Retirement25-26

Balance Sheet of X, Y and Z who shared profits in the ratio of 5 : 3 : 2, as on 31st March, 2025 was as follows:

Liabilities		₹	Assets	₹
Sundry Creditors		39,750	Bank (Minimum Balance)	15,000
Employees' Provident Fund		5,250	Debtors	97,500
Workmen Compensation Reserve		22,500	Stock	82,500
Capital A/cs:			Fixed Assets	1,87,500
X	1,65,000
Y	84,000
Z	66,000	3,15,000
		3,82,500		3,82,500

Y retired on 1st April, 2025 and it was agreed that:
(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y's share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20%.
(iii) Stock be reduced to ₹ 75,000.
(iv) Y be paid amount brought in by X and Z so as to make their capitals proportionate to their new profit-sharing ratio.
Prepare Revaluation Account, Capital Accounts of all partners and the Balance Sheet of the New Firm.

Answer:

Revaluation Account
Dr.					Cr.
Particulars			(₹)	Particulars	(₹)
Stock			7,500	Fixed Assets	37,500
Revaluation Profit
X’s Capital A/c		15,000
Y’s Capital A/c		9,000
Z’s Capital A/c		6,000	30,000
			37,500		37,500

 

Partners’ Capital Accounts
Dr.								Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Y’s Capital A/c	11,250	-	22,500	Balance b/d	1,65,000	84,000	66,000
Bank	-	1,33,500	-	General Reserve	11,250	6,750	4500
Balance c/d	2,20,500	-	1,47,000	Revaluation (Profit)	15,000	9,000	6,000
				X’s Capital A/c	-	11,250	-
				Z’s Capital A/c	-	22,500	-
				Bank A/c	40,500	-	93,000
	2,31,750	1,33,500	1,69,500		2,31,750	1,33,500	1,69,500

 

Balance Sheet as on March 31, 2025
Liabilities		(₹)	Assets	(₹)
Sundry Creditors		39,750	Bank	15,000
Employees Provident Fund		5,250	Debtors	97,500
Capitals:			Stock	75,000
X	2,20,500		Fixed Assets	2,25,000
Z	1,47,000	72,000
		4,12,500		4,12,500

Working Notes:
New Capital = 1,80,000 + 54,000 + 1,33,500 = ₹ 3,67,500

X's New Capital=3,67,500×3/5=2,20,500

Z's New Capital=3,67,500×2/5=1,47,500

X brings in ₹ 40,500 (2,20,500 – 1,80,000)

Z brings in ₹₹ 93,000 (1,47,500 – 54,000)

 

Sushil, Satish and Samir are partners sharing profits in the ratio of 5 : 3 : 2. Satish retires on 1st April, 2025 from the firm, on which date capitals of Sushil, Satishand Samir after all adjustments are ₹ 1,03,680, ₹ 87,840 and ₹ 26,880 respectively. The Cash and Bank Balance on that date was ₹ 9,600.Satish is to be paid through amount brought in by Sushiland Samir in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be Sushil 3/5 and Samir2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of ₹ 7,200 was to be maintained and pass the necessary Journal entries.

 

Answer:

Total capital of firm before retirement = 1,03,680+87,840+26,880 = ₹ 2,18,400

Availability of cash = 9,600-7,200 (Minimum Balance) = ₹ 2,400

Combined new capital of Sushiland Samir =₹ 2,16,000

Sushil's new capital = 2,16,000×3/5=₹ 1,29,600

Existing capital of Sushil= ₹ 1,03,680

So, Sushil has to bring = 1,29,600−1,03,680= ₹ 25,920

Samir's new capital = 2,16,000×2/5=₹ 86,400

Existing capital of Samir = ₹ 26,880

So, Samir has to bring = 86,400−26,880=₹ 59,520  

 

BALANCE SHEET
Liabilities		₹	Assets	₹
Creditors		28,000	Cash	27,000
General Reserve		7,500	Debtors	20,000
Capitals:			Stock	28,000
Meghna	20,000		Furniture	5,000
Mehak	14,500
Mandeep	10,000	44,500
		80,000		80,000

Mehak retired on this date under following terms:

(i) To reduce stock and furniture by 5% and 10% respectively.

(ii) To provide for doubtful debts at 10% on debtors.

(ii) Goodwill was valued at ₹12,000.

(iv) Creditors of ₹8,000 were settled at ₹7,100.

(V) Mehak should be paid off and the entire sum payable to Mehak shall be brought in by Meghna and Mandeep in such a way that their capitals should be in their new profit sharing ratio and a balance of ₹25,000 is maintained in the Cash Account.

Prepare Revaluation Account and Partners' Capital Accounts of the new firm.

