Question 31:
X, Y and Z were equal partners in a firm. On 31st March, 2026, 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 |
Preparation of Revaluation Account, Partners' Capital Accounts and Balance Sheet
Question 32:
Naval. Nyaya and Nritya were partners in a firm sharing profits and losses in the ratio of 3 : 5: 2. On 31st March, 2024, their Balance Sheet was as follows:
|
Liabilities |
|
₹ |
Assets |
|
₹ |
|
Capitals: |
|
|
Land and Building |
|
9,50,000 |
|
Naval |
2,00,000 |
|
Plant and Machinery |
|
2,00,000 |
|
Nyaya |
3,00,000 |
|
Furniture |
|
50,000 |
|
Nritya |
5,00,000 |
10,00,000 |
Stock |
|
70,000 |
|
General Reserve |
|
80,000 |
Sundry Debtors |
|
95,000 |
|
Workmen Compensation Reserve |
50,000 |
Less: Prov. for Doubtful Debts |
5,000 |
90,000 |
|
|
Mrs. Naval's Loan |
|
2,00,000 |
Bank |
|
70,000 |
|
Sundry Creditors |
|
1,50,000 |
Deferred Revenue Expenditure |
|
50,000 |
|
|
|
14,80,000 |
|
|
14,80,000 |
On the above date, Nyaya retired from the firm on the following terms:
(i) Goodwill of the firm was valued at ₹1,20,000.
(ii) Land and Building was to be increased by ₹50,000.
(iii) Plant and Machinery will be decreased by 10%.
(iv) All debtors were good.
(v) Investments of ₹65,000 were unrecorded.
(vi) The liability for Workmen Compensation at ₹30,000.
(vii) Amount payable to Nyaya was transferred to his Loan Account.
Prepare Revaluation Account and Partners' Capital Accounts on Nyaya's retirement.
(CBSE 2025)
Answer:
|
Revolution Account |
|||
|
Particulars |
(₹) |
Particulars |
(₹) |
|
To Plant and Machinery |
20,000 |
By Land and Building |
50,000 |
|
To Profit transferred to: |
By Provision for Doubtful Debts |
5,000 |
|
|
Naval's Cap A/c (3/10) |
30,000 |
By Investments |
65,000 |
|
Nyaya's Cap A/c (5/10) |
50,000 |
||
|
Nritya's Cap A/c (2/10) |
20,000 |
||
|
1,20,000 |
1,20,000 |
||
|
Capital Account |
|||||||
|
Particulars |
Naval |
Nyaya |
Nritya |
Particulars |
Naval |
Nyaya |
Nritya |
|
To Def. Rev. Exp. |
15,000 |
25,000 |
10,000 |
By Balance b/d |
2,00,000 |
3,00,000 |
5,00,000 |
|
To Nyaya's Cap (Goodwill) |
36,000 |
- |
24,000 |
By Revaluation A/c |
30,000 |
50,000 |
20,000 |
|
To Nyaya's Loan A/c |
- |
4,35,000 |
- |
By Gen. Reserve |
24,000 |
40,000 |
16,000 |
|
To Balance c/d |
2,09,000 |
- |
5,06,000 |
By W.C. Reserve |
6,000 |
10,000 |
4,000 |
|
By Naval's Cap (Goodwill) |
- |
36,000 |
- |
||||
|
By Nritya's Cap (Goodwill) |
- |
24,000 |
- |
||||
|
Total |
2,60,000 |
4,60,000 |
5,40,000 |
Total |
2,60,000 |
4,60,000 |
5,40,000 |
Working notes:
WN 1: Adjustment of Goodwill to compensate Nyaya
Firm's Goodwill = ₹1,20,000
Nyaya's Share = 1,20,000×5/10=₹60,000
Gaining Ratio of Naval and Nritya = 3:2
Naval's contribution = 60,000×3/5=₹36,000
Nritya's contribution = 60,000×2/5=₹24,000
WN 2: Distribution of Reserves and Fictitious Assets
General Reserve (₹80,000) has been distributed in 3:5:2
Naval = 80,000×3/10 = 24,000
Nyaya = 80,000×5/10 = 40,000
Nritya = 80,000×2/10 = 16,000
Balance in Workmen Compensation Reserve account after liability Workmen Compensation has been distributed in 3:5:2
Workmen Compensation Reserve = 50,000- 20,000 (liability) =30,000
Naval = 30,000×3/10 = 6,000
Nyaya = 30,000×5/10 = 10,000
Nritya = 30,000×2/10 = 4,000
Deferred Revenue Expenditure (50,000) has been written off in 3:5:2
Naval = 50,000×3/10 = 15,000
Nyaya = 50,000×5/10 = 25,000
Nritya = 50,000×2/10 = 10,000
Question 33:
Alfa, Beta and Gama are in partnership sharing profits in the ratio of 5:3:2.Their Balance Sheet on 1st April, 2026, the day Beta decided to retire from firm, was as follows:
|
Liabilities |
₹ |
Assets |
₹ |
|
Alfa's Capital |
3,00,000 |
Building |
2,50,000 |
|
Beta's Capital |
2,00,000 |
Machinery |
1,50,000 |
|
Gama's Capital |
2,00,000 |
Investments |
2.50,000 |
|
General Reserve |
1,00,000 |
Debtors |
1,00,000 |
|
Sundry Creditors |
1,00,000 |
Stock |
50,000 |
|
|
|
Cash at Bank |
1,00,000 |
|
|
9,00,000 |
|
9,00,000 |
The terms of retirement were:
(i) Beta takes goodwill from Alfa for ₹ 30,000 and from Gama for ₹ 40,000 for foregoing his share of profits.
