Question

N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31.3.2016 their Balance Sheet was as under: 

Balance Sheet of N, S and G                                                  as on 31.3.2016
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		1,65,000	Cash		1,20,000
General Reserve		90,000	Debtors	1,35,000
Capitals:			Less Provision	15,000	1,20,000
N	2,25,000		Stock		1,50,000
S	3,75,000		Machinery		4,50,000
G	4,50,000	10,50,000	Patents		90,000
			Building		3,00,000
			Profit & Loss Account		75,000
		13,05,000			13,05,000

G retired on the above date and it was agreed that:
(i) Debtors of Rs 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(ii) Patents will be completely written off and stock, machinery and building will be depreciated by 5%.
(iii) An unrecorded creditor of Rs 30,000 will be taken into account.
(iv) N and S will share the future profits in the ratio of 2 : 3 ratio.
(v) Goodwill of the firm on G’s retirement was valued at Rs 90,000.
Pass necessary journal entries for the above transactions in the books of the firm on G’s retirement.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	General Reserve A/c	Dr.		90,000
	To N’s Capital A/c				18,000
	To S’s Capital A/c				27,000
	To G’s Capital A/c				45,000
	(Balance in reserve distributed among all partners in old ratio)
	N’s Capital A/c	Dr.		15,000
	S’s Capital A/c	Dr.		22,500
	G’s Capital A/c	Dr.		37,500
	To Profit & Loss A/c				75,000
	(Debit balance P&L A/c written off among all partners in old ratio)
	N’s Capital A/c	Dr.		18,000
	S’s Capital A/c	Dr.		27,000
	To G’s Capital A/c				45,000
	(Goodwill adjusted in gaining ratio)
	Revaluation A/c	Dr.		1,65,000
	To Patent A/c				90,000
	To Stock A/c				7,500
	To Machinery  A/c				22,500
	To Building A/c				15,000
	To Creditors A/c				30,000
	(Decrease in assets and increase in liabilities debited to Revaluation A/c)
	Provision for Doubtful Debts A/c	Dr.		2,550
	To Revaluation A/c				2,550
	(Excess provision written back)
	N’s Capital A/c	Dr.		32,490
	S’s Capital A/c	Dr.		48,735
	G’s Capital A/c	Dr.		81,225
	To Revaluation A/c				1,62,450
	(Loss on revaluation debited to partners’ capital accounts in old ratio)
	G’s Capital A/c	Dr.		4,21,275
	To G’s Loan A/c				4,21,275
	(Amount due to G transferred to his loan A/c)