AHSEC Accountancy Question Bank: Retirement of a Partner for Upcoming Exam

AHSEC CLASS 12
ACCOUNTANCY QUESTION BANK

UNIT – 5A Retirement of a Partner

Calculation of New ratio and Gaining Ratio and Treatment of Goodwill in case of Retirement of Partner

1. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires. Calculate new ratio and gaining ratio.

2. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and his share is acquired by P and R equally. Calculate new ratio and gaining ratio.

3. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and his share is acquired entirely by P. Calculate new ratio and gaining ratio.

4. A, B and C are partner sharing profits in the ratio of 2:2:1. C retires. A and B have decided to share future profits and losses in the ratio of 2: 1. Calculate the gaining ratio.              2015

5. Ranjana, Sadhana and Kamona are partners sharing profits in the ratio of 4 : 3: 2. Ranjana retires and Sadhana and Kamona agree to share future profits in the ratio of 5 : 3. Calculate the gaining ratio.        2018

6. A, B and C are partners sharing profits in the ratio 3 : 2 : 1. A retires. B and C have decided to take up A’s share equally. Calculate the new ratio.                2020

7. P, Q and R are partners sharing profits and losses in the ratio 4:3:3. Q retires and amount standing to his credit after all adjustment is Rs. 5,00,000 which is contributed by P and R Rs. 3,00,000 and Rs. 2,00,000 respectively.

8. X, Y and Z were partners sharing profits in proportion to 5:3:2. Goodwill does not appear in the books but it is agreed to be worth of Rs. 1, 00, 000. X retires from the firm and Y and Z decide to share future profits equally. You are required to make adjustment entry for goodwill without opening Goodwill Account at all. Show your workings clearly.

9. A, B and C are partners sharing profits in the ratio 3:4:2. B retires and the goodwill of the firm is valued at        Rs. 16,200. No Goodwill Account appears in the books of the firm. A and C decide to share profits in the ratio of 5:3. No goodwill is to be raised in the books of the firm. Give journal entries to record the above.

10. A, B and C are partners sharing profits and losses in the ratio of 4:3:2. C retires from the business. The value of the goodwill is Rs. 1, 20, 000. Goodwill appears in the books at Rs. 30,000 and it will remain at that figure. A and B decided to share the profits and losses in the ratio of 2:1. Pass necessary journal entry.

11. X, Y and Z are partners sharing profits and losses in the ratio of 3:2:1. X retires from the business. His share of goodwill is Rs. 20,000. Goodwill appears in the books at its full value and it has been decided not to show goodwill in the books. Y and Z decided to share profits and losses in the ratio 3:2. Pass necessary journal entry.

12. A, B and C are partners. They share profits and losses in the ratio of 4 : 3 : 1. On 1st January, 2011 B retires from the business. Goodwill is appearing in the books at Rs. 10,000. For the purpose of B’s retirement, goodwill is to be valued at two years purchase of average profits of the five year’s immediately preceding the retirement. The profit for the year: 2006, 2007, 2009 and 2010 were Rs. 8,000; Rs. 12,000; Rs. 16,000; Rs. 20,000 and Rs. 10,000 respectively. No goodwill is to be shown in the books of the firm.  Pass journal entries.

13. Bhim, Nakul and Sahadev are partners sharing profits in the ratio 2 : 3 : 5. Goodwill appears in the books at Rs. 50,000. Bhim retires and on the day of his retirement goodwill is valued at Rs. 45,000. Nakul and Sahadev decided to share future profits equally. Pass necessary journal entries.

Retirement of a Partner

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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Q.1. A, B and C were in partnership sharing profits and losses as 3:2:1 respectively. On 1st January, 2018 B retired from the firm. On that date, their Balance Sheet was as follows:

Liabilities

Rs.

Assets

Rs.

Trade Creditors

Bills Payable

Expenses Owing

Reserve Fund

Capital:

A: 10,000

B:   7,000

C:   5,500

1,500

2,250

2,250

6,750

 

 

 

22,500

Cash in hand

Cash at Bank

Debtors

Stock

Factory premises

Machinery

Furniture

750

3,750

7,500

6,000

11,250

4,000

2,000

 

35,250

 

35,250

The terms were:

a)      Goodwill of the firm was valued at Rs. 9,000.

b)      Expenses owing were to be brought down to Rs. 2,000

c)       Machinery and Furniture were to be valued at 10% less than their book values.

d)      Factory premises was to be revalued at Rs. 15,000

e)      Factory premises are sold and 10,000 is paid to the retiring partner and balance transferred to his loan account.

Show the Revaluation Account, Partner’s Capital Accounts and Prepare the Balance Sheet of the firm after the retirement of B. Also pass necessary journal entries.

