Question

A, B and C are partners sharing profits in the ratio of their Capitals. Their Balance Sheet as at March 31, 2024 is as under:

Liabilities	₹	₹	Assets	₹
Capitals:		5,00,000	Bank	44,800
A	2,00,000		Sundry Debtors	1,72,000
B	2,00,000		Stock	3,00,000
C	1,00,000		Furniture and Fittings	46,000
Reserve Fund		40,000
Sundry Creditors		20,000
Outstanding Expenses		2,800
		5,62,800		5,62,800

A retired on this date.

Additional Information:

1. Furniture and fittings were undervalued by ₹ 4,000.
2. An amount of ₹ 12,000 due from Mr. Arun, a debtor, was doubtful and a provision for the same is required.
3. Stock be valued at 90%.
4. Goodwill of the firm be valued at ₹ 60,000.
5. ₹ 1,00,000 be transferred to A’s loan account and balance be paid through bank. Bank overdraft be arranged, if required.
6. B and C will share future profits in 5 : 3.

Prepare necessary ledger accounts and balance sheet of the firm after A’s retirement.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Stock A/c	30,000	By Furniture and fittings A/c		4,000
To Provision for Doubtful Debts A/c	12,000	By Loss t/f to capital A/cs:		38,000
		A	15,200
		B	15,200
		C	7,600
	42,000			42,000

 

Dr.	Partners’ Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Revaluation A/c - Loss	15,200	15,200	7,600	By Balance b/d	2,00,000	2,00,000	1,00,000
To A’s Capital A/c	-	13,500	10,500	By Reserve fund A/c	16,000	16,000	8,000
To A’s loan A/c	1,00,000	-	-	By B’s Capital A/c	13,500	-	-
To Bank A/c	1,24,800	-	-	By C’s Capital A/c	10,500	-	-
To Balance c/d	-	1,87,300	89,900
	2,40,000	2,16,000	1,08,000		2,40,000	2,16,000	1,08,000

 

Balance sheet of the firm after A’s retirement
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		20,000	Sundry Debtors	1,72,000	1,60,000
Outstanding Expenses		2,800	Less: Provision for doubtful debts	12,000
A’s Loan A/c		1,00,000	Stock		2,70,000
Capitals A/cs:		2,77,200	Furniture and Fittings		50,000
B	1,87,300
C	89,900
Bank Overdraft		80,000
		4,80,000			4,80,000

Working notes:

(i) Gaining ratio = New Ratio – Old Ratio 

B = `5/8-2/5=(25-16)/40=9/40`

C = `3/8-1/5=(15-8)/40=7/40`

Gaining ratio = 9 : 7

(ii) Goodwill of the firm = ₹ 60,000

A share in Goodwill = `60,000xx2/5` = 24,000

B = `24,000xx9/16` = ₹ 13,500

C = `24,000xx7/16` = ₹ 10,500