000

Unexpired insurance

1,000

Machinery

22,800

 

Freehold premises

 55,000

1,,09,300

1,,09,300

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of A,B and C =45,0000:30,000:15,000=3:2:1

New ratio of A and C= 3:1

Gaining ratio= New ratio- Old ratio

A’s gain = ¾- 3/6 =18-12/24=6/24

C’s gain =1/4-1/6=6-4/24=2/24

Gaining ratio of A:C = 6:2=3:1

WN-2 treatment of Goodwill

Goodwill of the firm= 18,000

B will be compensated for 18,000×2/6=6,000

A will compensate =6,000×3/4=4,500

C will compensate =6,000×3/4=1,500

Condition for goodwill treatment: Remaining partner to retiring partner

WN-3 Capital adjustment

A’s capital = 60,000×3/4=45,000

C’s capital = 60,000×1/4=15,000

WN-4

Closing bank balance= 13,000-5,000+3,000+1,000=12,000

 

Question 43:  X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance Sheet as on


31st March, 2018 was as follows:

Liabilities

 

`

Assets

 

`

Sundry Creditors

 

16,600

Cash

 

15,000

Workmen's Compensation Fund

 

9,000

Debtors

21,000

 

General Reserve

 

6,000

Less: Provision for Doubtful Debts

(1,400)

19,600

Capitals:

 

 

Stock

 

19,000

X

Y

Z

90,000

60,000

30,000

 

 

1,80,000

Machinery

Building

 

58,000

1,00,000

 

 

 

 

 

 

 

 

2,11,600

 

 

2,11,600

On the above date, Y retired owing to ill health. The following adjustments were agreed upon for calculation of amount due to Y:

(a) Provision for Doubtful Debts to be increased to 10% of Debtors.

(b) Goodwill of the firm be valued at 36,000 and be adjusted into the Capital Accounts of X and Z, who will share profits in future in the ratio of 3 :1.

(c)Included in the value of Sundry Creditors was `2,500 for an outstanding legal claim, which will not arise.

(d) X and Z also decided that the total capital of the new firm will be `1,20,000 in their profit-sharing ratio. Actual cash to be brought in or to be paid off as the case may be.

(e) Y to be paid `9,000 immediately and balance to be transferred to his Loan Account.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm after Y's retirement.

(CBSE Sample Paper 2019)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

To provision for doubtful debts

700

By sundry creditors

2,500

To capital a/c – Profit transferred;

 X=1800×3/6=900

y=1800×2/6=600

Z=1800×1/6=300

1,800

2,500

2,500

 

 

 

 

 

 

 

 

 

 

 

  

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

To Y’s capital a/c

9,000

-

3,000

By Balance b/c

90,000

60,000

30,000

To Cash a/c

-

9,000

-

By X’s Capital a/c

-

9,000

-

To Y’s loan a/c

-

68,600

-

By Z’s Capital a/c

-

3,000

-

 To  Balance C/d

89,400 

-

29,800 

By Workers’ compensation fund

4,500

3,000

1,500

By General reserve

3,000

2,000

1,000

By Revaluation a/c

900

600

300

98,400

77,600

32,800

98,400

77,600

32,800

 To  Balance C/d

 90,000

-

 30,000

 By Balance b/d

89,400

-

29,800 

By Cash a/c

600

-

200

 

 

 90,000

-

 30,000

90,000

-

 30,000

 

 

Balance Sheet

as on April 01, 2018 after Z’s retirement

Liabilities

 (`)

Assets

 (`)

Sundry creditors

14,100

Cash a/c

(15,000-9000+600+200)

6,800

Capital a/c

Debtors                            21,000

Less; Prov. For D.D.        2,100

 

18,900

X= 90,000

Z= 30,000

 

1,20,000

Stock

Machinery

19,000

58,000

Y’s loan a/c

68,600

Buildings

1,00,000

2,02,700

2,02,700

 

 

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of X,Y and Z =90,0000:60,000:30,000=3:2:1

New ratio of X and Z= 3:1

Gaining ratio= New ratio- Old ratio

X’s gain = ¾- 3/6 =18-12/24=6/24

Z’s gain =1/4-1/6=6-4/24=2/24

Gaining ratio of A:C = 6:2=3:1

WN-2 treatment of Goodwill

Goodwill of the firm= 36,000

Y will be compensated for 36,000×2/6=12,000

X will compensate =12,000×3/4=9,000

Z will compensate =12,000×1/4=3,000

 

Condition for goodwill treatment: Remaining partner to retiring partner

X’s capital     a/c

Dr.

