In this article, I have provided Q51 to 60 Retirement of a Partner TS Grewal Solutions 2025-26. You can find the solutions of specifically Q51 to Q60 here. If you have any doubts regarding any of these questions, you can ask in the comments. I will try to resolve your doubts as soon as possible.
Topics Discussed
Question 51: (X, Y, and Z)
Balance Sheet of X, Y and Z who shared profits in the ratio of 5 : 3 : 2, as on 31st March, 2025 was as follows:
| Balance Sheet as at 31st March, 2025 | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Sundry Creditors | 39,750 | Bank (Minimum Balance) | 15,000 | |
| Employees’ Provident Fund | 5,250 | Debtors | 97,500 | |
| Workmen Compensation Reserve | 22,500 | Stock | 82,500 | |
| Capital A/cs: | Fixed Assets | 1,87,500 | ||
| X | 1,65,000 | |||
| Y | 84,000 | |||
| Z | 66,000 | 3,15,000 | ||
| 3,82,500 | 3,82,500 | |||
Y retired on 1st April, 2025 and it was agreed that:
(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y’s share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20%.
(iii) Stock be reduced to ₹ 75,000.
(iv) Y be paid amount brought in by X and Z so as to make their capitals proportionate to their new profit-sharing ratio.
Prepare Revaluation Account, Capital Accounts of all partners and the Balance Sheet of the New Firm.
Answer:
| Revaluation Account | |||||
| Dr. | Cr. | ||||
| Particulars | (₹) | Particulars | (₹) | ||
| Stock | 7,500 | Fixed Assets | 37,500 | ||
| Revaluation Profit | |||||
| X’s Capital A/c | 15,000 | ||||
| Y’s Capital A/c | 9,000 | ||||
| Z’s Capital A/c | 6,000 | 30,000 | |||
| 37,500 | 37,500 | ||||
| Partners’ Capital Accounts | ||||||||
| Dr. | Cr. | |||||||
| Particulars | X | Y | Z | Particulars | X | Y | Z | |
| Y’s Capital A/c | 11,250 | – | 22,500 | Balance b/d | 1,65,000 | 84,000 | 66,000 | |
| Bank | – | 1,33,500 | – | General Reserve | 11,250 | 6,750 | 4500 | |
| Balance c/d | 2,20,500 | – | 1,47,000 | Revaluation (Profit) | 15,000 | 9,000 | 6,000 | |
| X’s Capital A/c | – | 11,250 | – | |||||
| Z’s Capital A/c | – | 22,500 | – | |||||
| Bank A/c | 40,500 | – | 93,000 | |||||
| 2,31,750 | 1,33,500 | 1,69,500 | 2,31,750 | 1,33,500 | 1,69,500 | |||
| Balance Sheet as on March 31, 2025 | ||||
| Liabilities | (₹) | Assets | (₹) | |
| Sundry Creditors | 39,750 | Bank | 15,000 | |
| Employees Provident Fund | 5,250 | Debtors | 97,500 | |
| Capitals: | Stock | 75,000 | ||
| X | 2,20,500 | Fixed Assets | 2,25,000 | |
| Z | 1,47,000 | 72,000 | ||
| 4,12,500 | 4,12,500 | |||
Working Notes:
New Capital = 1,80,000 + 54,000 + 1,33,500 = ₹ 3,67,500
X’s New Capital=3,67,500×3/5=2,20,500
Z’s New Capital=3,67,500×2/5=1,47,500
X brings in ₹ 40,500 (2,20,500 – 1,80,000)
Z brings in ₹₹ 93,000 (1,47,500 – 54,000)
Question 52: (Sushil, Satish, and Samir)
Sushil, Satish and Samir are partners sharing profits in the ratio of 5 : 3 : 2. Satish retires on 1st April, 2025 from the firm, on which date capitals of Sushil, Satishand Samir after all adjustments are ₹ 1,03,680, ₹ 87,840 and ₹ 26,880 respectively. The Cash and Bank Balance on that date was ₹ 9,600.Satish is to be paid through amount brought in by Sushiland Samir in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be Sushil 3/5 and Samir2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of ₹ 7,200 was to be maintained and pass the necessary Journal entries.
