Question

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z retires from the firm on 31st March, 2019. On the date of Z's retirement, the following balances appeared in the books of the firm:
General Reserve ₹ 1,80,000
Profit and Loss Account (Dr.) ₹ 30,000

Workmen Compensation Reserve ₹ 24,000 which was no more required
Employees' Provident Fund ₹ 20,000.
Pass necessary Journal entries for the adjustment of these items on Z's retirement.

Answer 1

Journal

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019 Mar.31	General Reserve A/c	Dr.		1,80,000
	Workmen Compensation Reserve A/c	Dr.		24,000
	To X’s Capital A/c				1,02,000
	To Y’s Capital A/c				68,000
	To Z’s Capital A/c				34,000
	(Accumulated profits distributed among partners in old ratio)
	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		10,000
	Z’s Capital A/c	Dr.		5,000
	To Profit and Loss A/c				30,000
	(Debit balance in Profit and Loss A/c distributed among partners in old ratio)

Working Notes:

WN1: Calculation of Share in Credit Balance of Reserves

Total Credit Balance of Reserves = General Reserve + WCF

                                       = `1,80,000 + 24,000 = 2,04,000`

 

`"X's share" = 2,04,000 xx 3/6 = 1,02,000`

`"Y's share" = 2,04,000 xx 2/6 = 68,000`

`"Z's share" = 2,04,000 xx 1/6 = 34,000`

 

WN2: Calculation of Share in Debit Balance of Profit and Loss A/c

`"X's share" = 30,000 xx 3/6 = 15,000`

`"Y's share" = 30,000 xx 2/6 = 10,000`

`"Z's share" = 30,000 xx 1/6 = 5,000`

 

Note: Employees’ Provident Fund will not be distributed as it is a liability and not accumulated profit.