In this article, I have provided Q41 to 50 Retirement of a Partner TS Grewal Solutions 2025-26. You can find the solutions of specifically Q41 to Q50 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.
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Question 41: (Harish, Paresh, and Mahesh)
Harish, Paresh and Mahesh were three partners sharing profits and losses in the ratio of 5:4:1. Paresh retired on 31st March, 2025. His capital as on 1st April, 2024, was 80,000. During the year 2024-25, he withdrew 5,000. He was to be charged interest of 100 on drawings.
The Partnership Deed provides that on the retirement of a partner, he will be entitled to:
(i) His share of capital.
(ii) Interest on capital @10% per annum.
(iii) His share of profit in the year of retirement.
(iv) His share of goodwill of the firm.
(v) His share in the profit/loss on revaluation of assets and liabilities.
Additional Information:
(a) Paresh’s share in the profit of the firm for the year 2024-25was 20,000.
(b) Goodwill of the firm was valued at 24,000.
(c) The firm incurred loss of 12,000 on the revaluation of assets and liabilities.
(d) Paresh was to be paid ₹7,700 in cash and the balance was to be transferred to his Loan Account bearing interest@ 6% per annum. Loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2026.
You are required to prepare:
(i) Paresh’s Capital Account.
(ii) Paresh’s Loan Account till it is finally closed.
Answer:
| Paresh’s Capital A/c | |||
| Particulars | ₹ | Particulars | ₹ |
| Revaluation A/c | 4,800 | Balance b/d | 80,000 |
| Drawings | 5,000 | Interest on Capital | 8,000 |
| Interest on Drawing | 100 | P&L Appropriation A/c | 20,000 |
| Paresh’s Loan A/c | 1,00,000 | Harish’s Capital A/c | 8,000 |
| Mahesh’s Capital A/c | 1,600 | ||
| 1,17,600 | 1,17,600 | ||
| Paresh’s Loan A/c | |||||
| Date | Particulars | ₹ | Date | Particulars | ₹ |
| 31-3-23 | Balance C/d | 1,00,000 | 31-3-24 | Paresh’s Capital A/c | 1,00,000 |
| 31-3-24 | Bank A/c | 56,000 | 1-4-24 | Balance b/d | 1,00,000 |
| 31-3-25 | Balance C/d | 50,000 | 31-3-25 | Interest on Loan A/c | 6,000 |
| 1,06,000 | 1,06,000 | ||||
| 31-3-25 | Bank A/c | 53,000 | 1-4-25 | Balance b/d | 50,000 |
| 31-3-26 | Interest on Loan A/c | 3,000 | |||
| 53,000 | 53,000 | ||||
Question 42: (X, Y, and Z)
X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at ₹ 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z after all adjustments on the date of retirement showed balance of ₹ 1,45,000 and ₹ 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners. (AI 2020)
Answer:
Old Ratio (X, Y, and Z) = 3 : 2 : 1
Y retires from the firm.
New Ratio (X and Z) = 3 : 1
Total capital of the New Firm = ₹ 2,10,000
X‘s new capital = 2,10,000×3/4=1,57,500
Z‘s new capital = 2,10,000×1/4=52,500
Ascertainment of Actual Cash to be brought in or to be paid to the partners
| Particulars | X | Z |
| New Capital | 1,57,500 | 52,500 |
| Existing Capital | 1,45,000 | 63,000 |
| Cash Paid/Brought in | (12,500)(Brought in) | 10,500(Paid) |
Question 43: (Lisa, Monika, and Nisha)
Lisa, Monika and Nisha were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2025, their Balance Sheet was as follows:
| BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2025 | ||||
| Liabilities | ₹ | Assets | ₹ | |
| Trade Creditors | 1,60,000 | Land and Building | 10,00,000 | |
| Bills Payable | 2,44,000 | Machinery | 12,00,000 | |
| Employees’ Provident Fund | 76,000 | Stock | 10,00,000 | |
| Capitals: | Sundry Debtors | 4,00,000 | ||
| Lisa 14,00,000 | 14,00,000 | Bank | 40,000 | |
| Monika | 3,60,000 | 31,60,000 | ||
| Nisha | ||||
| 36,40,000 | 36,40,000 | |||
On 31st March, 2025, Monika retired from the firm and the remaining partners decided to carry on the business. It was agreed that:
(I) Land and building be appreciated by ₹2,40,000 and machinery be depreciated by 10%
(ii) 50% of the stock was taken over by the retiring partner at book value.
