# TS Grewal solutions for Class 12 Accountancy - Double Entry Book Keeping Volume 1 chapter 6 - Retirement/Death of a Partner [Latest edition]

## Chapter 6: Retirement/Death of a Partner

Exercise
Exercise [Pages 77 - 102]

### TS Grewal solutions for Class 12 Accountancy - Double Entry Book Keeping Volume 1 Chapter 6 Retirement/Death of a Partner Exercise [Pages 77 - 102]

Exercise | Q 1 | Page 77

A, B and C were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of the remaining partners if C retires.

Exercise | Q 2 | Page 77

From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 : 5 : 4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5 : 4 : 1. P retires from the firm.

Exercise | Q 3 | Page 77

R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1 : 2. Calculate the new profit-sharing ratio.

Exercise | Q 4 | Page 77

A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. A retires, assuming B and C will share profits in the ratio of 2 : 1. Determine the gaining ratio.

Exercise | Q 5 | Page 77

X, Y and Z are partners sharing profits in the ratio of 1/2, 3/10, and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm.

Exercise | Q 6 | Page 77

(a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 2. C retires from the business. A is acquiring 4/9 of C's share and balance is acquired by B. Calculate the new profit-sharing ratio and gaining ratio.

Exercise | Q 7 | Page 78

Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Exercise | Q 8 | Page 78

A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profit-sharing ratio.

Exercise | Q 9 | Page 78

A, B, and C are partners sharing profits in the ratio of 5 : 3 : 2. C retires and his share is taken by A. Calculate new profit-sharing ratio of A and B.

Exercise | Q 10 | Page 78

P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that profit-sharing ratio between Q and R will be same as existing between P and Q. Calculate New profit-sharing ratio and Gaining Ratio.

Exercise | Q 11 | Page 78

Murli, Naveen and Omprakash are partners sharing profits in the ratio of 3/8, 1/2 and 1/8. Murli retires and surrenders 2/3rd of his share in favour of Naveen and remaining share in favour of Omprakash. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Exercise | Q 12 | Page 78

A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from the firm. Calculate new profit-sharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C.
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3 : 1.
(d) If B gives his share to A only.

Exercise | Q 13 | Page 78

L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at ₹ 72,000. Calculate M's share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.

Exercise | Q 14 | Page 78

P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2019, S retired from the firm. On S's retirement, goodwill of the firm was valued at ₹ 4,20,000. New profit-sharing ratio among P, Q and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary Journal entry for the treatment of goodwill in the books of the firm on S's retirement.

Exercise | Q 15 | Page 78

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

Exercise | Q 16 | Page 78

A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at ₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.

Exercise | Q 17 | Page 79

Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ​₹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at ₹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.

Exercise | Q 18 | Page 79

X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Y retires and at the time of Y's retirement, goodwill is valued at ₹ 84,000. X and Z decided to share future profits in the ratio of 2 : 1. Pass the necessary Journal entries through Goodwill Account.

Exercise | Q 19 | Page 79

A, B, and C are partners sharing profits in the ratio of 4/9: 3/9: 2/9. B retires and his capital after making adjustments for reserves and gain (profit) on revaluation stands at ₹ 1,39,200. A and C agreed to pay him ₹ 1,50,000 in full settlement of his claim. Record necessary journal entry for adjustment of goodwill if the new profit-sharing ratio is decided at 5: 3.

Exercise | Q 20 | Page 79

M, N and O are partners in a firm sharing profits in the ratio of 3 : 2 : 1. Goodwill has been valued at ₹ 60,000. On N's retirement, M and O agree to share profits equally. Pass the necessary Journal entry for treatment of N's share of goodwill.

Exercise | Q 21 | Page 79

A, B, C and D are partners in a firm sharing profits, in the ratio of 2 : 1 : 2 : 1. On the retirement of C, Goodwill was valued ₹ 1,80,000. A, B and D decide to share future profits equally. Pass the necessary Journal entry for the treatment of goodwill.

Exercise | Q 22 | Page 79

A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals were A − ₹ 1,00,000; B − ₹ 80,000 and C − ₹ 60,000 respectively. On 1st April, 2009, A retired from the firm and the new profit sharing ratio between B and C was decided as 1 : 4. On A's retirement, the goodwill of the firm was valued at ₹ 1,80,000. Showing your calculations clearly, pass the necessary Journal entry for the treatment of goodwill on A's retirement.

Exercise | Q 23 | Page 79

X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. Z retired and on the date of his retirement, following adjustments were agreed upon:
(a) The value of Furniture is to be increased by ₹ 12,000.
(b) The value of stock to be decreased by ₹ 10,000.
(c) Machinery of the book value of ₹ 50,000 is to be depreciated by 10%.
(d) A Provision for Doubtful Debts @ 5% is to be created on debtors of book value of ₹ 40,000.
(e) Unrecorded Investment worth ₹ 10,000.
(f) An item of ₹ 1,000 included in bills payable is not likely to be claimed, hence should be written back.
Pass necessary Journal entries.

Exercise | Q 24 | Page 80

A, B and C were partners, sharing profits and losses in the ratio of 2 : 2 : 1. B decides to retire on 31st March, 2019. On the date of his retirement, some of the assets and liabilities appeared in the books as follows:
Creditors ₹ 70,000; Building ₹ 1,00,000; Plant and Machinery ₹ 40,000; Stock of Raw Materials ₹ 20,000; Stock of Finished Goods ₹ 30,000 and Debtors ₹ 20,000.
Following was agreed among the partners on B's retirement:
(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be reduced by 10%.
(c) A Provision of 5% on Debtors to be created for Doubtful Debts.
(d) Stock of Raw Materials to be valued at ₹ 18,000 and Finished Goods at ₹ 35,000.
(e) An Old Computer previously written off was sold for ₹ 2,000 as scrap.
(f) Firm had to pay ₹ 5,000 to an injured employee.
Pass necessary Journal entries to record the above adjustments and prepare the Revaluation Account.

Exercise | Q 25 | Page 80

Ramesh wants to retire from the firm. The gain (profit) on revaluation on that date was ₹ 12,000. Mohan and Rahul want to share this in their new profit-sharing ratio of 3 : 2. Ramesh wants this to be shared equally. How is the profit to be shared? Give reasons.