Answer:
Total capital of firm before retirement = 1,03,680+87,840+26,880 = ₹ 2,18,400
Availability of cash = 9,600-7,200 (Minimum Balance) = ₹ 2,400
Combined new capital of Sushiland Samir =₹ 2,16,000
Sushil’s new capital = 2,16,000×3/5=₹ 1,29,600
Existing capital of Sushil= ₹ 1,03,680
So, Sushil has to bring = 1,29,600−1,03,680= ₹ 25,920
Samir’s new capital = 2,16,000×2/5=₹ 86,400
Existing capital of Samir = ₹ 26,880
So, Samir has to bring = 86,400−26,880=₹ 59,520
Question 53: (Meghna, Mehak, and Mandeep)
Meghna, Mehak and Mandeep were partners in a firm whose Balance Sheet as on 31st March, 2023 was as under:
| BALANCE SHEET | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Creditors | 28,000 | Cash | 27,000 | |
| General Reserve | 7,500 | Debtors | 20,000 | |
| Capitals: | Stock | 28,000 | ||
| Meghna | 20,000 | Furniture | 5,000 | |
| Mehak | 14,500 | |||
| Mandeep | 10,000 | 44,500 | ||
| 80,000 | 80,000 | |||
Mehak retired on this date under following terms:
(i) To reduce stock and furniture by 5% and 10% respectively.
(ii) To provide for doubtful debts at 10% on debtors.
(ii) Goodwill was valued at ₹12,000.
(iv) Creditors of ₹8,000 were settled at ₹7,100.
(V) Mehak should be paid off and the entire sum payable to Mehak shall be brought in by Meghna and Mandeep in such a way that their capitals should be in their new profit sharing ratio and a balance of ₹25,000 is maintained in the Cash Account.
Prepare Revaluation Account and Partners’ Capital Accounts of the new firm.
(CBSE Sample Question Paper 2025)
Answer:
| Revaluation Account | ||||||
| Particulars | ₹ | Particulars | ₹ | |||
| To Stock A/c | 1,400 | By Creditors | 900 | |||
| To Funiture A/c | 500 | Loss transferred to | ||||
| To Prov. For doubtful debts | 2,000 | Meghna’s Capital A/c | 1,000 | |||
| Mehak’s Capital A/c | 1,000 | |||||
| Mandeep’s Capital A/c | 1,000 | 3,000 | ||||
| 3,900 | 3,900 | |||||
| Partners’ Capital Accounts | |||||||
| Particulars | Meghna (₹) | Mehak (₹) | Mandeep (₹) | Particulars | Meghna (₹) | Mehak (₹) | Mandeep (₹) |
| To Revaluation A/c (Loss) | 1,000 | 1,000 | 1,000 | By Balance b/d | 20,000 | 14,500 | 10,000 |
| To Mehak’s Capital A/c (Goodwill) | 2,000 | – | 2,000 | By General Reserve | 2,500 | 2,500 | 2,500 |
| To Cash A/c (Bal. fig. for Mehak) | – | 20,000 | – | By Meghna (Goodwill to Mehak) | – | 2,000 | – |
| To Balance c/d | 27,050 | – | 27,050 | By Mandeep (Goodwill to Mehak) | – | 2,000 | – |
| By Cash A/c (Balancing figure) | 7,550 | – | 17,550 | ||||
| 33,350 | 26,250 | 33,350 | 33,350 | 26,250 | 33,350 | ||
Working notes:
WN 1: Calculation of Mehak’s share of Goodwill
Sacrificing ratio of Mahak 1/3
Mahak’s Share of Goodwill = 12,000×1/3 = 4,000
Mahak’s Share of Goodwill will be shared by Meghna and Mandeep in 1:1
Meghna and Mandeep will compensate = 4,000×1/2=2,000
Following Entry be passed:
| Date | Particulars | L.F. | (Dr.) ₹ | (Cr.) ₹ | |
| Meghna’s Capital A/c | Dr. | 2,000 | |||
| Mandeep’s Capital A/c | Dr. | 2,000 | |||
| To Mehak’s Capital A/c | 4,000 | ||||
| (Being sacrificing partner compensated) |
WN 2: Calculation of total capital of the firm after Mehak’s Retirement
| Balance of capital after all adjustment | |
| Meghna’s capital | 19,500 |
| Mandeep’s Capital | 9,500 |
| 29,000 | |
| Shortage of cash to be brought in by Meghna and Mandeep in order to make payment to Mehak | 25,100 |
| Capital of a new firm | 54,100 |
Capital of Each partner after retirement= 54,100×1/2 = 27,050
Shortage of Cash = Amount payable to Mehak – Existing Cash and Bank Balance + Minimum cash and bank balance required
