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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Amit, Bunty and Charan are partners sharing profits and losses in the ratio of 2 : 2 : 1. Charan retired on 30th June, 2025. Their Balance Sheet as at 31st March, 2025 showed Capitals – Amit ₹6,00,000, Bunty ₹6,00,000, Charan ₹4,00,000; Employees’ Compensation Reserve ₹1,00,000, General Reserve ₹3,00,000, Creditors ₹1,00,000; Building ₹10,00,000, Investments ₹1,25,000, Stock ₹2,50,000, Debtors ₹4,00,000, Cash at Bank ₹2,00,000, Cash in Hand ₹1,25,000. It was agreed that the amount payable to Charan would be determined after: (a) Building revalued at ₹12,00,000. (b) Investments revalued at ₹1,00,000. (c) Stock revalued at ₹3,00,000. (d) Goodwill of the firm valued at 2 years’ purchase of the average profit of the last 5 years. (e) Charan’s share of profit up to the date of retirement calculated on the basis of the average profit of the preceding three years. Profits of the preceding five years were: 2020-21 – ₹2,00,000; 2021-22 – ₹2,35,000; 2022-23 – ₹3,00,000; 2023-24 – ₹2,75,000; 2024-25 – ₹3,25,000. Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet after Charan’s retirement.
REVALUATION ACCOUNT
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Investments A/c | 25,000 | By Building A/c | 2,00,000 |
| To Profit transferred to: | By Stock A/c | 50,000 | |
| Amit’s Capital A/c 90,000 | |||
| Bunty’s Capital A/c 90,000 | |||
| Charan’s Capital A/c 45,000 | 2,25,000 | ||
| Total | 2,50,000 | Total | 2,50,000 |
PARTNERS’ CAPITAL ACCOUNTS
| Particulars | Amit | Bunty | Charan | Particulars | Amit | Bunty | Charan |
|---|---|---|---|---|---|---|---|
| To Charan’s Capital A/c | 53,400 | 53,400 | – | By Balance b/d | 6,00,000 | 6,00,000 | 4,00,000 |
| To Balance c/d | 7,96,600 | 7,96,600 | – | By Revaluation A/c | 90,000 | 90,000 | 45,000 |
| To Charan’s Loan A/c | 6,46,800 | By Employees’ Compensation Reserve A/c | 40,000 | 40,000 | 20,000 | ||
| By General Reserve A/c | 1,20,000 | 1,20,000 | 60,000 | ||||
| By Amit’s Capital A/c | – | – | 53,400 | ||||
| By Bunty’s Capital A/c | – | – | 53,400 | ||||
| By Profit & Loss Suspense A/c | – | – | 15,000 | ||||
| Total | 8,50,000 | 8,50,000 | 6,46,800 | Total | 8,50,000 | 8,50,000 | 6,46,800 |
BALANCE SHEET (after Charan’s Retirement)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capitals: Amit 7,96,600; Bunty 7,96,600 | 15,93,200 | Building | 12,00,000 |
| Charan’s Loan A/c | 6,46,800 | Investments | 1,00,000 |
| Creditors | 1,00,000 | Stock | 3,00,000 |
| Debtors | 4,00,000 | ||
| Cash at Bank | 2,00,000 | ||
| Cash in Hand | 1,25,000 | ||
| Profit & Loss Suspense A/c | 15,000 | ||
| Total | 23,40,000 | Total | 23,40,000 |
Working Notes: Average profit (5 years) = 13,35,000 / 5 = ₹2,67,000. Goodwill = 2,67,000 × 2 = ₹5,34,000; Charan’s share = 5,34,000 × 1/5 = ₹1,06,800, borne equally by Amit and Bunty (₹53,400 each). Average profit (preceding 3 years: 3,00,000 + 2,75,000 + 3,25,000)/3 = ₹3,00,000; Charan’s share of profit for 3 months (1 April–30 June 2025) = 3,00,000 × 1/5 × 3/12 = ₹15,000.
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.60 - 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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