commercemine

12th | Retirement Of A Partner | Question No. 46 To 50 | Ts Grewal Solution 2023-2024

Question 46:  On 31st March, 2023, 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, 2023 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, 2023 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 47:  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

 

Question 48:


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 49:


N, S and B are partners in a firm sharing profits and losses in the proportion of 1/2 : 1/6 : 1/3 respectively. The Balance Sheet of the firm as at On 31st March, 2017,was as follow:
 

BALANCE SHEET OF N,S AND B as at 31st march, 2017

Liabilities

 (`)

Assets

 (`)

Bills Payable

12,000

Freehold Premises

40,000

Sundry Creditors

18,000

Machinery

30,000

General Reserve

12,000

Furniture

12,000

Capital A/cs:

 

Stock

22,000

  N

30,000

 

Sundry Debtors

20,000

 

  S

30,000

 

  Less: Provision for Doubtful Debts

1,000

19,000

  B

28,000

88,000

Cash

7,000

 

 

 

 

 

 

1,30,000

 

1,30,000

 

 

 

 

 
B retired from the business on the above date and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to 
` 1,500.
(d) Goodwill of the firm is valued at 
` 21,000 on B's retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of B. Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.

(CBSE 2019)

Answer:


Revaluation Account

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

Machinery (30,000 × 10%)

Furniture (12,000 × 7%)

3,000

840

Freehold Premises (40,000 × 20%)

8,000

Provision for Doubtful Debts

1,500

Stock (22,000 × 15%)

3,300

 

 

Profit transferred to:

 

 

 

N’s Capital A/c

2,980

 

 

 

S’s Capital A/c

993

 

 

 

B’s Capital A/c

1,987

6,960

 

 

 

11,300

 

11,300

 

 

 

 

 

Partner’s Capital Accounts

Dr.

 

Cr.

Particulars

N

S

B

Particulars

N

S

B

B’s Capital A/c

5,250

1,750

-

Balance b/d

30,000

30,000

28,000

B’s Loan A/c

-

-

40,987

General Reserve

6,000

2,000

4,000

Balance c/d

33,730

31,243

40,987

N’s Capital A/c (Goodwill)

-

-

5,250

 

 

 

 

B’s Capital A/c (Goodwill)

-

-

1,750

 

Revaluation A/c (Profit)

2,980

993

1,987

 

38,980

32,993

40,987

 

38,980

32,993

40,987

Y’s Current A/c

-

7,500

-

Balance b/d

33,730

31,243

-

Balance c/d

48,730

16,243

-

X’s Current A/c

15,000

-

-

 

48,730

31,243

-

 

48,730

31,243

-

 

 

 

 

 

 

 

 

 

Balance Sheet
as on 1st April, 2017

Liabilities

 (`)

Assets

 (`)

Bills Payable

12,000

Freehold Premises (40,000 + 8,000)

48,000

Sundry Creditors

18,000

Machinery (30,000 – 3,000)

27,000

B’s Loan

40,987

Furniture (12,000 – 840)

11,160

Capital A/cs:

 

Stock (22,000 + 3,300)

25,300

N

48,730

 

Sundry Debtors

20,000

 

S

16,243

64,973

Less: Provision for Doubtful Debts

 

(2,500)

 

18,500

S’s Current A/c

15,000

Cash

7,000

 

 

N’s Current A/c

15,000

 

1,50,960

 

1,50,960

 

 

 

 


Working Notes

WN 1 Calculation of Profit Sharing Ratio
Old Ratio (N, S and B) = 3 : 1 : 2
B retires from the firm.
New Ratio (N and S) = 3 : 1 and
Gaining Ratio = 3 : 1

WN 2 Adjustment of Goodwill
Goodwill of the firm =
` 21,000
B’s Share of Goodwill =
= 21,000×2/6=7,000

 

This share of goodwill is to be distributed between N and S in their gaining ratio (i.e. 3 : 1).
N‘s share
= 7,000×3/4=5,250

S‘s share= 7,000×1/4=1,750

 

Condition for goodwill treatment; gaining partner to retiring partner

N’s capital a/c

Dr.

      5,250

-

S’s Capital a/c

Dr.               

