Q.No.37 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. Land and Building be appreciated by 10%.
2. Provision for Doubtful Debts is no longer necessary since all the debtors are good.
3. Stock be appreciated by 20%.
4. Adjustment is 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.
5. Goodwill of the firm is valued at 5,400 and Y's share of the same be adjusted to that of X and Z who was going to share in the ratio of 2:1.
6. It was decided 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.

The solution of Question 37 Chapter 6 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
			By Land and Building A/c		1,500
			(15,000 × 10%)
			By Prov. for Doubtful Debts A/c		105
			By Stock A/c		960
To Profit transferred to			(4,800 × 20%)
X’s Capital A/c	1,140
Y’s Capital A/c	855
Z’s Capital A/c	570	18,000
		2,565			2,565

 

Partners’ Capital Account

Part.	X	Y	Z	Part.	X	Y	Z
To Y’s Capital A/c(Goodwill)	1,200	-	600	By Balance B/d	12,000	9,000	6,000
To X’s Capital A/c	-	420	-	By Revaluation A/c	1,140	855	570
To Z’s Capital A/c	-	390	-	By X’s Capital A/c	-	1,200	-
To Y’s Loan A/c	-	10,845	-	By Z’s Capital A/c	-	600	-
To Balance c/d	12,360	-	6,360	By Y’s Capital A/c	420	-	390
	13,560	11,655	6,960		13,560	11,655	6,960

 

Balance Sheet

Liabilities		Amount	Assets		Amount
Sundry Creditors		24,140	Cash at Bank		3,300
			Sundry debtors		3,045
			Stock		5,760
			Plant and Machinery		5,100
			Land and Building		16,500
			Y's Loan		9,155
Capital:
X's Capital	12,360
Z's Capital	6,360	18,720
		42,860			42,860

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of X, Y, and Z = 4:3:2
Y retires from the firm.

Gaining Ratio of X and Z = 2:1 (Given)

Adjustment of Goodwill

Goodwill of the firm = Rs 5,400

Y's Share of Goodwill	=	5,400	X	3
				9
	=	Rs 1,800

 

X's Share of Goodwill	=	1,800	X	2
				3
	=	Rs 1,200

 

Z's Share of Goodwill	=	1,800	X	1
				3
	=	Rs 600

Computation of final settlement amount payable to/ receivable from Y after his retirement:

Existing Loan against Y = 20,000

Capital Account Balance Payable = 10,845

The amount payable to/receivable from Y	=	Existing Loan against Y	-	Capital Account Balance Payable
	=	20,000	-	10,845
	=	9,155/-

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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