Question

Naik, Vinay and Vibhuti were partners in a firm sharing profits and losses in the ratio of 4 : 2 : 3. On 31^st March, 2025, their Balance Sheet was as follows:

Balance Sheet of Naik, Vinay and Vibhuti as at 31^st March, 2025

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:			Patents	54,000
Naik	1,20,000	3,60,000	Land and Building	2,07,000
Vinay	1,20,000		Stock	1,08,000
Vibhuti	1,20,000		Debtors	81,000
General Reserve		45,000	Cash at bank	54,000
Creditors		99,000
		5,04,000		5,04,000

Naik retired from the firm on the above date on the following terms:

1. Goodwill of the firm was valued at ₹ 1,80,000 and the same was to be treated without opening goodwill account.
2. Revaluation of assets and reassessment of liabilities resulted in a loss of ₹ 18,000.
3. Amount payable to Naik was transferred to his loan account.

Pass necessary journal entries for general reserve, revaluation of assets and reassessment of liabilities and goodwill on Naik’s retirement.

Answer 1

Journal Entries In the books of the Firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
Mar 31	General Reserve A/c   ...Dr.		45,000
	To Naik’s Capital A/c			20,000
	To Vinay’s Capital A/c			10,000
	To Vibhuti’s Capital A/c			15,000
	(Being general reserve distributed among partners in their old profit sharing ratio of 4 : 2 : 3)
Mar 31	Naik’s Capital A/c   ...Dr.		8,000
	Vinay’s Capital A/c   ...Dr.		4,000
	Vibhuti’s Capital A/c   ...Dr.		6,000
	To Revaluation A/c			18,000
	(Being revaluation loss distributed among partners in their old ratio of 4 : 2 : 3)
Mar 31	Vinay’s Capital A/c   ...Dr.		32,000
	Vibhuti’s Capital A/c   ...Dr.		48,000
	To Naik’s Capital A/c			80,000
	(Being Naik’s share of goodwill adjusted through gaining partners’ capital accounts in their gaining ratio of 2 : 3)
Mar 31	Naik’s Capital A/c   ...Dr.		2,12,000
	To Naik’s Loan A/c			2,12,000
	(Being totally balanced due to Naik transferring to his loan account)

Working Note:

1. Profit Sharing & Gaining Ratio

Old Ratio: Naik : Vinay : Vibhuti = 4 : 2 : 3

Since no new ratio or acquisition details are specified, the remaining partners share profits in their existing relative ratio.

Gaining Ratio (Vinay : Vibhuti): 2 : 3

2. Valuation of Goodwill

• Total Firm Goodwill: ₹ 1,80,000
• Naik's Share of Goodwill: `1,80,000 xx 4/9 = 8,0000`
• Vinay's Contribution: `80,000 xx 2/5 = 32,000`
• Vibhuti's Contribution: `80,000 xx 3/5 = 48,000`

3. Calculation of Amount Due to Naik

Opening Capital Balance:                                          1,20,000
Add: Share of General Reserve (45,000 × 4/9):        + 20,000
Add: Share of Goodwill:                                           + 80,000
Less: Share of Revaluation Loss (18,000 × 4/9):        − 8,000
Total Amount Transferred to Laon Account:             2,12,000