Q.2. A, B and C are partners in a firm sharing profits and losses in the ratio of 4:3:1. Their Balance Sheet as at 31 December, 2018 stood as follows:

Liabilities

Rs.

Assets

Rs.

Capital:

A: 15,000

B: 11,250

C:   7,500

Sundry Creditors

 

 

 

33,750

5,150

Land & Buildings

Plant & Machinery

Sundry Debtors        3,800

Less: Reserve               100

Stock

Cash at Bank

18,700

4,100

 

3,700

6,000

6,400

 

38,900

 

38,900

B retires on the date subject to the following terms:

a)      The goodwill of the firm is to be valued at Rs. 18,000 and B’s share of the same be adjusted into the accounts of A and C who are going to share profits and losses in future in the ratio of 5 : 3.

b)      Plant and Machinery is to be depreciated by 10%.

c)       A 5% reserve is to be maintained for doubtful debts on the debtors.

d)      Stock is to be appreciated by 20% and Land and Buildings by 10%.

e)      An amount of Rs. 1,000 included in sundry creditors is not likely to be claimed.

f)       A provision of Rs. 600 be made in respect of outstanding legal charges.

g)      Prepare a Revaluation Account, Partner’s Capital Accounts and the Reconstituted Balance Sheet of the firm of A and C.

Q.3. The Balance Sheet of A, B, and C given below: [A.H.S.E.C – 1997]

Liabilities

Rs.

Assets

Rs.

Creditors

Capital: 

A: 30,000

B: 20,000

C: 15,000

20,000

 

 

 

65,000

Goodwill

Fixed Assets

Debtors

Cash

5,000

60,000

15,000

5,000

 

85,000

 

85,000

B retires on the following conditions:

a)      Goodwill is to be valued at Rs. 20,000.

b)      Computer valued at Rs. 10,000.

c)       There is an unpaid liability worth Rs. 10,000 which is not shown in the balance sheet.

d)      Fixed Assets are to be appreciated by Rs. 6,000 and creditors will not claim Rs. 300.

e)      A and C agree to share profits in the ratio of 3:2. The remaining partners will bring cash to pay off B in such a way that their capital becomes in proportion to their sharing ratio.

Give Journal Entries and Balance Sheet.                                               

Q.4. Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3: 2: 1. On 1.1.2018 Shyam retires from the firm. On that date, the balance sheet of the firm was as follows: [A.H.S.E.C – 2002]

Liabilities

Rs.

Assets

Rs.

Sundry Creditors

Reserve

Bills Payable

Capital A/c:

    Ram                     20,000

    Shyam                 15,000

    Mohan                12,000

5,000

6,000

2,600

 

 

 

47,000

Cash in hand

Debtors                     15,000

Less: Provision           1,500

Stock

Furniture

Premise

Investment

600

 

13,500

18,500

8,000

10,000

10,000

 

60,600

 

60,600

The terms of retirement were:

a)      Goodwill of the firm was valued at Rs. 12,000

b)      Premises to be appreciated by Rs. 5,000

c)       Furniture to be depreciated by Rs. 1,000

d)      Investment taken over by Shyam for Rs. 12,000.

e)      Workmen compensation liability Rs. 1,000

f)       Provision for bad debts to be increased by Rs. 1, 400

g)      The amount due to the retiring is paid in full which is contributed by Ram and Mohan in their respective capital ratio.

Pass Journal Entries to record the necessary adjustments for the retirement of Shyam and also prepare the balance Sheet of the firm after Shyam’s retirement.                       

Q.5. A, B and C were in partnership sharing profits and losses in the ratio of 3: 2: 1 respectively. On 1st January 2018, B retired from the firm. On that date their Balance Sheet was as follows:

Balance Sheet as on 1. 1. 2018

Liabilities

Rs.

Assets

Rs.

Trade Creditors

Profit and loss account

Capital: 

A            30,000

B            20,000

C            20,000

20,000

7,000

 

 

 

70,000

Cash

Debtors

Stock

Land & Building

Accumulated losses

9,400

16,000

23,000

46,000

2,600

 

97,000

 

97,000

The terms were:

a)      Land & Building are to the appreciated by Rs. 14,000

b)      Provision for doubtful debts is to be made at 5% on the debtors.

c)       The goodwill of the firm is to be valued at Rs. 36,000 and B’s share of the same is to be adjusted to the Accounts of A and C.

d)      Rs. 6,000 is to be paid to B immediately and the balance of his capital account is to be transferred to his Loan Account.

Pass journal entries to record the necessary adjustments for retirement of B and prepare the Balance Sheet of the firm after the retirement of B.

Q.6. A, B and C were partnership sharing Profits and Losses in the proportion of 3: 2: 1. Respectively. On 1st January, 2018. B retired from the firm. On that date, their Balance Sheet                was as follows: [H.S.’ 99]

Liabilities

Rs.

Assets

Rs.

Trade Creditors

Workmen Compensation fund

Capitals :

    A = 30,000

    B = 20,000

    C = 20,000

20,000

7,000

 

 

 

70,000

Cash

Debtors

Stock

Land & Building

Profit & Loss A/c

9,400

16,000

23,200

46,000

2,400

 

97,000

 

97,000

The terms were:

a)      Land and Buildings are to be appreciated by Rs. 14,000.

b)      Provision for doubtful debts to be made at 5% on Debtors.

c)       The goodwill of the firm to be valued at Rs. 36,000 and B’s share of the same be adjusted into the accounts of A and C.

d)      Workmen compensation liability Rs. 1,000.

e)      Rs. 6,000 to be paid to B immediately and the balance in his capital account to be transferred to his loan account.

Pass Journal entries to record the necessary adjustments for retirement of B and prepare the Balance Sheet of the form after the retirement of B.

Q.7. Ram, Jadu and Madhu were in partnership sharing profits and losses in the ratio 3:2:1. On 1.1.2006, Jadu retired from the firm. On that date the Balance Sheet of the firm was as follows:        [H.S’ 08]

Liabilities

Amount

Assets

Amount

Sundry Creditors

Reserve

Bills Payable

Capitals :

Ram =  20,000

Jadu =  15,000

Madhu = 12,000

5,000

6,000

2,600

 

 

 

47,000

Cash in hand

Debtors              15,000

Less : Provision   1.500

Stock

Furniture

Building

600

 

13,500

18,500

8,000

20,000

 

60,000

 

60,000

The terms of retirement were:

a)      Goodwill is to be valued at Rs. 12,000.

b)      Building is to be appreciated by Rs. 5,000.

c)       Provision for bad debts to be increased by Rs. 400.

d)      Furniture to be depreciated by Rs. 1,000

e)      Capital of the new firm is fixed at Rs. 60,000 in their respective capital ratio.

f)       Jadu’s capital account is to be transferred to his Loan account.

Pass the necessary Journal entries in the books of the firm; also prepare the Balance Sheet of the firm after Jadu’s retirement.

Q.8: X, Y and Z were partners in firm Sharing profit in 5:3:2 ratios. On 31st march, 2011 Z retired from the firm. On the date of Z’s retirement, the Balance Sheet of the Firm Was as Follows:     2012

Balance Sheet of X, Y, Z as at 31st March 2011

Liabilities

Amount

Assets

Amount

Creditors

Bills payable

Outstanding Rent

Provision for legal claims

Capitals:

X -1,27,000

Y -90,000

Z -71,000

 

27,000

13,000

22,500

57,500

 

 

 

2,88,000

Bank

Debtor          20,000

Less Reserve      500

Stock

Furniture

Land and Building

80,000

 

19,500

21,000

87,500

2,00,000

4,08,000

4,08,000

 

 

On Z’s retirement it was agreed that:

(a) Land and building will be appreciated by 5% and furniture will be depreciated by 20%

(b) Provision for Doubtful debts will be made at 5% on Debtor and provision for legal claim will be made at Rs. 60,000.

(c) Goodwill of the firm was valued at Rs.60, 000

(d) Rs. 70,000 from Z’s Capital Account will be transferred to his loan account and the balance will be paid to him by cheque.

Prepare Revaluation Account, Partners Capital Accounts and Balance sheet of X and Y after Z’s Retirement.

Q.9. Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3:2:1. On 01.01.2010 Shyam retires from the firm. On that date the Balance Sheet of the firm was as follows:                                 2013

Liabilities

Amount

Assets

 

Amount

Sundry Creditors

Reserve

Bills Payable

Capitals:

Ram –     20000

Shyam – 15000

Mohan – 12000

30000

6000

2600

 

 

 

47000

Cash in Hand

Investments

Debtors

Less: Provision

Stock

Furniture

Premises

 

 

15000

1500

600

25000

 

13500

18500

8000

20000

 

85600

 

 

85600

The terms of retirement were:

(i) Goodwill is to be valued at Rs.12000.

(ii) Premises to be appreciated by Rs.5000.

(iii) Furniture to be depreciated by Rs.1000.

(iv) Provision for bad debts to be increased by Rs.400.

(v) Investments were sold at book value and the amount due to Shyam was paid off.

Pass Journal Entries to record the necessary adjustments for retirement of Shyam.