(iii) Provision for doubtful debts was to be made at 5% on debtors
(iv) Goodwill of the firm be valued at ₹3,00,000 and Monika’s share of goodwill be adjusted in the accounts of Lisa and Nisha.
(v) The total capital of the new firm be fixed at ₹27,00,000 which will be in the proportion of the new profit Sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the partners were to be opened.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm on Monika’s retirement.
Answer:
| Revaluation Account | ||||||
| Dr. | Cr. | |||||
| Particulars | (₹) | Particulars | (₹) | |||
| To provision for doubtful debts | 20,000 | By land and building | 2,40,000 | |||
| To Machinery a/c | 1,20,000 | |||||
| To capital a/cLisa’s =1,00,000×2/5=40,000Monika’s =1,00,000×2/5=40,000Nisha’s =1,00,000×1/5=20,000(In old ratio) | 1,00,000 | |||||
| 2,40,000 | 2,40,000 | |||||
| Partners’ Capital Accounts | ||||||||||||||||
| Dr. | Cr. | |||||||||||||||
| Particulars | Lisa | Monika | Nisha | Particulars | Lisa | Monika | Nisha | |||||||||
| To Monika’s capital a/cTo stockTo Monika’s loan a/cTo balance c/d | 80,000 13,60,000 | 5,00,00010,60,000 | 40,000 3,40,000 | By Balance b/dBy Lisa’s capital a/cBy Nisha’s capital a/cBy revaluation a/c | 14,00,000 40,000 | 14,00,00080,00040,00040,000 | 3,60,000 20,000 | |||||||||
| 14,40,000 | 15,60,000 | 3,80,000 | 14,40,000 | 15,60,000 | 3,80,000 | |||||||||||
| To balance c/d | 18,00,000 | 9,00,000 | By Balance b/dBy Lisa’s current a/c | 13,60,0004,40,000 | 3,40,000 | |||||||||||
| By Nisha’s current a/c | 5,60,000 | |||||||||||||||
| 18,00,000 | 9,00,000 | 18,00,000 | 9,00,000 | |||||||||||||
| Balance Sheet as on April 01, 2025 after Monika’s retirement | |||||
| Liabilities | (₹) | Assets | (₹) | ||
| Trade creditorsBills payablesEmployees provident fundCapital a/cLisa= 18,00,000Nisha= 9,00,000 | 1,60,0002,44,00076,000 27,00,000 | Land and buildingMachineryStockSundry debtors 4,00,000Less; Provision 20,000for Doubtful debtsBankLisa’s current a/cNisha’s current a/c | 12,40,00010,80,0005,00,000 3,80,000 40,0004,40,0005,60,000 | ||
| Monika’s loan | 10.,60,000 | ||||
| 42,40,000 | 42,40,000 | ||||
Working notes;
WN -1
Calculation of gaining and sacrificing ratio
| Lisa | Monika | Nisha | |||
| Old ratio = | 2 | : | 2 | : | 1 |
| New ratio = | 2 | : | 1 |
Gaining ratio = New ratio – Old ratio
Lisa’s gain = 2/3-2/5=10-6/15=4/15
Nisha’s gain = 1/3-1/5=5-3/15=2/15
Gaining ratio of Lisa and Nisha = 4:2=2:1
WN-2 Treatment of goodwill;
Firm’s goodwill =3,00,000
Monika will be compensated = 3,00,000×2/5=1,20,000
Lisa will compensate =1,20,000×2/3 = 80,000
Nisha will compensate =1,20,000×1/3 = 40,000
Condition for goodwill remaining partner to retiring partner
WN -3
Lisa’s capital = 27,00,000×2/3=18,00,000
Nisha’s capital = 27,00,000×1/3=9,00,000
Question 44: (A, B, and C)
On 31st March, 2025, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:
| Liabilities | ₹ | Assets | ₹ | ||
| Creditors | 10,800 | Cash at Bank | 13,000 | ||
| Bills Payable | 5,000 | Debtors | 10,000 | ||
| Capital A/cs: | Less: Provision for Doubtful Debts | 200 | 9,800 | ||
| A | 45,000 | Stock | 9,000 | ||
| B | 15,000 | Machinery | 24,000 | ||
| C | 30,000 | 90,000 | Freehold Premises | 50,000 | |
| 1,05,800 | 1,05,800 |
B retired on 1st April, 2025 and following adjustments were agreed to determine the amount payable to B:
(a) Out of the amount of insurance premium debited to Profit and Loss Account, ₹1,000 be carried forward as prepaid Insurance.