Exercise | Q 26 | Page 80

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z retires from the firm on 31st March, 2019. On the date of Z's retirement, the following balances appeared in the books of the firm:
General Reserve ₹ 1,80,000
Profit and Loss Account (Dr.) ₹ 30,000

Workmen Compensation Reserve ₹ 24,000 which was no more required
Employees' Provident Fund ₹ 20,000.
Pass necessary Journal entries for the adjustment of these items on Z's retirement.

Exercise | Q 27 | Page 80

Asha, Naveen and Shalini were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at a value of ₹ 80,000 and General Reserve at ₹ 40,000. Naveen decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at ₹ 1,20,000. The new profit-sharing ratio decided among Asha and Shalini is 2 : 3.
Record necessary Journal entries on Naveen's retirement.

Exercise | Q 28 | Page 81

Ram, Laxman and Bharat are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 1,80,000. Laxman retires and at the time of his retirement, goodwill is valued at ₹ 2,52,000. Ram and Bharat decided to share future profits in the ratio of 2 : 1. The Profit for the first year after Laxman's retirement amount to ₹ 1,20,000. Give the necessary Journal entries to record goodwill  and to distribute the profit. Show your calculations clearly.

Exercise | Q 29 | Page 81

Partnership Deed of C and D, who are equal partners, has a clause that any partner may retire from the firm on the following terms by giving a six-month notice in writing:
The retiring partner shall be paid−
(a) the amount standing to the credit of his Capital Account and Current Account.
(b) his share of profit to the date of retirement, calculated on the basis of the average profit of the three preceding completed years.
(c) half the amount of the goodwill of the firm calculated at 11/2 times the average profit of the three preceding completed years.
C gave a notice on 31st March, 2017 to retire on 30th September, 2017, when the balance of his Capital Account was ₹ 6,000 and his Current Account (Dr.) ₹ 500. Profits for the three preceding completed years ended 31st March, were: 2015 − ₹ 2,800; 2016 − ₹ 2,200 and 2017 − ₹ 1,600. What amount is due to C as per the partnership agreement?

Exercise | Q 30 | Page 81

X, Y and were partners in a firm sharing profits in the ratio of 2 : 2 : 1. Their Balance Sheet as at 31st March, 2019 was:

 Liabilities Amount(₹) Assets Amount​(₹) Creditors 49,000 Cash 8,000 Reserve 18,500 Debtors 19,000 Capital A/cs:   X 82,000 Stock 42,000 Y 60,000 Building 2,07,000 Z 75,500 2,17,500 Patents 9,000 2,85,000 2,85,000

Y retired on 1st April, 2019 on the following terms:
(a) Goodwill of the firm was valued at ₹ 70,000 and was not to appear in the books.
(b) Bad Debts amounted to ₹ 2,000 were to be written off.
(c) Patents were considered as valueless.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of and Z after Y's retirement.

Exercise | Q 31 | Page 82

C

 Liabilities Amount(₹) Assets Amount(₹) Trade creditors 53,000 Bank 60,000 Employees' Provident Fund 47,000 Debtors 60,000 Kanika's Capital 2,00,000 Stock 1,00,000 Disha's Capital 1,00,000 Fixed assets 2,40,000 Kabir's Capital 80,000 Profit and Loss A/c 20,000 4,80,000 4,80,000

Kanika retired on 1st April, 2016. For this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of three completed years preceding the date of retirement. The profits for the year:
2013-14 were ₹ 1,00,000 and for 2014-15 were ₹ 1,30,000.
(b) Fixed Assets were to be increased to ₹ 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to her Loan Account.
​Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the reconstituted firm.

Exercise | Q 32 | Page 82

The Balance Sheet of X, Y and Z who were sharing profits in ratio of their capitals stood as follows at 31st March, 2019:

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 13,800 Cash at Bank 11,000 Capital A/cs: Sundry Debtors 10,000 X 45,000 Less: Provision for Doubtful Debts 200 9,800 Y 30,000 Stock 16,000 Z 15,000 90,000 Plant and Machinery 17,000 Land and Building 50,000 1,03,800 1,03,800

Y retired on 1st April, 2019 and the following terms:
(a) Out of the insurance premium debited to Profit and Loss Account, ₹ 1,500 to be carried forward as Prepaid Insurance.
(b) Provision for Doubtful Debts to be brought up to 5% of Sundry Debtors.
(c) Land and Building to be appreciated by 20%.
(d) A provision of ₹ 4,000 be made in respect of outstanding bills for repairs.
(e) Goodwill of the firm was determined at ₹ 21,600.
Y's share of goodwill be adjusted to that of X and Z who will share profits in future in the ratio of 3 : 1.
Pass necessary Journal entries and give the Balance Sheet after Y's retirement.

Exercise | Q 33 | Page 83

N, S and G were partners in a firm sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2016 their Balance Sheet was as under:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 1,65,000 Cash 1,20,000 General Reserve 90,000 Debtors 1,35,000 Capitals: Less: Provision 15,000 1,20,000 N 2,25,000 Stock 1,50,000 S 3,75,000 Machinery 4,50,000 G 4,50,000 10,50,000 Patents 90,000 Building 3,00,000 Profit and Loss Account 75,000 13,05,000 13,05,000

G retired on the above date and it was agreed that:
(a) Debtors of ₹ 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building will be depreciated by 5%.
(c) An unrecorded creditor of ₹ 30,000 will be taken into account.
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at ₹ 90,000.
Pass necessary Journal entries for the above transactions in the books of the firm on G's retirement.

Exercise | Q 34 | Page 83

A, B and C are partners in a firm, sharing profits and losses as A 1/3, B 1/2 and C 1/6 respectively. The Balance Sheet of the firm as at 31st March, 2019 was:

 Liabilities ₹ Assets ₹ Capital A/cs: Building 50,000 A 30,000 Plant and Machinery 40,000 B 40,000 Furniture 10,000 C 25,000 95,000 Stock 25,000 General Reserve 16,000 Debtors 18,000 Sundry Creditors 25,000 Less: Provision for Doubtful Debts 500 17,500 Loan Payable 15,000 Cash in Hand 8,500 1,51,000 1,51,000

​C retires on 1st April, 2019 subject to the following adjustments:
(a) Goodwill of the firm be valued at ₹ 24,000. C's share of goodwill be adjusted into the accounts of A and B who are going to share in future in the ratio of 3 : 2.
(b) Plant and Machinery to be reduced by 10% and Furniture by 5%.
(c) Stock to be appreciated by 15% and Building by 10%.
(d) Provision for Doubtful Debts to be raised to ₹ 2,000.
Pass Journal entries to record the above transactions in the books of the firm and show the Profit and Loss Adjustment Account, Capital Account of C and the Balance Sheet of the firm after C's retirement.

Exercise | Q 35 | Page 84

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.

Exercise | Q 36 | Page 84

Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2019, Naresh retired on that date, Balance Sheet of the firm was as follows:

 Liabilities Amount (₹) Assets Amount (₹) General Reserve 12,000 Bank 7,600 Sundry Creditors 15,000 Debtors 6,000 Bills Payable 12,000 Less: Provision for Doubtful Debts 400 5,600 Outstanding Salary 2,200 Stock 9,000 Provision for Legal Damages 6,000 Furniture 41,000 Capital A/cs: Premises 80,000 Pankaj 46,000 Naresh 30,000 Saurabh 20,000 96,000 1,43,200 1,43,200

(a) 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 ₹ 1,200 and furniture to be brought up to ₹ 45,000.
(b) Goodwill of the firm be valued at ₹ 42,000.
(c) ₹ 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.
(d) 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 37 | Page 85

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.

Exercise | Q 38 | Page 86

A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 3. Their Balance Sheet as at 31st March, 2019 is:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 7,000 Land and Building 36,000 Bills Payable 3,000 Plant and Machinery 28,000 Reserves 20,000 Computer Printer 8,000 Capital A/cs: Stock 20,000 A 32,000 Sundry Debtors 14,000 B 24,000 Less: Provision for Doubtful Debts 2,000 12,000 C 20,000 76,000 Bank 2,000 1,06,000 1,06,000

On 1st April, 2019, B retired from the firm on the following terms:
(a) Goodwill of the firm is to be valued at ₹ 14,000.
(b) Stock, Land and Building are to be appreciated by 10%.
(c) Plant and Machinery and Computer Printer are to be reduced by 10%.
(d) Sundry Debtors are considered to be good.
(e) There is a liability of ₹ 2,000 for the payment of outstanding salary to the employees of the firm. This liability was not provided in the Balance Sheet but the same is to be recorded now.
(f) Amount payable to B is to be transferred to his Loan Account.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C after B's retirement.

Exercise | Q 39 | Page 86

Following is the Balance Sheet of X, Y and Z as at 31st March, 2019. They shared profits in the ratio of 3 : 3 : 2:

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 2,50,000 Cash at Bank 50,000 General Reserve 80,000 Bills Receivable 60,000 Partners' Loan A/cs: Debtors 80,000 X 50,000 Less: Provision for Doubtful Debts 4,000 76,000 Y 40,000 Stock 1,24,000 Capital A/cs: Fixed Assets 3,00,000 X 1,00,000 Advertisement Suspense A/c 16,000 Y 60,000 Profit and Loss A/c 4,000 Z 50,000 2,10,000 6,30,000 6,30,000

On 1st April, 2019, Y decided to retire from the firm on the following terms:
(a) Stock to be reduced by ₹ 12,000.
(c) Provision for Doubtful Debts to be increased to ₹ 6,000.
(d) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm, valued at ₹ 80,000 and the amount due to the retiring partners be adjusted in X's and Z's Capital Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet to give effect to the above.

Exercise | Q 40 | Page 87

X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Balance Sheet of the firm as at 31st March, 2019 was as follows:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 21,000 Cash at Bank 5,750 Workmen Compensation Reserve 12,000 Debtors 40,000 Investments Fluctuation Reserve 6,000 Less: Provision for Doubtful Debts 2,000 38,000 Capital A/cs: Stock 30,000 X 68,000 Investment (Market Value ₹ 17,600) 15,000 Y 32,000 Patents 10,000 Z 21,000 1,21,000 Machinery 50,000 Goodwill 6,000 Advertisement Expenditure 5,250 1,60,000 1,60,000

Z retired on 1st April, 2019 on the following terms:
(a) Goodwill of the firm is to be valued at ₹ 34,800.
(b) Value of Patents is to be reduced by 20% and that of machinery to 90%.
(c) Provision for doubtful debts is to be created @ 6% on debtors.
(d) Z took over the investment at market value.
(e) Liability for Workmen Compensation to the extent of ₹ 750 is to be created.
(f) A liability of ₹ 4,000 included in creditors is not to be paid.
(g) Amount due to Z to be paid as follows: ₹ 5,067 immediately, 50% of the balance within one year and the balance by a draft for 3 Months.
Give necessary Journal entries for the treatment of goodwill, prepare Revaluation Account, Capital Accounts and the Balance Sheet of the new firm.

Exercise | Q 41 | Page 87

X, Y and Z were in partnership sharing profits and losses equally. 'Y' retires from the firm. After adjustments, his Capital Account shows a  credit balance of ₹ 3,00,000 as on 1st April, 2016. Balance due to 'Y' is to be paid in three equal annual instalments along with interest @ 10% p.a. Prepare Y's Loan Account until he is paid the amount due to him. The firm closes its books on 31st March every year.

Exercise | Q 43 | Page 87

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at ₹ 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z  after all adjustments on the date of retirement showed balance of ₹ 1,45,000 and ₹ 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners.

Exercise | Q 44 | Page 88

On 31st March, 2019, the Balance Sheet of A, B and C who were sharing profits and losses in proportion to their capitals stood as:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 10,800 Cash at Bank 13,000 Bills Payable 5,000 Debtors 10,000 Capital A/cs: Less: Provision for Doubtful Debts 200 9,800 A 45,000 Stock 9,000 B 30,000 Machinery 24,000 C 15,000 90,000 Freehold Premises 50,000 1,05,800 1,05,800

B retired and following adjustments were agreed to determine the amount payable to B:
(a) Out of the amount of insurance premium debited to Profit and Loss Account, ₹ 1,000 be carried forward as prepaid Insurance.
(b) Freehold Premises be appreciated by 10%.
(c) Provision for Doubtful Debts is brought up to 5% on Debtors.
(d) Machinery be reduced by 5%.
(e) Liability for Workmen Compensation to the extent of ₹ 1,500 would be created.
(f) Goodwill of the firm be fixed at ₹ 18,000 and B's share of the same be adjusted into the accounts of A and C who will share future profits in the ratio of 3/4th and 1/4th.
(g) Total capital of the firm as newly constituted be fixed at ₹ 60,000 between A and C in the proportion of 3/4th and 1/4th after passing entries in their accounts for adjustments, i.e., actual cash to be paid or to be brought in by continuing partners as the case may be.
(h) B be paid ₹ 5,000 in cash and the balance be transferred to his Loan Account.
Prepare Capital Accounts of Partners and the Balance Sheet of the firm of A and C.

