Question

A, B and C were partners sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31-03-2024 stood as follows:

Liabilities	₹	₹	Assets	₹	₹
Sundry Creditors		12,500	Cash at Bank		1,500
General Reserve		18,000	Sundry Debtors	15,000	13,500
Capital A/cs:		81,000	Less: Provision for Bad Debts	1,500
A	40,000		Stock		20,500
B	21,000		Office Equipments		14,000
C	20,000		Furniture		12,000
			Building		50,000
		1,11,500			1,11,500

B retired on 1-4-2024 subject to the following conditions:

1. A typewriter purchased on 1-10-2023 for 2,000 debited to office expenses account is to be brought into account charging depreciation @ 10% p.a.
2. Building revalued at ₹ 75,000. Furniture is to be written-down by ₹ 2,000 and stock is reduced to ₹ 17,500.
3. Provision for bad debts is to be calculated @ 5% on debtors.
4. Goodwill of the firm is to be valued at ₹ 18,000.
5. Amount due to Bis to be transferred to his Loan Account.
6. A and C will share profits and losses in the ratio of 2 : 1 and their capitals are to be adjusted in the profit sharing ratio.

You are required to prepare: Revaluation Account, Partner’s Capital Accounts and Balance Sheet immediately after B’s retirement.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Furniture A/c		2,000	By Building A/c	25,000
To Stock A/c		3,000	By Provision for Doubtful debts A/c	750
To Depreciation office expenses		100	By Typewriter	2,000
To Profit t/f to Partners Capital A/cs:		22,650
A	11,325
B	7,550
C	3,775
		27,750		27,750

 

Dr.	Partners’ Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To B’s Capital A/c	3,000	-	3,000	By Balance b/d	40,000	21,000	20,000
To B’s Loan A/c	-	40,550	-	By Revaluation A/c - Profit	11,325	7,550	3,775
To Balance c/d	57,325	-	23,775	By General Reserve A/c	9,000	6,000	3,000
				By A’s Capital A/c	-	3,000	-
				By C’s Capital A/c	-	3,000	-
	60,325	40,550	26,775		60,325	40,550	26,775
To Balance c/d	54,067	-	27,033	By Balance b/d	57,325	-	23,775
				By Bank A/c	3,258	-	3,258
	54,067	-	27,033		54,067	-	27,033

 

Balance sheet of the firm after B’s retirement
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Sundry Creditors		12,500	Sundry Debtors	15,000	14,250
B’s Loan A/c		40,550	Less: Provision for doubtful debts	750
Capitals A/cs:		81,100	Stock		17,500
A	54,067		Furniture		10,000
C	27,033		Building		75,000
			Office Equipments		14,000
			Cash at Bank		1,500
			Typewriter	2,000	1,900
			Less: Depreciation on office expense	100
		1,34,150			1,34,150

Working notes:

(i) Gaining ratio = New Ratio – Old Ratio 

A = `2/3-3/6=(12-9)/18=3/18`

C = `1/3-1/6=(6-3)/18=3/18`

Gaining ratio = 3 : 3

(ii) Goodwill of the firm = ₹ 18,000

B share in Goodwill = `18,000xx2/6` = ₹ 6,000

A = `6,000xx3/6` = ₹ 3,000

C = `6,000xx3/6` = ₹ 3,000