Shortage of Cash = 20,000 – (27,000-7,100) + 25,000
Shortage of Cash = 25,100
| Meghna | Mandeep | |
| New Capital (54,100 in the ratio 1:1) | 27,050 | 27,050 |
| Existing Capital | 19,500 | 9,500 |
| Amount shall be brought in by Meghna and Mandeep | 7,550 | 17,550 |
Question 54: (Suraj, Pawan, and Kamal)
Suraj, Pawan and Kamal are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their Balance
Sheet as at 31st March, 2024 is:
| Liabilities | ₹ | Assets | ₹ |
| Creditors | 46,000 | Cash in Hand | 18,000 |
| General Reserve | 12,000 | Debtors 25,000 | |
| Capital A/cs: | Less: Provision for Doubtful Debts 3,000 | 22,000 | |
| Suraj 40,000 | Stock | 18,000 | |
| Pawan 40,000 | Furniture | 30,000 | |
| Kamal 30,000 | 1,10,000 | Machinery | 70,000 |
| Goodwill | 10,000 | ||
| 1,68,000 | 1,68,000 |
Pawan retired on 1st April, 2024 on the following terms:
(a) Provision for Doubtful Debts be raised by 1,000.
(b) Stock to be reduced by 10% and Furniture by 5%.
(c) There is an outstanding claim of damages of 1,100 and it is to be provided for.
(d) Creditors will be written back by 6,000.
(e) Goodwill of the firm is valued at ₹ 22,000.
(f) Pawan is paid in full with the cash brought in by Suraj and Kamal in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at 10,000.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Suraj and Kamal.
Answer:
| Revaluation A/c | |||
| Particulars | ₹ | Particulars | ₹ |
| Provision for Doubtful Debts | 1,000 | Creditors | 6,000 |
| Stock | 1,800 | ||
| Furniture | 1,500 | ||
| outstanding claim of damages | 1,100 | ||
| Capital A/cs: | |||
| Suraj – 300 | |||
| Pawan- 200 | |||
| Kamal- 100 | 600 | ||
| 6,000 | 6,000 | ||
| Capital A/c | |||||||
| Particulars | Suraj | Pawan | Kamal | Particulars | Suraj | Pawan | Kamal |
| To Goodwill A/c | 5,000 | 3,333 | 1,667 | By Balance B/d | 3,00,000 | 2,00,000 | 2,00,000 |
| To Pawan ‘s Capital A/c | 5,500 | – | 1,833 | By Revaluation A/c | 300 | 200 | 100 |
| By General Reserve | 6,000 | 4,000 | 2,000 | ||||
| To Balance C/d | 35,800 | 48,200 | 28,600 | By Suraj ‘s Capital A/c | – | 5,500 | – |
| By Kamal ‘s Capital A/c | – | 1,833 | – | ||||
| 46,300 | 51,533 | 32,100 | 46,300 | 51,533 | 32,100 | ||
| To Cash A/c | – | 48,200 | 2,450 | By Balance B/d | 35,800 | 48,200 | 28,600 |
| To Balance C/d | 78,450 | – | 26,150 | By Cash A/c | 42,650 | – | – |
| 78,450 | 48,200 | 28,600 | 78,450 | 48,200 | 28,600 | ||
| Balance sheet of new firm | |||
| Liabilities | ₹ | Assets | ₹ |
| Creditors | 40,000 | Cash in Hand | 10,000 |
| outstanding claim of damages | 1,100 | Debtors 25,000 | |
| Capital A/cs: | Less: Provision for Doubtful Debts 4,000 | 21,000 | |
| Suraj 78,450 | Stock (18,000-1,800) | 16,200 | |
| Kamal 26,150 | 1,04,600 | Furniture (30,000-1,500) | 28,500 |
| Machinery | 70,000 | ||
| 1,45,700 | 1,45,700 | ||
Question 55: (Asha, Deepa, and Leta)
The Balance Sheet of Asha, Deepa and Leta who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2025 is as follows:
| Liabilities | ₹ | Assets | ₹ | |
| Creditors | 50,000 | Cash at Bank | 40,000 | |
| Employees’ Provident Fund | 10,000 | Sundry Debtors | 1,00,000 | |
| Profit and Loss A/c | 85,000 | Stock | 80,000 | |
| Capital A/cs: | Fixed Assets | 60,000 | ||
| Asha | 40,000 | |||
| Deepa | 62,000 | |||
| Leta | 33,000 | 1,35,000 | ||
| 2,80,000 | 2,80,000 | |||
Asha retired on 1st April, 2025 and Deepa and Leta decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for ₹ 10,000, is settled at ₹ 8,000.
