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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Kanika, Disha and Kabir were partners sharing profits in the ratio of 2 : 1 : 1. On 31st March, 2025, their Balance Sheet showed Trade Creditors ₹53,000, Employees’ Provident Fund ₹47,000, Capitals – Kanika ₹2,00,000, Disha ₹1,00,000, Kabir ₹80,000; Bank ₹60,000, Debtors ₹60,000, Stock ₹1,00,000, Fixed Assets ₹2,40,000, Profit and Loss A/c (Dr.) ₹20,000. Kanika retired on 1st April, 2025 on these terms: (a) Goodwill of the firm was valued at 2 years’ purchase of the average profits of the three years preceding retirement. Profits: 2023 – ₹1,00,000; 2024 – ₹1,30,000 (the Profit and Loss A/c debit balance of ₹20,000 relates to the third year). (b) Fixed Assets to be increased to ₹3,00,000. (c) Stock to be valued at 120%. (d) The amount payable to Kanika was transferred to her Loan Account. Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm. (AI 2017, Modified)
REVALUATION ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Profit transferred to: | By Fixed Assets A/c | 60,000 | |
| Kanika’s Capital A/c 40,000 | By Stock A/c | 20,000 | |
| Disha’s Capital A/c 20,000 | |||
| Kabir’s Capital A/c 20,000 | 80,000 | ||
| Total | 80,000 | Total | 80,000 |
PARTNERS’ CAPITAL ACCOUNTS
| Particulars | Kanika | Disha | Kabir | Particulars | Kanika | Disha | Kabir |
|---|---|---|---|---|---|---|---|
| To Profit and Loss A/c | 10,000 | 5,000 | 5,000 | By Balance b/d | 2,00,000 | 1,00,000 | 80,000 |
| To Kanika’s Capital A/c | – | 35,000 | 35,000 | By Revaluation A/c | 40,000 | 20,000 | 20,000 |
| To Kanika’s Loan A/c | 3,00,000 | – | – | By Disha’s & Kabir’s Capital A/cs (Goodwill) | 70,000 | – | – |
| To Balance c/d | – | 80,000 | 60,000 | ||||
| Total | 3,10,000 | 1,20,000 | 1,00,000 | Total | 3,10,000 | 1,20,000 | 1,00,000 |
BALANCE SHEET as at 1st April, 2025 (after Kanika’s Retirement)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Employees’ Provident Fund | 47,000 | Bank | 60,000 |
| Trade Creditors | 53,000 | Sundry Debtors | 60,000 |
| Kanika’s Loan A/c | 3,00,000 | Stock | 1,20,000 |
| Capitals: Disha 80,000; Kabir 60,000 | 1,40,000 | Fixed Assets | 3,00,000 |
| Total | 5,40,000 | Total | 5,40,000 |
Working Note (Goodwill): Average Profit = (1,00,000 + 1,30,000 – 20,000) / 3 = ₹70,000. Goodwill = 70,000 × 2 = ₹1,40,000. Kanika’s share = 1,40,000 × 2/4 = ₹70,000, borne by Disha and Kabir equally (₹35,000 each), as no new profit-sharing ratio was specified.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 5 Q.32 - Retirement of a Partner", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 5 - Retirement of a Partner.
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