(b) Freehold Premises be appreciated by 10%.
(c) Provision for Doubtful Debts is brought up to 5% on Debtors.
(d) Machinery be reduced by 5%.
(e) Liability for Workmen Compensation to the extent of ₹1,500 would be created.
(f) Goodwill of the firm be fixed at ₹18,000 and B’s share of the same be adjusted into the Capital Accounts of A and C, who will share future profits in the ratio of 3/4th and 1/4th.
(g)Total capital of the firm as newly constituted be fixed at ₹60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.
(h) B be paid ₹5,000 in cash and the balance be transferred to his Loan Account.
Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.
Answer:
| Revaluation a/cDr. Cr. | |||
| Particulars | ₹ | Particulars | ₹ |
| To provision for doubtful debts | 300 | By unexpired insurance | 1,000 |
| To Machinery | 1,200 | By freehold premises | 5,000 |
| To workers’ compensation liabilities | 1,500 | ||
| To capital a/c -profit transferred to : | |||
| A=3,000×3/6=1,500 | |||
| B=3,000×2/6=1,000 | |||
| C=3,000×1/6=500 | 3,000 | ||
| 6,000 | 6,000 | ||
| Partners’ Capital Accounts | |||||||||
| Dr. | Cr. | ||||||||
| Particulars | A | B | C | Particulars | A | B | C | ||
| To B’s capital a/c | 4,500 | 1,500 | By Balance b/d | 45,000 | 30,000 | 15,000 | |||
| To cash a/c | 5,000 | By A’s capital | 4,500 | ||||||
| To B’s loan a/c | 32,000 | By C’s Capital | 1,500 | ||||||
| To balance c/d | 42,000 | 14,000 | By Revaluation a/c | 1,500 | 1,000 | 500 | |||
| 46,500 | 37,000 | 15,500 | 46,500 | 37,000 | 15,500 | ||||
| To balance c/d | 45,000 | 15,000 | By Balance b/d | 42,000 | 14,000 | ||||
| By Bank a/c | 3,000 | 1,000 | |||||||
| 45,000 | 15,000 | 45,000 | 15,000 | ||||||
| Balance Sheetas on April 01, 2025 after Z’s retirement | |||||
| Liabilities | (₹) | Assets | (₹) | ||
| Creditors | 10,800 | Cash at bank | 12,000 | ||
| Bills payables | 5,000 | Debtors 10,000 | |||
| Workers’ Compensation liabilities | 1,5000 | Less; prov. For D.D. 500 | 9,500 | ||
| Capital a/c | |||||
| A | 45,000 | ||||
| C | 15,000 | 60,000 | Stock | 9,000 | |
| B’s loan | 32,000 | Unexpired insurance | 1,000 | ||
| Machinery | 22,800 | ||||
| Freehold premises | 55,000 | ||||
| 1,,09,300 | 1,,09,300 | ||||
Working notes;
WN-1 Calculation of new and gaining ratio
Old ratio of A, B and C =45,0000:30,000:15,000=3:2:1
New ratio of A and C= 3:1
Gaining ratio= New ratio- Old ratio
A’s gain = ¾- 3/6 =18-12/24=6/24
C’s gain =1/4-1/6=6-4/24=2/24
Gaining ratio of A:C = 6:2=3:1
WN-2 treatment of Goodwill
Goodwill of the firm= 18,000
B will be compensated for 18,000×2/6=6,000
A will compensate =6,000×3/4=4,500
C will compensate =6,000×3/4=1,500
Condition for goodwill treatment: Remaining partner to retiring partner
WN-3 Capital adjustment
A’s capital = 60,000×3/4=45,000
C’s capital = 60,000×1/4=15,000
WN-4
Closing bank balance= 13,000-5,000+3,000+1,000=12,000
Question 45: (X, Y, and Z)
X, Y and Z were in partnership sharing profits in proportion to their capitals. Their Balance Sheet as on
31st March, 2018 was as follows:
| Liabilities | ₹ | Assets | ₹ | ||
| Sundry Creditors | 16,600 | Cash | 15,000 | ||
| Workmen’s Compensation Fund | 9,000 | Debtors | 21,000 | ||
| General Reserve | 6,000 | Less: Provision for Doubtful Debts | (1,400) | 19,600 | |
| Capitals: | Stock | 19,000 | |||
| XYZ | 90,00060,00030,000 | 1,80,000 | MachineryBuilding | 58,0001,00,000 | |
| 2,11,600 | 2,11,600 |
On the above date, Y retired owing to ill health. The following adjustments were agreed upon for calculation of amount due to Y:
(a) Provision for Doubtful Debts to be increased to 10% of Debtors.
