Q.No.38 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. Goodwill of the firm is to be valued at 14,000.
2. Stock, Land, and buildings are to be appreciated by 10%.
3. Plant and Machinery and Computer Printer are to be reduced by 10%.
4. Sundry Debtors are considered to be good.
5. 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.
6. The 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.

The solution of Question 38 Chapter 6 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
To Plant and Machinery		2,800	By Stock A/c		2,000
28,000 × 10%			(20,000 × 10%)
To Electronic Typewriter		800	By Land and Building A/c		3,600
8,000 × 10%			(36,000 × 10%)
To Outstanding Salary		2,000	By Provision for Doubtful Debts A/c		2,000
To Profit transferred to
A’s Capital A/c	800
B’s Capital A/c	600
C’s Capital A/c	600	2,000
		7,600			7,600

 

Partners’ Capital Account

Part.	X	Y	Z	Part.	X	Y	Z
To B's Capital A/c (Goodwill)	1,200	-	600	By Balance B/d	32,000	24,000	20,000
				By Reserves A/c	8,000	6,000	6,000
				By Revaluation A/c	800	600	600
To B's Loan A/c		34,800		By A's Capital A/c	-	2,400	-
To Balance c/d	38,400	-	24,800	By C's Capital A/c	-	1,800	-
	40,800	34,800	26,600		40,800	34,800	26,600

 

Balance Sheet

Liabilities		Amount	Assets		Amount
Creditors		7,000	Land and Building		39,600
Bills Payable		3,000	(36,000 + 3,600)
Outstanding Salary		2,000	Plant and Machinery		25,200
			(28,000 – 2,800)
			Electronic Typewriter		7,200
			(8,000 – 800)
B’s Loan		34,800	Stock		22,000
Capital:			(20,000 + 2,000)
A's Capital	38,400		Sundry Debtors		14,000
C's Capital	24,800	41,200	Bank		2000
		1,10,000			1,10,000

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of A, B and C= 4:3:3
B retires from the firm.

Gaining Ratio of A and C= 4:3 (Given)

Adjustment of Goodwill

Goodwill of the firm = Rs 14,000

B's Share of Goodwill	=	Firm's Goodwill	X	B's share
	=	14,000	X	3
				10
	=	Rs 4,200

 

A's Share of Goodwill	=	B's Goodwill	X	Gaining share of A
	=	4,200	X	4
				7
	=	Rs 2,400

 

C's Share of Goodwill	=	B's Goodwill	X	Gaining share of C
	=	4,200	X	3
				7
	=	Rs 1,800

 

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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication