Retirement of a Partner Problems and Solutions
[AHSEC Solved Practical Problems 2012 to 2025]
2024
14. Susanta, Ananta and Diganta were
in partnership sharing profits and losses in the ratio of 3:2:1. On 1.1.2023,
Susanta retires from the firm. On that date Balance Sheet of the firm was as
follows: 6
Balance Sheet
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Creditors
Reserve
Fund Capital:
Susanta
= 80,000 Ananta
= 60,000 Diganta
= 40,000 |
50,000 60,000 1,80,000 |
Cast
at Bank Debtors
Stock
Furniture
Land
and Building |
6,000 1,50,000 30,000 24,000 80,000 |
|
|
2,90,000 |
|
2,90,000 |
The
terms of the retirement were:
(i)
Goodwill of the firm were valued at Rs. 1,20,000.
(ii)
Land and Building to be appreciated by Rs. 20,000.
(iii)
Provision for Bad Debts to be made @ 2% on debtors.
(iv)
Furniture to be depreciated by Rs. 4,000.
(v)
Susanta capital is to be transferred to his Loan Account.
Give Journal entries relating to the above transactions.
Ans:
Journal Entries
In the books of firm
|
Particulars |
L/f |
Amount
Dr. |
Amount
Cr. |
|
Ananta’s
Capital A/c Dr. Diganta’s
Capital A/c Dr. To Susanta’s Capital A/c (Being
the Susanta’s share of goodwill adjusted amongst the partners) |
|
40,000 20,000 |
60,000 |
|
Reserve
Fund A/c
Dr. To Susanta’s Capital A/c To Ananta’s Capital A/c To Diganta’s Capital A/c (Being
the reserves distributed amongst the partners) |
|
60,000 |
30,000 20,000 10,000 |
|
Land
and Building A/c Dr. To Revaluation A/c (Being
the profit on revaluation of Land and building transferred to revaluation
account) |
|
20,000 |
20,000 |
|
Revaluation
A/c
Dr. To Furniture A/c To Provision for doubtful debts A/c (Being
the loss on revaluation of furniture and provision for doubtful debts
transferred to revaluation account) |
|
7,000 |
4,000 3,000 |
|
Revaluation
A/c
Dr. To Susanta’s Capital A/c To Ananta’s Capital A/c To Diganta’s Capital A/c (Being
the profit on revaluation distributed amongst the old partners in old ratio) |
|
13,000 |
6,500 4,333 2,167 |
|
Susanta’s
Capital A/c
Dr. To Susanta’s Loan A/c (Being the amount due to the retiring
partner transferred to his loan account) |
|
1,76,500 |
1,76,500 |
Working Note: Old
Ratio = 3:2:1; New Ratio = 2:1, Gaining Ratio = 2:1
Value
of Goodwill = 1,20,000
Susanta’s
share of goodwill = 3/6 x 1,20,000 = 60,000
Ananta’s
Contribution = 60,000 x 2/3 = 40,000
Diganta’s
Contribution = 60,000 x 1/3 = 20,000
2022
16. A, B and C were in partnership
sharing profits and losses in the ratio of 3: 2: 1. On 1st January,
2020, B retired from the firm. On that date their Balance Sheet was as follows:
2+3=5
Balance Sheet
|
Liabilities |
(Rs.) |
Assets |
(Rs.) |
|
Creditors
Capitals:
A 30,000 B 20,000 C 20,000 |
27,180 70,000 |
Cash
Debtors
Stock
Buildings
Profit
and Loss A/c |
9,400 16,000 23,380 46,000 2,400 |
|
|
97,180 |
|
97,180 |
The terms of
the retirement were:
a) Building is
to be 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.
d) No cash is
to be paid to B immediately and balance of his capital account is to be
transferred to his loan account.
Prepare
Revaluation Account and Partners’ Capital Account.
Solution:
Revaluation A/c
|
Particulars |
Amount |
Particulars |
Amount |
|
To
Provision for D/d To
Profit on revaluation A = 13,200 x
3/6 B = 13,200 x
2/6 C = 13,200 x
1/6 |
800 6,600 4,400 2,200 |
By
Building |
14,000 |
|
|
5,400 |
|
5,400 |
Partner’s Capital A/c
|
|
A |
B |
C |
|
A |
B |
C |
|
To B’s
Capital A/c To
Profit and Loss A/c To B’s
Loan A/c To
Balance c/d |
9,000 1,200 26,400 |
800 35,600 |
3,000 400 18,800 |
By
Balance b/d By
Revaluation A/c By A’s
Capital A/c By C’s
Capital A/c |
30,000 6,600 |
20,000 4,400 9,000 3,000 |
20,000 2,200 |
|
|
36,600 |
36,400 |
22,200 |
|
36,600 |
36,400 |
22,200 |
WORKING NOTES
Value of
goodwill = 36,000
B’s share = 36,000
x 2/6 = 12,000
A’s
contribution = 12,000 x ¾ = 9,000
C’s
contribution = 12,000 x ¼ = 3,000
2020
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: 2+3=5
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:
a) Goodwill of
the firm to be valued at Rs. 12,000.