9,000

 

Z’s capital     a/c

Dr.

3,000

 

 To Y’s capital a/c

 

 

12,000

WN-3 Capital adjustment

X’s capital = 1,20,000×3/4=90,000

Z’s capital = 1,20,000×1/4=30,000

 

When existing total capital of remaining partners is to be in New Profit-sharing Ratio

Question 44: Shweta, Meenu and Asha were partners in a firm sharing profits and losses in the ratio of 3:5:2. Meenu retired on 1st April, 2022. After making all adjustments relating to revaluation, goodwill and accumulated profits, etc., Capital Accounts of Shweta and Asha showed credit balance of 3,00,000 and 1,00,000 respectively. It was decided to adjust the capitals of Shweta and Asha in their new profit-sharing ratio.


Pass necessary Journal entries for bringing in or withdrawal of the necessary amounts involved. Show your working clearly. (CBSE 2024)

Answer:


Date

Particulars

 

Dr. (`)

Cr. (`)

(i)

Bank A/c

Dr.

60,000

 

 

 To Aastha 's Capital A/c

 

 

60,000

 

(Being amount brought)

 

 

 

(ii)

Shweta's Capital A/c

 

60,000

 

 

 To Bank A/c

 

 

60,000

 

(Being amount withdrawn)

 

 

 

 

 Total Capital of Shweta and Asha showed credit balance of 3,00,000+1,00,000=4,00,000

New Ratio of Shweta and Asha = 3:2

New Capital as per New Ratio of Shweta and Asha

Shweta = 4,00,000×3/5=2,40,000

Asha = 4,00,000×2/5=1,60,000

Capital adjustment requirement

Shweta

Adjusted Capital

3,00,000

 

New Capital

2,40,000

 

Amount withdrawn

60,000

 

 

 

Aastha

Adjusted Capital

1,00,000

 

New Capital

1,60,000

 

Amount brought

60,000

 

 

Question 45:


Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
 

Liabilities

 (`)

Assets

 (`)

Sundry Creditors

12,600

 Bank

4,100

Provident Fund

3,000

 Debtors

30,000

 

General Reserve

9,000

 Less: Provision 

1,000

29,000

Capital A/cs:

 

 

 

 

Amit

40,000

 

Stock

25,000

Balan

36,500

 

Investments

10,000

Chander

20,000

96,500

Patents

5,000

 

 

 

Machinery

48,000

 

1,21,100

 

1,21,100

 

 

 

 

 
It was agreed that:
(i)  Goodwill will  be valued at 
` 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%. 
(iv) Liability on account of Provident Fund was estimated at  ` 2,400.
(v) Chander took over Investments for  ` 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement. 

(Delhi 2015, Modified)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

`

Particulars

`

Machinery

4,800

Investments A/c

5,800

Patents

1,000

Provident Fund A/c

600

Profit transferred to:

 

 

 

Amit’s Capital A/c

300

 

 

 

Balan’s Capital A/c

200

 

 

 

Chander’s Capital A/c

100

600

 

 

 

6,400

 

6,400

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

Cr.

Particulars

Amit

Balan

Chander

Particulars

Amit

Balan

Chander

Investments A/c

 

 

15,800

Balance b/d

40,000

36,500

20,000

Chander’s Capital A/c

2,700

1,800

 

Revaluation A/c (Profit)

300

200

100

Loan A/c

 

 

10,300

General Reserve

4,500

3,000

1,500

Current A/c

 

5,900

 

Amit’s Capital A/c

 

 

2,700

Balance c/d

48,000

32,000

 

Balan’s Capital A/c

 

 

1,800

 

 

 

 

Current A/c

5,900

 

 

 

50,700

39,700

26,100

 