Exercise | Q 45 | Page 88

Amit, Balan and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3 and 1/6 respectively. Chander retired on 1st April, 2014. The Balance Sheet of the firm on the date of Chander's retirement was as follows:

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 12,600 Bank 4,100 Provident Fund 3,000 Debtors 30,000 General Reserve 9,000 Less: Provision 1,000 29,000 Capital A/cs: Amit 40,000 Stock 25,000 Balan 36,500 Investments 10,000 Chander 20,000 96,500 Patents 5,000 Machinery 48,000 1,21,100 1,21,100

It was agreed that:
(i)  Goodwill will  be valued at ₹ 27,000.
(ii) Depreciation of 10% was to be provided on Machinery.
(iii) Patents were to be reduced by 20%.
(iv) Liability on account of Provident Fund was estimated at ₹ 2,400.
(v) Chander took over Investments for ₹ 15,800.
(vi) Amit and Balan decided to adjust their capitals in proportion of their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.

Exercise | Q 46 | Page 89

J, H and K were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2015, their Balance Sheet was as follows:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 42,000 Land and Building 1,24,000 Investment Fluctuation Fund 20,000 Motor Vans 40,000 Profit and Loss Account 80,000 Investments 38,000 Capital A/cs: J 1,00,000 Machinery 24,000 H 80,000 Stock 30,000 K 40,000 2,20,000 Debtors 80,000 Less: Provision 6,000 74,000 Cash 32,000 3,62,000 3,62,000

On the above date, H retired and J and K agreed to continue the business on the following terms:
(i) Goodwill of the firm was valued at ₹ 1,02,000.
(ii) There was a claim of ₹ 8,000 for workmen's compensation.
(iii) Provision for bad debts was to be reduced by ₹ 2,000.
(iv) H will be paid ₹ 14,000 in cash and balance will be transferred in his Loan Account which will be paid in four equal yearly instalments together with interest @ 10% p.a.
(v) The new profit-sharing ratio between J and K will be 3 : 2 and their capitals will be in their new profit-sharing ratio. The capital adjustments will be done by opening Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.

Exercise | Q 47 | Page 89

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 1 : 2. On 31st March, 2019, their Balance Sheet was:

 Liabilities Amount (₹) Assets Amount (₹) Bills Payable 12,000 Freehold Premises 40,000 Sundry Creditors 28,000 Machinery 30,000 General Reserve 12,000 Furniture 12,000 Capital A/cs: Stock 22,000 X 30,000 Sundry Debtors 20,000 Y 20,000 Less: Provision for Doubtful Debts 1,000 19,000 Z 28,000 78,000 Cash 7,000 1,30,000 1,30,000

Z retired on 1st April, 2019 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 reduced by 10% and 7% respectively.
(c) Provision for Doubtful Debts is to be increased to ₹ 1,500.
(d) Goodwill of the firm is valued at ₹ 21,000 on Z's retirement.
(e) Continuing partners to adjust their capitals in their new profit-sharing ratio after retirement of Z. 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 48 | Page 90

X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 7. X retired from the firm. Y and Z decided to share future profits in the ratio of 2 : 3. The adjusted Capital Accounts of Y and Z showed balance of ₹ 49,500 and ₹ 1,05,750 respectively. The total amount to be paid to X is ₹ 1,35,750. This amount is to be paid by Y and Z in a manner that their capitals become proportionate to their new profit-sharing ratio. Calculate the amount to be brought in or to be paid to partners.

Exercise | Q 49 | Page 90

Balance Sheet of X, Y and Z who shared profits in the ratio of 5 : 3 : 2, as on 31st March, 2019 was as follows:

 Liabilities ₹ Assets ₹ Sundry Creditors 39,750 Bank (Minimum Balance) 15,000 Employees' Provident Fund 5,250 Debtors 97,500 Workmen Compensation Reserve 22,500 Stock 82,500 Capital A/cs: Fixed Assets 1,87,500 X 1,65,000 Y 84,000 Z 66,000 3,15,000 3,82,500 3,82,500

Y retired on 1st April, 2019 and it was agreed that:
(i) Goodwill of the firm is valued at ₹ 1,12,500 and Y's share of it be adjusted into the accounts of X and Z who are going to share future profits in the ratio of 3 : 2.
(ii) Fixed Assets be appreciated by 20%.
(iii) Stock be reduced to ₹ 75,000.
(iv) Y be paid amount brought in by X and Z so as to make their capitals proportionate to their new profit-sharing ratio.
Prepare Revaluation Account, Capital Accounts of all partners and the Balance Sheet of the New Firm.

Exercise | Q 50 | Page 90

X, Y and Z are partners sharing profits in the ratio of 5 : 3 : 2. Y retires on 1st April, 2019 from the firm, on which date capitals of X, Y and Z after all adjustments are ₹ 1,03,680, ₹ 87,840 and ₹ 26,880 respectively. The Cash and Bank Balance on that date was ₹ 9,600. Y is to be paid through amount brought in by X and Z in such a way as to make their capitals proportionate to their new profit-sharing ratio which will be X 3/5 and Z 2/5. Calculate the amount to be paid or to be brought in by the continuing partners assuming that a minimum Cash and Bank balance of ₹ 7,200 was to be maintained and pass the necessary Journal entries.

Exercise | Q 51 | Page 90

A, B and C are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2019 is:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 30,000 Cash in Hand 18,000 Bills Payable 16,000 Debtors 25,000 General Reserve 12,000 Less: Provision for Doubtful Debts 3,000 22,000 Capital A/cs: Stock 18,000 A 40,000 Furniture 30,000 B 40,000 Machinery 70,000 C 30,000 1,10,000 Goodwill 10,000 1,68,000 1,68,000

B retires on 1st April, 2019 on the following terms:
(a) Provision for Doubtful Debts be raised by ₹ 1,000.
(b) Stock to be reduced by 10% and Furniture by 5%.
(c) Their is an outstanding claim of damages of ₹ 1,100 and it is to be provided for.
(d) Creditors will be written back by ₹ 6,000.
(e) Goodwill of the firm is valued at ₹ 22,000.
(f) B is paid in full with the cash brought in by A and C in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at ₹ 10,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of A and C.