(b) Goodwill of the firm be valued at 36,000 and be adjusted into the Capital Accounts of X and Z, who will share profits in future in the ratio of 3 :1.
(c)Included in the value of Sundry Creditors was ₹2,500 for an outstanding legal claim, which will not arise.
(d) X and Z also decided that the total capital of the new firm will be ₹1,20,000 in their profit-sharing ratio. Actual cash to be brought in or to be paid off as the case may be.
(e) Y to be paid ₹9,000 immediately and balance to be transferred to his Loan Account.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm after Y’s retirement.
(CBSE Sample Paper 2019)
Answer:
| Revaluation Account | ||||||
| Dr. | Cr. | |||||
| Particulars | (₹) | Particulars | (₹) | |||
| To provision for doubtful debts | 700 | By sundry creditors | 2,500 | |||
| To capital a/c – Profit transferred; X=1800×3/6=900 | ||||||
| y=1800×2/6=600 | ||||||
| Z=1800×1/6=300 | 1,800 | |||||
| 2,500 | 2,500 | |||||
| Partners’ Capital Accounts | |||||||||
| Dr. | Cr. | ||||||||
| Particulars | X | Y | Z | Particulars | X | Y | Z | ||
| To Y’s capital a/c | 9,000 | – | 3,000 | By Balance b/c | 90,000 | 60,000 | 30,000 | ||
| To Cash a/c | – | 9,000 | – | By X’s Capital a/c | – | 9,000 | – | ||
| To Y’s loan a/c | – | 68,600 | – | By Z’s Capital a/c | – | 3,000 | – | ||
| To Balance C/d | 89,400 | – | 29,800 | By Workers’ compensation fund | 4,500 | 3,000 | 1,500 | ||
| By General reserve | 3,000 | 2,000 | 1,000 | ||||||
| By Revaluation a/c | 900 | 600 | 300 | ||||||
| 98,400 | 77,600 | 32,800 | 98,400 | 77,600 | 32,800 | ||||
| To Balance C/d | 90,000 | – | 30,000 | By Balance b/d | 89,400 | – | 29,800 | ||
| By Cash a/c | 600 | – | 200 | ||||||
| 90,000 | – | 30,000 | 90,000 | – | 30,000 | ||||
| Balance Sheet as on April 01, 2018 after Z’s retirement | |||||
| Liabilities | (₹) | Assets | (₹) | ||
| Sundry creditors | 14,100 | Cash a/c(15,000-9000+600+200) | 6,800 | ||
| Capital a/c | Debtors 21,000Less; Prov. For D.D. 2,100 | 18,900 | |||
| X= 90,000Z= 30,000 | 1,20,000 | StockMachinery | 19,00058,000 | ||
| Y’s loan a/c | 68,600 | Buildings | 1,00,000 | ||
| 2,02,700 | 2,02,700 | ||||
Working notes;
WN-1 Calculation of new and gaining ratio
Old ratio of X,Y and Z =90,0000:60,000:30,000=3:2:1
New ratio of X and Z= 3:1
Gaining ratio= New ratio- Old ratio
X’s gain = ¾- 3/6 =18-12/24=6/24
Z’s gain =1/4-1/6=6-4/24=2/24
Gaining ratio of A:C = 6:2=3:1
WN-2 treatment of Goodwill
Goodwill of the firm= 36,000
Y will be compensated for 36,000×2/6=12,000
X will compensate =12,000×3/4=9,000
Z will compensate =12,000×1/4=3,000
Condition for goodwill treatment: Remaining partner to retiring partner
| X’s capital a/c | Dr. | 9,000 | |
| Z’s capital a/c | Dr. | 3,000 | |
| To Y’s capital a/c | 12,000 |
WN-3 Capital adjustment
X’s capital = 1,20,000×3/4=90,000
Z’s capital = 1,20,000×1/4=30,000
Question 46: (Shweta, Meenu, and Asha)
Shweta, Meenu and Asha were partners in a firm sharing profits and losses in the ratio of 3:5:2. Meenu retired on 1st April, 2022. After making all adjustments relating to revaluation, goodwill and accumulated profits, etc., Capital Accounts of Shweta and Asha showed credit balance of 3,00,000 and 1,00,000respectively. It was decided to adjust the capitals of Shweta and Asha in their new profit-sharing ratio.
