Q.No.36 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. 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.
2. Goodwill of the firm is valued at 42,000.
3. 26,000 from Naresh's Capital Account be transferred to his Loan Account and the balance be paid through the bank: if required, the necessary loan may be obtained from the bank.
4. The 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

The solution of Question 36 Chapter 6 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
To Stock A/c		900	By Premises A/c		16,000
To Provision for Legal Damages A/c		1,200	By Provision for Doubtful Debts A/c		100
To Revaluation Profit A/c		1,500	By Furniture A/c		4,000
To Profit transferred to
Pankaj’s Capital A/c	9,000
Naresh’s Capital A/c	6,000
Saurabh’s Capital A/c	3,000	18,000
		20,100			20,100

 

Partners’ Capital Account

Part.	X	Y	Z	Part.	X	Y	Z
To Naresh’s Capital A/c (Goodwill)	14,000	-	-	By Balance B/d	46,000	30,000	20,000
				By General Reserve	6,000	4,000	2,000
To Naresh’s Loan A/c	-	26,000	-	By Revaluation A/c	9,000	6,000	3,000
To Bank A/c	-	28,000	-	By Pankaj’s Capital A/c (Goodwill)	-	14,000	-
To Balance c/d	47,000	-	25,000
	61,000	54,000	25,000		61,000	54,000	25,000

 

Bank Account

Liabilities		Amount	Assets		Amount
To Balance b/d		7,600	By Naresh’s Capital A/c		28,000
To Bank Loan A/c (Balancing Figure)		20,400
		28,000			28,000

 

Balance Sheet

Liabilities		Amount	Assets		Amount
Sundry Creditors		15,000	Debtor	6,000
Bills Payable		12,000	Less: Provision	300	5,700
Bank Loan		20,400	Stock		8,100
Outstanding Salaries		2,200	Furniture		45,000
Provision for Legal Damages		7,200	Premises		96,000
Naresh’s Loan		26,000
Capital:
Pankaj's Capital	47,000
Saurabh's Capital	25,000	72,000
		1,54,800			1,54,800

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of X, Y, and Z = 3:2:1
Naresh retires from the firm.

New Ratio of N and S = 5:1

Gaining Ratio = New Ratio - Old Ratio

Pankaj's Gaining Share	=	5	-	3
		6		6
	=	5	-	3
		6
	=	2
		6

 

Saurabh's Gaining Share	=	1	-	1
		6		6
	=	1	-	1
		6
	=	0
		6

Adjustment of Goodwill

Goodwill of the firm = Rs 42,000

Naresh's Share of Goodwill	=	42,000	X	2
				6
	=	Rs 14,000

Pankaj's gain = Pankaj’s gaining the share of Naresh So He will pay the whole of the amount of Naresh’s share of Goodwill

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

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