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Harish, Paresh and Mahesh Were Three Partners as Sharing Profits and Losses in the Ratio of 5:4:1. Paresh Retired on 31st March, 2017. His Capital on 1st April, 2016, Was - Accounts

Harish, Paresh and Mahesh were three partners as sharing profits and losses in the ratio of 5:4:1. Paresh retired on 31st March, 2017. His capital on 1st April, 2016, was Rs. 80,000. During the year 2016-17, he made drawings of Rs. 5,000. He was to be charged interest on drawings of ` 100. The partnership deed provides that on the retirement of a partner, he will be entitled to:

(i) His share of capital.

(ii) Interest on capital @ 10% per annum.

(iii) His share of profit for the year of his retirement.

(iv) His share of goodwill in the firm.

(v) His share in the profit/loss on revaluation of assets and liabilities.

Additional information:

(a) Paresh's share in the profits of the firm for the year 2016-17 was Rs. 20,000.

(b) Goodwill of the firm was valued at Rs. 24,000.

(c) The firm suffered a loss of Rs.12,000 on the revaluation of assets and liabilities.

(d) It was decided to transfer the amount due to Paresh to his loan account bearing interest @ 6% per annum. The loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2018.

You are required to prepare:

(i) Paresh's Capital Account.

(ii) Paresh's Loan Account till it is finally closed.

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Solution

                                                          Paresh’s Capital A/c 

Particulars Amount Particulars Amount
To Drawings 5,000 By Balance b/d 80,000
To Invest on Drawings 100 By IOC 8,000
To Revaluation 4,800 By P/L Appropriation A/c 20,000
To Paresh’s Loan A/c 1,07,700 By Harish’s Capital A/c 8,000
    By Mahesh’s Capital A/c 1,600
  1,17,600   1,17,600

                                                      Paresh’s Loan A/c

Date Particulars Amount Date Particulars Amount
31/3/2017 To Balance c/d 1,07,700 31/3/2017 By Paresh’s Capital 1,07,700
    1,07,700     1,07,700 
31/3/2018 To Bank 60,312 1/4/2017 By Balance b/d 1,07,700
31/3/2018 To Balanced c/d 53,850 31/3/2018 By IOL 6,462
    1,14,162     1,14,162 
31/3/2019 To Bank 57,081 1/4/2018 By balance b/d 53,850
      31/3/2019 By IOL 3,231
    57,081     57,081
Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
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