Question

X; Y and Z were partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their capital accounts showed the following balances:

	₹
X	1,80,000
Y	1,50,000
Z	1,20,000

Z retired on 31st March, 2022. All the partners agreed to revalue certain assets as follows:

	Book value as on 31st March, 2022	Revised Value
Plant & Machinery	1,22,000	1,30,000
Furniture	90,000	88,000

Goodwill was agreed to be valued at ₹ 54,000. Z’s current account at the date of retirement showed a credit balance of ₹ 11,000. At the date of retirement Z was given 75,000 in cash and the balance were transferred to his loan account and were repaid (at the end of each year) in four equal instalments plus interest at 6% per annum on the annual balance.

After Z’s retirement, profits were to be shared in the ratio of 2 : 1 and all assets (except goodwill) would appear at their revised values.

You are required to show the Partnership Accounts giving effect to these transactions.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Assets	Amount (₹)
To Furniture A/c		2,000	By Plant & Machinery	8,000
To Profit t/f to capital A/cs:
X	3,000
Y	2,000
Z	1,000	6,000
		8,000		8,000

 

Dr.	Partner’s Capital A/c						Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
To Z’s Capital A/c (Goodwill)	9,000	-	-	By Balance b/d	1,80,000	1,50,000	1,20,000
To Z’s loan A/c	-	-	66,000	By Revaluation A/c - Profit	3,000	2,000	1,000
To Cash A/c	-	-	75,000	By X’s Capital A/c (Goodwill)	-	-	9,000
To Balance c/d	1,74,000	1,52,000	-	By Z’s Current A/c	-	-	11,000
	1,83,000	1,52,000	1,41,000		1,83,000	1,52,000	1,41,000

 

Dr.	Z’s loan A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
31-3-2022		31-3-2022
To Balance c/d	66,000	By Z’s Capital A/c	66,000
31-3-2023		1-4-2022
To Bank A/c	20,460	By Balance b/d	66,000
(16,500 + 3,960)		31-3-2023
To Balance c/d	49,500	By Interest A/c (66,000 × 6%)	3,960
	69,960		69,960
31-3-2024		1-4-2023
To Bank A/c (16,500 + 2,970)	19,470	By Balance b/d	49,500
To Balance c/d	33,000	31-3-2024
		By Interest A/c (49,500 × 6%)	2,970
	52,470		52,470
31-3-2025		1-4-2024
To Bank A/c (16,500 + 1,980)	18,480	By Balance b/d	33,000
To Balance c/d	16,500	31-3-2025
		By Interest A/c (33,000 × 6%)	1,980
	34,980		34,980
31-3-205		1-4-2025
To Bank A/c (16,500 + 990)	17,490	By Balance b/d	16,500
		31-3-2026
		By Interest A/c (16,500 × 6%)	990
	17,490		17,490

Working Note:

Z’s share of goodwill amounting to ₹ 9,000 (i.e. `1/6` % of 54,000) has been credited to B and debited to X and Y in their gaining ratio calculated as below:

X = `2/3-3/6=(12-9)/18=3/18`

Y = `1/3-2/6=(6-6)/18=0/18`

Gaining ratio = 3 : 0