The amount to be paid to Asha by Deepa and Letain such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners’ Capital Accounts.
Answer:
| Revaluation Account | ||||
| Dr. | Cr. | |||
| Particulars | (₹) | Particulars | (₹) | |
| Fixed Assets A/c(60,000 – 57,500) | 2,500 | Creditors (10,000 – 8,000) | 2,000 | |
| Provision for Doubtful Debts | 5,000 | Loss on Revaluation transferred to: | ||
| Asha’s Capital a/c | 2,750 | |||
| Deepa’s Capital a/c | 1,650 | |||
| Leta’s Capital a/c | 1,100 | 5,500 | ||
| 7,500 | 7,500 | |||
| Partners’ Capital Accounts | |||||||||
| Dr. | Cr. | ||||||||
| Particulars | Asha | Deepa | Leta | Particulars | Asha | Deepa | Leta | ||
| Revaluation A/c (Loss) | 2,750 | 1,650 | 1,100 | Balance b/d | 40,000 | 62,000 | 33,000 | ||
| Asha’s Capital A/c | – | 24,000 | 16,000 | Profit & Loss A/c | 42,500 | 25,500 | 17,000 | ||
| Balance c/d | 1,19,750 | 61,850 | 32,900 | Deepa’s Capital A/c | 24,000 | – | – | ||
| Leta’s Capital A/c | 16,000 | – | – | ||||||
| 1,22,500 | 87,500 | 50,000 | 1,22,500 | 87,500 | 50,000 | ||||
| Bank A/c | 1,19,750 | – | – | Balance b/d | 1,19,750 | 61,850 | 32,900 | ||
| Balance c/d | – | 1,18,500 | 79,000 | Bank A/c | – | 56,650 | 46,100 | ||
| 1,19,750 | 1,18,500 | 79,000 | 1,19,750 | 1,18,500 | 79,000 | ||||
Working Notes
WN 1: Calculation of Gaining Ratio
Old Ratio (Asha, Deepa and Leta) = 5:3:2
New Ratio (Deepa and Leta) = 3:2
Gaining Ratio = New Ratio – Old Ratio
| Deepa’s | =3/5-3/10 |
| =3/10 | |
| Leta’s | =2/5-2/10 |
| =2/10 |
Hence, gaining ratio is 3: 2.
WN2: Adjustment of Goodwill
Total Goodwill of the Firm = 80,000
Asha’s Share of Goodwill = 80,000×5/10=40,000
To be borne by Gaining partners in their Gaining Ratio i.e. 3:2
Deepa’s Share = 40,000×3/5=24,000
Leta’s Share = 40,000×2/5=16,000
WN3: Adjustment of Capital
Asha’s Capital before adjustment = 1,19,750
Deepa’s Capital before adjustment = 61,850
Leta’s Capital before adjustment = 32,900
Total Capital of New Firm= Asha’s Capital+Deepa’s Capital+Leta’s Capital+Closing balance of Bank Account-Available Bank Balance=1,19,750+61,850+32,900+15,000-32,000=₹1,97,500
New profit sharing ratio=3:2
Deepa’s Share of Goodwill =1,97,500×3/5=1,18,500
Leta’s Share of Goodwill =1,97,500×2/5=79,000
| Particulars | Deepa | Leta |
| New Capital Balance | 1,18,500 | 79,000 |
| Adjusted Old Capital Balance | 61,850 | 32,900 |
| Cash brought in by the Partner | 56,650 | 46,100 |
WN4
| Cash at Bank A/c | |||
| Dr. | Cr. | ||
| Particulars | (₹) | Particulars | (₹) |
| Balance b/d | 40,000 | Creditors | 8,000 |
| Deepa’s Capital A/c | 56,650 | Asha’s Capital A/c | 1,19,750 |
| Leta’s Capital A/c | 46,100 | Balance c/d | 15,000 |
| 1,42,750 | 1,42,750 | ||
Question 56: (Amrit, Bhanu, and Chanu)
Amrit, Bhanu and Charu were partners in a firm sharing profits equally. Bhanu retired on 30th September, 202. Profit till the date of retirement was to be estimated based on last year’s profit. Profit for the year ended 31st March, 2024, was ₹ 3,60,000.