(ii) Stock to be appreciated by 20% and building by 50,000.
(iii) Investments were sold for 2,70,000.
(iv) Beta is paid by bank draft.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
|
Revaluation A/c |
|||
|
Particulars |
₹ |
Particulars |
₹ |
|
Gain |
|
Building |
50,000 |
|
Capital A/cs: |
|
Investments |
20,000 |
|
Alfa's 40,000 |
|
Stock |
10,000 |
|
Beta's 24,000 |
|
|
|
|
Gama's 16,000 |
80,000 |
|
|
|
|
80,000 |
|
80,000 |
|
Capital A/c |
|||||||
|
Particulars |
Alfa |
Beta |
Gama |
Particulars |
Alfa |
Beta |
Gama |
|
To Beta's Capital A/c |
30,000 |
- |
40,000 |
By Balance B/d |
3,00,000 |
2,00,000 |
2,00,000 |
|
To Bank A/c |
- |
3,24,000 |
- |
By Revaluation A/c |
40,000 |
24,000 |
16,000 |
|
To Balance C/d |
3,60,000 |
- |
1,96,000 |
By General Reserve |
50,000 |
30,000 |
20,000 |
|
|
|
|
|
By Alfa's Capital A/c |
- |
30,000 |
- |
|
|
|
|
|
By Gama's Capital A/c |
- |
40,000 |
- |
|
|
3,90,000 |
3,24,000 |
2,36,000 |
|
3,90,000 |
3,24,000 |
2,36,000 |
|
Balance Sheet |
|||
|
Liabilities |
₹ |
Assets |
₹ |
|
Alfa's Capital |
3,60,000 |
Building |
3,00,000 |
|
Beta's Capital |
1,96,000 |
Machinery |
1,50,000 |
|
Sundry Creditors |
1,00,000 |
Debtors |
1,00,000 |
|
|
|
Stock |
60,000 |
|
|
|
Cash at Bank |
46,000 |
|
|
|
|
|
|
|
9,00,000 |
|
9,00,000 |
Question 34:
N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016 their Balance Sheet was as under:
|
Liabilities |
(₹) |
Assets |
(₹) |
||
|
Creditors |
1,65,000 |
Cash |
1,20,000 |
||
|
General Reserve |
90,000 |
Debtors |
1,35,000 |
|
|
|
Capitals: |
|
Less: Provision |
15,000 |
1,20,000 |
|
|
N |
2,25,000 |
|
Stock |
1,50,000 |
|
|
S |
3,75,000 |
|
Machinery |
4,50,000 |
|
|
G |
4,50,000 |
10,50,000 |
Patents |
90,000 |
|
|
|
|
|
Building |
3,00,000 |
|
|
|
|
|
Profit and Loss Account |
75,000 |
|
|
|
13,05,000 |
|
13,05,000 |
||
|
|
|
|
|
||
G retired on the above date and it was agreed that:
(a) Debtors of ₹ 6,000 will be written off as bad debts and a
provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building
will be depreciated by 5%.
(c) An unrecorded creditor of ₹ 30,000 will be taken into
account.
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at ₹
90,000.
Pass necessary Journal entries for the above transactions in the books of the
firm on G's retirement.