(CBSE Sample Question Paper 2025)

Answer:

	Revaluation Account
Particulars		₹	Particulars		₹
To Stock A/c		1,400	By Creditors		900
To Funiture A/c		500	Loss transferred to
To Prov. For doubtful debts		2,000	Meghna’s Capital A/c	1,000
			Mehak’s Capital A/c	1,000
			Mandeep’s Capital A/c	1,000	3,000
		3,900			3,900

 

Partners’ Capital Accounts
Particulars	Meghna (₹)	Mehak (₹)	Mandeep (₹)	Particulars	Meghna (₹)	Mehak (₹)	Mandeep (₹)
To Revaluation A/c (Loss)	1,000	1,000	1,000	By Balance b/d	20,000	14,500	10,000
To Mehak’s Capital A/c (Goodwill)	2,000	-	2,000	By General Reserve	2,500	2,500	2,500
To Cash A/c (Bal. fig. for Mehak)	-	20,000	-	By Meghna (Goodwill to Mehak)	-	2,000	-
To Balance c/d	27,050	-	27,050	By Mandeep (Goodwill to Mehak)	-	2,000	-
				By Cash A/c (Balancing figure)	7,550	-	17,550
	33,350	26,250	33,350		33,350	26,250	33,350

 

 Working notes:

WN 1: Calculation of Mehak’s share of Goodwill

Sacrificing ratio of Mahak 1/3

Mahak’s Share of Goodwill = 12,000×1/3 = 4,000

Mahak’s Share of Goodwill will be shared by Meghna and Mandeep in 1:1

Meghna and Mandeep will compensate = 4,000×1/2=2,000

 

Following Entry be passed:

Date	Particulars		L.F.	(Dr.)  ₹	(Cr.)  ₹
	Meghna’s Capital A/c	Dr.		2,000
	Mandeep’s Capital A/c	Dr.		2,000
	To Mehak’s Capital A/c				4,000
	(Being sacrificing partner compensated)

 

WN 2: Calculation of total capital of the firm after Mehak’s Retirement

Balance of capital after all adjustment
Meghna’s capital	19,500
Mandeep’s Capital	9,500
	29,000
Shortage of cash to be brought in by Meghna and Mandeep in order to make payment to Mehak	25,100
Capital of a new firm	54,100

 

Capital of Each partner after retirement= 54,100×1/2 =27,050

Shortage of Cash = Amount payable to Mehak – Existing Cash and Bank Balance + Minimum cash and bank balance required

Shortage of Cash = 20,000 – (27,000-7,100) + 25,000

Shortage of Cash = 25,100

 

	Meghna	Mandeed
New Capital (54,100 in the ratio 1:1)	27,050	27,050
Existing Capital	19,500	9,500
Amount shall be brought in by Meghna and Mandeep	7,550	17,550

 

 

Suraj, Pawan and Kamal are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their Balance

Sheet as at 31st March, 2024 is:

Liabilities	₹	Assets	₹
Creditors	46,000	Cash in Hand	18,000
General Reserve	12,000	Debtors              25,000
Capital A/cs:		Less: Provision for Doubtful Debts 3,000	22,000
Suraj 40,000		Stock	18,000
Pawan 40,000		Furniture	30,000
Kamal 30,000	1,10,000	Machinery	70,000
		Goodwill	10,000
	1,68,000		1,68,000

Pawan retired on 1st April, 2024 on the following terms:

(a) Provision for Doubtful Debts be raised by 1,000.

(b) Stock to be reduced by 10% and Furniture by 5%.

(c) There is an outstanding claim of damages of 1,100 and it is to be provided for.

(d) Creditors will be written back by 6,000.

(e) Goodwill of the firm is valued at ₹ 22,000.

(f) Pawan is paid in full with the cash brought in by Suraj and Kamal in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at 10,000.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of Suraj and Kamal.

Answer:

Revaluation A/c
Particulars	₹	Particulars	₹
Provision for Doubtful Debts	1,000	Creditors	6,000
Stock	1,800
Furniture	1,500
outstanding claim of damages	1,100
Capital A/cs:
Suraj - 300
Pawan- 200
Kamal- 100	600
	6,000		6,000

 

Capital A/c
Particulars	Suraj	Pawan	Kamal	Particulars	Suraj	Pawan	Kamal
To Goodwill A/c	5,000	3,333	1,667	By Balance B/d	3,00,000	2,00,000	2,00,000
To Pawan 's Capital A/c	5,500	-	1,833	By Revaluation A/c	300	200	100
				By General Reserve	6,000	4,000	2,000
To Balance C/d	35,800	48,200	28,600	By Suraj 's Capital A/c	-	5,500	-
				By Kamal 's Capital A/c	-	1,833	-
	46,300	51,533	32,100		46,300	51,533	32,100
To Cash A/c	-	48,200	2,450	By Balance B/d	35,800	48,200	28,600
To Balance C/d	78,450	-	26,150	By Cash A/c	42,650	-	-
	78,450	48,200	28,600		78,450	48,200	28,600

