Question 41:
Harish, Paresh and Mahesh were three partners sharing profits and losses in the ratio of 5 :4: 1. Paresh retired on 31st March, 2026. His capital as on 1st April, 2025, was 80,000. During the year 2025-26, he withdrew 5,000. He was to be charged interest of 100 on drawings.
The Partnership Deed provides that on the retirement of a partner, he will be entitled to:
(i) His share of capital.
(ii) Interest on capital @10% per annum.
(iii) His share of profit in the year of retirement.
(iv) His share of goodwill of the firm.
(v) His share in the profit/loss on revaluation of assets and liabilities.
Additional Information:
(a) Paresh's share in the profit of the firm for the year 2025-26 was 20,000.
(b) Goodwill of the firm was valued at 24,000.
(c) The firm incurred loss of 12,000 on the revaluation of assets and liabilities.
(d) Paresh was to be paid ₹7,700 in cash and the balance was to be transferred to his Loan Account bearing interest@ 6% per annum. Loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2027.
You are required to prepare:
(i) Paresh's Capital Account.
(ii) Paresh's Loan Account till it is finally closed.
Answer:
|
Paresh’s Capital A/c |
|||
|
Particulars |
₹ |
Particulars |
₹ |
|
Revaluation A/c |
4,800 |
Balance b/d |
80,000 |
|
Drawings |
5,000 |
Interest on Capital |
8,000 |
|
Interest on Drawing |
100 |
P&L Appropriation A/c |
20,000 |
|
Paresh’s Loan A/c |
1,00,000 |
Harish’s Capital A/c |
8,000 |
|
|
|
Mahesh’s Capital A/c |
1,600 |
|
|
1,17,600 |
|
1,17,600 |
|
Paresh’s Loan A/c |
|||||
|
Date |
Particulars |
₹ |
Date |
Particulars |
₹ |
|
31-3-26 |
Balance C/d |
1,00,000 |
31-3-26 |
Paresh’s Capital A/c |
1,00,000 |
|
31-3-26 |
Bank A/c |
56,000 |
1-4-27 |
Balance b/d |
1,00,000 |
|
31-3-27 |
Balance C/d |
50,000 |
31-3-27 |
Interest on Loan A/c |
6,000 |
|
|
|
1,06,000 |
|
|
1,06,000 |
|
31-3-27 |
Bank A/c |
53,000 |
1-4-27 |
Balance b/d |
50,000 |
|
|
|
|
31-3-28 |
Interest on Loan A/c |
3,000 |
|
|
|
53,000 |
|
|
53,000 |
Question 42:
X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at ₹ 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z after all adjustments on the date of retirement showed balance of ₹ 1,45,000 and ₹ 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners.
(AI 2020)
Answer:
Old Ratio (X, Y, and Z) = 3 : 2 : 1
Y retires from the firm.
∴New Ratio (X and Z) = 3 : 1
Total capital of the New Firm = ₹ 2,10,000
X‘s new capital = 2,10,000×3/4=1,57,500
Z‘s new capital = 2,10,000×1/4=52,500
Ascertainment of Actual Cash to be brought in or to be paid to the partners
|
Particulars |
X |
Z |
|
New Capital |
1,57,500 |
52,500 |
|
Existing Capital |
1,45,000 |
63,000 |
|
Cash Paid/Brought in |
(12,500) (Brought in) |
10,500 (Paid) |
|
|
|
|
Question 43:
Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2026, their Balance Sheet was as follows:
|
BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2026 |
||||
|
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, 2026, 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.
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 Lisa’s current a/c |
13,60,000 4,40,000 |
|
3,40,000 |
||||||||||
|
|
|
|
|
By Nisha’s current a/c |
|
|
5,60,000 |
|||||||||
|
18,00,000 |
9,00,000 |
18,00,000 |
9,00,000 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Balance Sheet as on April 01, 2026 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 = 3,00,000×2/5=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 44:
On 31st March, 2026, 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, 2026 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, 2026 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 45:
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
Ts Grewal Solution 2026-2027
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Class 12 / Volume – I
Chapter 5 – Retirement of a Partner