Pass necessary Journal entries for bringing in or withdrawal of the necessary amounts involved. Show yourworking clearly. (CBSE 2023)
Answer:
| Date | Particulars | Dr. (₹) | Cr. (₹) | |
| (i) | Bank A/c | Dr. | 60,000 | |
| To Aastha’s Capital A/c | 60,000 | |||
| (Being amount brought) | ||||
| (ii) | Shweta’s Capital A/c | 60,000 | ||
| To Bank A/c | 60,000 | |||
| (Being amount withdrawn) |
Total Capital of Shweta and Asha showed credit balance of 3,00,000+1,00,000=4,00,000
New Ratio of Shweta and Asha = 3:2
New Capital as per New Ratio of Shweta and Asha
Shweta = 4,00,000×3/5=2,40,000
Asha = 4,00,000×2/5=1,60,000
Capital adjustment requirement
| Shweta | Adjusted Capital | 3,00,000 |
| New Capital | 2,40,000 | |
| Amount withdrawn | 60,000 | |
| Aastha | Adjusted Capital | 1,00,000 |
| New Capital | 1,60,000 | |
| Amount brought | 60,000 |
Question 47: (Amit, Balan, and Chander)
Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander’s retirement was as follows:
| Liabilities | (₹) | Assets | (₹) | ||
| Sundry Creditors | 12,600 | Bank | 4,100 | ||
| Provident Fund | 3,000 | Debtors | 30,000 | ||
| General Reserve | 9,000 | Less: Provision | 1,000 | 29,000 | |
| Capital A/cs: | |||||
| Amit | 40,000 | Stock | 25,000 | ||
| Balan | 36,500 | Investments | 10,000 | ||
| Chander | 20,000 | 96,500 | Patents | 5,000 | |
| Machinery | 48,000 | ||||
| 1,21,100 | 1,21,100 | ||||
It was agreed that:
(i) Goodwill will be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%.
(iv) Liability on account of Provident Fund was estimated at ₹ 2,400.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners’ Capital Accounts on Chander’s retirement.
