Q.No.45 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. Goodwill will be valued at 27,000.
2. Depreciation of 10% was to be provided on Machinery.
3. Patents were to be reduced by 20%.
4. Liability on account of Provident Fund was estimated at 2,400.
5. Chander took over Investments for 15,800.
6. Amit and Balan decided to adjust their capitals in a proportion to their profit-sharing ratio by opening Current Accounts.

Prepare Revaluation Account and Partners' Capital Accounts on Chander's retirement.

The solution of Question 45 Chapter 6 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
To Machinery A/c		4,800	By Investments A/c		5,800
To Patents		1,000	By Provident Fund A/c		600
To Profit transferred to:
Amit’s Capital A/c	300
Balan’s Capital A/c	200
Chander’s Capital A/c	100	600
		6,400			6,400

 

Partners’ Capital Account

Part.	Amit	Balan	Chander	Part.	Amit	Balan	Chander
To Investments A/c	-	-	15,800	By Balance B/d	40,000	36,500	20,000
To Chander’s Capital A/c	2,700	1,800	-	By Revaluation (Profit)A/c	300	200	100
To Chander’s Loan A/c	-	-	10,300	By General Reserve A/c	4,500	3,000	1,500
To Balan's Current A/c	-	5,900	-	By Amit’s Capital A/c	-	-	2,700
				By Balan’s Capital A/c	-	-	1,800
				By Current A/c	5,900	-	-
	50,700	39,700	26,100		50,700	39,700	26,100

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of Amit, Balan, and Chander = 1/2: 1/3: 1/6

= 3/6:2/6:1/6       (make base equal)
Chander retires from the firm.

New or Gaining Ratio of Amit and Balan,= 3:2 (as per old ratio)

Adjustment of Goodwill

Goodwill of the firm = Rs 27,000

Chander's Share of Goodwill	=	Firm's Goodwill	X	Chander's share
	=	27,000	X	1
				6
	=	Rs 4,500

 

Amit will pay	=	Chander’s Goodwill	X	Share of Amit
	=	4,500	X	3
				5
	=	Rs 2,700

 

Balan will pay	=	Chander’s Goodwill	X	Share of Balan
	=	4,500	X	2
				5
	=	Rs 1,800

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Balance of Capital Amount after all adjustments

=

Opening Balance of Capital Account

+

All Credits

-

All Debits

 

Balance of Amit’s Capital Amount after all adjustments	=	40,000	+	300	+	4,500	-	2,700
	=	42,100/-

 

Balance of Balan's Capital Amount after all adjustments	=	36,500	+	200	+	3,000	-	(1,800)
	=	37,900

 

Total Capital of the firm	=	Amit's Capital Balance	+	Balan's Capital Balance
	=	42,100	+	37,900
	=	80,000

 

Calculation of Total Capital

The total capital of the Firm= Rs 80,000

Amit's New Capital	=	Firm’s new Capital	X	Share of Amit
	=	80,000	X	3
				5
	=	Rs 48,000

 

Balan New Capital	=	Firm’s new Capital	X	Share of Balan
	=	80,000	X	2
				5
	=	Rs 32,000

 

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Addition/withdrawal by Amit's in/from Capital A/c	=	New Capital Amount	-	Balance of Capital Amount after all adjustments
	=	48,000	-	42,100
	=	5,900/-

 

Addition/withdrawal by Balan's in/from Capital A/c	=	New Capital Amount	-	Balance of Capital Amount after all adjustments
	=	32,000	-	37,900
	=	5,900/-

 

 

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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