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NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts chapter 4 - Reconstitution of a Partnership Firm – Retirement/Death of a Partner [Latest edition]

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Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts - Shaalaa.com

Chapter 4: Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Exercise

NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner Exercise [Pages 213 - 214]

Exercise | Q 1 | Page 213

What are the different ways in which a partner can retire from the firm?

Exercise | Q 2 | Page 213

Write the various matters that need adjustments at the time of retirement of partner/partners.

Exercise | Q 3 | Page 213

Distinguish between sacrificing ratio and gaining ratio.

Exercise | Q 4 | Page 214

Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?

Exercise | Q 5 | Page 214

Why a retiring/deceased partner is entitled to a share of goodwill of the firm?

NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner Exercise [Page 214]

Exercise | Q 1 | Page 214

Explain the modes of payment to a retiring partner.

Exercise | Q 2 | Page 214

How will you compute the amount payable to a deceased partner?

Exercise | Q 3 | Page 214

Explain the treatment of goodwill at the time of retirement or on the event of death of a partner?

Exercise | Q 4 | Page 214

Discuss the various methods of computing the share in profits in the event of death of a partner.

NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner Exercise [Pages 214 - 221]

Exercise | Q 1 | Page 214

Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at Rs 1,80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary Journal entries.

Exercise | Q 2 | Page 214

Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 2:3:5. Goodwill is appearing in the books at a value of Rs 60,000. Sangeeta retires and goodwill is valued at Rs 90,000. Saroj and Shanti decided to share future profits equally. Record necessary Journal entries.

Exercise | Q 3 | Page 214

Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3:2:1. On March 31, 2017, Naman retires.
The various assets and liabilities of the firm on the date were as follows:
Cash Rs 10,000, Building Rs 1,00,000, Plant and Machinery Rs 40,000, Stock Rs 20,000, Debtors Rs 20,000 and Investments Rs 30,000.
The following was agreed upon between the partners on Naman’s retirement:

(i)

Building to be appreciated by 20%.

(ii)

Plant and Machinery to be depreciated by 10%.

(iii)

A provision of 5% on debtors to be created for bad and doubtful debts.

(iv)

Stock was to be valued at Rs 18,000 and Investment at Rs 35,000.

Record the necessary journal entries to the above effect and prepare the Revaluation Account.

Exercise | Q 4 | Page 214

Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs 36,000 and Profit and Loss Account (Dr.) Rs 15,000.
Pass the necessary journal entries to the above effect.

Exercise | Q 5 | Page 215

Digvijay, Brijesh and Parakaram were partners in a firm sharing profits in the ratio of 2:2:1. Their Balance Sheet as on March 31, 2017 was as follows:

Liabilities Amt
(Rs.)
Assets Amt
(Rs.)
Creditors 49,000 Cash 8,000
Reserves 18,500 Debtors 19,000
Digvijay’s Capital 82,000

Stock

42,000
Brijesh’s Capital 60,000 Buildings 207,000
Parakaram’s Capital 75,500 Patents 9,000
  2,85,000   2,85,000

Brijesh retired on March 31, 2017 on the following terms:
(i) Goodwill of the firm was valued at Rs 70,000 and was not to appear in the books.
(ii)  Bad debts amounting to Rs 2,000 were to be written off.
(iii)  Patents were considered as valueless.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of Digvijay and Parakaram after Brijesh’s retirement.

Exercise | Q 6 | Page 215

RadhaSheela and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2017, Sheela retires from the firm. On that date, their Balance Sheet was as follows:

Liabilities Amt
(Rs.)
Amt
(Rs.)
Assets Amt (Rs.)
Trade Creditors   3,000 Cash-in-Hand 1,500
Bills Payable   4,500 Cash at Bank 7,500
Expenses Owing   4,500 Debtors 15,000
General Reserve   13,500

Stock

12,000
Capitals:   45,000 Factory Premises 22,500
Radha 15,000 Machinery 8,000
Sheela 15,000 Losse Tools 4,000
Meena 15,000    
    70,500   70,500

The terms were:
a) Goodwill of the firm was valued at Rs 13,500.
b) Expenses owing to be brought down to Rs 3,750.
c) Machinery and Loose Tools are to be valued at 10% less than their book value.
d) Factory premises are to be revalued at Rs 24,300.