50,700

39,700

26,100

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Adjustment of Goodwill

Chander’s share of Goodwill =27,000 ×1/6=4,500

Amit wil pay=4,500×3/5=2,700

Balan wil pay=4,500×2/5=1,800

 

WN2 Adjustment of Capital
Adjusted Old Capital of Amit=44,800 (40,000+4,500+300)-2,700=
` 42,100

Adjusted Old Capital of Balan=39,700 (36,500+3,000+200)-1,800=` 37,900

Total Adjusted Capital=42,100+37,900=` 80,000

New Profit Sharing Ratio=3:2

Amit's New Capital=80,000×3/5=` 48,000

Balan's New Capital=80,000×2/5=` 32,000


Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.

  

Question 41: Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2019, their Balance Sheet was as follows:


BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2019

Liabilities

 

`

Assets

`

Trade Creditors

 

1,60,000

Land and Building

10,00,000

Bills Payable

 

2,44,000

Machinery

12,00,000

Employees' Provident Fund

 

76,000

Stock

10,00,000

Capitals:

 

 

Sundry Debtors

4,00,000

Lisa 14,00,000

14,00,000

 

Bank

40,000

Monika

3,60,000

31,60,000

 

 

Nisha

 

 

 

 

 

 

36,40,000

 

36,40,000

On 31st March, 2019, Monika retired from the firm and the remaining partners decided to carry on the business. It was agreed that:

(I) Land and building be appreciated by `2,40,000 and machinery be depreciated by 10%

(ii) 50% of the stock was taken over by the retiring partner at book value.

(iii) Provision for doubtful debts was to be made at 5% on debtors

(iv) Goodwill of the firm be valued at `3,00,000 and Monika's share of goodwill be adjusted in the accounts of Lisa and Nisha.

(v) The total capital of the new firm be fixed at `27,00,000 which will be in the proportion of the new profit Sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the partners were to be opened.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on Monika's retirement. (CBSE 2019)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

To provision for doubtful debts

20,000

By land and building

2,40,000

To Machinery a/c

1,20,000

To capital a/c

Lisa’s =1,00,000×2/5=40,000

Monika’s =1,00,000×2/5=40,000

Nisha’s =1,00,000×1/5=20,000

(In old ratio)

 

 

 

1,00,000

 

 

 

 

 

2,40,000

2,40,000

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Accounts

 

Dr.

 

Cr.

 

Particulars

Lisa

Monika

Nisha

Particulars

Lisa

Monika

Nisha

To Monika’s capital a/c

To stock

To Monika’s loan a/c

To balance c/d

80,000

 

 

13,60,000

 

5,00,000

10,60,000

40,000

 

 

3,40,000

By Balance b/d

By Lisa’s capital a/c

By Nisha’s capital a/c

By revaluation a/c

14,00,000

 

 

40,000

14,00,000

80,000

40,000

40,000

3,60,000

 

 

20,000

14,40,000

15,60,000

3,80,000

14,40,000

15,60,000

3,80,000

 To balance c/d

18,00,000

9,00,000

By Balance b/d

By current a/c

13,60,000

4,40,000 

 

3,40,000 

5,60,000

18,00,000

9,00,000

18,00,000

9,00,000

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

as on April 01, 2019 after Monika’s retirement

Liabilities

 (`)

Assets

 (`)

Trade creditors

Bills payables

Employees provident fund

Capital a/c

Lisa= 18,00,000

Nisha= 9,00,000

1,60,000

2,44,000

76,000

 

 

27,00,000

Land and building

Machinery

Stock

Sundry debtors     4,00,000

Less; Provision           20,000

for Doubtful debts

Bank

Lisa’s current a/c

Nisha’s current a/c

12,40,000

10,80,000

5,00,000

 

3,80,000

 

40,000

4,40,000

5,60,000

Monika’s loan

10.,60,000

42,40,000

42,40,000

 

 

Working notes;

WN -1

Calculation of gaining and sacrificing ratio

 

Lisa

 

Monika

 

Nisha

Old ratio =

2

:

2

:

1

New ratio =

2

 

:

 

1

Gaining ratio = New ratio – Old ratio

Lisa’s gain = 2/3-2/5=10-6/15=4/15

Nisha’s gain = 1/3-1/5=5-3/15=2/15

Gaining ratio of Lisa and Nisha = 4:2=2:1

 