Calculate Bhanu’s share of profit till his retirement and pass Journal entry/entries for the same when:
(i) The profit-sharing ratio between Amrit and Charu does not change; and
(ii) The new profit-sharing ratio between Amrit and Charu changes to 3:2.
Answer:
| Date | Particulars | ₹ | ₹ | |
| (Case) | Profit and Loss Suspense A/c | Dr. | 60,000 | |
| 1. | To Bhanu’s Capital A/c | 60,000 | ||
| (Bhanu was compensated for his share of goodwill ) (W.N. – 1) | ||||
| (Case) | Amrit’s Capital A/c | Dr. | 48,000 | |
| 2. | Charu’s Capital A/c | Dr. | 12,000 | |
| To Bhanu’s Capital A/c | 60,000 | |||
| (Bhanu was compensated for his share of goodwill) (W.N. – 2) |
Working notes:
W.N. – 1 ((i) The profit-sharing ratio between Amrit and Charu does not change)
Profit sharing ratio of Amrit, Bhanu and Charu was 1:1:1
Profit for the year ended 31st March, 2021, was ₹ 3,60,000
Bhanu’s share of profit=3,60,000×1×6/3×12=60,000
W.N.-2 ((ii) The new profit-sharing ratio between Amrit and Charu changes to 3:2)
A= 1/3-3/5=5-9/15= -4/15 (Gain)
B= 1/3-2/5=5-6/15= -1/15 (Gain)
Share of A and B in 4:1
A= 60,000×4/5=48,000
A= 60,000×1/5=12,000
Question 57: (Amar, Bhuvi, and Charan)
Amar, Bhuvi and Charan were partners in a firm sharing profits equally. Bhuvi retired on 30th September, 2024. Profit or loss till the date of retirement was to be estimated based on last year’s profit. Loss for the year ended 31st March, 2024 was ₹1,80,000.
Calculate Bhuvi’s share of loss till her retirement and pass Journal entry / entries for the same when:
(i) The profit-sharing ratio between Amar and Charan does not change; and
(ii) The new profit-sharing ratio between Amar and Charan changes to 3: 2.
Answer:
| Date | Particulars | ₹ | ₹ | |
| (Case) | Bhuvi’sCapital A/c | Dr. | 60,000 | |
| 1. | To Profit and Loss Suspense A/c A/c | 60,000 | ||
| (Bhavi was compensated for his share of goodwill ) (W.N. – 1) | ||||
| (Case) | Bhuvi’sCapital A/c | Dr. | 60,000 | |
| 2. | To Amar’s Capital A/c | 48,000 | ||
| To Charu’s Capital A/c | 12,000 | |||
| (Bhavi was compensated for his share of goodwill) (W.N. – 2) |
Working notes:
Loss for the year ended 31st March, 2024 was ₹1,80,000.
W.N. – 1 ((i) The profit-sharing ratio between Amar and Charan does not change)
Profit sharing ratio of Amrit, Bhanu and Charu was 1:1:1
Loss for the year ended 31st March, 2021 was ₹1,80,000.
Bhavi’s share of profit = 1,80,000×1/3 = 60,000
W.N.-2 ((ii) The new profit-sharing ratio between Amar and Charan changes to 3: 2)
A= 1/3-3/5=5-9/15= -4/15 (Gain)
B= 1/3-2/5=5-6/15= -1/15 (Gain)
Share of A and B in 4:1
A= 60,000×4/5=48,000
B= 60,000×1/5=12,000
Question 58: (Yogesh, Naresh, and Pavesh)
Yogesh, Naresh and Pavesh were partners in a firm sharing profits in the ratio of 2: 2: 1. Naresh retired on 1st October, 2024. In terms of the Partnership Deed, financial statements were prepared as on date of retirement and profit was determined as ₹7,20,000.
(i) Pass the Journal entries for distribution of profit for the period.
(ii) Pass the Journal entries if loss of ₹3,60,000 was incurred.
