Question

R, S and T were partners in a firm sharing profits in 2 : 2 : 1 ratio. On 1-4-2025 their Balance Sheet was as follows:

Liabilities	Amount (₹)	₹	Assets	Amount (₹)
Bank Loan		12,800	Cash	51,300
Sundry Creditors		25,000	Bills Receivable	10,800
Capitals		1,70,000	Debtors	35,600
R	80,000		Stock	44,600
S	50,000		Furniture	7,000
T	40,000		Plant and Machinery	19,500
Profit and Loss Ale		9,000	Building	48,000
		2,16,800		2,16,800

S retired from the firm on 1-4-2025 and his share was ascertained on the revaluation of assets as follows:

Stock ₹ 40,000; Furniture ₹ 6,000; Plant and Machinery ₹ 18,000; Building ₹ 40,000; ₹ 1,700 were to be provided for doubtful debts. The goodwill of the firm was valued at ₹ 12,000.

S was to be paid ₹ 21,680 in cash on retirement and the balance in three equal quarterly instalments (starting from 30th June 2025) along with interest @ 12% p.a.

Prepare Revaluation Account, Partner's Capital Accounts, S's Loan Account and Balance Sheet on 1-4-2025.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Stock A/c	4,600	By Loss t/f to capital A/cs:		16,800
To Furniture A/c	1,000	R	6,720
To Plant & Machinery A/c	1,500	S	6,720
To Building A/c	8,000	T	3,360
To Provision for Doubtful Debts	1,700
	16,800			16,800

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	R	S	T	Particulars	R	S	T
To Revaluation A/c - Loss	6,720	6,720	3,360	By Balance b/d	80,000	50,000	40,000
To S’s capital A/c	3,200	-	1,600	By P & L A/c	3,600	3,600	1,800
To Cash A/c	-	21,680	-	By R’s capital A/c	-	3,200	-
To S’s Loan A/c	-	30,000	-	By T’s capital A/c	-	1,600	-
To Balance c/d	73,680	-	36,840
	83,600	58,400	41,800		83,600	58,400	41,800

 

Balance Sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Bank Loan		12,800	Cash		29,620
Sundry Creditors		25,000	Bills Receivable		10,800
S’s Loan		30,000	Debtors	35,600	33,900
Capital A/cs:		1,10,520	Less: Provision for Doubtful Debts	1,700
R	73,680		Stock	44,600	40,000
T	36,840		Less: decreased	4,600
			Furniture	7,000	6,000
			Less: decreased	1,000
			Plant & Machinery	19,500	18,000
			Less: decreased	1,500
			Building	48,000	40,000
			Less: decreased	8,000
		1,78,320			1,78,320

 

Dr.	S’s Loan A/c				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
30.6.21	To Bank A/c	10,900	1.4.21	By Balance b/d	30,000
30.6.21	To Balance c/d	20,000	30.6.21	By Interest A/c	900
		30,900			30,900
30.9.21	To Bank A/c	10,600	1.7.21	By Balance b/d	20,000
30.9.21	To Balance c/d	10,000	30.9.21	By Interest A/c	600
		20,600			20,600
31.12.21	To Bank A/c	10,300	1.10.21	By Balance b/d	10,000
			31.12.21	By Interest A/c	300
		10,300			10,300

Working Notes:

1. Old ratio of R, S & T = 2 : 2 : 1

S retired, 

New ratio of R & T = 2 : 1

Gaining ratio = New ratio (i.e., 2 : 1)

2. Goodwill of the firm = ₹ 12,000

S’s Share of Goodwill = `12000xx2/5`

= ₹ 4,800