WN-2 Treatment of goodwill;

Firm’s goodwill =3,00,000

Monika will be compensated = 1,20,000×2/5=1,20,000

Lisa will compensate =1,20,000×2/3 = 80,000

Nisha will compensate =1,20,000×1/3 = 40,000

Condition for goodwill remaining partner to retiring partner

 

WN -3

Lisa’s capital = 27,00,000×2/3=18,00,000

Nisha’s capital = 27,00,000×1/3=9,00,000

 

Question 42:  On 31st March, 2024, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:


Liabilities

 

`

Assets

 

`

Creditors

 

10,800

Cash at Bank

 

13,000

Bills Payable

 

5,000

Debtors

10,000

 

Capital A/cs:

 

 

Less: Provision for Doubtful Debts

200

9,800

A

45,000

 

Stock

 

9,000

B

15,000

 

Machinery

 

24,000

C

30,000

90,000

Freehold Premises

 

50,000

 

 

1,05,800

 

 

1,05,800

B retired on 1st April, 2024 and following adjustments were agreed to determine the amount payable to B:

(a) Out of the amount of insurance premium debited to Profit and Loss Account, `1,000 be carried forward as prepaid Insurance.

(b) Freehold Premises be appreciated by 10%.

(c) Provision for Doubtful Debts is brought up to 5% on Debtors.

(d) Machinery be reduced by 5%.

(e) Liability for Workmen Compensation to the extent of `1,500 would be created.

(f) Goodwill of the firm be fixed at `18,000 and B's share of the same be adjusted into the Capital Accounts of A and C, who will share future profits in the ratio of 3/4th and 1/4th.

(g)Total capital of the firm as newly constituted be fixed at `60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.

(h) B be paid `5,000 in cash and the balance be transferred to his Loan Account.

Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

 

Answer:


Revaluation a/c

Dr.                                                                                                                                                Cr.

Particulars

`

Particulars

`

To provision for doubtful debts

300

By unexpired insurance

1,000

To Machinery

1,200

By freehold premises

5,000

To workers’ compensation liabilities

1,500

 

 

To capital a/c -profit transferred to :

 

 

 

A=3,000×3/6=1,500

 

 

 

B=3,000×2/6=1,000

 

 

 

C=3,000×1/6=500

3,000

 

 

 

6,000

 

6,000

 

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

A

B

C

Particulars

A

B

C

To B’s capital a/c

4,500

1,500

By Balance b/d

45,000

30,000

15,000

To cash a/c

5,000

By A’s capital

4,500

To B’s loan a/c

32,000

By C’s Capital

1,500

To balance c/d

42,000

14,000

By Revaluation a/c

1,500

1,000

500

46,500

37,000

15,500

46,500

37,000

15,500

 To balance c/d

45,000 

 

15,000 

 By Balance b/d

42,000

14,000

By Bank a/c

3,000

1,000

 

 45,000

 

 15,000

 

 45,000

 

 15,000

 

 

Balance Sheet

as on April 01, 2024 after Z’s retirement

Liabilities

 (`)

Assets

 (`)

Creditors

10,800

Cash at bank

12,000

Bills payables

5,000

Debtors                      10,000

Workers’ Compensation liabilities

1,5000

Less; prov. For D.D.      500

9,500

Capital a/c

A

45,000

C

15,000

60,000

Stock

9,000

B’s loan

32,000

Unexpired insurance

1,000

Machinery

22,800

 

Freehold premises

 55,000

1,,09,300

1,,09,300

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of A,B and C =45,0000:30,000:15,000=3:2:1

New ratio of A and C= 3:1

Gaining ratio= New ratio- Old ratio

A’s gain = ¾- 3/6 =18-12/24=6/24

C’s gain =1/4-1/6=6-4/24=2/24

Gaining ratio of A:C = 6:2=3:1

WN-2 treatment of Goodwill

Goodwill of the firm= 18,000

B will be compensated for 18,000×2/6=6,000

A will compensate =6,000×3/4=4,500

C will compensate =6,000×3/4=1,500

Condition for goodwill treatment: Remaining partner to retiring partner

WN-3 Capital adjustment

A’s capital = 60,000×3/4=45,000

C’s capital = 60,000×1/4=15,000

WN-4

Closing bank balance= 13,000-5,000+3,000+1,000=12,000

 

