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The Balance Sheet Of X, Y And Z Who Were Sharing Profits in the Ratio of 5 : 3 : 2 as at 31st March, 2019 is as Follows: - Accountancy

Numerical

The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2019 is as follows:

Liabilities Assets
Creditors 50,000 Cash at Bank 40,000
Employees' Provident Fund 10,000 Sundry Debtors 1,00,000
Profit and Loss A/c 85,000 Stock 80,000
Capital A/cs:   Fixed Assets 60,000
40,000      
          Y 62,000      
          Z 33,000 1,35,000    
  2,80,000   2,80,000

    
X retired on 1st April, 2019 and Y and Z decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for ₹ 10,000, is settled at ₹ 8,000.
The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners' Capital Accounts.

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Solution

Revaluation Account

Dr.

                                                                   Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Fixed Assets A/c (60,000 – 57,500)

2,500

Creditors (10,000 – 8,000)

2,000

Provision for Doubtful Debts

5,000

Loss on Revaluation transferred to:

 

 

 

X

2,750

 

 

 

Y

1,650

 

 

 

Z

1,100

5,500

 

7,500

 

7,500

 

Partners’ Capital Accounts

Dr.

                                                                                  Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Revaluation A/c (Loss)

2,750

1,650

1,100

Balance b/d

40,000

62,000

33,000

X’s Capital A/c

24,000

16,000

Profit & Loss A/c

42,500

25,500

17,000

Balance c/d

1,19,750

61,850

32,900

Y’s Capital A/c

24,000

 

 

 

 

Z’s Capital A/c

16,000

 

1,22,500

87,500

50,000

 

1,22,500

87,500

50,000

Bank A/c

1,19,750

Balance b/d

1,19,750

61,850

32,900

Balance c/d

1,18,500

79,000

Bank A/c

56,650

46,100

 

1,19,750

1,18,500

79,000

 

1,19,750

1,18,500

79,000

 

Working Notes

WN 1 Calculation of Gaining Ratio 

Old Ratio (X, Y and Z) = 5:3:2

New Ratio (Y and Z) = 3:2

Gaining Ratio = New Ratio – Old Ratio

`"Y's share" = 3/5 - 3/10 = 3/10`

`"Z's share" = 2/5 - 2/10 = 2/10`

Hence, gaining ratio is 3 : 2.

WN2 Adjustment of Goodwill

Total Goodwill of the Firm = 80,000

`"X's share in goodwill" = 5/10 xx 80,000`

                                      = `40,000`

To be borne by Gaining partners in their Gaining Ratio i.e. 3:2

`"Y's share" = 40,000 xx 3/5 = 24,000`

`"Z's share" = 40,000 xx 2/5 = 16,000`


WN3 Adjustment of Capital

X’s Capital before adjustment = 1,19,750

Y’s Capital before adjustment = 61,850

Z’s Capital before adjustment = 32,900


`"New profit sharing Ratio" = 3 : 2`

`"Y's share in new capital" = 3/5 xx 1,97,500 = 1,18,500`

`"Z's share in new capital" = 2/5 xx 1,97,500 = 79,000`
 

Particulars

Y

Z

 New Capital Balance

1,18,500

79,000

 Adjusted Old Capital Balance

61,850

32,900

Cash brought in by the Partner

56,650

46,100


WN4

Cash at Bank A/c

Dr.

                                                                        Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Balance b/d

40,000

Creditors

8,000

Y’s Capital A/c

56,650

X’s Capital A/c

1,19,750

Z’s Capital A/c

46,100

Balance c/d

15,000

 

1,42,750

 

1,42,750

Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 6 Retirement/Death of a Partner
Exercise | Q 53 | Page 92
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