Class 12 Samacheer Kalvi students, here are the Retirement and Death of a Partner text book solutions. Please revise the formulas and account formats before you start working out the problems. If you have any doubts, please reach out to us in the comments section.
Retirement and Death of a Partner – Important Formula and Format
I Multiple choice questions
1. A partner retires from the partnership firm on 30th June. He is liable for all the acts of the firm up to the | |
(a) End of the current accounting period | (b) End of the previous accounting period |
(c) Date of his retirement | (d) Date of his final settlement |
2. On retirement of a partner from a partnership firm, accumulated profits and losses are distributed to the partners in the | |
(a) New profit sharing ratio | (b) Old profit sharing ratio |
(c) Gaining ratio | (d) Sacrificing ratio |
3. On retirement of a partner, general reserve is transferred to the | |
(a) Capital account of all the partners | (b) Revaluation account |
(c) Capital account of the continuing partners | (d) Memorandum revaluation account |
4. On revaluation, the increase in liabilities leads to | |
(a) Gain | (b) Loss |
(c) Profit | (d) None of these |
5. At the time of retirement of a partner, determination of gaining ratio is required | |
(a) To transfer revaluation profit or loss | (b) To distribute accumulated profits and losses |
(c) To adjust goodwill | (d) None of these |
6. If the final amount due to a retiring partner is not paid immediately, it is transferred to | |
(a) Bank A/c | (b) Retiring partner’s capital A/c |
(c) Retiring partner’s loan A/c | (d) Other partners’ capital A/c |
7. ‘ A’ was a partner in a partnership firm. He died on 31st March 2019. The final amount due to him is Rs. 25,000 which is not paid immediately. It will be transferred to | |
a) A’s capital account | (b) A’s current account |
(c) A’s Executor account | (d) A’s Executor loan account |
8. A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill of the firm was valued as Rs. 30,000. Find the contribution of A and C to compensate B: | |
(a) Rs. 20,000 and Rs. 10,000 | (b) Rs. 8,000 and Rs. 4,000 |
(c) Rs. 10,000 and Rs. 20,000 | (d) Rs. 15,000 and Rs. 15,000 |
9. A, B and C are partners sharing profits in the ratio of 4:2:3. C retires. The new profit sharing ratio between A and B will be | |
(a) 4:3 | (b) 3:4 |
(c) 2:1 | (d) 1:2 |
10. X, Y and Z were partners sharing profits and losses equally. X died on 1st April 2019. Find out the share of X in the profit of 2019 based on the profit of 2018 which showed ` 36,000. | |
(a) Rs. 1,000 | (b) Rs. 3,000 |
(c) Rs. 12,000 | (d) Rs. 36,000 |
II. Very short answer questions
1. What is meant by retirement of a partner?
Answer: When a partner leaves from a partnership firm, it is known as retirement. The reasons for the retirement of a partner may be illness, old age, better opportunity elsewhere, disagreement with other partners, etc.
2. What is gaining ratio?
Answer: Gaining ratio is the proportion of the profit which is gained by the continuing partners.
3. What is the purpose of calculating gaining ratio?
Answer: The purpose of finding the gaining ratio is to bear the goodwill to be paid to the retiring partner. The share gained is calculated as follows:
Share gained = New share – Old share
Gaining ratio = Ratio of share gained by the continuing partners
4. What is the journal entry to be passed to transfer the amount due to the deceased partner to the executor of the deceased partner?
Answer:
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Deceased partner’s capital A/c Dr. | xxx | |||
To Deceased partner’s executor A/c | xxx | |||
(transfer the amount due to the deceased partner) |
III Short answer questions
1. List out the adjustments made at the time of retirement of a partner in a partnership firm.
Answer: The following adjustments are necessary at the time of retirement of a partner:
(1) Distribution of accumulated profits, reserves and losses
(2) Revaluation of assets and liabilities
(3) Determination of new profit sharing ratio and gaining ratio
(4) Adjustment for goodwill
(5) Adjustment for current year’s profit or loss upto the date of retirement
(6) Settlement of the amount due to the retiring partner.
2. Distinguish between sacrificing ratio and gaining ratio.
Answer:
Basis | Sacrificing ratio | Gaining ratio |
Meaning | It is the proportion of the profit which is sacrificed by the old partners in favour of a new partner. | It is the proportion of the profit which is gained by the continuing partners from the retiring partner. |
Purpose | It is calculated to determine the amount to be adjusted towards goodwill for the sacrificing partners. | It is calculated to determine the amount to be adjusted towards goodwill for the gaining partners. |
Time of calculation | It is calculated at the time of admission of a new partner. | It is calculated at the time of retirement of a partner. |
Method of calculation | It is the difference between the old ratio and the new ratio Sacrificing ratio = Old profit sharing ratio – New profit sharing ratio | It is the difference between the new ratio and the old ratio. Gaining ratio = New profit sharing ratio – Old profit sharing ratio |