Prepare:
1. Revaluation account
2. Partner’s capital accounts and
3. Balance sheet of the firm after retirement of Sheela.

Exercise | Q 7 | Page 216

Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3:2:1. Naresh retired from the firm due to his illness. On that date the Balance Sheet of the firm was as follows:

Books of Pankaj, Naresh and Saurabh
Balance Sheet as on March 31, 2017

Liabilities

Amount Rs

Assets

Amount Rs

General Reserve

12,000

Bank

7,600

Sundry Creditors

15,000

Debtors

6,000

 

Bills Payable

12,000

Less:Provision for Doubtful Debt

400

5,600

Outstanding Salary

2,200

 

 

Provision for Legal Damages

6,000

Stock

9,000

Capitals:

 

Furniture

41,000

Pankaj

46,000

 

Premises

80,000

Naresh

30,000

 

 

 

Saurabh

20,000

96,000

 

 

 

1,43,200

 

1,43,200

Additional Information:
(i) Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for Rs 1,200 and furniture to be brought up to Rs 45,000.
(ii) Goodwill of the firm be valued at Rs 42,000.
(iii) Rs 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.
(iv) New profit sharing ratio of Pankaj and Saurabh is decided to be 5:1.
Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.

Exercise | Q 8 | Page 217

Puneet, Pankaj and Pammy are partners in a business sharing profits and losses in the ratio of 2:2:1 respectively. Their balance sheet as on March 31, 2017 was as follows:

Books of Puneet, Pankaj and Pammy
Balance Sheet as on March 31, 2017

Liabilities

Amt
(
Rs.)

Assets

Amt (Rs.)

Sundry Creditors

1,00,000

Cash at Bank

20,000

Capital Accounts:

 

Stock

30,000

Puneet

60,000

 

Sundry Debtors

80,000

Pankaj

1,00,000

 

Investments

70,000

Pammy

40,000

2,00,000

Furniture

35,000

Reserve

 

50,000

Buildings

1,15,000

 

3,50,000

 

3,50,000

Mr. Pammy died on September 30, 2017. The partnership deed provided the following:
(i) The deceased partner will be entitled to his share of profit up to the date of death calculated on the basis of previous year’s profit.
(ii)  He will be entitled to his share of goodwill of the firm calculated on the basis of 3 years’ purchase of average of last 4 years’ profit. The profits for the last four financial years are given below: for 2013–14; Rs 80,000; for 2014–15, Rs 50,000; for 2015–16, Rs 40,000; for 2016–17, Rs 30,000.
The drawings of the deceased partner up to the date of death amounted to Rs 10,000. Interest on capital is to be allowed at 12% per annum. Surviving partners agreed that Rs 15,400 should be paid to the executors immediately and the balance in four equal yearly instalments with interest at 12% p.a. on outstanding balance.
Show Mr. Pammy’s Capital account, his Executor’s account till the settlement of the amount due.

Exercise | Q 9 | Page 217

Following is the Balance Sheet of Prateek, Rockey and Kushal as on March 31, 2017.

Books of Prateek, Rockey and Kushal
Balance Sheet as on March 31, 2017

Liabilities

Amt (Rs.)

Assets

Amt (Rs.)

