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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
N, S and B are partners sharing profits and losses in the proportion of 1/2 : 1/6 : 1/3. The Balance Sheet as at 31st March, 2017 showed Bills Payable ₹12,000, Sundry Creditors ₹18,000, General Reserve ₹12,000, Capitals – N ₹30,000, S ₹30,000, B ₹28,000; Freehold Premises ₹40,000, Machinery ₹30,000, Furniture ₹12,000, Stock ₹22,000, Sundry Debtors ₹20,000 less Provision ₹1,000, Cash ₹7,000. B retired, and the partners agreed: (a) Freehold Premises and Stock to be appreciated by 20% and 15% respectively. (b) Machinery and Furniture to be reduced by 10% and 7% respectively. (c) Provision for Doubtful Debts to be increased to ₹1,500. (d) Goodwill of the firm valued at ₹21,000 on B’s retirement. (e) The continuing partners to adjust their capitals in their new profit-sharing ratio, any surplus/deficit being adjusted through Current Accounts. Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm. (CBSE 2019)
REVALUATION ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Machinery A/c | 3,000 | By Freehold Premises A/c | 8,000 |
| To Furniture A/c | 840 | By Stock A/c | 3,300 |
| To Provision for Doubtful Debts A/c | 500 | ||
| To Profit transferred to: | |||
| N’s Capital A/c 3,480 | |||
| S’s Capital A/c 1,160 | |||
| B’s Capital A/c 2,320 | 6,960 | ||
| Total | 11,300 | Total | 11,300 |
PARTNERS’ CAPITAL ACCOUNTS
| Particulars | N | S | B | Particulars | N | S | B |
|---|---|---|---|---|---|---|---|
| To B’s Capital A/c | 5,250 | 1,750 | – | By Balance b/d | 30,000 | 30,000 | 28,000 |
| To Balance c/d | 34,230 | 31,410 | – | By General Reserve A/c | 6,000 | 2,000 | 4,000 |
| By N’s Capital A/c | – | – | 5,250 | ||||
| By S’s Capital A/c | – | – | 1,750 | ||||
| To B’s Loan A/c | 41,320 | By Revaluation A/c | 3,480 | 1,160 | 2,320 | ||
| Total | 39,480 | 33,160 | 41,320 | Total | 39,480 | 33,160 | 41,320 |
| To Current A/c | – | 15,000 | By Balance b/d | 34,230 | 31,410 | ||
| To Balance c/d | 49,230 | 16,410 | By Current A/c | 15,000 | – | ||
| Total | 49,230 | 31,410 | Total | 49,230 | 31,410 |
BALANCE SHEET as at 1st April, 2017 (after B’s Retirement)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Bills Payable | 12,000 | Freehold Premises | 48,000 |
| Sundry Creditors | 18,000 | Machinery | 27,000 |
| B’s Loan A/c | 41,320 | Furniture | 11,160 |
| Capitals: N 49,230; S 16,410 | 65,640 | Stock | 25,300 |
| S’s Current A/c | 15,000 | Sundry Debtors 20,000 less Provision 1,500 | 18,500 |
| Cash | 7,000 | ||
| N’s Current A/c | 15,000 | ||
| Total | 1,51,960 | Total | 1,51,960 |
Working Notes: Old ratio N : S : B = 3 : 1 : 2 (sixths); new ratio N : S = 3 : 1; gaining ratio = 3 : 1. B’s share of goodwill = 21,000 × 2/6 = ₹7,000, borne by N (₹5,250) and S (₹1,750). Combined adjusted capital of N and S = ₹65,640, split 3 : 1 — N = ₹49,230 (brings in ₹15,000 via Current A/c) and S = ₹16,410 (withdraws ₹15,000 via Current A/c). Provision for Doubtful Debts is increased from ₹1,000 to ₹1,500, so only the ₹500 increase is debited to Revaluation.
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.48 - 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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