3. What are the ways in which the final amount due to an outgoing partner can be settled?
Answer: The amount due to the retiring partner may be settled in one of the following ways:
(i) Paying the entire amount due immediately in cash
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Retiring partner’s capital A/c Dr. | xxx | |||
To Cash / Bank A/c | xxx | |||
(amount due is paid in cash immediately) |
(ii) Transfer the entire amount due, to the loan account of the partner
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Retiring partner’s capital A/c Dr. | xxx | |||
To Retiring partner’s loan A/c | xxx | |||
(amount due is not paid immediately in cash) |
(iii) Paying part of the amount immediately in cash and transferring the balance to the loan account of the partner
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Retiring partner’s capital A/c Dr. | xxx | |||
To Cash / Bank A/c (amount paid) | xxx | |||
To Retiring partner’s loan A/c | xxx | |||
(the amount due is partly paid in cash immediately) |
Retiring partner’s loan account will appear on the liabilities side of the balance sheet prepared after retirement till it is completely settled.
IV Exercises
Retirement of a partner
Distribution of accumulated profits, reserves and losses
1. Dheena, Surya and Janaki are partners sharing profits and losses in the ratio of 5:3:2. On 31.3.2018, Dheena retired. On the date of retirement, the books of the firm showed a reserve fund of 50,000. Pass journal entry to transfer the reserve fund.
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
31.3.2018 | General reserve A/c Dr. | 50,000 | ||
To Dheena's capital a/c | 25,000 | |||
To Surya's capital a/c | 15,000 | |||
To Janaki's capital a/c | 10,000 | |||
(transferring general reserves to all partners in the old ratio) | ||||
Calculation | ||||
Dheena: 50000x5/10= Rs. 25000 | ||||
Surya: 50000x3/10 = Rs. 15000 | ||||
Janaki: 50000 x2/10 = Rs. 10000 |
2. Rosi, Rathi and Rani are partners of a firm sharing profits and losses equally. Rathi retired from the partnership on 1.1.2018. On that date, their balance sheet showed accumulated loss of 45,000 on the asset side of the balance sheet. Give the journal entry to distribute the accumulated loss.
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Rosi's capital a/c Dr. | 15,000 | |||
Rathi's capital a/c Dr. | 15,000 | |||
Rani's capital a/c Dr. | 15,000 | |||
To Profit and loss A/c | 45,000 | |||
(transferring accumulated losses in the old ratio) |
3. Akash, Mugesh and Sanjay are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their balance sheet as on 31st March, 2017 is as follows:
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Buildings | 1,10,000 | ||
Akash | 40,000 | Vehicle | 30,000 | |
Mugesh | 60,000 | Stock in trade | 26,000 | |
Sanjay | 30,000 | 1,30,000 | Debtors | 25,000 |
Profit and loss appropriation A/ | 12,000 | Cash in hand | 15,000 | |
General reserve | 24,000 | |||
Workmen compensation fund | 18,000 | |||
Bills payable | 22,000 | |||
Total | 2,06,000 | Total | 2,06,000 |
Pass journal entry to transfer accumulated Profit and prepare the capital account of the partners.
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Profit and loss Appropriation A/c Dr. | 12,000 | |||
General reserve A/c Dr. | 24,000 | |||
Workmen compensation fund A/c Dr. | 18,000 | |||
To Akash's capital a/c | 27,000 | |||
To Mugesh's capital a/c | 18,000 | |||
To Sanjay's capital a/c | 9,000 | |||
(transferring accumulated profits and reserves in the old ratio) | ||||
Calculation | ||||
Akash: 54000 x 3/6 = Rs.27000 | ||||
Mugesh: 54000 x 2/6 = Rs.18,000 | ||||
Sanjay: 54000 x 1/6 = Rs.9,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Akash | Mugesh | Sanjay | Particulars | Akash | Mugesh | Sanjay |
To balance c/d | 67,000 | 78,000 | 39,000 | By balance b/d | 40,000 | 60,000 | 30,000 |
By profits and reserves | 27,000 | 18,000 | 9,000 | ||||
Total | 67,000 | 78,000 | 39,000 | Total | 67,000 | 78,000 | 39,000 |
Revaluation of assets and liabilities
4. Roja, Neela and Kanaga are partners sharing profits and losses in the ratio of 4:3:3. On 1st April 2017, Roja retires and on retirement, the following adjustments are agreed upon.
(i) Increase the value of building by Rs. 30,000.
(ii) Depreciate stock by Rs. 5,000 and furniture by Rs. 12,000.
(iii) Provide an outstanding liability of Rs. 1,000
Pass journal entries and prepare revaluation account.
Revaluation Account | ||||
---|---|---|---|---|
Particulars | Rs. | Particulars | Rs. | |
To stock a/c | 5,000 | By building a/c | 30,000 | |
To furniture a/c | 12,000 | |||
To Outstanding liability a/c | 1,000 | |||
To profit transferred to capital a/c | ||||
Roja | 4,800 | |||
Neela | 3,600 | |||
Kanaga | 3,600 | 12,000 | ||
Total | 30,000 | Total | 30,000 |
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Revaluation a/c Dr. | 18,000 | |||
To stock a/c | 5,000 | |||
To furniture a/c | 12,000 | |||
To outstanding liability a/c | 1,000 | |||
(decrease in the value of assets) | ||||
Buildings a/c Dr. | 30,000 | |||
To Revaluation a/c | 30,000 | |||
(increase in the value of buildings) | ||||
Revaluation A/c Dr. | 12,000 | |||
To Roja's capital a/c | 4,800 |
|||
To Neela's capital a/c | 3,600 | |||
To Kanaga's capital a/c | 3,600 | |||
(profit on revaluation a/c) |
5. Vinoth, Karthi and Pranav are partners sharing profits and losses in the ratio of 2:2:1. Pranav retires from partnership on 1st April 2018. The following adjustments are to be made.
(i) Increase the value of land and building by Rs. 18,000
(ii) Reduce the value of machinery by Rs.15,000
(iii) A provision would also be made for outstanding expenses for Rs. 8,000.
Give journal entries and prepare revaluation account.
Revaluation Account | ||||
---|---|---|---|---|
Particulars | Rs. | Particulars | Rs. | |
To machinery a/c | 15,000 | By building a/c | 18,000 | |
To Outstanding expenses a/c | 8,000 | By loss on revaluation transferred to capital a/c | ||
Vinoth | 2000 | |||
Karthi | 2000 | |||
Pranav | 1000 | 5000 | ||
Total | 23,000 | Total | 23,000 |
Date | Particulars | L.F. | Debit | Credit |
---|---|---|---|---|
Revaluation a/c Dr. | 23,000 | |||
To machinery a/c | 15,000 | |||
To outstanding expenses a/c | 8,000 | |||
(decrease in the value of assets) | ||||
Buildings a/c Dr. | 18,000 | |||
To Revaluation a/c | 18,000 | |||
(increase in the value of buildings) | ||||
Vinoth's capital a/c Dr | 2,000 | |||
Karthi's capital a/c Dr | 2,000 | |||
Pranav's capital a/c Dr. | 1,000 | |||
To Revaluation a/c | 5,000 | |||
(loss on revaluation a/c) |
6. Chandru, Vishal and Ramanan are partners in a firm sharing profits and losses equally. Their balance sheet as on 31st March, 2018 is as follows:
Liabilities | Rs. | Rs. | Assets | Rs. | |
---|---|---|---|---|---|
Capital accounts: | Furniture | 60,000 | |||
Chandru | 60,000 | Machinery | 1,20,000 | ||
Vishal | 70,000 | Sundry debtors | 33,000 | ||
Ramanan | 70,000 | 2,00,000 | Less: Provision for doubtful debts | 3,000 | 30,000 |
Bills payable | 80,000 | Bills receivable | 50,000 | ||
Cash at bank | 20,000 | ||||
Total | 2,80,000 | Total | 2,80,000 |
Ramanan retired on 31st March 2019 subject to the following conditions:
(i) Machinery is valued at Rs. 1,50,000
(ii) Value of furniture brought down by Rs. 10,000
(iii) Provision for doubtful debts should be increased to Rs. 5,000
(iv) Investment of Rs. 30,000 not recorded in the books is to be recorded now.
Pass necessary journal entries and prepare revaluation account.
Revaluation Account | ||||
---|---|---|---|---|
Particulars | Rs. | Rs. | Particulars | Rs. |
To furniture a/c | 10,000 | By buildings a/c | 30,000 | |
To provision for doubtful debts a/c | 2,000 | By investment a/c | 30,000 | |
To profit on revaluation transferred to capital a/cs | ||||
Chandru | 16,000 | |||
Vishal | 16,000 | |||
Ramanan | 16,000 | 48,000 | ||
Total | 60,000 | Total | 60,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Chandru | Vishal | Ramanan | Particulars | Chandru | Vishal | Ramanan |
To balance c/d | 76,000 | 86,000 | 86,000 | By balance b/d | 60,000 | 70,000 | 70,000 |
By profit on revaluation | 16,000 | 16,000 | 16,000 | ||||
Total | 76,000 | 86,000 | 86,000 | Total | 76,000 | 86,000 | 86,000 |
By balance b/d | 76,000 | 86,000 | 86,000 |
New profit sharing ratio and gaining ratio
7. Kayal, Mala and Neela are partners sharing profits in the ratio of 2:2:1. Kayal retires and the new profit sharing ratio between Mala and Neela is 3:2. Calculate the gaining ratio.
Gaining ratio = New ratio – Old ratio
Kayal –
Gaining Ratio = 1:1
8. Sunil, Sumathi and Sundari are partners sharing profits in the ratio of 3:3:4. Sundari retires and her share is taken up entirely by Sunil. Calculate the new profit sharing ratio and gaining ratio.
New Ratio = 7:3
Sacrificing Ratio=4:0
9. Ramu, Somu, Gopu are partners sharing profits in the ratio of 3:5:7. Gopu retires and the share is purchased by Ramu and Somu in the ratio of 3:1. Find the new profit sharing ratio and gaining ratio.
Old Ratio: 3:5:7
New Ratio = 21:7 = 3:1
Gaining Ratio = 3:1
New Ratio = Old ratio + Share gained
New ratio = 33: 27 = 11:9
10. Navin, Ravi and Kumar are partners sharing profits in the ratio of 1/2, 1/4 and 1/4 respectively. Kumar retires and his share is taken up by Navin and Ravi equally. Calculate the new profit sharing ratio and gaining ratio.
Old ratio of Navin, Ravi Kumar = 1/2, 1/4 and 1/4
Kumar share is taken up by Navin and Ravi equally
New Ratio = 5:3
Gaining ratio = 1:1
11. Mani, Gani and Soni are partners sharing the profits and losses in the ratio of 4:5:6. Mani retires from the firm. Calculate the new profit sharing ratio and gaining ratio.
Since the new profit sharing ratio, share gained, and the proportion of share gained is not given, the new share is calculated by assuming that the share gained is in the proportion of old ratio. Therefore, the new profit sharing ratio and gaining ratio between the continuing partners, Gani and Soni is their old profit sharing ratio, that is 5:6.
Adjustment for goodwill
12. Rajan, Suman and Jegan were partners in a firm sharing profits and losses in the ratio of 4:3:2. Suman retired from partnership. The goodwill of the firm on the date of retirement was valued at Rs. 45,000. Pass necessary journal entries for goodwill on the assumption that the fluctuating capital method is followed.
Date | Particulars | L.F | Debit | Credit |
---|---|---|---|---|
Rajan's capital a/c Dr. | 10,000 | |||
Jegan's capital a/c Dr. | 5,000 | |||
To Suman's capital a/c | 15,000 | |||
Suman's share of goodwill shared with other partners) |
13. Balu, Chandru and Nirmal are partners in a firm sharing profits and losses in the ratio of 5:3:2. On 31st March 2018, Nirmal retires from the firm. On the date of Nirmal’s retirement, goodwill appeared in the books of the firm at Rs. 60,000. By assuming fluctuating capital account, pass the necessary journal entry if the partners decide to
(a) write off the entire amount of existing goodwill
(b) write off half of the existing goodwill.
Particulars | L.F | Debit | Credit | |
---|---|---|---|---|
(a) | Balu's capital a/c Dr. | 30,000 | ||
Chandru's capital a/c Dr. | 18,000 | |||
Nirmal's capital a/c Dr. | 12,000 | |||
To Goodwill a/c | 60,000 | |||
(Value of goodwill shared with all partners) | ||||
(b) | Balu's capital a/c Dr. | 15,000 | ||
Chandru's capital a/c Dr. | 9,000 | |||
Nirmal's capital a/c Dr. | 6,000 | |||
To Goodwill a/c | 30,000 | |||
(Half the value of goodwill written off) |
Adjustment for current year’s profit or loss upto the date of retirement
14. Rani, Jaya and Rathi are partners sharing profits and losses in the ratio of 2:2:1. On 31.3.2018, Rathi retired from the partnership. Profit of the preceding years is as follows:
2014: 10,000; 2015: Rs. 20,000; 2016: Rs. 18,000 and 2017: Rs. 32,000
Find out the share of profit of Rathi for the year 2018 till the date of retirement if
(a) Profit is to be distributed on the basis of the previous year’s profit
(b) Profit is to be distributed on the basis of the average profit of the past 4 years
Also pass necessary journal entries by assuming partners capitals are fluctuating.
Answer: (a) ) If the profit is to be distributed on the basis of the previous year’s profit, Rathi’s share distributed for 3 months = Rs. 32000 x 1/5 x 3/12 = Rs.1600
Date | Particulars | L.F | Debit | Credit |
---|---|---|---|---|
Profit and loss suspense a/c Dr. | 1600 | |||
To Rathi's capital a/c | 1600 | |||
(Profit is to be distributed on the basis of the previous year’s profit) |
(b) Profit is to be distributed on the basis of the average profit of the past 4 years
Year | Profit |
---|---|
2014 | 10,000 |
2015 | 20,000 |
2016 | 18,000 |
2017 | 32,000 |
Total | 80,000 |
Date | Particulars | L.F | Debit | Credit |
---|---|---|---|---|
Profit and loss suspense a/c Dr. | 4,000 | |||
To Rathi's capital a/c | 4,000 | |||
(Rathi's current year share of profit credited to her capital a/c) |
Settlement of amount due to the retiring partner
15. Kavin, Madhan and Ranjith are partners sharing profits and losses in the ratio of 4:3:3 respectively. Kavin retires from the firm on 31st December, 2018. On the date of retirement, his capital account shows a credit balance of Rs. 1,50,000. Pass journal entries if:
(a) The amount due is paid off immediately.
(b) The amount due is not paid immediately.
(c) Rs. 1,00,000 is paid and the balance in future.
Date | Particulars | L.F | Debit | Credit |
---|---|---|---|---|
(a) | Kavin's capital a/c Dr. | 1,50,000 | ||
To bank a/c | 1,50,000 | |||
(amount is paid off immediately) | ||||
(b) | Kavin's capital a/c Dr. | 1,50,000 | ||
To Kavin's loan a/c | 1,50,000 | |||
(amount is not paid off immediately) | ||||
(c) | Kavin's capital a/c Dr. | 1,50,000 | ||
To bank a/c | 1,00,000 | |||
To Kavin's loan a/c | 50,000 | |||
(Rs.100000 paid in cash and the rest is paid in future) |
16. Manju, Charu and Lavanya are partners in a firm sharing profits and losses in the ratio of 5:3:2. Their balance sheet as on 31st March, 2018 is as follows:
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Buildings | 1,00,000 | ||
Manju | 70,000 | Furniture | 80,000 | |
Charu | 70,000 | Stock | 60,000 | |
Lavanya | 70,000 | 2,10,000 | Debtors | 40,000 |
Sundry creditors | 40,000 | Cash in hand | 20,000 | |
Profit and loss A/c | 50,000 | |||
Total | 3,00,000 | Total | 3,00,000 |
Manju retired from the partnership firm on 31.03.2018 subject to the following adjustments:
(i) Stock to be depreciated by Rs. 10,000
(ii) Provision for doubtful debts to be created for Rs. 3,000.
(iii) Buildings to be appreciated by Rs. 28,000
Prepare revaluation account and capital accounts of partners after retirement.
Revaluation a/c | ||||
---|---|---|---|---|
To stock a/c | 10,000 | By buildings a/c | 28,000 | |
To provision for doubtful debts a/c | 3,000 | |||
To profit on revaluation transferred to capital a/c | ||||
Manju | 7,500 | |||
Charu | 4,500 | |||
Lavanya | 3,000 | 15,000 | ||
Total | 28,000 | Total | 28,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Manju | Charu | Lavanya | Particulars | Manju | Charu | Lavanya |
To Manju's loan a/c | 1,02,500 | By balance b/d | 70,000 | 70,000 | 70,000 | ||
To balance c/d | 89,500 | 83,000 | By profit and loss a/c | 25,000 | 15,000 | 10,000 | |
By revaluation a/c | 7,500 | 4,500 | 3,000 | ||||
Total | 1,02,500 | 89,500 | 83,000 | Total | 1,02,500 | 89,500 | 83,000 |
Comprehensive problems
17. Kannan, Rahim and John are partners in a firm sharing profit and losses in the ratio of 5:3:2. The balance sheet as on 31st December, 2017 was as follows:
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Buildings | 90,000 | ||
Kannan | 1,00,000 | Machinery | 60,000 | |
Rahim | 80,000 | Debtors | 30,000 | |
John | 40,000 | 2,20,000 | Stock | 20,000 |
Workmen compensation | 30,000 | Cash at bank | 50,000 | |
fund | 20,000 | Profit and loss A/c (loss) | 20,000 | |
Creditors | ||||
Total | 2.70,000 | Total | 2,70,000 |
John retires on 1st January 2018, subject to following conditions:
(i) To appreciate building by 10%
(ii) Stock to be depreciated by 5%.
(iii) To provide Rs.1,000 for bad debts
(iv) An unrecorded liability of Rs. 8,000 have been noticed.
(v) The retiring partner shall be paid immediately.
Prepare revaluation account, partners’ capital account and the balance sheet of the firm after retirement.
Revaluation a/c | ||||
---|---|---|---|---|
To stock a/c | 1,000 | By buildings a/c | 9,000 | |
To provision for doubtful debts a/c | 1,000 | By revaluation loss transferred to partner's capital a/c | ||
John | 300 | |||
Rahim | 200 | 1000 | ||
Total | 10,000 | Total | 10,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Kannan | Rahim | John | Particulars | Kannan | Rahim | John |
To revaluation loss a/c | 500 | 300 | 200 | By balance c/d | 1,00,000 | 80,000 | 40,000 |
To Profit and loss a/c | 10,000 | 6,000 | 4,000 | By workman's compensation fund | 15,000 | 9,000 | 6,000 |
To balance c/d | 1,04,500 | 82,700 | |||||
To cash a/c | 41,800 | ||||||
Total | 1,15,000 | 89,000 | 46,000 | Total | 115,000 | 89000 | 46,000 |
Liabilities | Rs. | Rs. | Assets | Rs. | |
---|---|---|---|---|---|
Capital accounts: | Buildings | 90,000 | |||
Kannan | 1,04,500 | Add: Revaluation | 9,000 | 99,000 | |
Rahim | 82,700 | 1,87,200 | Machinery | 60,000 | |
Creditors | 20,000 | Debtors | 30,000 | ||
Unrecorded liability | 8,000 | Less: provision for doubtful debts | 1,000 | 29,000 | |
Stock | 20,000 | ||||
Less: Revaluation | 1,000 | 19,000 | |||
Cash at bank | 50,000 | ||||
Less: John's capital | 41,800 | 8,200 |
|||
Total | 2,15,200 | Total | 2.15,200 |
18. Saran, Arun and Karan are partners in a firm sharing profits and losses in the ratio of 4:3:3. Their balance sheet as on 31.12.2016 was as follows:
Liabilities | Rs. | Rs. | Assets | Rs. | Rs. |
---|---|---|---|---|---|
Capital accounts: | Buildings | 60,000 | |||
Saran | 60,000 | Machinery | 40,000 | ||
Arun | 50,000 | Investment | 20,000 | ||
Karan | 40,000 | 1,50,000 | Stock | 12,000 | |
General reserve | 15,000 | Debtors | 25,000 | ||
Creditors | 35,000 | Less: Provision for bad debts | 1000 | 24,000 | |
Cash at bank | 44,000 | ||||
Total | 2,00,000 | Total | 2,00,000 |
Karan retires on 1.1.2017 subject to the following conditions:
(i) Goodwill of the firm is valued at Rs. 21,000
(ii) Machinery to be appreciated by 10%
(iii) Building to be valued at Rs. 80,000
(iv) Provision for bad debts to be raised to Rs. 2,000
(v) Stock to be depreciated by Rs. 2,000
(vi) Final amount due to Karan is not paid immediately.
Prepare the necessary ledger accounts and show the balance sheet of the firm after retirement.
Revaluation a/c | ||||
---|---|---|---|---|
Particulars | Rs. | Particulars | Rs. | |
To provision for bad debts | 1,000 | By machinery a/c | 4,000 | |
To stock | 2,000 | By buildings a/c | 20,000 | |
To profit on revaluation transferred to capital a/c | ||||
Saran | 8,400 | |||
Arun | 6,300 | |||
Karan | 6,300 | 21,000 | ||
Total | 24,000 | Total | 24,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Saran | Arun | Kannan | Particulars | Saran | Arun | Kannan |
To Karan's capital a/c | 3,600 | 2,700 | By balance b/d | 60,000 | 50,000 | 40,000 | |
To balance c/d | 70,800 | 58,100 | By revaluation profit | 8,400 | 6,300 | 6,300 | |
To loan a/c | 57,100 | By general reserve a/c | 6,000 | 4,500 | 4,500 | ||
By Saran's capital a/c | 3,600 | ||||||
By Arun's capital a/c | 2,700 | ||||||
Total | 74,400 | 60,800 | 57,100 | Total | 74,400 | 60,800 | 57,100 |
Liabilities | Rs. | Rs. | Assets | Rs. | |
---|---|---|---|---|---|
Capital accounts: | Buildings | 90,000 | |||
Kannan | 1,04,500 | Add: Revaluation | 9,000 | 99,000 | |
Rahim | 82,700 | 1,87,200 | Machinery | 60,000 | |
Creditors | 20,000 | Debtors | 30,000 | ||
Unrecorded liability | 8,000 | Less: provision for doubtful debts | 1,000 | 29,000 | |
Stock | 20,000 | ||||
Less: Revaluation | 1,000 | 19,000 | |||
Cash at bank | 50,000 | ||||
Less: John's capital | 41,800 | 8,200 |
|||
Total | 2,15,200 | Total | 2.15,200 |
19. Rajesh, Sathish and Mathan are partners sharing profits and losses in the ratio of 3:2:1 respectively. Their balance sheet as on 31.3.2017 is given below.
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Premises | 4,00,000 | ||
Rajesh | 4,00,000 | Machinery | 4,20,000 | |
Sathish | 3,00,000 | Debtors | 1,60,000 | |
Mathan | 2,50,000 | 9,50,000 | Stock | 3,00,000 |
General reserve | 1,20,000 | Cash at bank | 20,000 | |
Creditors | 50,000 | |||
Bills payable | 1,80,000 | |||
Total | 13,00,000 | Total | 13,00,000 |
Mathan retires on 31st March, 2017 subject to the following conditions:
(i) Rajsh and Sathish will share profits and losses in the ratio of 3:2
(ii) Assets are to be revalued as follows:
Machinery Rs. 3,90,000, Stock Rs. 2,90,000, Debtors Rs. 1,52,000.
(iii) Goodwill of the firm is valued at Rs. 1,20,000
Prepare necessary ledger accounts and the balance sheet immediately after the retirement of Mathan.
Gaining ratio = New share – Old share
Gaining Ratio = 3:2
Goodwill = Rs.1,20,000
Manoj share of goodwill: 120,000 x 1/6 = Rs.20,000
It is to be adjusted in the gaining ratio 3:2 between Rajesh and Satish.
Revaluation a/c | ||||
---|---|---|---|---|
Particulars | Rs. | Particulars | Rs. | Rs. |
To machinery a/c | 30,000 | By loss on revaluation transferred to capital a/c | ||
To stock | 10,000 | Rajesh | 24,000 | |
To debtors a/c | 8,000 | Sathish | 16,000 | |
Mathan | 8,000 | 48,000 | ||
Total | 48,000 | Total | 48,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Rajesh | Sathish | Mathan | Particulars | Rajesh | Sathish | Mathan |
To revaluation a/c | 24,000 | 16,000 | 8,000 | By balance b/d | 4,00,000 | 3,00,000 | 2,50,000 |
To Mathan's capital a/c | 12,000 | 8,000 | By general reserve a/c | 60,000 | 40,000 | 20,000 | |
To Mathan's loan a/c | 2,82,000 | By Rajesh's capital a/c | 12,000 | ||||
To balance c/d | 4,24,000 | 3,16,000 | By Sathish's capital a/c | 8,000 | |||
Total | 4,60,000 | 3,40,000 | 2,90,000 | Total | 4,60,000 | 3,40,000 | 2,90,000 |
Liabilities | Rs. | Rs. | Assets | Rs. | Rs. |
---|---|---|---|---|---|
Capital accounts: | Premises | 4,00,000 | |||
Rajesh | 4,24,000 | Machinery | 4,20,000 | ||
Sathish | 3,16,000 | 7,40,000 | Less: Depreciation | 30,000 | 3,90,000 |
Madan Loan a/c | 2,82,000 | Stock | 3,00,000 | ||
Creditors | 50,000 | Less: Revaluation | 10,000 | 2,90,000 | |
Bills Payable | 1,80,000 | Goodwill | 20,000 | ||
Debtors | 1,60,000 | ||||
Less: Bad debts | 8,000 | 1,52,000 | |||
Total | 12,52,000 | Total | 12,52,000 |
Death of a partner
20. Janani, Janaki and Jamuna are partners sharing profits and losses in the ratio of 3:3:1 respectively. Janaki died on 31st December, 2017. Final amount due to her showed a credit balance of Rs. 1,40,000. Pass journal entries if,
(a) The amount due is paid off immediately.
(b) The amount due is not paid immediately.
(c) Rs. 75, 000 is paid and the balance in future.
Date | Particulars | L.F | Debit | Credit |
---|---|---|---|---|
Janaki's Executor's a/c Dr. | 1,40,000 | |||
To bank a/c | 1,40,000 | |||
(amount due to Janaki paid off immediately) | ||||
Janaki's Executor's a/c Dr. | 1,40,000 | |||
To Janaki's Executor's Loan a/c Dr. | 1,40,000 | |||
Janaki's Executor's a/c Dr. | 1,40,000 | |||
To bank a/c | 75,000 | |||
To Janaki's Executor's Loan a/c Dr. | 65,000 | |||
(Rs. 75, 000 is paid and the balance in future) |
21. Varsha, Shanthi and Madhuri are partners, sharing profits in the ratio of 5:4:3. Their balance sheet as on 31st December 2017 is as under:
Balance Sheet as on 31st December 2017
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Premises | 1,20,000 | ||
Varsha | 80,000 | Stock | 40,000 | |
Shanthi | 60,000 | Debtors | 50,000 | |
Madhuri | 20,000 | 1,60,000 | Cash at bank | 18,000 |
General reserve | 48,000 | Profit and loss A/c (loss) | 12,000 | |
Sundry creditors | 32,000 | |||
Total | 2,40,000 | Total | 2,40,000 |
On 1.1.2018, Madhuri died and on her death the following arrangements are made:
(i) Stock to be depreciated by Rs. 5,000
(ii) Premises is to be appreciated by 20%
(iii) To provide Rs. 4,000 for bad debts
(iv) The final amount due to Madhuri was not paid
Prepare revaluation account, partners’ capital account and the balance sheet of the firm after death.
Revaluation a/c | |||||
---|---|---|---|---|---|
Particulars | Rs. | Rs. | Particulars | Rs. | Rs. |
To stock | 5,000 | By premises | 24,000 | ||
To bad debts | 4,000 | ||||
To revaluation transferred to capital a/c | 8,000 | ||||
Varsha | 6,250 | ||||
Shanti | 5,000 | ||||
Madhuri | 3,750 | 15,000 | |||
Total | 24,000 | Total | 24,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Varsha | Shanthi | Madhuri | Particulars | Varsha | Shanthi | Madhuri |
To profit and loss a/c | 5000 | 4000 | 3000 | By balance c/d | 80,000 | 60,000 | 20,000 |
To balance c/d | 1,01,250 | 77,000 | By general reserve | 20,000 | 16,000 | 12,000 | |
To executor's a/c | 32,750 | By revaluation profit a/c | 6,250 | 5000 | 3750 | ||
Total | 1,06,250 | 81,000 | 35,750 | Total | 1,06,250 | 81,000 | 35,750 |
Liabilities | Rs. | Rs. | Assets | Rs. | Rs. |
---|---|---|---|---|---|
Capital accounts: | Premises | 1,20,000 | |||
Varsha | 1,01,250 | Add: Revaluation | 24,000 | 1,44,000 | |
Shanti | 77,000 | 1,78,250 | Stock | 40,000 | |
Creditors | 32,000 | Add: Revaluation | 5000 | 45,000 | |
Madhuri Executor a/c | 32,750 | Debtors | 50,000 | ||
Less: Bad debts | 4,000 | 46,000 | |||
Cash | 18,000 | ||||
Total | 2,43,000 | Total | 2,43,000 |
22. Vijayan, Sudhan and Suman are partners who share profits and losses in their capital ratio. Their balance sheet as on 31.12.2018 is as follows:
Balance Sheet as on 31.12.2018
Liabilities | Rs. | Rs. | Assets | Rs. |
---|---|---|---|---|
Capital accounts: | Building | 80,000 | ||
Vijayan | 70,000 | Stock | 45,000 | |
Sudhan | 50,000 | Debtors | 25,000 | |
Suman | 30,000 | 1,50,000 | Cash at bank | 20,000 |
General reserve | 18,000 | Cash in hand | 15,000 | |
Creditors | 17,000 | |||
Total | 1,85,000 | Total | 1,85,000 |
Suman died on 31.3.2019. On the death of Suman, the following adjustments are made:
(i) Building is to be valued at Rs. 1,00,000
(ii) Stock to be depreciated by Rs. 5,000
(iii) Goodwill of the firm is valued at Rs. 36,000
(iv) Share of profit from the closing of the last financial year to the date of death on the basis of the average of the three completed years’ profit before death.
Profit for 2016, 2017 and 2018 were Rs. 40,000, Rs. 50,000 and Rs. 30,000 respectively.
Prepare the necessary ledger accounts and the balance sheet immediately after the death of Suman.
Profit sharing ratio = Capital ratio
=70,000:50,000:30,000
=7:5:3
Gaining ratio between Vijayan and Sudhan = 7:5
Calculation of goodwill:
Current Year Share of profit = Rs. 40,000 x 3/15 = Rs. 8000
Share of goodwill = 36,000 x 3/15 = Rs.7,200 to be borne by Vijayan and Sudhan in ratio of 7:5
Vijayan = 7200 x 7/12 = Rs. 4,200
Sudhan = 7200 x 5/12 = Rs. 3000
Revaluation a/c | ||||
---|---|---|---|---|
Particulars | Rs. | Rs. | Particulars | Rs. |
To stock a/c | 5000 | By buildings a/c | 20,000 | |
To profit on revaluation transferred to capital a/c | ||||
Vijayan | 7,000 | |||
Sudhan | 5,000 | |||
Suman | 3,000 | 15,000 | ||
Total | 20,000 | Total | 20,000 |
Capital a/c | |||||||
---|---|---|---|---|---|---|---|
Particulars | Vijayan | Sudhan | Suman | Particulars | Vijayan | Sudhan | Suman |
To Suman's share of profit | 4,200 | 3,000 | By balance b/d | 70,000 | 50,000 | 30,000 | |
To Suman's executors | 43,800 | By general reserve | 8,400 | 6,000 | 3,600 | ||
To balance c/d | 81,200 | 58,000 | By revaluation profit | 7000 | 5000 | 3000 | |
By Vijayan's capital a/c | 4,200 | ||||||
By Sudhan's capital a/c | 3,000 | ||||||
Total | 85,400 | 61,000 | 43,800 | Total | 85,400 | 61,000 | 43,800 |
Liabilities | Rs. | Rs. | Assets | Rs. | Rs. |
---|---|---|---|---|---|
Capital accounts: | Building | 80,000 | |||
Vijayan | 81,200 | Add: Revaluation | 20,000 | 1,00,000 | |
Sudhan | 58,000 | 1,39,200 | Stock | 45,000 | |
Creditors | 17,000 | Less: Revaluation | 5,000 | 40,000 | |
Suman's Executors a/c | 43,800 | Debtors | 25000 | ||
Bank | 20,000 | ||||
Cash | 15,000 | ||||
Total | 2,00,000 | Total | 2,00,000 |
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