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X, Y And Z Are Partners Sharing Profits in the Ratio of 4 : 3 : 2. Their Balance Sheet as at 31st March, 2019 Stood as Follows: - Accountancy

Numerical

X, Y and Z are partners sharing profits in the ratio of 4 : 3 : 2. Their Balance Sheet as at 31st March, 2019 stood as follows:
 

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

24,140

Cash at Bank 3,300
Capital A/cs:

 

Sundry Debtors

3,045

 

 X 12,000

 

Less: Provision for Doubtful Debts

105

2,940

 Y

9,000

 

Stock 4,800
 Z 6,000 27,000 Plant and Machinery 5,100
   

 

Land and Building 15,000
 

 

 

Y's Loan

20,000

 

51,140

 

51,140

 
Y retired on 1st April, 2019 after giving due notice. Following adjustments in the books of the firm were agreed:
(a) Land and Building be appreciated by 10%.
(b) Provision for Doubtful Debts is no longer necessary since all the debtors are good.
(c) Stock be appreciated by 20%.
(d) Adjustment be made in the accounts to rectify a mistake previously committed whereby Y was credited in excess by ₹ 810, while X and Z were debited in excess of ₹ 420 and ₹ 390 respectively.
(e) Goodwill of the firm be valued at ₹ 5,400 and Y's share of the same be adjusted to that of X and Z who were going to share in the ratio of 2 : 1.
(f) It was decide by X and Y to settle Y's account immediately on his retirement.
Prepare: (i) Revaluation Account; (ii) Partner's Capital Accounts and (iii) Balance Sheet of the firm after Y's retirement.

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Solution

Revaluation Account

Dr.

 

          Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Profit transferred to :

 

Land and Building (15,000 × 10%)

1,500

X’s Capital A/c

1,140

 

Provision for Doubtful Debts

105

Y’s Capital A/c

855

 

Stock (4,800 × 20%)

960

Z’s Capital A/c

570

2,565

 

 

 

2,565

 

2,565

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Y’s Capital A/c

1,200

 

600

Balance b/d

12,000

9,000

6,000

X’s Capital A/c (Rectification)

 

420

 

Revaluation A/c (Profit)

1,140

855

570

Z’s Capital A/c (Rectification)

 

390

 

X’s Capital A/c (Goodwill)

 

1,200

 

Y’s Loan A/c

 

10,845

 

Z’s Capital A/c (Goodwill)

 

600

 

Balanced c/d

12,360

 

6,360

Y’s Capital A/c (Rectification)

420

 

390

 

13,560

11,655

6,960

 

13,560

11,655

6,960

 Balance Sheet

as on March 31, 2019 (after Y’s Retirement)

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Creditors

24,140

Cash at Bank

3,300

 

 

Sundry debtors

3,045

 

 

Stock (4,800 + 960)

5,760

Capital A/cs:

 

Plant and Machinery

5,100

X

12,360

 

Land and Building

 

Z

6,360

18,720
 

 (15,000 + 1,500)
Y's Loan 
(W. N. 2)

16,500
9,155

 

42,860

 

42,860

Working Note:

1.Adjustment of Goodwill

Old Ratio (X, Y and Z) = 4 : 3 : 2

Y retires from the firm.

∴ Gaining Ratio = 4 : 2 or 2 : 1

Goodwill of the firm = Rs 5,400

Y’s Share of Goodwill = `54,000 xx 3/9 = "Rs" 1800`

This share of goodwill is to be distributed between X and Z in their gaining ratio (i.e. 2 : 1).

`"X's share" = 1,800 xx 2/3 = "Rs" 1,200`

`"Z's share" = 1,800 xx 1/3 = "Rs" 600`

2. Computation of final settlement amount payable to/ receivable from Y after his retirement:

  Existing Loan against Y = 20,000
  Less: Amount payable   =  10,845
                                               9,155
Amount receivable from Y by the firm = Rs.9,155

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 37 | Page 85
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