Question 43:  X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance Sheet as on


31st March, 2018 was as follows:

Liabilities

 

`

Assets

 

`

Sundry Creditors

 

16,600

Cash

 

15,000

Workmen's Compensation Fund

 

9,000

Debtors

21,000

 

General Reserve

 

6,000

Less: Provision for Doubtful Debts

(1,400)

19,600

Capitals:

 

 

Stock

 

19,000

X

Y

Z

90,000

60,000

30,000

 

 

1,80,000

Machinery

Building

 

58,000

1,00,000

 

 

 

 

 

 

 

 

2,11,600

 

 

2,11,600

On the above date, Y retired owing to ill health. The following adjustments were agreed upon for calculation of amount due to Y:

(a) Provision for Doubtful Debts to be increased to 10% of Debtors.

(b) Goodwill of the firm be valued at 36,000 and be adjusted into the Capital Accounts of X and Z, who will share profits in future in the ratio of 3 :1.

(c)Included in the value of Sundry Creditors was `2,500 for an outstanding legal claim, which will not arise.

(d) X and Z also decided that the total capital of the new firm will be `1,20,000 in their profit-sharing ratio. Actual cash to be brought in or to be paid off as the case may be.

(e) Y to be paid `9,000 immediately and balance to be transferred to his Loan Account.

Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm after Y's retirement.

(CBSE Sample Paper 2019)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

To provision for doubtful debts

700

By sundry creditors

2,500

To capital a/c – Profit transferred;

 X=1800×3/6=900

y=1800×2/6=600

Z=1800×1/6=300

1,800

2,500

2,500

 

 

 

 

 

 

 

 

 

 

 

  

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

To Y’s capital a/c

9,000

-

3,000

By Balance b/c

90,000

60,000

30,000

To Cash a/c

-

9,000

-

By X’s Capital a/c

-

9,000

-

To Y’s loan a/c

-

68,600

-

By Z’s Capital a/c

-

3,000

-

 To  Balance C/d

89,400 

-

29,800 

By Workers’ compensation fund

4,500

3,000

1,500

By General reserve

3,000

2,000

1,000

By Revaluation a/c

900

600

300

98,400

77,600

32,800

98,400

77,600

32,800

 To  Balance C/d

 90,000

-

 30,000

 By Balance b/d

89,400

-

29,800 

By Cash a/c

600

-

200

 

 

 90,000

-

 30,000

90,000

-

 30,000

 

 

Balance Sheet

as on April 01, 2018 after Z’s retirement

Liabilities

 (`)

Assets

 (`)

Sundry creditors

14,100

Cash a/c

(15,000-9000+600+200)

6,800

Capital a/c

Debtors                            21,000

Less; Prov. For D.D.        2,100

 

18,900

X= 90,000

Z= 30,000

 

1,20,000

Stock

Machinery

19,000

58,000

Y’s loan a/c

68,600

Buildings

1,00,000

2,02,700

2,02,700

 

 

Working notes;

WN-1 Calculation of new and gaining ratio

Old ratio of X,Y and Z =90,0000:60,000:30,000=3:2:1

New ratio of X and Z= 3:1

Gaining ratio= New ratio- Old ratio

X’s gain = ¾- 3/6 =18-12/24=6/24

Z’s gain =1/4-1/6=6-4/24=2/24

Gaining ratio of A:C = 6:2=3:1

WN-2 treatment of Goodwill

Goodwill of the firm= 36,000

Y will be compensated for 36,000×2/6=12,000

X will compensate =12,000×3/4=9,000

Z will compensate =12,000×1/4=3,000

 

Condition for goodwill treatment: Remaining partner to retiring partner

X’s capital     a/c

Dr.

9,000

 

Z’s capital     a/c

Dr.

