Question

Pawan, Qamar and Raj were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2023, the Balance Sheet of the firm stood as follows:

Balance Sheet
Liabilities	Amount ₹	Assets	Amount ₹
Sundry Creditors	8,000	Plant	30,000
Bills Payable	2,000	Furniture	20,000
General Reserve	6,000	Stock	22,000
Capitals:		Debtors	18,000
Pawan                     40,000		Cash at bank	4,000
Qamar                     20,000
Raj                           18,000	78,000
	94,000		94,000

On this date Qamar decided to retire and for this purpose:

1. Goodwill was valued at ₹ 40,000;
2. Plant was valued at ₹ 36,000;
3. Furniture was valued at ₹ 24,000;
4. Stock was considered as worth ₹ 2 0,000.

Qamar was paid through an amount, brought in by Pawan and Raj, in such a way, which made their capitals proportionate to their new profit-sharing ratio of 3 : 2 and left a balance of ₹ 12,000 in the Bank Account.

You are required to prepare Balance sheet of the new firm immediately after retirement of Qamar.

Answer 1

Balance Sheet (of the New Firm) as at 1st April, 2023
Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹
Sundry Creditors		8,000	Plant	36,000
Bills Payable		2,000	Furniture	24,000
Capital Accounts :			Stock	20,000
(Balancing Figure)			Debtors	18,000
Pawan (\[\frac{3}{5} \times 1,00,000\])	60,000		Cash at Bank	12,000
Raj ($\frac{2}{5} \times 1,00,000$)	40,000	1,00,000
		1,10,000		1,10,000

Hints:

(1) There will be no effect of goodwill on the balance sheet since retiring partner will be credited and remaining partners will be debited by the same amount.

(2) Balance Sheet of the new firm is prepared with revised figures of assets and liabilities as given in the question. Hence, the balancing figure will be the amount of capitals of partners Pawan and Raj which will be in their new ratio of 3 : 2.