Answer:
| Date | Particulars | ₹ | ₹ | |
| (Case) | Profit & Loss AppropriationA/c | Dr. | 7,20,000 | |
| 1. | To Yogesh’s Capital A/c | 2,88,000 | ||
| To Naresh’s Capital A/c | 2,88,000 | |||
| To Pavesh’s Capital A/c | 1,44,000 | |||
| (Bhavi was compensated for his share of goodwill ) (W.N. – 1) | ||||
| (Case) | Yogesh’s Capital A/c | Dr. | 1,44,000 | |
| 2. | Naresh’s Capital A/c | Dr. | 1,44,000 | |
| Pavesh’s Capital A/c | Dr. | 72,000 | ||
| To Profit & Loss AppropriationA/c | 3,60,000 | |||
| (Bhavi was compensated for his share of goodwill) (W.N. – 2) |
Working Notes:
W.N. – 1 ((i) Pass the Journal entries for distribution of profit for the period.)
Profits sharing in the ratio of 2: 2: 1
Yogeshs = 7,20,000×2/5=2,88,000
Nareshs= 7,20,000×2/5=2,88,000
Pavesh= 7,20,000×1/5=1,44,000
W.N. – 2 ((ii) Pass the Journal entries if loss of ₹3,60,000 was incurred)
Profits sharing in the ratio of 2: 2: 1
Yogeshs = 3,60,000×2/5 = 1,44,000
Nareshs= 3,60,000×2/5 = 1,44,000
Pavesh= 3,60,000×1/5 = 72,000
Question 59: (Aman, Bharat, and Chetan)
The Partnership Deed of Aman, Bharat and Chetan has a clause that any partner may retire from the firm on the following terms by giving six months’ notice in writing. The retiring partner shall be paid:
(a) The amount standing to the credit of his Capital Account and Current Account.
(b) His share of profit to the date of retirement, calculated on the basis of the average profit of the three preceding completed years, if he retires in-between the year.
(c) His Share of Goodwill of the firm calculated on the basis of 1% times the average profit of the three preceding completed years.
(d) Assets shall be revalued and liabilities re-assessed. Retiring partner will get his share in the gain (profit and will bear loss, if any.
Chetan gave notice on 31st March, 2024 to retire with effect from 30th September, 2024. On that date, the balance of his capital was ₹1,60,000 and his Current Account (in debit) ₹5,000. The profits for the three preceding completed years were: I- ₹45,000, II- ₹30,000 and III- ₹24,000.
Revaluation of assets and reassessment of liabilities resulted in neither gain (profit) nor loss.
What amount is due to Chetan in accordance with the partnership agreement?
Answer:
| CHETAN’S CURRENT ACCOUNT | |||
| Particulars | ₹ (Dr.) | Particulars | ₹ (Cr.) |
| To Balance bld | 5,000 | By Profit & Loss Suspense A/c | 5,500 |
| To Chetan’s Capital A/c (Balancing Figure) | 17,000 | By Aman’s Current A/c(Share of Goodwill) | 8,250 |
| By Bharat’s Current A/c(Share of Goodwill) | 8,250 | ||
| 22,000 | 22,000 | ||
Working Notes:
W.N. – 1 (Calculation of Share of Profit)
The profits for the three preceding completed years were: I- ₹45,000, II- ₹30,000 and III- ₹24,000.
Average Profit= 45,000+30,000+24,000/3= 33,000
Share of Chetan’s Profit= 33,000×1×6/3×12=5,500
W.N. – 1 (Calculation of Share of Goodwill)
Average Profit= 45,000+30,000+24,000/3= 33,000
Firm’s Goodwill= 33,000×1.5=49,500
Chetan’s Share of Goodwill=49,500×1/3=16,500
Chetan will be compensated by Amar and Bharat in 1:1
Amar and Bharat = 16,500×1/2=8,250
Question 60: (Amit, Bunty, and Charan)
Amit, Bunty and Charan are partners sharing profits and losses in the ratio of 2:2:1. Charan retired on 30th June, 2025. The Balance Sheet of the firm on 31st March, 2025 was as follows:
| Liabilities | ₹ | Assets | ₹ | |
| Capital Accounts: | Building | 10,00,000 | ||
| Amit | 6.00,000 | Investments | 1,25,000 | |
| Bunty | 6,00,000 | Stock | 2,50,000 | |
| Charan | 4,00,000 | 16,00,000 | Debtors | 4,00,000 |
| employee’s’ Compensation Reserve | 1,00,000 | Cash at Bank | 2,00,000 | |
| General Reserve | 3,00,000 | Cash in Hand | 1,25,000 | |
| Creditors | 1,00,000 | |||
| 21,00,000 | 21,00,000 | |||
It was agreed that amount payable to Charan will be determined by making following adjustments
(a) Building be valued at ₹ 12,00,000.