1,750

-

   To B’s Capital a/c                                  

 

-

7,000

 

WN 3 Adjustment of Partners’ Capital after B’s Retirement
Combined Capital of N and S after all adjustments = 33,730 + 31243 =
`. 64,973

New Ratio = 3 : 1

N‘s new capital
= 64,973×3/4=48,730

S‘s new capital = 64,973×1/4=16,243

 

Question 50:


Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March, 2023, who have agreed to share profits and losses in proportion of their capitals:

 

 

Liabilities

 `

Assets

 `

Capital A/cs:

 

Land and Building

 4,00,000

Kusum

4,00,000

 

Machinery

6,00,000

Sneh

6,00,000

 

Closing Stock

2,00,000

Usha

4,00,000

14,00,000

Sundry Debtors

2,20,000

 

Employees' Provident Fund

70,000

Less: Provision for Doubtful Debts

20,000

 

Workmen Compensation Reserve            

30,000

Cash at Bank

 

2,00,000

Sundry Creditors

1,00,000

 

 

 2,00,000

 

 

 

 

 

 

16,00,000

 

 16,00,000

 

 

 

 

On 1st April, 2023, Kusum retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
(a) Land and Building be appreciated by 30%.
(b) Machinery be depreciated by 30%.
(c) There were Bad Debts of  ` 35,000.
(d) The claim against Workmen Compensation Reserve was estimated at  ` 15,000.
(e) Goodwill of the firm was valued at 
` 2,80,000 and Kusum's share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
(f) Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners.
(g) Amount due to Kusum be settled by paying  ` 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum's retirement.

(AI 2012 C, Modified)

Answer:


Revaluation Account

Dr.

Cr.

Particulars

 (`)

Particulars

 (`)

Machinery A/c

1,80,000

Land and Building A/c

1,20,000

Bad Debts A/c

(35,000 – 20,000)

15,000

Loss on Revaluation transferred to:

 

 

 

Kusum

21,429

 

 

 

Sneh

32,142

 

 

 

Usha

21,429

75,000

 

1,95,000

 

1,95,000

 

 

 

 

 


Partners’ Capital Account

Dr.

Cr.

Particulars

Kusum

Sneh

Usha

Particulars

Kusum

Sneh

Usha

Revaluation A/c (Loss)

21,429

32,142

21,429

Balance b/d

4,00,000

6,00,000

4,00,000

Usha’s Capital A/c

80,000

Workmen Compensation Fund

4,286

6,428

4,286

Bank A/c

1,00,000

Usha’s Capital A/c

80,000

Kusum’s Loan A/c

3,62,857

 

 

 

 

Balance c/d

5,74,286

3,02,857

 

 

 

 

 

4,84,286

6,06,428

4,04,286

 

4,84,286

6,06,428

4,04,286

Balance c/d

6,00,000

8,00,000

Balance b/d

5,74,286

3,02,857

 

 

 

 

Bank A/c (WN3)

25,714

4,97,143

 

6,00,000

8,00,000

 

6,00,000

8,00,000

 

 

 

 

 

 

 

 

 

Balance Sheet

as at March 31, 2023

Liabilities

 (`)

Assets

 (`)

Creditors

1,00,000

Land & Building

5,20,000

Employee’s Provident Fund

70,000

Machinery (6,00,000 – 1,80,000)

4,20,000

Workmen’s Compensation Claim

15,000

Stock

2,00,000

Kusum’s Loan

3,62,857

Sundry Debtors (2,20,000 – 35,000)

1,85,000

Capital A/c :

 

Bank

6,22,857

Sneh

6,00,000

 

 

 

Usha

8,00,000

14,00,000

 

 

 

19,47,857

 

19,47,857

 

 

 

 

 

Working Notes

 

WN 1 Calculation of Gaining Ratio 


Old Ratio (Kusum, Sneh and Usha) = 2:3:2

New Ratio (Sneh and Usha) = 3:4

Gaining Ratio = New Ratio – Old Ratio

Sneh‘s share= 3/7-3/7=nil

Usha‘s share= 4/7-2/7=2/7


WN2 Adjustment of Goodwill


Total Goodwill of the Firm = 2,80,000

Kusum’s Share of Goodwill = 2,80,000×2/7=80,000

It is to be adjusted by the Gaining partners i.e. only by Usha

 

WN3 Adjustment of Capital

Tatal capital of the firm before kusum’s retirement =14,00,000

New Ratio (Sneh and Usha) = 3:4

Sneha‘s new captial= 14,00,000×3/7=6,00,000


Usha‘s
new capital= 14,00,000×4/7=8,00,000

 

Particulars

Sneh

Usha

New Capital Balance

6,00,000

8,00,000

Adjusted Old Capital Balance

5,74,286

3,02,857

Cash brought in by the Partner

25,714

4,97,143

 

 

 

 

WN4

Cash at Bank A/c

Dr.

Cr.

Particulars

 (`)

Particulars

 (`)

Balance b/d

2,00,000

Kusum’s Capital A/c

1,00,000

Sneh’s Capital A/c

25,714

Balance c/d

6,22,857

Usha’s Capital A/c

4,97,143

 

 

 

7,22,857

 

7,22,857

 

 

 

 

 

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 5 – Retirement of a Partner

 

Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30
Question No. 31 To 35
Question No. 36 To 40
Question No. 41 To 45
Question No. 46 To 50
Question No. 51 To 55

Question No. 56 To 60