(Delhi 2015, Modified)
Answer:
| Revaluation Account | ||||||
| Dr. | Cr. | |||||
| Particulars | ₹ | Particulars | ₹ | |||
| Machinery | 4,800 | Investments A/c | 5,800 | |||
| Patents | 1,000 | Provident Fund A/c | 600 | |||
| Profit transferred to: | ||||||
| Amit’s Capital A/c | 300 | |||||
| Balan’s Capital A/c | 200 | |||||
| Chander’s Capital A/c | 100 | 600 | ||||
| 6,400 | 6,400 | |||||
| Partners’ Capital Account | |||||||
| Dr. | Cr. | ||||||
| Particulars | Amit | Balan | Chander | Particulars | Amit | Balan | Chander |
| Investments A/c | 15,800 | Balance b/d | 40,000 | 36,500 | 20,000 | ||
| Chander’s Capital A/c | 2,700 | 1,800 | Revaluation A/c (Profit) | 300 | 200 | 100 | |
| Loan A/c | 10,300 | General Reserve | 4,500 | 3,000 | 1,500 | ||
| Current A/c | 5,900 | Amit’s Capital A/c | 2,700 | ||||
| Balance c/d | 48,000 | 32,000 | Balan’s Capital A/c | 1,800 | |||
| Current A/c | 5,900 | ||||||
| 50,700 | 39,700 | 26,100 | 50,700 | 39,700 | 26,100 | ||
Working Notes:
WN1: Adjustment of Goodwill
Chander’s share of Goodwill =27,000 ×1/6=4,500
Amit wil pay=4,500×3/5=2,700
Balanwil pay=4,500×2/5=1,800
WN2: Adjustment of Capital
Adjusted Old Capital of Amit=44,800 (40,000+4,500+300)-2,700=₹ 42,100
Adjusted Old Capital of Balan=39,700 (36,500+3,000+200)-1,800=₹ 37,900
Total Adjusted Capital=42,100+37,900=₹ 80,000
New Profit Sharing Ratio=3:2
Amit’s New Capital=80,000×3/5=₹ 48,000
Balan’s New Capital=80,000×2/5=₹ 32,000
Note: Since, here no information is given regarding the share acquired by Amit and Balan, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 3 : 2.
Question 48: (N, S, and B)
N, S and B are partners in a firm sharing profits and losses in the proportion of 1/2 : 1/6 : 1/3 respectively. The Balance Sheet of the firm as at On 31st March, 2017, was as follow:
| BALANCE SHEET OF N,S AND B as at 31st march, 2017 | |||||
| Liabilities | (₹) | Assets | (₹) | ||
| Bills Payable | 12,000 | Freehold Premises | 40,000 | ||
| Sundry Creditors | 18,000 | Machinery | 30,000 | ||
| General Reserve | 12,000 | Furniture | 12,000 | ||
| Capital A/cs: | Stock | 22,000 | |||
| N | 30,000 | Sundry Debtors | 20,000 | ||
| S | 30,000 | Less: Provision for Doubtful Debts | 1,000 | 19,000 | |
| B | 28,000 | 88,000 | Cash | 7,000 | |
| 1,30,000 | 1,30,000 | ||||
B retired from the business on the above date and the partners agree to the following:
(a) Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
(b) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ₹ 1,500.
(d) Goodwill of the firm is valued at ₹ 21,000 on B’s retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of B. Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.
Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.
Answer:
| Revaluation Account | |||||
| Dr. | Cr. | ||||
| Particulars | (₹) | Particulars | (₹) | ||
| Machinery (30,000 × 10%)Furniture (12,000 × 7%) | 3,000840 | Freehold Premises (40,000 × 20%) | 8,000 | ||
| Provision for Doubtful Debts | 1,500 | Stock (22,000 × 15%) | 3,300 | ||
| Profit transferred to: | |||||
| N’s Capital A/c | 2,980 | ||||
| S’s Capital A/c | 993 | ||||
| B’s Capital A/c | 1,987 | 6,960 | |||
| 11,300 | 11,300 | ||||
| Partner’s Capital Accounts | |||||||
| Dr. | Cr. | ||||||
| Particulars | N | S | B | Particulars | N | S | B |
| B’s Capital A/c | 5,250 | 1,750 | – | Balance b/d | 30,000 | 30,000 | 28,000 |
| B’s Loan A/c | – | – | 40,987 | General Reserve | 6,000 | 2,000 | 4,000 |
| Balance c/d | 33,730 | 31,243 | 40,987 | N’s Capital A/c (Goodwill) | – | – | 5,250 |
| B’s Capital A/c (Goodwill) | – | – | 1,750 | ||||
| Revaluation A/c (Profit) | 2,980 | 993 | 1,987 | ||||
| 38,980 | 32,993 | 40,987 | 38,980 | 32,993 | 40,987 | ||
| Y’s Current A/c | – | 7,500 | – | Balance b/d | 33,730 | 31,243 | – |
| Balance c/d | 48,730 | 16,243 | – | X’s Current A/c | 15,000 | – | – |
| 48,730 | 31,243 | – | 48,730 | 31,243 | – | ||
| Balance Sheet as on 1st April, 2017 | |||||
| Liabilities | (₹) | Assets | (₹) | ||
| Bills Payable | 12,000 | Freehold Premises (40,000 + 8,000) | 48,000 | ||
| Sundry Creditors | 18,000 | Machinery (30,000 – 3,000) | 27,000 | ||
| B’s Loan | 40,987 | Furniture (12,000 – 840) | 11,160 | ||
| Capital A/cs: | Stock (22,000 + 3,300) | 25,300 | |||
| N | 48,730 | Sundry Debtors | 20,000 | ||
| S | 16,243 | 64,973 | Less: Provision for Doubtful Debts | (2,500) | 18,500 |
| S’s Current A/c | 15,000 | Cash | 7,000 | ||
| N’s Current A/c | 15,000 | ||||
| 1,50,960 | 1,50,960 | ||||
Working Notes:
WN 1: Calculation of Profit Sharing Ratio
Old Ratio (N, S and B) = 3 : 1 : 2
B retires from the firm.