3,000

 

 To Y’s capital a/c

 

 

12,000

WN-3 Capital adjustment

X’s capital = 1,20,000×3/4=90,000

Z’s capital = 1,20,000×1/4=30,000

 

When existing total capital of remaining partners is to be in New Profit-sharing Ratio

Question 44: Shweta, Meenu and Asha were partners in a firm sharing profits and losses in the ratio of 3:5:2. Meenu retired on 1st April, 2022. After making all adjustments relating to revaluation, goodwill and accumulated profits, etc., Capital Accounts of Shweta and Asha showed credit balance of 3,00,000 and 1,00,000 respectively. It was decided to adjust the capitals of Shweta and Asha in their new profit-sharing ratio.


Pass necessary Journal entries for bringing in or withdrawal of the necessary amounts involved. Show your working clearly. (CBSE 2024)

Answer:


Date

Particulars

 

Dr. (`)

Cr. (`)

(i)

Bank A/c

Dr.

60,000

 

 

 To Aastha 's Capital A/c

 

 

60,000

 

(Being amount brought)

 

 

 

(ii)

Shweta's Capital A/c

 

60,000

 

 

 To Bank A/c

 

 

60,000

 

(Being amount withdrawn)

 

 

 

 

 Total Capital of Shweta and Asha showed credit balance of 3,00,000+1,00,000=4,00,000

New Ratio of Shweta and Asha = 3:2

New Capital as per New Ratio of Shweta and Asha

Shweta = 4,00,000×3/5=2,40,000

Asha = 4,00,000×2/5=1,60,000

Capital adjustment requirement

Shweta

Adjusted Capital

3,00,000

 

New Capital

2,40,000

 

Amount withdrawn

60,000

 

 

 

Aastha

Adjusted Capital

1,00,000

 

New Capital

1,60,000

 

Amount brought

60,000

 

 

Question 45:


Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:
 

Liabilities

 (`)

Assets

 (`)

Sundry Creditors

12,600

 Bank

4,100

Provident Fund

3,000

 Debtors

30,000

 

General Reserve

9,000

 Less: Provision 

1,000

29,000

Capital A/cs:

 

 

 

 

Amit

40,000

 

Stock

25,000

Balan

36,500

 

Investments

10,000

Chander

20,000

96,500

Patents

5,000

 

 

 

Machinery

48,000

 

1,21,100

 

1,21,100

 

 

 

 

 
It was agreed that:
(i)  Goodwill will  be valued at 
` 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%. 
(iv) Liability on account of Provident Fund was estimated at  ` 2,400.
(v) Chander took over Investments for  ` 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement. 

(Delhi 2015, Modified)

 

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

`

Particulars

`

Machinery

4,800

Investments A/c

5,800

Patents

1,000

Provident Fund A/c

600

Profit transferred to:

 

 

 

Amit’s Capital A/c

300

 

 

 

Balan’s Capital A/c

200

 

 

 

Chander’s Capital A/c

100

600

 

 

 

6,400

 

6,400

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

Cr.

Particulars

Amit

Balan

Chander

Particulars

Amit

Balan

Chander

Investments A/c

 

 

15,800

Balance b/d

40,000

36,500

20,000

Chander’s Capital A/c

2,700

1,800

 

Revaluation A/c (Profit)

300

200

100

Loan A/c

 

 

10,300

General Reserve

4,500

3,000

1,500

Current A/c

 

5,900

 

Amit’s Capital A/c

 

 

2,700

Balance c/d

48,000

32,000

 

Balan’s Capital A/c

 

 

1,800

 

 

 

 

Current A/c

5,900

 

 

 

50,700

39,700

26,100

 

50,700

39,700

26,100

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Adjustment of Goodwill

Chander’s share of Goodwill =27,000 ×1/6=4,500

Amit wil pay=4,500×3/5=2,700

Balan wil pay=4,500×2/5=1,800

 

WN2 Adjustment of Capital
Adjusted Old Capital of Amit=44,800 (40,000+4,500+300)-2,700=
` 42,100

Adjusted Old Capital of Balan=39,700 (36,500+3,000+200)-1,800=` 37,900

Total Adjusted Capital=42,100+37,900=` 80,000

New Profit Sharing Ratio=3:2

Amit's New Capital=80,000×3/5=` 48,000

Balan's New Capital=80,000×2/5=` 32,000


Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.