b) Machinery to
be appreciated by Rs. 5,000.
c) Furniture to
be depreciated by Rs. 1,000.
d) Provision
for bad debts to be increased by Rs. 400.
Prepare
Revaluation A/c and Partners’ Capital A/c.
Solution:
Revaluation A/c
|
Particulars |
Amount |
Particulars |
Amount |
|
To
Furniture To Profit on
revaluation - Ram = 4,400
x 3/6 - Shyam =
4,400 x 2/6 - Mohan =
4,400 x 1/6 |
1,000 2,200 1,467 733 |
By
Machinery By
Provision for b/d |
5,000 400 |
|
|
5,400 |
|
5,400 |
Partner’s Capital A/c
|
|
Ram |
Shyam |
Mohan |
|
Ram |
Shyam |
Mohan |
|
To
Shyam’s Capital A/c To
Shyam’s Loan A/c To
Balance c/d |
3,000 22,200 |
22,467 |
1,000 12,733 |
By
Balance b/d By
Reserve By
Revaluation A/c By Ram’s
Capital A/c By
Mohan’s Capital A/c |
20,000 3,000 2,200 |
15,000 2,000 1,467 3,000 1,000 |
12,000 1,000 733 |
|
|
25,200 |
22,467 |
13,733 |
|
25,200 |
22,467 |
13,733 |
WORKING NOTES
Value of
goodwill = 12,000
Shyam’s share =
12,000 x 2/6 = 4,000
Ram’s
contribution = 4,000 x ¾ = 3,000
Mohan’s contribution = 4,000 x ¼ = 1,000
2019
15. 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: 5
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:
a) Building to
be appreciated by Rs. 8,800.
b) Provision
for doubtful debts to be made @ 5% on debtors.
c) Goodwill of
the firm be valued at Rs. 9,000.
Pass necessary
Journal Entries.
Ans:
Journal Entries
In the Book of the firm
|
Particulars |
L/F |
Amount (Dr.) |
Amount (Cr.) |
|
Building
A/c
Dr. To Revaluation A/c (Being
the profit on revaluation of Building transferred to revaluation A/c) |
|
8,800 350 8,450 2,250 750 13,317 |
8,800 350 4,225 2,817 1,408 3,000 13,317 |
|
Revaluation
A/c
Dr. To Provision for d/d A/c (Being
the provision for b/d transferred to revaluation A/c) |
|||
|
Revaluation
A/c
Dr. To A’s capital A/c To B’s capital A/c To C’s capital A/c (Being
the profit on revaluation distributed amongst partners) |
|||
|
A’s
capital A/c Dr. C’s
capital A/c Dr. To B’s capital A/c (Being
the goodwill adjusted amongst the partners) |
|||
|
B’s
capital A/c Dr. To B’s loan A/c (Being
the amount due to transferred to his loan A/c) |
2018
15. 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:
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. 2 ½ + 2 ½=5
Ans:
Revaluation A/c
|
Particulars |
Amount |
Particulars |
Amount |
|
To Stock To
Machinery To
Profit on revaluation. - Shyam
= 5,000*2/5 - Gagan
= 5,000*2/5 - Ram =
5,000*1/5 |
5,000 5,000 2,000 2,000 1,000 |
By
Building |
15,000 |
|
|
15,000 |
|
15,000 |
Partner’s Capital A/c
|
Particulars |
Shyam |
Gagan |
Ram |
Particulars |
Shyam |
Gagan |
Ram |
|
To
Gagan’s loan A/c To
Balance c/d |
26,000 |
16,000 |
13,000 |
By
Balance b/d By
Reserve By
Revaluation |
20,000 4,000 2,000 |
10,000 4,000 2,000 |
10,000 2,000 1,000 |
|
|
26,000 |
|
13,000 |
|
26,000 |
16,000 |
13,000 |
2017
15. The
Balance Sheet of Ram, Shyam and Hari who were sharing profits in proportion to
their capital stood as follows on 31st March, 2016:
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:
a) That stock
be depreciated by Rs. 1,000/-
b) That
Building be appreciated by 20%.