(b) Investment be valued at ₹ 1,00,000.
(c) Stock to be valued at ₹3,00,000.
(d) Goodwill of the firm be valued at 2 years’ purchase of average profit of last 5 years.
(e) Charans share of profit up to the date of retirement be calculated on the basis of average profit of the preceding three years.
Profits of the preceding five years were as under:
| Years | 2020-21(₹) | 2021-22(₹) | 2022-23(₹) | 2023-24(₹) | 2024-25(₹) |
| Profit | 2,00,000 | 2,35,000 | 3,00,000 | 2,75,000 | 3,25,000 |
Prepare: (i) Revaluation Account; (ii) Partners’ Capital Accounts and (ii) Balance Sheet after Charan’s retirement.
Answer:
| Revaluation Account | |||||
| Particulars | (₹)Dr. | Particulars | (₹)Cr. | ||
| Investment | 25,000 | Building | 2,00,000 | ||
| Gain transferred to: | Stock | 50,000 | |||
| Amit’s Capital A/c | 90,000 | ||||
| Bunty’s Capital A/c | 90,000 | ||||
| Charan ’s Capital A/c | 45,000 | 2,25,000 | |||
| 2,50,000 | 2,50,000 | ||||
| Dr. | Partners’ Capital Accounts | Cr. | |||||
| Particulars | Amit | Bunty | Charan | Particulars | Amit | Bunty | Charan |
| Charan ’s Capital A/c | 53,400 | 53,400 | – | Balance B/d | 6,00,000 | 6,00,000 | 4,00,000 |
| Charan ’s Loan A/c | – | – | 6,46,800 | Revaluation A/c | 90,000 | 90,000 | 45,000 |
| Balance C/d | 7,96,600 | 7,96,600 | – | W.C.R. A/c | 40,000 | 40,000 | 20,000 |
| G. R. A/c | 1,20,000 | 1,20,000 | 60,000 | ||||
| Amit’s Capital A/c | – | – | 53,400 | ||||
| Bunty’s Capital A/c | – | – | 53,400 | ||||
| P&L Suspense A/c | 15,000 | ||||||
| 8,50,000 | 8,50,000 | 6,46,800 | 8,50,000 | 8,50,000 | 6,46,800 | ||
| Balance Sheet (after Charan’s retirement) | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Capital Accounts: | Building | 12,00,000 | ||
| Amit | 7,96,600 | Investments | 1,00,000 | |
| Bunty | 7,96,600 | 15,93,200 | Stock | 3,00,000 |
| Charan ’s Loan | 6,46,800 | Debtors | 4,00,000 | |
| Creditors | 1,00,000 | Cash at Bank | 2,00,000 | |
| Cash in Hand | 1,25,000 | |||
| P&L Suspense A/c | 15,000 | |||
| 23,40,000 | 23,40,000 | |||
Working Notes:
W.N.- 1: Distribution of employee’s’ Compensation Reserve
A = 1,00,000×2/5=40,000
B = 1,00,000×2/5=40,000
C = 1,00,000×1/5=20,000
W.N.- 2: Distribution of General Reserve
A = 3,00,000×2/5 = 1,20,000
B = 3,00,000×2/5= 1,20,000
C = 3,00,000×1/5 = 60,000
W.N.- 3: Valuation of goodwill
Average Profit = 2,00,000+2,35,000+3,00,000+2,75,000+3,25,000/5=2,67,000
Goodwill =2,67,000×2= 5,34,000
Charan’s share of Goodwill= 5,34,000×1/5=1,06,800
Charan will be compensated by Amit and Bunty in 2:2 or 1:1 as follow
Amount of compensation = 1,06,800×1/2=53,400
W.N.- 3: Calculation of Share of Profit till the date of retirement on the basis of past three year profits
Average Profit = 3,00,000+2,75,000+3,25,000/3=3,00,000
Profit share of Charan = 3,00,000×1×6/5×12= 15,000
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