# 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 X 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.

#### 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.

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

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
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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