Pass the
necessary journal entries and prepare the opening Balance Sheet of the new
firm. 5
Solution:
Journal Entries
In the books of the Firm
|
Particulars |
L/f |
Amount
Dr. |
Amount
Cr. |
|
Revaluation
A/c Dr. To Stock A/c (Being
stock revalued) |
|
1,000 |
1,000 |
|
Building
A/c Dr. To Revaluation A/c (Being
Building revalued) |
|
6,000 |
6,000 |
|
Revaluation
A/c Dr. To Ram’s Capital A/c To Shyam’s Capital A/c To Hori’s Capital A/c (
Being revaluation profit transferred) |
|
5,000 |
2,000 2,000 1,000 |
|
Shyam’s
Capital A/c Dr. To Shyam’s Loan A/c (
Being shyam’s capital account balance transferred to shyam’s loan a/c) |
|
22,000 |
22,000 |
Balance Sheet
As on 31-3-2016
|
Liabilities |
Amount |
Assets |
Amount
|
|
Capital:
Ram’s
Capital: 20,000 Add:
Revaluation 2,000 Hori’s
Capital 10,000 Add:
Revaluation 1,000 Shyam’s
Loan A/c Sundry
Creditors |
22,000 11,000 22,000 10,000 |
Cash
at Bank Sundry
Debtors Stock
9,000 Less:
Depreciation (1,000) Investments Building
|
5,000 6,000 8,000 10,000 36,000 |
|
|
65,000 |
|
65,000 |
2016
15. 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:
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: 5
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.
Solution:
Journal Entries
In the books of firm
|
Particulars |
L/f |
Amount
Dr. |
Amount
Cr. |
|
General
Reserve A/c Dr. To Partha’s Capital A/c To Pranoy’s Capital A/c To Prasanna’s Capital A/c (Being
General reserve transferred to partner’s capital a/c) |
|
24,000 |
12,000 8,000 4,000 |
|
Revaluation
A/c Dr. To Plant & Machinery A/c (Being
P/M revalued) |
|
8,600 |
8,600 |
|
Building
A/c Dr. Inventory
A/c Dr. To Revaluation A/c (Being
Inventory & Building revalued) |
|
9,000 10,000 |
19,000 |
|
Revaluation
A/c Dr. To Partha’s Capital A/c To Pranoy’s Capital A/c To Prasanna’s Capital A/c (Being
Revaluation Profit transferred to Capital A/c) |
|
10,400 |
5,200 3,467 1,733 |
|
Partha’s
Capital A/c Dr. Prasanna’s
Capital A/c Dr. To Pranoy’s Capital A/c (Being
G/W adjusted in Gaining Ratio) |
|
9,000 3,000 |
12,000 |
|
Pranoy’s
Capital A/c Dr. To Pranoy’s Loan A/c (Being
Pranoy’s capital transferred to his loan A/c) |
|
83,467 |
83,647 |
Working Note: Gaining Ratio = 3/4 – 3/6: 1/4 – 1/6 =
(9/12 – 6/12): (3/12 – 2/12) =3/12: 1/12
Pranoy
Share of Goodwill = 36,000*2/6 = 12,000
Partha’s Contribution
= 3/12 x 36,000 = 9,000
Prasanna’s
Contribution = 1/12 x 36,000 = 3,000
2015
16. The Balance Sheet of A, B and C who were sharing profits in
proportion to their Capitals stood as follows on 31st March, 2014:
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: 5
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.
Solution:
Journal Entries
In the books of firm
|
Particulars |
L/f |
Amount
Dr. |
Amount
Cr. |
|
Revaluation
A/c Dr. To Stock A/c To Provision on doubtful debts A/c (Being
the loss on revaluation of asset transferred to rev. a/c) |
|
725 |
480 245 |
|
Land
& Building A/c
Dr. To Revaluation A/c (Being
the profit on revaluation of asset transferred to rev. a/c) |
|
5,000 |
5,000 |
|
Revaluation
A/c Dr. To A’s Capital A/c To B’s Capital A/c To C’s Capital A/c (Being
the profit on revaluation distributed amongst the partners) |
|
4,275 |
1,900 1,425 950 |
|
A’s
Capital A/c
Dr. C’s
Capital A/c
Dr. To B’s Capital A/c (Being
the goodwill adjusted amongst the partners) |
|
1,950 1,650 |
3,600 |
|
B’s
Capital A/c Dr. To B’s Loan A/c (Being
the amount due to B transferred to his loan account) |
|
18,525 |
18,525 |
Working Note: A:
B: C (Capital Ratio) = 18,000: 13,500: 9,000 = 4: 3: 2
Gaining
Ratio (A: C) = (5/8 – 4/9): (3/8 – 2/9) = (45/72 – 32/72): (27/72 – 16/72) =
13/72: 11/72 = 13: 11
Now,
B’s Share of goodwill = 10,800 x 3/9 = 3,600
A’s
Contribution = 3,600 x 13/24 = 1,950
C’s
Contribution = 3,600 x 11/24 = 1,650
2013
Q. 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: 8
|
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.
