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X, Y And Z Were in Partnership Sharing Profits and Losses in the Proportions of 3 : 2 : 1. on 1st April, 2019, Y Retired from the Firm. on that Date, Their Balance Sheet Was: - Accountancy

Numerical

X, Y and Z were in partnership sharing profits and losses in the proportions of 3 : 2 : 1. On 1st April, 2019, Y retired from the firm. On that date, their Balance Sheet was:

Liabilities Amount
(₹)
Assets Amount
(₹)
Trade Creditors 30,000 Cash in Hand 15,000
Bills Payable 45,000 Cash at Bank 75,000
Expenses Owing 45,000 Debtors 1,50,000
General Reserve 1,35,000 Stock 1,20,000
Capital A/cs:      Factory Premises          2,25,000

X

1,50,000   Machinery 80,000

Y

1,50,000   Loose Tools 40,000

Z

1,50,000 4,50,000    
  7,05,000   7,05,000

   
The terms were:
(a) Goodwill of the firm was valued at ₹ 1,35,000 and adjustment in this respect was to be made in the continuing Partners' Capital Accounts without raising Goodwill Account.
(b) Expenses Owing to be brought down to ₹ 37,500.
(c) Machinery and Loose Tools are to be valued @ 10% less than their book value.
(d) Factory Premises are to be revalued at ₹ 2,43,000.
Show Revaluation Account, Partners' Capital Accounts and prepare the Balance Sheet of the firm after the retirement of Y.

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Solution

 

Revaluation Account

Dr.

 

       Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Machinery (80,000 × 10%)

8,000

Expenses Owing (45,000 –37,500)

7,500

Loose Tools (40,000 × 10%)

4,000

Factory Premises 

18,000

Profit transferred to:

 

(2,43,000 – 2,25,000)

 

X’s Capital A/c

6,750

 

 

 

Y’s Capital A/c

4,500

 

 

 

Z’s Capital A/c

2,250

13,500

 

 

 

25,500

 

25,500

 

Partners’ Capital Accounts

Dr.

 

Cr.

Particulars

X

Y

Z

Particulars

X

Y

Z

Y’s Capital A/c (Goodwill)

33,750

 

11,250

Balance b/d

1,50,000

1,50,000

1,50,000

 

 

 

 

General Reserve 

67,500

45,000

22,500

Y’s Loan A/c

 

2,44,500

 

Revaluation A/c

6,750

4,500

2,250

 

 

 

 

X’s Capital A/c  (Goodwill)

 

33,750

 

Balance c/d

1,90,500

 

1,63,500

Z’s Capital A/c (Goodwill)

 

11,250

 

 

2,24,250

2,44,500

1,74,750

 

2,24,250

2,44,500

1,74,750

 

Balance Sheet

as on April 01, 2019 (after Y’s Retirement)

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Trade Creditors

30,000

Cash in Hand

15,000

Bills Payable

45,000

Cash at Bank

75,000

Expenses Owing

37,500

Debtors

1,50,000

Y’s Loan

2,44,500

Stock

1,20,000

Capital A/c

 

Factory Premises

2,43,000

X

1,90,500

 

Machinery (8000 – 800)

72,000

Z

1,63,500

3,54,000

Loss tools (4,000 – 400)

36,000

 

7,11,000

 

7,11,000

Working Notes:

WN 1 Calculation of Gaining Ratio

Old Ratio (X, Y and Z) = 3 : 2 : 1

Y retires from the firm.

∴Gaining Ratio = 3: 1

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 1,35,000

Y’s Share of Goodwill = ₹`(1,35,000 xx 2/6) = ₹ 45,000`

This share of goodwill is to be distributed between X and Z in their gaining ratio (i.e. 3 : 1).

`"X's share" = ₹ (45,000 xx 3/4) = ₹ 33,750`

`"Z's share" = ₹ (45,000 xx 1/4) = ₹ 11,250`

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 35 | Page 84
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