Question

Following is the Balance Sheet of X, Y and Z as at 31st March, 2019. They shared profits in the ratio of 3 : 3 : 2. 

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors	2,50,000		Cash at Bank		50,000
General Reserve	80,000		Bills Receivable		60,000
Partner’s Loan A/cs:			Debtors	80,000
X	50,000		Less: Provision for Doubtful Debts	4,000	76,000
Y	40,000		Stock		1,24,000
Capital A/cs:			Fixed Assets		3,00,000
X	1,00,000		Advertisement Suspense A/c		16,000
Y	60,000		Profit and Loss A/c		4,000
Z	50,000	2,10,000
		6,30,000			6,30,000

On 1st April, 2019, Y decided to retire from the firm on the following terms:

1. Stock to be reduced by ₹ 12,000.
2. Advertisement Suspense Account to be written off. 
3. Provision for Doubtful Debts to be increased to ₹ 6,000.
4. Fixed Assets be appreciated by 10%.
5. Goodwill of the firm, valued at ₹ 80,000 and the amount due to the retiring partners be adjusted in X’s and Z’s Capital Accounts.

Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet to give effect to the above.

Following is the Balance Sheet of X, Y and Z as at 31st March, 2025. They shared profits in the ratio of 3 : 3 : 2. 

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors	2,50,000		Cash at Bank		50,000
General Reserve	80,000		Bills Receivable		60,000
Partner’s Loan A/cs:			Debtors	80,000
X	50,000		Less: Provision for Doubtful Debts	4,000	76,000
Y	40,000		Stock		1,24,000
Capital A/cs:			Fixed Assets		3,00,000
X	1,00,000		Advertisement Suspense A/c		16,000
Y	60,000		Profit and Loss A/c		4,000
Z	50,000	2,10,000
		6,30,000			6,30,000

 On 1st April, 2025, Y decided to retire from the firm on the following terms:

1. Stock to be reduced by ₹ 12,000.
2. Advertisement Suspense Account to be written off. 
3. Provision for Doubtful Debts to be increased to ₹ 6,000.
4. Fixed Assets be appreciated by 10%.
5. Goodwill of the firm, valued at ₹ 80,000 and the amount due to the retiring partners be adjusted in X’s and Z’s Capital Accounts.

Prepare Revaluation Account, Partner’s Capital Accounts and the Balance Sheet to give effect to the above.

Answer 1

Dr.	Revaluation Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Stock A/c		12,000	By Fixed Assets A/c	30,000
To Provision for Doubtful Debts		2,000
To Profit t/f to capital A/c
X	6,000
Y	6,000
Z	4,000	16,000
		30,000		30,000

 

Dr.	Partner’s capital A/c						Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
To P & L A/c	1,500	1,500	1,000	By bal. b/d	1,00,000	60,000	50,000
To adv. susp. A/c	6,000	6,000	4,000	By general reserve A/c	30,000	30,000	20,000
To Y’s Capital A/c	18,000	-	12,000	By  Revaluation A/c	6,000	6,000	4,000
To Y’s Loan A/c	-	1,18,500	-	To X’s Capital A/c	-	18,000	-
To bal c/d	1,10,500	-	57,000	To Z’s Capital A/c		12,000	-
	1,36,000	1,26,000	74,000		1,36,000	1,26,000	74,000

 

Balance sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount  (₹)	Amount (₹)
Sundry Creditors		2,50,000	Cash at bank		50,000
Partner’s Loan A/c		2,08,500	Bills Receivable		60,000
X	50,000		Debtors	80,000	74,000
Y	40,000		Less: Provision for bad debts	6,000
Capital A/c’s		1,67,500	Stock	1,24,000	1,12,000
X	1,10,500		Less: Depreciation	12,000
Y	57,000		Fixed Assets	3,00,000
			Add: Appreciation	30,000	3,30,000
		6,26,000			6,26,000

Working notes:

1. Old ratio of X, Y & Z = 3 : 3 : 2

Y retires,

New Ratio of X & Z = 3 : 2

Gaining ratio = New ratio (i.e., 3 : 2)

2. Goodwill = ₹ 80,000 

Y’s share of Goodwill = `80,000xx3/8`

= ₹ 30,000