∴ New Ratio (N and S) = 3 : 1 and
Gaining Ratio = 3 : 1
WN 2: Adjustment of Goodwill
Goodwill of the firm = ₹ 21,000
B’s Share of Goodwill = = 21,000×2/6=7,000
This share of goodwill is to be distributed between N and S in their gaining ratio (i.e. 3 : 1).
N‘s share= 7,000×3/4=5,250
S‘s share= 7,000×1/4=1,750
Condition for goodwill treatment; gaining partner to retiring partner
| N’s capital a/c | Dr. | 5,250 | – |
| S’s Capital a/c | Dr. | 1,750 | – |
| To B’s Capital a/c | – | 7,000 |
WN 3: Adjustment of Partners’ Capital after B’s Retirement
Combined Capital of N and S after all adjustments = 33,730 + 31243 = ₹. 64,973
New Ratio = 3 : 1
N‘s new capital = 64,973×3/4=48,730
S‘s new capital = 64,973×1/4=16,243
Question 49: (Kusum, Sneh, and Usha)
Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March, 2025, who have agreed to share profits and losses in proportion of their capitals:
| Liabilities | ₹ | Assets | ₹ | ||
| Capital A/cs: | Land and Building | 4,00,000 | |||
| Kusum | 4,00,000 | Machinery | 6,00,000 | ||
| Sneh | 6,00,000 | Closing Stock | 2,00,000 | ||
| Usha | 4,00,000 | 14,00,000 | Sundry Debtors | 2,20,000 | |
| Employees’ Provident Fund | 70,000 | Less: Provision for Doubtful Debts | 20,000 | ||
| Workmen Compensation Reserve | 30,000 | Cash at Bank | 2,00,000 | ||
| Sundry Creditors | 1,00,000 | 2,00,000 | |||
| 16,00,000 | 16,00,000 | ||||
On 1st April, 2025, Kusum retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
(a) Land and Building be appreciated by 30%.
(b) Machinery be depreciated by 30%.
(c) There were Bad Debts of ₹ 35,000.
(d) The claim against Workmen Compensation Reserve was estimated at ₹ 15,000.
(e) Goodwill of the firm was valued at ₹ 2,80,000 and Kusum’s share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
(f) Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners.
(g) Amount due to Kusum be settled by paying ₹ 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum’s retirement.
