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

## AHSEC CLASS 12ACCOUNTANCY 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

********************************************

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

********************************************

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.

********************************************

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

********************************************

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.