 

Balance sheet of new firm
Liabilities	₹	Assets	₹
Creditors	40,000	Cash in Hand	10,000
outstanding claim of damages	1,100	Debtors              25,000
Capital A/cs:		Less: Provision for Doubtful Debts 4,000	21,000
Suraj 78,450		Stock (18,000-1,800)	16,200
Kamal 26,150	1,04,600	Furniture (30,000-1,500)	28,500
		Machinery	70,000
	1,45,700		1,45,700

 

The Balance Sheet of Asha, Deepa and Leta who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2025 is as follows:

Liabilities		₹	Assets	₹
Creditors		50,000	Cash at Bank	40,000
Employees' Provident Fund		10,000	Sundry Debtors	1,00,000
Profit and Loss A/c		85,000	Stock	80,000
Capital A/cs:			Fixed Assets	60,000
Asha	40,000
Deepa	62,000
Leta	33,000	1,35,000
		2,80,000		2,80,000

Asharetired on 1st April, 2025 and Deepa and Leta decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for ₹ 10,000, is settled at ₹ 8,000.
The amount to be paid to Asha by Deepa and Letain such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners' Capital Accounts.

 

Answer:

Revaluation Account
Dr.		Cr.
Particulars	(₹)	Particulars		(₹)
Fixed Assets A/c (60,000 – 57,500)	2,500	Creditors (10,000 – 8,000)		2,000
Provision for Doubtful Debts	5,000	Loss on Revaluation transferred to:
		Asha’s Capital a/c	2,750
		Deepa’s Capital a/c	1,650
		Leta’s Capital a/c	1,100	5,500
	7,500			7,500

 

Partners’ Capital Accounts
Dr.					Cr.
Particulars	Asha	Deepa	Leta	Particulars		Asha	Deepa	Leta
Revaluation A/c (Loss)	2,750	1,650	1,100	Balance b/d		40,000	62,000	33,000
Asha’s Capital A/c	–	24,000	16,000	Profit & Loss A/c		42,500	25,500	17,000
Balance c/d	1,19,750	61,850	32,900	Deepa’s Capital A/c		24,000	–	–
				Leta’s Capital A/c		16,000	–	–
	1,22,500	87,500	50,000			1,22,500	87,500	50,000
Bank A/c	1,19,750	–	–	Balance b/d		1,19,750	61,850	32,900
Balance c/d	–	1,18,500	79,000	Bank A/c		–	56,650	46,100
	1,19,750	1,18,500	79,000			1,19,750	1,18,500	79,000

 

Working Notes

 WN 1Calculation of Gaining Ratio 

Old Ratio (Asha, Deepa and Leta) = 5:3:2

New Ratio (Deepa and Leta) = 3:2

Gaining Ratio = New Ratio – Old Ratio

Deepa’s	=3/5-3/10
	=3/10
Leta’s	=2/5-2/10
	=2/10

Hence, gaining ratio is 3: 2.

 

WN2 Adjustment of Goodwill

Total Goodwill of the Firm = 80,000

Asha’s Share of Goodwill = 80,000×5/10=40,000

To be borne by Gaining partners in their Gaining Ratio i.e. 3:2
Deepa’s Share = 40,000×3/5=24,000
Leta’s Share = 40,000×2/5=16,000

WN3 Adjustment of Capital

Asha’s Capital before adjustment = 1,19,750

Deepa’s Capital before adjustment = 61,850

Leta’s Capital before adjustment = 32,900

Total Capital of New Firm= Asha's Capital+Deepa's Capital+Leta's Capital+Closing balance of Bank Account-Available Bank Balance=1,19,750+61,850+32,900+15,000-32,000=₹1,97,500

New profit sharing ratio=3:2

Deepa’s Share of Goodwill =1,97,500×3/5=1,18,500

Leta’s Share of Goodwill =1,97,500×2/5=79,000
 

Particulars	Deepa	Leta
New Capital Balance	1,18,500	79,000
Adjusted Old Capital Balance	61,850	32,900
Cash brought in by the Partner	56,650	46,100

WN4

Cash at Bank A/c
Dr.		Cr.
Particulars	(₹)	Particulars	(₹)
Balance b/d	40,000	Creditors	8,000
Deepa’s Capital A/c	56,650	Asha’s Capital A/c	1,19,750
Leta’s Capital A/c	46,100	Balance c/d	15,000
	1,42,750		1,42,750