Question

Harish, Paresh and Mahesh were three partners as sharing profits and losses in the ratio of 5 : 4 : 1. Paresh retired on 31st March, 2017. His capital on 1st April, 2016, was ₹ 80,000. During the year 2016-17, he made drawings of Rs. 5,000. He was to be charged interest on drawings of ₹ 100.

The partnership deed provides that on the retirement of a partner, he will be entitled to:

1. His share of capital.
2. Interest on capital @ 10% per annum.
3. His share of profit for the year of his retirement.
4. His share of goodwill in the firm.
5. His share in the profit/loss on revaluation of assets and liabilities.

Additional information: 

1. Paresh’s share in the profits of the firm for the year 2016-17 was ₹ 20,000.
2. Goodwill of the firm was valued at ₹ 24,000.
3. The firm suffered a loss of ₹ 12,000 on the revaluation of assets and liabilities.
4. It was decided to transfer the amount due to Paresh to his loan account bearing interest @ 6% per annum. The loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2018.

You are required to prepare: 

1. Paresh’s Capital Account.
2. Paresh’s Loan Account till it is finally closed.

Answer 1

Dr.	Paresh’s Capital A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Drawings	5,000	By Balance b/d	80,000
To Invest on Drawings	100	By Interest on Capital A/c	8,000
To Revaluation A/c - Loss	4,800	By P/L Appropriation A/c	20,000
To Paresh’s Loan A/c	1,07,700	By Harish’s Capital A/c	8,000
		By Mahesh’s Capital A/c	1,600
	1,17,600		1,17,600

 

Dr.	Paresh’s Loan A/c				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
31/3/2017	To Balance c/d	1,07,700	31/3/2017	By Paresh’s Capital	1,07,700
		1,07,700			1,07,700
31/3/2018	To Bank A/c	60,312	1/4/2017	By Balance b/d	1,07,700
31/3/2018	To Balance c/d	53,850	31/3/2018	By Interest A/c	6,462
		1,14,162			1,14,162
31/3/2019	To Bank A/c	57,081	1/4/2018	By balance b/d	53,850
			31/3/2019	By Interest A/c	3,231
		57,081			57,081

Working Note:

Goodwill of the firm = ₹ 24,000

Paresh share in Goodwill = `24,000xx4/10` = ₹ 9,600

Harish = `9,600xx5/6` = ₹ 8,000

Mahesh = `9,600xx1/6` = ₹ 1,600