Sundry Creditors

16,000

Bills Receivable

16,000

General Reserve

16,000

Furniture

22,600

Capital Accounts:

 

Stock

20,400

Prateek

30,000

 

Sundry Debtors

22,000

Rockey

20,000

 

Cash at Bank

18,000

Kushal

20,000

70,000

Cash in Hand

3,000

 

1,02,000

 

1,02,000

Rockey died on June 30, 2017. Under the terms of the partnership deed, the executors of a deceased partner were entitled to:

a) Amount standing to the credit of the Partner’s Capital account.
b) Interest on capital at 5% per annum.
c) Share of goodwill on the basis of twice the average of the past three years’ profit and
d) Share of profit from the closing date of the last financial year to the date of death on the basis of last year’s profit.

Profits for the year ending on March 31, 2015, March 31, 2016 and March 31, 2017 were Rs 12,000, Rs 16,000 and Rs 14,000 respectively. Profits were shared in the ratio of capitals.Pass the necessary journal entries and draw up Rockey’s capital account to be rendered to his executor.

Exercise | Q 10 | Page 218

NarangSuri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2015 was as follows:

Books of Suri, Narang and Bajaj
Balance Sheet as on April 1, 2015

Liabilities

Amt (Rs.)

Assets

Amt
(Rs.)

Bills Payable

12,000

Freehold Premises

40,000

Sundry Creditors

18,000

Machinery

30,000

Reserves

12,000

Furniture

12,000

Capital Accounts:

 

Stock

22,000

Narang

30,000

 

Sundry Debtors

20,000

 

Suri

20,000

 

Less: Reserve

1,000  

19,000

Bajaj

28,000

88,000

for Bad Debt

 

 

 

 

Cash

7,000

 

1,30,000

 

1,30,000

Bajaj retires from the business and the partners agree to the following:
a) Freehold premises and stock are to be appreciated by 20% and 15% respectively.
b) Machinery and furniture are to be depreciated by 10% and 7% respectively.
c) Bad Debts reserve is to be increased to Rs 1,500.
d) Goodwill is valued at Rs 21,000 on Bajaj’s retirement.
e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts.
Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

Exercise | Q 11 | Page 219

The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015:
                      Books of Rajesh, Pramod and Nishant
                       Balance Sheet as on March 31, 2015

Liabilities

Amt (Rs.)

Assets

Amt

(Rs.)

Bills Payable

6,250

Factory Building

12,000

Sundry Creditors

10,000

Debtors

10,500

 

Reserve Fund

2,750

Less: Reserve

500

10,000

Capital Accounts:

 

Bills Receivable

7,000

Rajesh

20,000

 

Stock

15,500

Pramod

15,000

 

Plant and Machinery

11,500

Nishant

15,000

50,000

Bank Balance

13,000

 

69,000

 

69,000

Pramod retired on the date of Balance Sheet and the following adjustments were made:
a) Stock was valued at 10% less than the book value.
b) Factory buildings were appreciated by 12%.
c) Reserve for doubtful debtsbecreated up to 5%.
d) Reserve for legal charges to be made at Rs 265.
e) The goodwill of the firmbefixed at Rs 10,000.
f) The capital of the new firmbefixed at Rs 30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2.
Pass journal entries and prepare the balance sheet of the reconstituted firm after transferring the balance in Pramod’s Capital account to his loan account.

Exercise | Q 12 | Page 219

Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.
                         Books of Jain, Gupta and Malik
                    Balance Sheet as on March 31, 2016    

Liabilities

Amt
(
Rs.)

Assets

Amt (Rs.)

Sundry Creditors

19,800

Land and Building

26,000

Telephone Bills Outstanding

300

Bonds

14,370

Accounts Payable

8,950

Cash

5,500

Accumulated Profits

16,750

Bills Receivable

23,450

 

 

Sundry Debtors

26,700

Capitals :

 

Stock

18,100

Jain

40,000

 

Office Furniture

18,250

Gupta

60,000

 

Plants and Machinery

20,230

Malik

20,000

1,20,000

Computers

13,200

 

1,65,800

 

1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.
A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.
The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.
Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

Exercise | Q 13 | Page 220

ArtiBharti and Seema are partners sharing profits in the proportion of 3:2:1 and their Balance Sheet as on March 31, 2016 stood as follows:

Books of Arti, Bharti and Seema
Balance Sheet as on March 31, 2016

Liabilities

Amt (Rs.)