Exercise | Q 52 | Page 91

Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March, 2019, who have agreed to share profits and losses in proportion of their capitals:

 Liabilities ₹ Assets ₹ Capital A/cs: Land and Building 4,00,000 Kusum 4,00,000 Machinery 6,00,000 Sneh 6,00,000 Closing Stock 2,00,000 Usha 4,00,000 14,00,000 Sundry Debtors 2,20,000 Employees' Provident Fund 70,000 Less: Provision for Doubtful Debts 20,000 Workmen Compensation Reserve 30,000 Cash at Bank 2,00,000 Sundry Creditors 1,00,000 2,00,000 16,00,000 16,00,000

On 1st April, 2019, Kusum retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
(a) Land and Building be appreciated by 30%.
(b) Machinery be depreciated by 30%.
(c) There were Bad Debts of ₹ 35,000.
(d) The claim against Workmen Compensation Reserve was estimated at ₹ 15,000.
(e) Goodwill of the firm was valued at ₹ 2,80,000 and Kusum's share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
(f) Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners.
(g) Amount due to Kusum be settled by paying ₹ 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum's retirement.

Exercise | Q 53 | Page 92

The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3 : 2 as at 31st March, 2019 is as follows:

 Liabilities ₹ Assets ₹ Creditors 50,000 Cash at Bank 40,000 Employees' Provident Fund 10,000 Sundry Debtors 1,00,000 Profit and Loss A/c 85,000 Stock 80,000 Capital A/cs: Fixed Assets 60,000 X 40,000 Y 62,000 Z 33,000 1,35,000 2,80,000 2,80,000

X retired on 1st April, 2019 and Y and Z decided to share profits in future in the ratio of 3 : 2 respectively.
The other terms on retirement were:
(a) Goodwill of the firm is to be valued at ₹ 80,000.
(b) Fixed Assets are to be depreciated to ₹ 57,500.
(c) Make a Provision for Doubtful Debts at 5% on Debtors.
(d) A liability for claim, included in Creditors for ₹ 10,000, is settled at ₹ 8,000.
The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of ₹ 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners' Capital Accounts.

Exercise | Q 54 | Page 92

A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. Their Balance Sheet as on 31st March, 2018 is given below:

 Liabilities ₹ Assets ₹ Capital A/cs: Building 18,00,000 A 11,00,000 Investments 4,00,000 B 11,40,000 Stock 6,00,000 C 7,60,000 30,00,000 Debtors 10,00,000 Workmen Compensation Reserve 10,00,000 Cash and Bank 6,00,000 Creditors 2,00,000 Employees' Provident Fund 2,00,000 44,00,000 44,00,000

C retires on 30th June, 2018 and it was mutually agreed that:
(a) Building be valued at ₹ 22,00,000.
(b) Investments to be valued at ₹ 3,00,000.
(c) Stock be taken at ₹ 8,00,000.
(d) Goodwill of the firm be valued at two years' purchase of the average profit of the past five years.
(e) C's share of profits up to the date of retirement be calculated on the basis of average profit of the preceding three years.
The profits of the preceding five years were as under:

 Year 2013-14 2014-15 2015-16 2016-17 2017-18 Profits (₹) 4,00,000 5,00,000 6,00,000 8,00,000 7,00,000

(f) Amount payable to C to be transferred to his Loan Account carrying interest @ 10% p.a.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet as at 30th June, 2018.

Exercise | Q 55 | Page 93

Kumar, Verma and Naresh were partners in a firm sharing Profit and Loss in the ratio of 3 : 2 : 2. On 23rd January, 2015 Verma died. Verma's share of profit till the date of his death was calculated at ₹ 2,350. Pass necessary Journal entry for the same in the books of the firm.

Exercise | Q 56 | Page 93

A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. C died on 30th June, 2018. Profit and Sales for the year ended 31st March, 2018 were ₹ 1,00,000 and ₹ 10,00,000 respectively. Sales during April to June, 2018 were ₹ 1,50,000. You are required to calculate share of profit of C up to the date of his death.

Exercise | Q 57 | Page 93

A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. B died on 30th June, 2018. For the year ended 31st March, 2019, proportionate profit of 2018 is to be taken into consideration. During the year ended 31st March, 2018, bad debts of ₹ 2,000 had to be adjusted. Profit for the year ended 31st March, 2018 was ₹ 14,000 before adjustment of bad debts. Calculate B's share of profit till the date of his death.

Exercise | Q 58 | Page 93

Ram, Manohar and Joshi were partners in a firm. Joshi died on 31st May, 2018. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed financial years of profits before death. Profits for the years ended 31st March, 2016, 2017 and 2018 were ₹ 7,000; ₹ 8,000 and ₹ 9,000 respectively. Calculate Joshi's share of profit till the date of his death and pass necessary Journal entry for the same.

Exercise | Q 59 | Page 93

X, Y and Z were partners sharing profits and losses in the ratio of 3 : 2 : 1. Y died on 30th June, 2018. Profit from 1st April, 2018 to 30th June, 2018 was ₹ 3,60,000. X and Z decided to share the future profits in the ratio of 3 : 2 respectively with effect  from 1st July, 2018. Pass the necessary Journal entries to record Y's share of profit up to the date of death.

Exercise | Q 60 | Page 93

X, Y and Z were partners in a firm. Z died on 31st May, 2018. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed ₹ 19,000 and ₹ 17,000 respectively.
Calculate Z's share of profit till his death and pass necessary Journal entry for the same when:
(a) there is no change in profit-sharing ratio of remaining partners, and
(b) there is change in profit-sharing ratio of remaining partners, new ratio being 3 : 2.

Exercise | Q 61 | Page 93

P, R and S are in partnership sharing profits 4/8, 3/8 and 1/8 respectively. It is provided in the Partnership Deed that on the death of any partner his share of goodwill is to be valued at one-half of the net profit credited to his account during the last four completed years.
R died on 1st January, 2018. The firm's profits for the last four years ended 31st December, were as:
2014 − ₹ 1,20,000; 2015 − ₹ 80,000; 2016 − ₹ 40,000; 2017 − ₹ 80,000.
(a) Determine the amount that should be credited to R in respect of his share of Goodwill.
(b) Pass Journal entry without raising Goodwill Account for its adjustment.