Solution:
Journal Entries
In the books of firm
|
Particulars |
L/f |
Amount
Dr. |
Amount
Cr. |
|
Premises
A/c Dr.
To Revaluation A/c (Being
the profit on revaluation of premises transferred to revaluation account) |
|
5,000 |
5,000 |
|
Revaluation
A/c Dr. To Furniture A/c To Provision for doubtful debts A/c (Being
the profit on revaluation of premises transferred to revaluation account) |
|
1,400 |
1,000 400 |
|
Revaluation
A/c Dr. To Shyam’s Capital A/c To Ram’s Capital A/c To Mohan’s Capital A/c (Being
the profit on revaluation distributed amongst the old partners) |
|
3,600 |
1,200 1,800 600 |
|
Reserve
A/c
Dr. To Ram’s Capital A/c To Shyam’s Capital A/c To Mohan’s Capital A/c (Being
the reserves distributed amongst the partners) |
|
6,000 |
3,000 2,000 1,000 |
|
Ram’s
Capital A/c Dr. Mohan’s
Capital A/c Dr. To Shyam’s Capital A/c (Being
the shyam’s share of goodwill adjusted amongst the partners) |
|
3,000 1,000 |
4,000 |
|
Bank
A/c
Dr. To Investments A/c (Being
the investment sold at book value) |
|
25,000 |
25,000 |
|
Shyam’s
Capital A/c Dr. To Bank A/c (Being the final payment made to the
retiring partner) |
|
22,200 |
22,200 |
Working Note: Gaining Ratio = New Ratio – Old Ratio
= 3/4 – 3/6: 1/4 – 1/6 = 9 – 6/12: 3 – 2/12 = 3/12: 1/12 = 3:1
Shyam’s
share of goodwill = 2/6 x 12,000 = 4,000
Ram’s
Contribution = 4,000 x 3/4 = 3,000
Mohan’s
Contribution = 4,000 x 1/4 = 1,000
2012
Q.22: 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: (8)
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.
Solution:
Revaluation A/c
|
Particulars |
Amount |
Particulars |
Amount
|
|
To
Furniture To
Provision for legal claims To
Provision for doubtful debts |
17,500 2,500 500 |
By
Land & Building By
Loss on revaluation X:
10,500 x 5/10 = 5,250 Y:
10,500 x 3/10 = 3,150 Z:
10,500 x 2/10 = 2,100 |
10,000 10,500 |
|
|
20,500 |
|
20,500 |
Partner’s Capital A/c
|
Particulars |
X |
Y |
Z |
Particulars
|
X |
Y |
Z |
|
To
Z’s Capital To
Revaluation A/c To
Z’s Loan A/c To
Bank A/c To
Balance c/d |
7,500 5,250 1,14,250 |
4,500 3,150 82,350 |
- 2,100 70,000 10,900 |
By
Balance b/d By
X’s Capital A/c By
Y’s Capital A/c |
1,27,000 |
90,000 |
71,000 7,500 4,500 |
|
|
1,27,000 |
90,000 |
83,000 |
|
1,27,000 |
90,000 |
83,000 |
Balance Sheet
As on 31st March, 2011
|
Liabilities |
Amount |
Assets |
Amount
|
|
Capital:
X: 1,14,250 Y: 82,350 Z’s
Loan A/c Sundry
Creditors Bills
Payable Outstanding
Rent Provision
for legal claims |
1,96,600 70,000 27,000 13,000 22,500 60,000 |
Land
& Building Furniture 87,500 Less:
Depreciation (17,500) Stock
Debtors 20,000 Less:
Provision (1,000) Bank
(80,000 – 10,900) |
2,10,000 70,000 21,000 19,000 69,100 |
|
|
3,89,100 |
|
3,89,100 |
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