Question

Pratik, Krish and Susan are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31^st March, 2024, Krish retires and `1/3` of his share is taken by Pratik and the balance by Susan.

The extract of the Balance Sheet as at 31.03.2024 is as follows:

Balance Sheet (Extract) of Pratik, Krish and Susan As at 31.3.24
Liabilities	₹	₹	Assets	₹	₹
Investment Fluctuation Reserve		8,000	Investment		52,000
Employee Provident Fund		12,000	Debtors	20,000	18,000
			Less: P.D.D	(2,000)
Capital Accounts:
Pratik	50,000	1,03,000
Krish	32,500
Susan	21,000

Other information:

1. Bad debts amounted to ₹ 3,000.
2. Remaining debtors are all good.
3. Market value of the investments is ₹ 40,000.
4. Krish was given investments in full settlement.

You are required to pass the journal entries on the date of Krish’s retirement.

Answer 1

Journal of Pratik, Krish and Susan
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bad debts A/c   ...Dr.		3,000	-
	To Debtors A/c		-	3,000
	(Being Bad debts incurred)
2.	Provision for doubtful debts A/c   ...Dr.		2,000	-
	Revaluation A/c   ...Dr.		1,000	-
	To Bad Debts A/c		-	3,000
	(Being Bad debts written off)
3.	Investment Fluctuation Reserve A/c   ...Dr.		8,000	-
	Revaluation A/c   ...Dr.		4,000	-
	To Investment A/c		-	12,000
	(Being the difference in book value and market value of the investment adjusted through IFR and revaluation)
4.	Pratik’s Capital A/c   ...Dr.		2,500	-
	Krish’s Capital A/c   ...Dr.		1,500	-
	Susan’s Capital A/c   ...Dr.		1,000	-
	To Revaluation A/c		-	5,000
	(Being Revaluation loss distributed among the partners)
5.	Krish’s Capital A/c   ...Dr.		40,000	-
	To Investment A/c		-	40,000
	(Being Krish’s A/c settled by giving him investments)
6.	Pratik’s Capital A/c   ...Dr.		3,000	-
	Susan’s Capital A/c   ...Dr.		6,000	-
	To Krish’s Capital A/c		-	9,000
	(Being journal entry for hidden goodwill passed in the gaining ratio 1 : 2)