Exercise | Q 62 | Page 94

X, Y and Z were partners in a firm sharing profit in 3 : 2 : 1. The firm closes its books on 31st March every year. Y died on 30th June, 2018. On Y's death goodwill of the firm was valued at ₹ 60,000. Y's share in the profit of the firm till the date of his death was to be calculated on the basis of previous year's profit which was ₹ 1,50,000.
Pass necessary Journal entries for goodwill and Y's share of profit at the time of his death.

Exercise | Q 63 | Page 94

A, B and C were partners sharing profits in the ratio of 3 : 2 : 1. The firm closes its books on 31st March every year. B died on 30th June, 2018. On his death, Goodwill of the firm was valued at ₹ 6,00,000. B's share in profit or loss till the date of death was to be calculated on the basis of previous year's profit which was ₹ 15,00,000 (Loss). Pass necessary Journal entries for goodwill and his share of loss.

Exercise | Q 64 | Page 94

X, Y and Z were partners in a firm sharing profits in the ratio of 4 : 3 : 1. The firm closes its books on 31st March every year. On 1st February, 2019, Y died and it was decided that the new profit-sharing ratio between X and Z will be equal. Partnership Deed provided for the following on the death of a partner:
(a) His share of goodwill be calculated on the basis of half of the profits credited to his account during the previous four completed years. The firm's profits for the last four years were:

 Year 2014-15 2015-16 2016-17 2017-18 Profits (₹) 1,50,000 1,00,000 50,000 1,00,000

(b) His share of profit in the year of his death was to be computed on the basis of average profit of past two years.
Pass necessary Journal entries relating to goodwill and profit to be transferred to Y's Capital Account.

Exercise | Q 65 | Page 94

X and Y are partners. The Partnership Deed provides inter alia:
(a) That the Accounts be balanced on 31st March every year.
(b) That the profits be divided as: X one-half, Y one-third and carried to a Reserve one-sixth.
(c) That in the event of the death of a partner, his Executors be entitled to be paid:
(i) The Capital to his credit till the date of death.
(ii) His proportion of profits till the date of death based on the average profits of the last three completed years.
(iii) By way of Goodwill, his proportion of the total profits for the three preceding years.
(d)

 BALANCE SHEET as at 31st March, 2019 Liabilities ₹ Assets ₹ Capital A/cs: Sundry Assets 21,000 X 9,000 Y 6,000 15,000 Reserve 3,000 Creditors 3,000 21,000 21,000

Profits for three years were: 2016-17 − ₹ 4,200; 2017-18 − ₹ 3,900; 2018-19 − ₹ 4,500. Y died on 1st August, 2019. Prepare necessary accounts.

Exercise | Q 66 | Page 95

, Q and R were partners in a firm sharing profits in 2 : 2 : 1 ratio. The Partnership Deed provided that on the death of a partner his executors will be entitled to the following:
(a) Interest on Capital @ 12% p.a.
(b) Interest on Drawings @ 18% p.a.
(c) Salary of ₹ 12,000 p.a.
(d) Share in the profit of the firm (up to the date of death) on the basis of previous year's profit.
P died on 31st May, 2018. His capital was ₹ 80,000. He had withdrawn ₹ 15,000 and interest on his drawings was calculated as ₹ 1,200. Profit of the firm for the previous year ended 31st March, 2018 was ₹ 30,000.
Prepare P's Capital Account to be rendered to his executors.

Exercise | Q 67 | Page 95

Vikas, Gagan and Momita were partners in a firm sharing profits in the ratio of 2 : 2 : 1. The firm closes its books on 31st March every year. On 30th September, 2014 Momita died. According to the provisions of Partnership Deed the legal representatives of a deceased partner are entitled for the following in the event of his/her death:
(a) Capital as per the last Balance Sheet.
(b) Interest on capital at 6% per annum till the date of her death.
(c) Her share of profit to the date of death calculated on the basis of average profit of last four years.
(d) Her share of goodwill to be determined on the basis of three years' purchase of the average profit of last four years. The profits of last four years were:

 Year 2010-11 2011-12 2012-13 2013-14 Profit (₹ ) 30,000 50,000 40,000 60,000

The balance in Momita's Capital Account on 31st March, 2014 was ₹ 60,000 and she had withdrawn ₹ 10,000 till date of her death. Interest on her drawings was ₹ 300.
Prepare Momita's Capital Account to be presented to her executors.

Exercise | Q 68 | Page 95

On 31st March, 2014, the Balance Sheet of Pooja, Qureshi and Ross, who were partners in a firm was as under:

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 2,50,000 Building 2,60,000 Reserve Fund 2,00,000 Investment 1,10,000 Capital A/cs: Pooja 1,50,000 Qureshi's Loan 1,00,000 Qureshi 1,00,000 Debtors 1,50,000 Ross 1,00,000 3,50,000 Stock 1,20,000 Cash 60,000 8,00,000 8,00,000

Qureshi died on 1st July, 2014. The profit-sharing ratio of the partners was 2 : 1 : 1. On the death of a partner, the partnership deed provided for the following:
(i) His share in the profits of the firm till the date of his death will be calculated on the basis of average profits of last three completed years.
(ii) Goodwill of the firm will be calculated on the basis of total profit of last two years.
(iii) Interest on loan given by the firm to a partner will be charged at the rate of 6% p.a. or ₹ 4,000, whichever is more.
(iv) Profits for the last three years were ₹ 45,000; ₹ 48,000 and ₹ 33,000.
Prepare Qureshi's Capital Account to be rendered to his executors.

Exercise | Q 69 | Page 96

Iqbal and Kapoor are in partnership sharing profits and losses in 3 : 2. Kapoor died three months after the date of the last Balance Sheet. According to the Partnership Deed, the legal heir is entitled to the following:
(a) His capital as per the last Balance Sheet.
(b) Interest on above capital @ 3% p.a. till the date of death.
(c) His share of profits till the date of death calculated on the basis of last year's profits.
His drawings are to bear interest at an average rate of 2% on the amount irrespective of the period.
The net profits for the last three years, after charging insurance premium, were ₹ 20,000; ₹ 25,000 and ₹ 30,000 respectively. Kapoor's capital as per Balance Sheet was ₹ 40,000 and his drawings till the date of death were ₹ 5,000.
Draw Kapoor's Capital Account to be rendered to his representatives.

