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.

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) 16,5009,155 42,860 42,860

Working Note:

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
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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