Assets

Amt (Rs.)

Bills Payable

12,000

Buildings

21,000

Creditors

14,000

Cash in Hand

12,000

General Reserve

12,000

Bank

13,700

Capitals:

 

Debtors

12,000

Arti                      20,000

 

Bills Receivable

4,300

Bharti

12,000

 

Stock

1,750

Seema

8,000

40,000

Investment

13,250

 

78,000

 

78,000

Bharti died on June 12, 2016 and according to the deed of the said partnership, her executors are entitled to be paid as under:(a) The capital to her credit at the time of her death and interest thereon @ 10% per annum.
(b) Her proportionate share of reserve fund.
(c) Her share of profits for the intervening period will be based on the sales during that period, which were calculated as Rs 1,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to her share of profit to be calculated by taking twice the amount of the average profit of the last three years less 20%. The profits of the previous years were:
2013 – Rs 8,200
2014 – Rs 9,000
2015 – Rs 9,800
The investments were sold for Rs 16,200 and her executors were paid out. Pass the necessary journal entries and write the account of the executors of Bharti.

Exercise | Q 14 | Page 221

Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as on March 31, 2015 was as follows:

Books of Nithya, Sathya and Mithya
Balance Sheet at March 31, 2015

Liabilities

Amt (Rs.)

Assets

Amt (Rs.)

Creditors

14,000

Investments

10,000

Reserve Fund

6,000

Goodwill

5,000

Capitals:

 

Premises

20,000

Nithya

30,000

 

Patents

6,000

Sathya

30,000

 

Machinery

30,000

Mithya

20,000

80,000

Stock

13,000

 

 

 

Debtors

8,000

 

Bank

8,000

 

1,00,000

 

1,00,000

Mithya dies on August 1, 2015. The agreement between the executors of Mithya and the partners stated that:
(a) Goodwill of the firm be valued at `2 1/2` times the average profits of last four years. The profits of four years were : in 2011-12, Rs 13,000; in 2012-13, Rs 12,000; in 2013-14, Rs 16,000; and in 2014-15, Rs 15,000.
(b) The patents are to be valued at Rs 8,000, Machinery at Rs 25,000 and Premises at Rs 25,000.
(c) The share of profit of Mithya should be calculated on the basis of the profit of 2014-15.
(d) Rs 4,200 should be paid immediately and the balance should be paid in 4 equal half-yearly instalments carrying interest @ 10%.

Record the necessary journal entries to give effect to the above and write the executor’s account till the amount is fully paid. Also prepare the Balance Sheet of Nithya and Sathya as it would appear on August 1, 2015 after giving effect to the adjustments.

Chapter 4: Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Exercise
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Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts - Shaalaa.com

NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts chapter 4 - Reconstitution of a Partnership Firm – Retirement/Death of a Partner

NCERT solutions for Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts chapter 4 (Reconstitution of a Partnership Firm – Retirement/Death of a Partner) include all questions with solution and detail explanation. This will clear students doubts about any question and improve application skills while preparing for board exams. The detailed, step-by-step solutions will help you understand the concepts better and clear your confusions, if any. Shaalaa.com has the CBSE Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts solutions in a manner that help students grasp basic concepts better and faster.

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Concepts covered in Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner are Ascertaining the Amount Due to Retiring/Deceased Partner, Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio, Retirement and Death of a Partner - Gaining Ratio, Concept of Goodwill, Retirement Or Death of a Partner - Revaluation of Assets and Liabilities, Retirement Or Death of a Partner - Adjustment of Accumulated Profits and Losses, Disposal of Amount Due to Retiring Partner, Adjustment of Partners’ Capitals, Meaning of Retirement Or Death of a Partner.

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