Question

Trisha, Urvi and Varsha were partners in a firm sharing profits and losses in the ratio of 5 : 4 : 1. Their Balance Sheet as at 31st March, 2023 was as follow:

BALANCE SHEET OF TRISHA, URVI AND VARSHA as at 31st March, 2023
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)
Capitals:			Fixed Assets	4,00,000
Trisha	2,00,000		Stock	1,00,000
Urvi	1,30,000		Debtors	1,50,000
Varsha	1,00,000	4,30,000	Cash	2,00,000
General Reserve		1,50,000	Total Assets	8,50,000
Creditors		2,70,000
Total		8,50,000	Total	8,50,000

Trisha retired on 1st April, 2023 and the partners agreed to the following terms:

1. Fixed Assets were found overvalued by ₹ 80,000.
2. Stock was taken over by Trisha at ₹ 80,000.
3. Goodwill of the firm was valued at ₹ 1,00,000 on Trisha's retirement and Trisha's share in the goodwill was adjusted through the Capital Accounts of remaining partners.
4. New profit sharing ratio between the remaining partners was agreed at 2 : 3.
5. Trisha was paid ₹ 50,000 on retirement and the balance was transferred to her loan account.

Pass necessary journal entries in the books of the firm on Trisha's retirement.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2023
Apr 1	General Reserve A/c   ...Dr.		1,50,000
	To Trisha’s Capital A/c			75,000
	To Urvi’s Capital A/c			60,000
	To Varsha’s Capital A/c			15,000
	(General reserve distributed)
Apr 1	Revaluation A/c   ...Dr.		80,000
	To Fixed Assets A/c			80,000
	(Value of Fixed Assets decreased)
Apr 1	Trisha’s Capital A/c   ...Dr.		80,000
	Revaluation A/c   ...Dr.		20,000
	To Stock A/c			1,00,000
	(Stock taken over by Trisha at reduced value)
Apr 1	Trisha’s Capital A/c   ...Dr.		50,000
	Urvi’s Capital A/c   ...Dr.		40,000
	Varsha’s Capital A/c   ...Dr.		10,000
	To Revaluation A/c			1,00,000
	(Loss on revaluation transferred)
Apr 1	Varsha’s Capital A/c   ...Dr.		50,000
	To Trisha’s Capital A/c			50,000
	(Trisha’s share of goodwill compensated by gaining partner Varsha)
Apr 1	Trisha’s Capital A/c   ...Dr.		1,95,000
	To Cash A/c			50,000
	To Trisha’s Loan A/c			1,45,000
	(Trisha’s Capital account settled partly by cash and balance transferred to her Loan A/c)

Working note:

(1) Gain by remaining partners:

Urvi = `2/5 - 4/10 = (4 - 4)/10 = 0`

Varsha = `3/5 - 1/10 = (6 - 1)/10 = 5/10 "(Gain)"`

Only Varsha is gaining, hence, she will compensate to Trisha for her share of goodwill i.e., `1,00,000 xx 5/10 = ₹ 50,000`

(2) Calculation of Trisha's final balance in her Capital:

	₹
Opening balance	2,00,000
Add: Share in General Reserve	75,000
Add: Share in Goodwill	50,000
	3,25,000
Less: Stock taken over	(80,000)
Share in Revaluation Loss	50,000
	1,95,000
Less: Cash Paid	(50,000)
Transferred to Trisha's Loan A/c	1,45,000