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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Q.10. The Balance Sheet of A, B and C who were sharing profits in proportion to their Capitals stood as follows on 31st March, 2014:              2015

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Sundry Creditors

Capital Accounts :

    A = 18,000/-

    B = 13,500/-

    C =   9,000/-

14,400/-

 

 

 

40,500/-

Cash at Bank

Sundry Debtors

Stock

Investments

Land of Building

5,500/-

4,900/-

8,000/-

11,500/-

25,000/-

 

54,900/-

 

54,900/-

B retired on the above date on the following terms and conditions:

a)      That stock is depreciated by 6%.

b)      That a provision for doubtful debts be created @ 5% on the Debtors.

c)       That Land and Buildings be appreciated by 20%.

d)      That the Goodwill of the entire firm be fixed at Rs. 10,800/- and B’s share goodwill be adjusted into the accounts of A and C who are going to share future profits in the ratio of 5: 3. (No Goodwill account is to be raised.)

Pass the necessary journal entries in the books of the firm.                                                                        

Q.11. Partha, Pranoy and Prasanna are partners sharing profits and losses in the ratio of 3: 2: 1. On 31st March, 2015, their Balance Sheet stood as follows:              2016

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Capitals :

    Partha :         80,000/-

    Pranoy :        60,000/-

    Prasanna :    50,000/-

General Reserve

Sundry Creditors

 

 

 

1,90,000

24,000

48,000

Buildings

Plant & Machinery

Inventory

Debtors

Bank

90,000

86,000

50,000

31,000

5,000

 

2,62,000

 

2,62,000

Pranoy retires on that date under the following terms:

a)      The Goodwill of the firm is valued at Rs. 36,000/-

b)      Plant & Machinery is to be depreciated by 10%.

c)       Inventory and Buildings are to be appreciated by 20% and 10% respectively.

Give necessary Journal entries in the books of the firm.

Q.12. The Balance Sheet of Ram, Shyam and Hari who were sharing profits in proportion to their capital stood as follows on 31st March, 2016:                    2017

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Sundry Creditors

Capital Account:

     Ram:              20,000/-

     Shyam:          20,000/-

     Hari:               10,000/-

10,000

 

 

 

50,000

Cash at Bank

Sundry Debtors

Stock

Investments

Buildings

5,000

6,000

9,000

10,000

30,000

 

60,000

 

60,000

Shyam retired on the above date on the following terms and conditions:

1)      That stock be depreciated by Rs. 1,000/-

2)      That Building be appreciated by 20%.

Pass the necessary journal entries and prepare the opening Balance Sheet of the new firm. 

Q.13. Shyam, Gagan and Ram are partners sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2017, their Balance Sheet was as follows:                  2018

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Sundry Creditors

Reserve

Capital:

Shyam:                 20,000/-

Gagan:                  10,000/-

Ram:                    10,000/-

 

50,000

10,000

 

 

 

40,000

Cash

Debtors

Stock

Machinery

Buildings

5,000

20,000

25,000

20,000

30,000

 

1,00,000

 

1,00,000

Gagan retired on that date and Shyam and Ram agreed to share future profits in the ratio 5 : 3. Stock, Machinery and Buildings were revalued at Rs. 20,000/-, Rs. 15,000/- and Rs. 45,000/- respectively. Prepare Revaluation Account and Partner’s Capital Account.                                                           

Q.14. A, B and C were partners sharing profits in the ratio of 3 : 2 : 1 respectively. Balance sheet of the firm as at 31st March, 2017 stood as follows:                     2019

Balance Sheet

Liabilities

(Rs.)

Assets

(Rs.)

Sundry Creditors

Capital:

A                         20,000/-

B                           7,500/-

C                          12,500/-

16,000

 

 

 

40,000

Building

Debtors

Stock

Patent

Bank

23,000

7,000

12,000

8,000

6,000

 

56,000

 

56,000

“B” retired on the above date on the following terms:

1)            Building to be appreciated by Rs. 8,800.

2)            Provision for doubtful debts to be made @ 5% on debtors.

3)            Goodwill of the firm be valued at Rs. 9,000.

Pass necessary Journal Entries.

Q.15. Ram, Shyam and Mohan were in partnership sharing profits and losses in the ratio of 3 : 2 : 1. On 31/12/2018 Shyam retired from the firm, Balance Sheet of the firm on that date was as under:                         2020

Balance Sheet

Liabilities

Rs.

Assets

Rs.

Sundry Creditors

Reserve

Bills Payable

Capital:

Ram                       20,000

Shyam                   15,000

Mohan                  12,000

5,000

6,000

2,600

 

 

 

47,000

Cash

Debtors                                 15,000

Less: Provision                        1,500

Stock

Furniture

Machinery

600

 

13,500

18,500

8,000

20,000

 

60,600

 

60,600

The terms of retirement were:

1)         Goodwill of the firm to be valued at Rs. 12,000.

2)         Machinery to be appreciated by Rs. 5,000.

3)         Furniture to be depreciated by Rs. 1,000.

4)         Provision for bad debts to be increased by Rs. 400.

Prepare Revaluation A/c and Partners’ Capital A/c.

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