(Foreign 2017)
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
|
|
|
General Reserve A/c |
Dr. |
|
90,000 |
|
|
|
To N’s Capital A/c |
|
|
|
18,000 |
|
|
To S’s Capital A/c |
|
|
|
27,000 |
|
|
To G’s Capital A/c |
|
|
|
45,000 |
|
|
(Balance in reserve distributed among all partners in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
15,000 |
|
|
|
S’s Capital A/c |
Dr. |
|
22,500 |
|
|
|
G’s Capital A/c |
Dr. |
|
37,500 |
|
|
|
To Profit & Loss A/c |
|
|
|
75,000 |
|
|
(Debit balance P&L A/c written off among all partners in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
18,000 |
|
|
|
S’s Capital A/c |
Dr. |
|
27,000 |
|
|
|
To G’s Capital A/c |
|
|
|
45,000 |
|
|
(Goodwill adjusted in gaining ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
1,65,000 |
|
|
|
To Patent A/c |
|
|
|
90,000 |
|
|
To Stock A/c |
|
|
|
7,500 |
|
|
To Machinery A/c |
|
|
|
22,500 |
|
|
To Building A/c |
|
|
|
15,000 |
|
|
To Creditors A/c |
|
|
|
30,000 |
|
|
(Decrease in assets and increase in liabilities debited to Revaluation A/c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Doubtful Debts A/c |
Dr. |
|
2,550 |
|
|
|
To Revaluation A/c |
|
|
|
2,550 |
|
|
(Excess provision written back) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
32,490 |
|
|
|
S’s Capital A/c |
Dr. |
|
48,735 |
|
|
|
G’s Capital A/c |
Dr. |
|
81,225 |
|
|
|
To Revaluation A/c |
|
|
|
1,62,450 |
|
|
(Loss on revaluation debited to partners’ capital accounts in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
G’s Capital A/c |
Dr. |
|
4,21,275 |
|
|
|
To G’s Loan A/c |
|
|
|
4,21,275 |
|
|
(Amount due to G transferred to his loan A/c) |
|
|
|
|
Working Notes:
WN1: Calculation of G’s Share of Goodwill
G's share=Firm's Goodwill×G's Profit Share
G's share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)
WN2: Calculation of Gaining
Ratio
Gaining Ratio = New Ratio − Old Ratio
N's gain=2/5−2/10=2/10
S's gain=3/5−3/10=3/10Gaining Ratio=2:3
N's share=45,000×2/5=18,000
S's share=45,000×3/5=27,000
WN2: Calculation of Excess/Deficit Provision for
Doubtful Debts
Required Provision @5%=1,35,000−6,000×5÷100=6,450
Existing Provision after writing bad-debts= 9,000
Excess Provision to be written back=2,550=9,000−6,450
WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits
=
4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
= ₹ 4,21,275
Question 35:
Ashok, Bhaskar and Chaman are partners in a firm, sharing profits and losses as Ashok 1/3, Bhaskar 1/2, and Chaman 1/6 respectively. The Balance Sheet of the firm as at 31st March, 2026 was
|
Liabilities |
₹ |
Assets |
₹ |
||
|
Capital A/cs: |
|
|
Building |
|
5,00,000 |
|
Ashok |
3,00,000 |
|
Plant and Machinery |
|
4,00,000 |
|
Bhaskar |
4,00,000 |
|
Furniture |
|
1,00,000 |
|
Chaman |
2,50,000 |
9,50,000 |
Stock |
|
2,50,000 |
|
General Reserve |
|
2,20,000 |
Debtors |
1,80,000 |
|
|
Sundry Creditors |
|
2,50,000 |
Less: Provision for Doubtful Debts |
5,000 |
1,75,000 |
|
Loan Payable |
|
1,50,000 |
Cash in Hand |
|
85,000 |
|
|
|
|
Advertisement Suspense Account |
|
60,000 |
|
|
|
15,70,000 |
|
|
15,70,000 |
Chaman retired on 1st April, 2026 subject to the following adjustments:
(a) Goodwill of the firm be valued at ₹2,40,000. Chaman's share of goodwill be adjusted into the Capital Accounts of Ashok and Bhaskar who will share future profits in the ratio of 3:2.
(6) Plant and Machinery to be reduced by 10% and Furniture by 5%.
(c) Stock to be increased by 15% and Building by 10%.
(d) Provision for Doubtful Debts to be raised to ₹20,000.
Prepare Revaluation Account, Capital Account of Chaman and the Balance Sheet of the firm after Chaman's retirement.