Exercise | Q 70 | Page 96

​A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st March, 2018, their Balance Sheet was as follows:​

 Liabilities ₹ Assets ₹ Creditors 11,000 Building 20,000 Reserves 6,000 Machinery 30,000 A's Loan A/c 5,000 Stock 10,000 Capital A/cs: Patents 11,000 A 25,000 Debtors 8,000 B 25,000 Cash 8,000 C 15,000 65,000 87,000 87,000

A died on 1st October, 2018. It was agreed among his executors and the remaining partners that:
(i) Goodwill to be valued at 212 years' purchase of the average profit of the previous 4 years, which were 2014-15: ₹ 13,000; 2015-16: ₹ 12,000; 2016-17: ₹ 20,000 and 2017-18: ₹ 15,000.
(ii) Patents be valued at ₹ 8,000; Machinery at ₹ 28,000; and Building at ₹ 25,000.
(iii) Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year.
(iv) Interest on capital be provided @ 10% p.a.
(v) Half of the amount due to A to be paid immediately to the executors and the balance transferred to his (Executors') Loan Account.
Prepare A's Capital Account and A's Executors' Account as on 1st October, 2018.

Exercise | Q 71 | Page 96

Virad, Vishad and Roma were partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively. On 31st March, 2013, their Balance Sheet was as under:

 Liabilities ₹ Assets ₹ Capital A/cs: Buildings 2,00,000 Virad 3,00,000 Machinery 3,00,000 Vishad 2,50,000 Patents 1,10,000 Roma 1,50,000 7,00,000 Stock 1,00,000 Reserve Fund 60,000 Debtors 80,000 Creditors 1,10,000 Cash 80,000 8,70,000 8,70,000

​Virad died on 1st October, 2013. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 212 years purchase of average profits for the last three years. The average profits were ₹ 1,50,000.
(ii) Interest on capital be provided at 10% p.a.
(iii) Profits for the 2013-14 be taken as having accrued at the same rate as that of the previous year which was ₹ 1,50,000.
Prepare Virad's Capital Account to be presented to his Executors as on 1st October, 2013.

Exercise | Q 72 | Page 97

Kavita, Leena and Monica are partners in firm sharing profits in the ratio of 1 : 1 : 3 respectively. Their Capital Accounts showed the following balances on 31st March, 2012: Kavita ₹ 70,000; Leena ₹ 65,000 and Monica ₹ 2,10,000. Firm closes its accounts every year on 31st March. Kavita died on 30th September, 2012. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The deceased partner's share in the goodwill of the firm will be calculated on the basis of 2 years' purchase of the average profit of last three years. The profits of the firm for the last three years were ₹ 90,000; ₹ 1,00,000 and ₹ 1,10,000 respectively.
(c) Her share in the Reserve Fund of the firm will be paid. The Reserve Fund of the firm was ₹ 60,000 at the time of Kavita's death.
(d) Her share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were ₹ 20,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 4,00,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Kavita's Capital Account to be presented to his legal representative.

Exercise | Q 73 | Page 97

A, B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2018 stood as follows:

 Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 2,70,000 Cash in Hand 42,500 General Reserve 1,20,000 Cash at Bank 2,14,500 Capital A/cs: Debtors 1,63,000 A 2,00,000 Stock 17,500 B 1,20,000 Investment 1,32,500 C 80,000 4,00,000 Building 2,10,000 B's Loan 10,000 7,90,000 7,90,000

B died on 30th June, 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
(c) His share of profit for the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June, 2018 were as ₹ 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20%. The profit of the previous three years were: 1st Year: ₹ 82,000; 2nd year: ₹ 90,000; 3rd year ₹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.

Exercise | Q 74 | Page 97

Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of ₹ 1,25,000 in Chetan's Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.

Exercise | Q 75 | Page 98

Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:

 Liabilities ₹ Assets ₹ Creditors 10,000 Plant and Machinery 40,000 General Reserve 30,000 Furniture 15,000 Capital A/cs: Investments 20,000 Sunny 30,000 Debtors 20,000 Honey 30,000 Stock 20,000 Rupesh 20,000 80,000 25,000 1,20,000 1,20,000

Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

Exercise | Q 76 | Page 98

​​R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:

 Liabilities ₹ Assets ₹ Sundry Creditors 40,000 Goodwill 25,000 Bills Payable 15,000 Leasehold 1,00,000 Workmen Compensation Reserve 30,000 Patents 30,000 Capital A/cs: Machinery 1,50,000 R 1,50,000 Stock 50,000 S 1,25,000 Debtors 40,000 T 75,000 3,50,000 Cash at Bank 40,000 4,35,000 4,35,000

T died on 1st August, 2018. It was agreed that:
(a) Goodwill be valued at 212 years' purchase of average of last 4 years' profits which were:
2014-15: ₹ 65,000;  2015-16: ₹ 60,000; 2016-17: ₹ 80,000 and 2017-18: ₹ 75,000.
(b) Machinery be valued at ₹ 1,40,000; Patents be valued at ₹ 40,000; Leasehold be valued at ₹ 1,25,000 on 1st August, 2018.
(c) For the purpose of calculating T's share in the profits of 2018-19, the profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
(d) A sum of ₹ 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's Executors' Account.

Exercise | Q 77 | Page 99

Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:

 Liabilities ₹ Assets ₹ Trade Creditors 40,000 Building 2,00,000 General Reserve 45,000 Plant and Machinery 80,000 Capital A/cs: Stock 35,000 Akhil 1,95,000 Debtors 80,000 Nikhil 1,20,000 Cash at Bank 85,000 Sunil 80,000 3,95,000 4,80,000 4,80,000

Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) ₹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 2014-15 − ₹ 80,000 Profit; 2015-16 − ₹ 1,00,000 Loss; 2016-17 − ₹ 1,20,000 Profit; 2017-18 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account.

Exercise | Q 78 | Page 99

B, C and D were partners in a firm sharing profits in the ratio of 5 :3 : 2. On 31st December, 2008, their Balance Sheet was as follows:

 Liabilities Amount (₹) Assets Amount(₹) Creditors 43,000 Cash 10,200 Bills Payable 17,000 Stock 24,500 General Reserve 70,000 Debtors 27,300 Capital A/cs: Land and Building 1,40,000 B 40,000 Profit and Loss A/c 70,000 C 50,000 D 52,000 1,42,000 2,72,000 2,72,000

B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years' purchase of the average profit of last 5 years. The  profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005, and 31st December, 2004 were ₹ 70,000; ₹ 60,000; ₹ 50,000 and ₹ 40,000 respectively.
(b) B's share of profit or loss till the date of his death was to be calculated on the basis of the profit or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B's share of goodwill at the time of his death.
(ii) B's share in the profit or loss of the firm till the date of his death.
(iii) Prepare B's Capital Account at the time of his death to be presented to his Executors.