Answer:
| Revaluation Account | ||||
| Dr. | Cr. | |||
| Particulars | (₹) | Particulars | (₹) | |
| Machinery A/c | 1,80,000 | Land and Building A/c | 1,20,000 | |
| Bad Debts A/c(35,000 – 20,000) | 15,000 | Loss on Revaluation transferred to: | ||
| Kusum | 21,429 | |||
| Sneh | 32,142 | |||
| Usha | 21,429 | 75,000 | ||
| 1,95,000 | 1,95,000 | |||
Partners’ Capital Account | |||||||
| Dr. | Cr. | ||||||
| Particulars | Kusum | Sneh | Usha | Particulars | Kusum | Sneh | Usha |
| Revaluation A/c (Loss) | 21,429 | 32,142 | 21,429 | Balance b/d | 4,00,000 | 6,00,000 | 4,00,000 |
| Usha’s Capital A/c | – | – | 80,000 | Workmen Compensation Fund | 4,286 | 6,428 | 4,286 |
| Bank A/c | 1,00,000 | – | – | Usha’s Capital A/c | 80,000 | – | – |
| Kusum’s Loan A/c | 3,62,857 | – | – | ||||
| Balance c/d | – | 5,74,286 | 3,02,857 | ||||
| 4,84,286 | 6,06,428 | 4,04,286 | 4,84,286 | 6,06,428 | 4,04,286 | ||
| Balance c/d | – | 6,00,000 | 8,00,000 | Balance b/d | – | 5,74,286 | 3,02,857 |
| Bank A/c (WN3) | – | 25,714 | 4,97,143 | ||||
| – | 6,00,000 | 8,00,000 | – | 6,00,000 | 8,00,000 | ||
| Balance Sheet as at March 31, 2025 | ||||
| Liabilities | (₹) | Assets | (₹) | |
| Creditors | 1,00,000 | Land & Building | 5,20,000 | |
| Employee’s Provident Fund | 70,000 | Machinery (6,00,000 – 1,80,000) | 4,20,000 | |
| Workmen’s Compensation Claim | 15,000 | Stock | 2,00,000 | |
| Kusum’s Loan | 3,62,857 | Sundry Debtors (2,20,000 – 35,000) | 1,85,000 | |
| Capital A/c : | Bank | 6,22,857 | ||
| Sneh | 6,00,000 | |||
| Usha | 8,00,000 | 14,00,000 | ||
| 19,47,857 | 19,47,857 | |||
Working Notes
WN 1: Calculation of Gaining Ratio:
Old Ratio (Kusum, Sneh and Usha) = 2:3:2
New Ratio (Sneh and Usha) = 3:4
Gaining Ratio = New Ratio – Old Ratio
Sneh‘s share= 3/7-3/7=nil
Usha‘s share= 4/7-2/7=2/7
WN2: Adjustment of Goodwill:
Total Goodwill of the Firm = 2,80,000
Kusum’s Share of Goodwill = 2,80,000×2/7=80,000
It is to be adjusted by the Gaining partners i.e. only by Usha
WN3: Adjustment of Capital
Tatal capital of the firm before kusum’s retirement =14,00,000
New Ratio (Sneh and Usha) = 3:4
Sneha‘s new captial= 14,00,000×3/7=6,00,000
Usha‘s new capital= 14,00,000×4/7=8,00,000
| Particulars | Sneh | Usha |
| New Capital Balance | 6,00,000 | 8,00,000 |
| Adjusted Old Capital Balance | 5,74,286 | 3,02,857 |
| Cash brought in by the Partner | 25,714 | 4,97,143 |
WN4
| Cash at Bank A/c | |||
| Dr. | Cr. | ||
| Particulars | (₹) | Particulars | (₹) |
| Balance b/d | 2,00,000 | Kusum’s Capital A/c | 1,00,000 |
| Sneh’s Capital A/c | 25,714 | Balance c/d | 6,22,857 |
| Usha’s Capital A/c | 4,97,143 | ||
| 7,22,857 | 7,22,857 | ||
Question 50: (Lal, Bal, and Pal)
Lal, Bal and Pal are partners sharing profits in the ratio of 5 : 3 : 7. Lal retired from the firm. Bal and Pal decided to share future profits in the ratio of 2 : 3. The adjusted Capital Accounts of Bal and Pal showed balance of ₹ 49,500 and ₹ 1,05,750 respectively. The total amount to be paid to X is ₹ 1,35,750. This amount is to be paid by Bal and Pal in a manner that their capitals become proportionate to their new profit-sharing ratio. Calculate the amount to be brought in or to be paid to partners.
Answer:
New Capital = 49,500 + 1,05,750 + 1,35,750 = ₹ 2,91,000
Bal’s New Capital=2,91,000×2/5=1,16,400
Pal’s New Capital=2,91,000×3/5=1,74,600
Bal brings in ₹ 66,900 (1,16,400 – 49,500)
Pal brings in ₹ 68,850 (1,74,600 – 1,05,750)