Question

Sam, Tim and Uday are partners in a firm sharing profits and losses in the ratio of 3 : 3 : 2.

Their Balance Sheet as at 31st March, 2021, is as follows:

Balance Sheet of Sam, Tim and Uday As at 31st March, 2021
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Sundry Creditors		20,000	Cash at Bank	25,000
Capital Accounts:			Stock	10,000
Sam	50,000		Plant & Machinery	50,000
Tim	50,000		Land & Building	65,000
Uday	30,000	1,30,000
		1,50,000		1,50,000

Uday retired from the firm on 1^st April, 2021, subject to the following adjustments:

1. Stock to be reduced to ₹ 8,000.
2. One creditor of ₹ 10,000 to be paid by Uday privately, for which he is not to be reimbursed.
3. Goodwill of the firm to be valued at ₹ 24,000.
4. Out of the amount due to Uday, ₹ 3,800 to be paid to him immediately.
   The balance amount to be paid to him by the remaining partners privately in their new profit-sharing ratio, for which they were to be reimbursed.

You are required to pass the necessary journal entries on Uday’s retirement.

Answer 1

In the books of Sam, Tim and Uday Journal Entries
Date	Particulars	L.F.	Amount Dr. (₹)	Amount Cr. (₹)
2021
April 1	Revaluation A/c   ...Dr.		2,000
	To Stock A/c			2,000
	(Being the value of stock reduced)
	Revaluation A/c   ...Dr.		2,000
	To Sam’s Capital A/c			750
	To Tim’s Capital A/c			750
	To Uday’s Capital A/c			500
	(Being Loss on revaluation)
	Sam’s Capital A/c   ...Dr.		3,000
	Tim’s Capital A/c   ...Dr.		3,000
	To Uday’s Capital A/c			6,000
	(Being adjustment made for Goodwill)
	Bank A/c   ...Dr.		3,800
	To Uday’s Capital A/c			3,800
	(Being Amount paid to Uday immediately)

Working Note:

Uday’s Share of Goodwill = ₹ 24,000 × `2/8` = ₹ 6,000

Sam’s contribution = ₹ 6,000 × `3/6` = ₹ 3,000

Tim’s contribution = ₹ 6,000 × `3/6` = ₹ 3,000