Exercise | Q 79 | Page 100

The Balance Sheet of X, Y and Z as at 31st March, 2018 was:

 Liabilities Amount (₹) Assets Amount (₹) Bills Payable 2,000 Cash at Bank 5,800 Employees' Provident Fund 5,000 Bills Receivable 800 Workmen Compensation Reserve 6,000 Stock 9,000 General Reserve 6,000 Sundry Debtors 16,000 Loans 7,100 Furniture 2,000 Capital A/cs: Plant and Machinery 6,500 X 22,750 Building 30,000 Y 15,250 Advertising Suspense 6,000 Z 12,000 50,000 76,100 76,100

The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2017-18: ₹ 24,000; 2016-17: ₹ 16,000; 2015-16: ₹ 20,000 and 2014-15: ₹ 10,000 and 2013-14: ₹ 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock ₹ 10,000; Debtors ₹ 15,000; Furniture ₹ 1,500; Plant and Machinery ₹ 5,000; Building ₹ 35,000. A Bill Receivable for ₹ 600 was found worthless.
(d) A Sum of ₹ 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

Exercise | Q 80 | Page 100

X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:

 Liabilities Amount (₹) Assets Amount (₹) Creditors 2,00,000 Building 2,00,000 Employees' Provident Fund 1,50,000 Machinery 3,00,000 General Reserve 36,000 Furniture 1,10,000 Investment Fluctuation Reserve 14,000 Investment (Market value ₹ 86,000) 1,00,000 Capital A/cs: Debtors 80,000 X 3,00,000 Cash at Bank 1,90,000 Y 2,50,000 Advertisement Suspense 1,20,000 Z 1,50,000 7,00,000 11,00,000 11,00,000

X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at 212 years' purchase of average of four completed years' profit which were:

 Year 2014-15 2015-16 2016-17 2017-18 Profits (₹) 1,70,000 1,80,000 1,90,000 1,80,000

(ii) X's share of profit from the closure of last accounting year till date of death be calculated on the basis of last years' profit.
(iii) Building undervalued by ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furniture overvalued by ₹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X's executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.

Exercise | Q 81 | Page 101

XY and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z died on 30th June, 2018. The Balance Sheet of the firm as at that 31st March, 2018 is as follows:

BALANCE SHEET as at 31st March, 2018

 Liabilities Amount(₹) Assets Amount​(₹) X's Capital A/c 2,40,000 Machinery 2,40,000 Y's Capital A/c 1,60,000 Furniture 1,50,000 Z's Capital A/c 80,000 4,80,000 Investments 40,000 X's Current A/c 16,000 Stock 64,000 Y's Current A/c 5,000 Sundry Debtors 50,000 Reserve 60,000 Bills Receivable 22,000 Bills Payable 34,000 Cash at Bank 37,000 Sundry Creditors 40,000 Cash in Hand 22,000 Z's Current A/c 10,000 6,35,000 6,35,000

​
The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
(c) Advertising Expenses ₹ 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
(d) Goodwill of the firm is valued at ₹ 60,000.
(e) X and Y are to share profits and losses equally in future.
(f) Profit for the year ended 31st March, 2018 was ₹ 8,16,000 and Z's share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March, 2018.
(g) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners' Capital Accounts.
Prepare the Revaluation Account, Partners' Capital Accounts and prepare C's Executors's Account to show that C's Executors were paid in two half-yearly instalments plus interest of 10% p.a. on the
unpaid balance. The first instalment was paid on 31st December, 2018.

Exercise | Q 82 | Page 102

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2018 was as follows:

 Liabilities Amount(₹) Assets Amount(₹) Sundry Creditors 18,000 Goodwill 12,000 Investments Fluctuation Reserve 7,000 Patents 52,000 Workmen Compensation Reserve 7,000 Machinery 62,400 Capital A/cs: Investment 6,000 X 1,35,000 Stock 20,000 Y 95,000 Sundry Debtors 24,000 Z 74,000 3,04,000 Less: Provision for Doubtful Debts 4,000 20,000 Loan to Z 1,000 Cash at Bank 600 Profit and Loss A/c 1,50,000 Z's Drawings 12,000 3,36,000 3,36,000

Z died on 1st April, 2018, X and Y decide to share future profits and losses in ratio of 3 : 5. It was agreed that:
(i) Goodwill of the firm be valued 212 years' purchase of average of four completed years' profits which were: 2014→₹ 1,00,000; 2015-16→₹ 80,000; 2016→17 ₹ 82,000.

(ii) Stock is undervalued by ₹ 14,000 and machinery is overvalued by ₹ 13,600.
(iii) All debtors are good. A debtor whose dues of ₹ 400 were written off as bad debts paid 50% in full settlement.
(iv) Out of the amount of insurance premium debited to Profit and Loss Account, ₹ 2,200 be carried forward as prepaid insurance premium.
(v) ₹ 1,000 included in Sundry Creditors is not likely to arise.
(vi) A claim of ₹ 1,000 on account of Workmen Compensation to be provided for.
(vii) Investment be sold for ₹ 8,200 and a sum of ₹ 11,200 be paid to executors of Z immediately. The balance to be paid in four equal half-yearly instalments together with interest @ 8% p.a. at half year rest.
Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm.

Exercise | Q 83 | Page 102

X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:

 Liabilities Amount (₹) Assets Amount (₹) Trade Creditors 1,20,000 Cash at Bank 1,80,000 Bills Payable 80,000 Stock 1,40,000 General Reserve 60,000 Sundry Debtors 80,000 Capital A/cs: Building 3,00,000 X 7,00,000 Advance to Y 7,00,000 Y 7,00,000 Profit and Loss A/c 3,20,000 Z 60,000 14,60,000 17,20,000 17,20,000

Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.

Exercise

## TS Grewal solutions for Class 12 Accountancy - Double Entry Book Keeping Volume 1 chapter 6 - Retirement/Death of a Partner

TS Grewal solutions for Class 12 Accountancy - Double Entry Book Keeping Volume 1 chapter 6 (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 - Double Entry Book Keeping Volume 1 solutions in a manner that help students grasp basic concepts better and faster.

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Concepts covered in Class 12 Accountancy - Double Entry Book Keeping Volume 1 chapter 6 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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