Question

Manoj, Naveen and Deepak were partners sharing profits and losses in the ratio of 4 : 3 : 2. As at 1st April, 2024, their Balance Sheet was as follows:

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Trade Creditors		7,000	Cash in hand		5,900
Capital		1,19,000	Debtors	19,000	17,600
Manoj	50,000		Less: Provision	1,400
Naveen	39,000		Stock		13,500
Deepak	30,000		Plant and Machinery		18,000
			Motor Car		20,000
			Building		48,000
			Goodwill		3,000
		1,26,000			1,26,000

Deepak retired on the above date as per the following terms:

1. Goodwill of the firm was valued at ₹ 21,000.
2. Stock to be appreciated by 10%.
3. Provision for doubtful debts should be 5% on debtors.
4. Machinery is to be valued at 5% more than its book value.
5. Motor Car is revalued at ₹ 15,500. Retiring partner took over Motor Car at this value.
6. Deepak be paid ₹ 2,000 in cash and balance be transferred to his loan account.

Show necessary journal entries. Prepare Revaluation Account, Capital Accounts and Opening Balance Sheet of continuing partners.

Answer 1

Journal
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(i)	Manoj’s Capital A/c         ...Dr.		2,667
	Naveen’s Capital A/c       ...Dr.		2,000
	To Deepak’s Capital A/c			4,667
	(Being Deepak's share of goodwill debited to the gaining partners in their gaining ratio of 4 : 3)

 

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Motor Car A/c	4,500	By Stock A/c		1,350
		By Provision A/c (excess)		450
		By Machinery A/c		900
		By Loss t/f to capital A/c		1,800
		Manoj	800
		Naveen	600
		Deepak	400
	4,500			4,500

 

Dr.	Partner’s capital A/c						Cr.
Particulars	Manoj	Naveen	Deepak	Particulars	Manoj	Naveen	Deepak
To Goodwill A/c	1,333	1,000	667	By bal. b/d	50,000	39,000	30,000
To Deepak’s Cap. A/c	2,667	2,000	-	By Manoj’s cap. A/c	-	-	2,667
To Revaluation A/c - Loss	800	600	400	By Naveen’s cap. A/c	-	-	2,000
To Motor Car A/c	-	-	15,500
To Cash A/c	-	-	2,000
To Deepak’s Loan A/c	-	-	16,100
To bal. c/d	45,200	35,400	-
	50,000	39,000	34,667		50,000	39,000	34,667

 

Balance sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Trade Creditors		7,000	Cash in hand A/c (5,900 - 2,000)		3,900
Deepak’s Loan		16,100	Debtors	19,000	18,050
Capital A/c’s		80,600	Less: Provision	950
Manoj	45,200		Stock	13,500	14,850
Naveen	35,400		Add: Appreciation	1,350
			Plant and Machinery	18,000	18,900
			Add: Appreciation	900
			Building		48,000
		1,03,700			1,03,700

Working Notes:

1. Provision for doubtful debts = `19,000xx5/100`

= ₹ 950

Provision to be made = Old Provision - New Provision

= 950 - 1400

= ₹ 450

2. Old ratio of Manoj, Naveen & Deepak = 4 : 3 : 2

Deepak retires,

New ratio of Manoj & Naveen = 4 : 3

New ratio = Gaining ratio (i.e., 4 : 3)

3. Goodwill = ₹ 3,000

Deepak’s share of Goodwill = `3,000xx2/9`

= ₹ 4,667