Q.No.51 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 51 Chapter 6 of +2-A

51. A B and C are partners in 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 is 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.

 

 

The solution of Question 51 Chapter 6 of +2-A: -

 

Revaluation Account

Particular		Amount	Particular		Amount
To Provision for Doubtful Debts		1,000	By Creditors		6,000
To Stock 18,000 × 10%		1,800
To Outstanding Claim for Damages		1,100
To Furniture 30,000 × 5%		1,500
To Profit transferred to
A’s Capital A/c	300
B’s Capital A/c	200
C’s Capital A/c	100	600
		6,000			6,000

 

Partners’ Capital Account

Part.	A	B	C	Part.	A	B	C
To B’s Capital A/c	5,500	-	1,833	By Balance B/d	40,000	40,000	30,000
To X’s Loan A/c	5,000	3,333	1,667	By Revaluation A/c	300	200	100
To Cash A/c	-	48,200	_	By A’s Capital A/c	-	5,500	-
				By C’s Capital A/c	-	1,833	-
To Balance c/d	35,800	-	28,600
	46,300	51,533	32,100		46,300	51,533	32,100
To Cash A/c	-	-	2,450	By Balance b/d	35,800	-	28,600
To Balance c/d	78,450	-	26,150	By Cash A/c	42,650	-	-
	78,450	-	28,600		78,450	-	28,600

 

Balance Sheet

Liabilities		Amount	Assets		Amount
Creditors		24,000	Cash in Hand		11,000
Bills Payable		16,000	Debtor	25,000
Outstanding Claim for Damages		1,100	Less: Provision for Doubtful Debts	4,000	21,000
Capital:			Stock		16,200
A	78,450		Furniture		28,500
C	26,150	1,04,600	Machinery		70,000
		1,45,700			1,45,700

 

Cash Account

Particulars		Amount	Particulars		Amount
Balance b/d		18,000	B’s Capital A/c		48,200
A’s Capital A/c		42,650	C’s Capital A/c		2,450
			Balance c/d		10,000
		60,650			60,650

Working Notes:
Calculation of Profit-Sharing Ratio

Old Ratio A, B and C = 3: 2: 1
B retires from the firm
∴ New Ratio A and C = 3: 1 and
Gaining Ratio = 3 : 1

Adjustment of Goodwill

Goodwill of the firm = Rs 22,000

B’s Share of Goodwill	=	22,000	X	2
				6
	=	Rs 7,333

This share of goodwill is to be distributed between A and C in their gaining ratio i.e. 3: 1.

A ‘ share	=	7,333	X	3
				4
	=	Rs 5,500

 

C ‘ share	=	7,333	X	1
				4
	=	Rs 1,833

 

Adjustment of Partners’ Capital after B’s Retirement

Amount to be brought in by A and C	=	Cash to be paid to B + Minimum Balance of Cash	-	Existing Balance of Cash
	=	48,200 + 10,000	-	18,000
	=	Rs 40,200

Combined Capital of A and C after of all adjustments = 35,800 + 28,600 = Rs 64,400
∴ Total Capital of the Firm = Amount to be brought in by A and C + Combined Capital of A and C
= 40,200 + 64,400 = 1,04,600

A’s New Capital	=	1,04,600	X	3
				4
	=	Rs 78,450

 

C ‘ share	=	1,04,600	X	1
				4
	=	Rs 26,150

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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