Answer:
|
Profit and loss adjustment a/c |
|||
|
Dr. |
|
|
Cr. |
|
Particulars |
₹ |
Particulars |
₹ |
|
To Plan and machinery To Furniture To Prov. for doubtful debts To capital a/c (profit transferred to) Ashok =27,500×2/6= 9,167 Bhaskar=27,500×3/6=13,750 Chaman =27,500×1/6=4,583 |
40,000 5,000 15,000
27,500 |
By stock By factory building |
37,500 50,000 |
|
|
87,500 |
|
87,500 |
1
|
Partners’ Capital Account |
||||||||
|
Dr. |
Cr. |
|||||||
|
Particulars |
Ashok |
Bhaskar |
Chaman |
Particulars |
Ashok |
Bhaskar |
Chaman |
|
|
B’s Capital A/c |
24,000 |
Balance b/d |
3,00,000 |
4,00,000 |
2,50,000 |
|||
|
C’s Capital A/c |
40,000 |
A’s Capital A/c |
24,000 |
40,000 |
||||
|
Advertisement sus. a/c C’s loan a/c |
20,000
|
30,000 |
10,000
3,21,250 |
Profit and loss adjustment a/c General reserve a/c |
9,167
73,333 |
13,750
1,10,000 |
4,583
36,667 |
|
|
Balance c/d |
2,98,500 |
5,17,750 |
||||||
|
|
||||||||
|
|
3,82,500 |
5,47,750 |
3,31,250 |
|
3,82,500 |
5,47,750 |
3,31,250 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
||||||||||
|
as on April 01, 2026 (after C’s Retirement) |
||||||||||
|
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|||||||
|
Sundry Creditors |
2,50,000 |
Factory building |
5,50,000 |
|||||||
|
Loan Payable |
1,50,000 |
Plant and machinery |
3,60,000 |
|||||||
|
C’s Loan |
3,21,250 |
Furniture |
95,000 |
|||||||
|
Stock |
2,87,500 |
|||||||||
|
Capital A/c |
|
Debtors 1,80,000 |
||||||||
|
Ashok |
2,98,500 |
|
Less; prov. 20,000 |
1,60,000 |
||||||
|
Bhaskar |
5,17,750 |
3,54,000 |
Cash |
85,000 |
||||||
|
|
15,37,500 |
|
15,37,500 |
|||||||
|
|
|
|
|
|||||||
|
Journal |
|
||||||||||
|
Date |
Particulars |
L.F. |
Debit (₹) |
Credit (₹) |
|
||||||
|
|
Ashok’s Capital A/c |
Dr. |
|
64,000 |
|
|
|||||
|
|
To Bhaskar’s Capital A/c |
|
|
|
24,000 |
|
|||||
|
|
To Chaman’s Capital A/c |
|
|
|
40,000 |
|
|||||
|
|
(Being goodwill adjusted for compensating bhaskar, Chaman) |
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
|
|
Profit and loss adjustment a/c |
Dr. |
|
60,000 |
|
|
|||||
|
|
To Plant and machinery A/c |
|
40,000 |
|
|||||||
|
|
To Furniture A/c |
|
5,000 |
|
|||||||
|
|
To Prov. for doubtful debts A/c |
|
|
15,000 |
|
||||||
|
|
(Decrease in assets and increase in liabilities debited to Revaluation A/c) |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
|
|
N’s Capital A/c |
Dr. |
|
18,000 |
|
|
|||||
|
|
S’s Capital A/c |
Dr. |
|
27,000 |
|
|
|||||
|
|
To G’s Capital A/c |
|
|
|
45,000 |
|
|||||
|
|
(Goodwill adjusted in gaining ratio) |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
|
|
Stock A/c |
Dr. |
|
37,500 |
|
||||||
|
|
Factory building A/c |
Dr. |
|
50,000 |
|
||||||
|
|
To P&L adjustment A/c |
|
87,500 |
|
|||||||
|
|
(Decrease in assets debited to Revaluation A/c) |
|
|
||||||||
|
|
|
|
|
|
|
||||||
Working notes;
Old ratio of Ashok :Bhaskar : chaman=1/3:1/2:1/6
=1/3×2/2:1/2×3/3=1/6
=2/6:3/6:1/6
=2:3:1
New ratio of Ashok and Bhaskar= 3:2
Gaining ratio= New ratio – old ratio
Ashok = 3/5-2/6=18-10/30=8/30
Bhaskar= 2/5-3/6=12-15/30= -3/30
Goodwill of firm= 2,40,000
Bhaskar will get =2,40,000×3/30=24,000
Chaman’s share of goodwill = 2,40,000×1/6=40,000
Ashok will give Bhaskarand, chaman 24,000, 40,000 respectively.
Ts Grewal Solution 2026-2027
Click below for more Questions
Class 12 / Volume – I
Chapter 5 – Retirement of a Partner