12th | Retirement of a Partner | Question No. 26 To 30 | Ts Grewal Solution 2025-2026

Punit, Ramit and Akshit were partners sharing profits equally. Akshit retired on 1st April, 2024. Punit and Ramit decided to continue the business and share profits in the ratio of 3: 2. They also decided to give effect to the change in values of assets and liabilities without changing their book values.

The book values and their revised values were as follows:

	Book Values (₹)	Revised Values (₹)
Land	5,50,000	8,50,000
Building	2,50,000	2,10,000
Computers	1,00,000	70,000
Computer Softwares	5,00,000	4,00,000
Sundry Creditors	70,000	60,000
Workmen Compensation Claim		5,000

Pass an adjustment entry.

Answer:

	Punit		Ramit		Akshit
Old Ratio	1	:	1	:	1
New Ratio	3	:	2	:	Retired

 

Punit = 1/3-3/5=5-9/15= -4/15 (Gain)

Ramit = 1/3-2/5=5-6/15= -1/15 (Gain)

Akshat = 1/3-0/5=5-0/15= 5/15 =1/3 (Sacrifice)

 

SHARE OF SACRIFICE FOR AKSHAT, RETIRING PARNTER

Sacrificing ratio of Akshat is 1/3

Compensating amount =1,35,,000×1/3=45,000

 

Share of Compensating amount by Punit and Ramit in sacrificing ratio (4:1)

Punit= 45,000×4/5=36,000

Ramit= 45,000×1/5=9,000

 

An adjustment entry

Particulars	Dr. ₹	Cr. ₹
Punit’s Capital A/c          Dr. Ronit’s Capital A/c          Dr.     To Akshat’s Capital A/c	36,000 9,000	45,000

 

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, 2025. 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 (₹)	Credit (₹)
2025 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
	((Being Accumulated profits distributed among partners in old ratio)
	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		10,000
	Z’s Capital A/c	Dr.		5,000
	To Profit and Loss A/c				30,000
	((Being Debit balance in Profit and Loss A/c distributed among partners in old ratio)

 

Working Notes:

WN1: Calculation of Share in Credit Balance of Reserves

Total Credit Balance of Reserves

= General Reserve + WCF = 1,80,000 + 24,000 = 2,04,000

X‘s share= 2,04,000××3/6 =1,02,000

Y‘s share= 2,04,000××2/6 =68,000

Z‘s share= 2,04,000××1/6 =34,000                     

 

WN2: Calculation of Share in Debit Balance of Profit and Loss A/c

X‘s share= 30,000××3/6 =15,000

Y‘s share= 30,000××2/6 =10,000

Z‘s share= 30,000××1/6 =5,000                 

 

Note: Employees’ Provident Fund will not be distributed as it is a liability and not accumulated profit.

 

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 (₹)	Credit  (₹)
	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
	(Being 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
	(Being 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
	(Being Goodwill adjusted by debiting gaining partner and crediting sacrificing partner and retiring partner)

Calculation of Gaining Ratio:

Gain of a Partner=New Share - Old Shares

Asha's Gain (Sacrifice): 2/5-5/10=4-5/10=(-)1/10

Shalini's Gain (Sacrifice): 3/5-2/10=6-2/10=4/10

Therefore, Both Asha and Naveen would be compensated by Shalini in the ratio of 1:3

Asha's Sacrifice for 1/10th Share=1,20,000×1/10=12,000

Naveen's Sacrifice for 3/10th Share= 1,20,000×3/10=36,000

 

 X, Y and Z were equal partners in a firm. On 31st March, 2025, their Balance Sheet was as follows:

Liabilities	₹	Assets	₹
Creditors	77,000	Bank	47,000
General Reserve	26,000	Debtors	23,000
Workmen Compensation Reserve	32,000	Stock	1,10,000
Capital A/cs:		Investments	17,000
X 60,000		Furniture	10,000
Y 40,000		Machinery	35,000
N 20,000	1,20,000	Profit & Loss A/c	11,000
		Advertisement Suspense A/c	2,000
	2,55,000		2,55,000

On the above date, Z retires from the firm and X and Y decided to share future profits in the ratio of 3 :2 Partners decide to show accumulated profits, losses and reserves in the Balance Sheet of the reconstituted firm at their original values.

Pass an 'Adjustment Entry' for the treatment of accumulated profits, losses and reserves.

Answer:

Date	Particulars		Dr. (₹)	Cr. (₹)
	X’s Capital A/c	Dr.	12,000
	Y's Capital A/c	Dr.	3,000
	ToZ's Capital A/c			15,000
	(Being accumulated profits, losses and reserve adjusted)

Working Note:

Net effect of accumulated profits, losses and reserve

General Reserve	26,000
Workmen Compensation Reserve	32,000
	58,000
Less:
Profit & Loss A/c	11,000
Advertisement Suspense	2,000
	45,000

Note; Above amount is to be adjusted in Gaining sacrificing ratio

X =	45,000	×	4/15	=	12,000
Y =	45,000	×	1/15	=	3,000
Z =	45,000	×	5/15	=	15,000

 

Gaining sacrificing ratio

	Old Ratio	-	New ratio	=	(-) Gain/(+) Sacrifice
X =	1/3	-	3/5	=	5-9/15	=	-4/15
Y =	1/3	-	2/5	=	5-6/15	=	-1/15
Z =	1/3	-	0/5	=	5-0/15	=	5/15

 

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 1^1/2 times the average profit of the three preceding completed years.
C gave a notice on 31st March, 2024 to retire on 30th September, 2024, 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: 2022 −₹ 2,800; 2023 − ₹ 2,200 and 2024 − ₹ 1,600. What amount is due to C as per the partnership agreement? 

 

Answer:

C’s Capital Account
Dr.				Cr.
Particulars		₹	Particulars		₹
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		₹	Particulars	₹
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

Working Notes:

WN 1Calculation of Profit (from April 01, 2024 to Sept. 30, 2024)

Average profit = total profit of past given years/number of years

Average profit =2,800+2,200+1,600/3=2,200

C’s  share of profit (for last 6 month)=Average profit×C’s share×6/12

=2,200×1/2×6/12=550

 

WN 2Calculation of Goodwill 

Goodwill = Average Profit × 1.5
= 2,200 × 1.5 = ₹ 3,300
C’s Share of Goodwill =3,300×1/2=1650