Question

Balance Sheet of Sameer, Yasmin and Saloni as at 31.3.2016
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Creditors		1,10,000	Cash		80,000
General Reserve		60,000	Debtors	90,000	80,000
Capitals:		7,00,000	Less: Provision	10,000
Sameer	3,00,000		Stock		1,00,000
Yasmin	2,50,000		Machinery		3,00,000
Saloni	1,50,000		Building		2,00,000
			Patents		60,000
			Profit and Loss Account		50,000
		8,70,000			8,70,000

On the above date, Sameer retired and it was agreed that:

1. Debtors of 4,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
2. An unrecorded creditor of 20,000 will be recorded.
3. Patents will be completely written off and 5% depreciation will be charged on stock, machinery and building.
4. Yasmin and Saloni will share future profits in the ratio of 3 : 2.
5. Goodwill of the firm on Sameer’s retirement was valued at ₹ 5,40,000.

Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s retirement.

Sameer, Yasmin and Saloni were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. On 31.3.2016, their Balance Sheet was as follows:

Balance Sheet of Sameer, Yasmin and Saloni as at 31.3.2016
Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Creditors		1,10,000	Cash		80,000
General Reserve		60,000	Debtors	90,000	80,000
Capitals:		7,00,000	Less: Provision	10,000
Sameer	3,00,000		Stock		1,00,000
Yasmin	2,50,000		Machinery		3,00,000
Saloni	1,50,000		Building		2,00,000
			Patents		60,000
			Profit and Loss Account		50,000
		8,70,000			8,70,000

On the above date, Sameer retired and it was agreed that:

1. Debtors of 4,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
2. An unrecorded creditor of 20,000 will be recorded.
3. Patents will be completely written off and 5% depreciation will be charged on stock, machinery and building.
4. Yasmin and Saloni will share future profits in the ratio of 3 : 2.
5. Goodwill of the firm on Sameer’s retirement was valued at ₹ 5,40,000.

Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s retirement.

Answer 1

Journal
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
(i)	General reserve A/c         ...Dr.		60,000
	To Sameer’s Capital A/c			24,000
	To Yasmin’s Capital A/c			18,000
	To Saloni’s Capital A/c			18,000
	(Being balance in reserve distributed among all partners in old ratio.)
(ii)	Sameer’s Capital A/c      ...Dr.		20,000
	Yasmin’s Capital A/c      ...Dr.		15,000
	Saloni’s Capital A/c        ...Dr.		15,000
	To Profit & Loss A/c			50,000
	(Being P & L A/c debit balance t/f to capital A/cs in old ratio 4 : 3 : 3)
(iii)	Yasmin’s Capital A/c      ...Dr.		1,62,000
	Saloni’s Capital A/c       ...Dr.		54,000
	To Sameer’s Capital A/c			2,16,000
	(Being Sameer’s share of goodwill debited to the gaining partners in their gaining ratio of 3 : 1)
(iv)	Bad debts A/c      ...Dr.		4,000
	To Debtors A/c			4,000
	(Being bad debts written off)
(v)	Provision for doubtful debts A/c   ...Dr.		4,000
	To Bad Debts A/c			4,000
	(Being Bad debts adjusted against provision for doubtful debts)
(vi)	Provision for doubtful debts A/c     ...Dr.		1,700
	To Revaluation A/c			1,700
	(Being excess provision credited to revaluation A/c)
(vi)	Revaluation A/c      ...Dr.		1,10,000
	To Creditors A/c			20,000
	To Patents A/c			60,000
	To Stock A/c			5,000
	To Machinery A/c			15,000
	To Building A/c			10,000
	(Being value of assets decreased & liabilities decreased)
(vii)	Sameer’s Capital A/c      ...Dr.		43,320
	Yasmin’s Capital A/c      ...Dr.		32,490
	Saloni’s Capital A/c      ...Dr.		32,490
	To Revaluation A/c			1,08,300
	(Being revaluation loss t/f to capital A/cs on old ratio i.e., 4 : 3 : 3)

 

Dr.	Sameer’s Capital A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Profit & Loss A/c	20,000	By balance b/d	3,00,000
To Revaluation A/c - Loss	43,320	By General reserve A/c	24,000
To Sameer’s loan A/c	4,76,680	By Yasmin’s Capital A/c	1,62,000
		By Saloni’s Capital A/c	54,000
	5,40,000		5,40,000

Working Note:

1. Calculation of Sameer’s Share of Goodwill

Gaining Ratio = New Ratio – Old Ratio

Yasmin: `3/5 - 3/10 = 3/10`

Saloni: `2/5 - 3/10 = 1/10`

Gaining Ratio Yasmin: Saloni = 3 : 1

Sameer’s Share of Goodwill = Rs `216000(540000xx4/10)`

Yasmin Share = `216000 xx 3/10 = 64800`

Saloni Share = `216000 xx 1/10 = 21600`

2. Calculation of Excess/Deficit Provision for Doubtful Debts

Required Provision (@5%) = `(90000 - 4000) xx 3/100 = 4300`

Existing Provision (after Writing bad-debts) = 6,000

Excess Provision (to be written back) = 1,700 (6,000 - 4,300)

3. Calculation of Sameer’s Loan Balance

Amount due to Sameer’s = Opening Capital + Credits – Debits

= 3,00,000 + (24,000 + 2,16,000) – (20,000 – 43,320)

= 3,00,000 + 2,40,000 – 63,320

Amount due to Sameer’s = ₹ 476680