Question

P, Q and R are partners in a firm. Q retires and his claim including his capital and his share of goodwill is ₹ 8,00,000. There was an unrecorded furniture valued at ₹ 60,000, three-fourth of which was given to an unrecorded creditor of ₹ 1,00,000 in settlement of his claim of ₹ 70,000 and remaining one-fourth was given to Q at ₹ 12,000 in part settlement of his claim. Balance of Q's claim was discharged by cheque.

Pass necessary Journal entries.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Revaluation A/c   ...Dr.		30,000
	To Creditors A/c			30,000
	(Being the remaining unrecorded liability of creditors recorded after partial settlement via furniture)
2.	Furniture A/c   ...Dr.		12,000
	To Revaluation A/c			12,000
	(Being the remaining 1/4th unrecorded furniture brought into the books at its agreed valuation)
3.	P's Capital A/c   ...Dr.		6,000
	Q's Capital A/c   ...Dr.		6,000
	R's Capital A/c   ...Dr.		6,000
	To Revaluation A/c			18,000
	(Being the net loss on revaluation distributed equally among the partners due to the absence of a specified profit-sharing ratio)
4.	Q's Capital A/c   ...Dr.		7,94,000
	To Furniture A/c			12,000
	To Bank A/c			7,82,000
	(Being the revised amount due to Q settled by handing over the furniture and paying the remaining balance by cheque)

Working note:

1. Adjustment of Unrecorded Furniture & Creditors

Total Unrecorded Furniture: ₹ 60,000

Total Unrecorded Creditor Claim: ₹ 1,00,000

Part A: 3/4th Furniture given to Creditors

Value of 3/4th Furniture = `60,000 xx 3/4 = 45,000`

Creditor's claim settled by this portion = ₹ 70,000

Remaining Unrecorded Liability to be recorded: 1,00,000 - 70,000 = 30,000 (debited to Revaluation Account)

Part B: 1/4th Furniture given to Q

Value of the remaining 1/4th Furniture = `60,000 xx 1/4 = 15,000`

Agreed value at which Q takes it = ₹ 12,000

Bringing this unrecorded asset into the books at its accepted value creates a revaluation gain of ₹ 12,000

2. Calculation of Net Revaluation Loss

Total Debit to Revaluation (Liability) = ₹ 30,000

Total Credit to Revaluation (Asset) = ₹ 12,000

Net Loss on Revaluation = 30,000 − 12,000 = 18,000

Each Partner's Share of Loss: 18,000 ÷ 3 = 6,000

3. Final Settlement Amount Due to Q 

Initial determined claim of Q = ₹ 8,00,000 

Less: Q's share of revaluation loss = ₹ 6,000

Revised Amount Due to Q: 8,00,000 − 6,000 = 7,94,000

Less: Portion settled via furniture = ₹ 12,000

Final Balance Paid by Cheque: 7,94,000 − 12,000 = 7,82,000