Question

Kamal, Rahul and Neeraj were partners in a firm sharing profits and losses in the ratio of 5: 3: 2. On 31st March, 2002, their Balance Sheet was as under:

Balance Sheet of Kamal, Rahul and Neeraj on 31st March, 2022
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:			Land and Building	1,70,000
Kamal	1,20,000	3,60,000	Plant and Machinery	2,60,000
Rahul	1,20,000		Stock	1,00,000
Neeraj	1,20,000		Debtors	80,000
General Reserve		1,20,000	Cash	50,000
Sundry Creditors		1,80,000
		6,60,000		6,60,000

On the above date, Rahul retired and following terms are agreed upon:

1. Goodwill of the firm was valued at ₹ 3,50,000.
2. An item of ₹ 10,000 included in sundry creditors is not likely to be claimed and hence written off. Stock was valued at ₹ 90,000.
3. Capital of the new firm was fixed a ₹  2,10,000 and the same will be adjusted in the profit sharing ratio of the remaining partners. For this purpose the required cash will be brought in or paid off as the case may be.
4. Amount payable to Rahul will be transferred to his loan account.

Prepare Revaluation Account and Partners' Capital Accounts on Rahul's retirement.

Answer 1

Dr.	Revaluation Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Stock A/c	10,000	By Sundry Creditors A/c	10,000
	10,000		10,000

 

Dr.	Partners' Capital Accounts						Cr.
Particulars	Kamal (₹)	Rahul (₹)	Neeraj (₹)	Particulars	Kamal (₹)	Rahul (₹)	Neeraj (₹)
To Rahul's Capital A/c	75,000	-	30,000	By Balance b/d	1,20,000	1,20,000	1,20,000
To Rahul's Loan A/c	-	2,61,000	-	By General Reserve A/c	60,000	36,000	24,000
To Balance c/d	1,05,000	-	1,14,000	By Kamal's Capital A/c (Goodwill)	-	75,000	-
				By Neeraj's Capital A/c  (Goodwill)	-	30,000	-
	1,80,000	2,61,000	1,44,000		1,80,000	2,61,000	1,44,000
To Cash A/c	-	-	54,000	By Balance b/d	1,05,000	-	1,14,000
To B.alance c/d	1,50,000	-	60,000	By Cash A/c	45,000	-	-
	1,50,000	-	1,14,000		1,50,000	-	1,14,000

Working Notes:

1. Goodwill of the Firm = ₹ 3,50,000
   Rahul's Share in Goodwill = `₹ 3,50,000 xx 3/10 `= ₹ 1,05,000
   Which will be compensated by Kamal and Neeraj in their gaining ratio, i.e., 5 : 2.
   Kamal will compensate = `₹ 1,05,000 xx 5/7`
   = ₹ 75,000
   Neeraj will compensate = `₹ 1,05,000xx 2/7 `
   = ₹ 30,000
2. Capital of new Firm = ₹ 2,10,000
   Kamal's New Capital = `₹ 2,10,000 xx 5/7`
   = ₹ 1,50,000
   Neeraj's New Capital =` ₹ 2,10,000 xx 2/7`
   = ₹ 60,000