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Question 35 Chapter 6 of +2-A
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35. X, Y, and Z were in partnership sharing profits and losses in the proportions of 3: 2: 1. On 1st April 2019, Y retired from the firm. On that date, their Balance Sheet was:
| Liabilities | Amount | Assets | Amount | ||
| Trade Creditors | 30,000 | Cash in Hand | 15,000 | ||
| Bills Payable | 45,000 | Cash at Bank | 75,000 | ||
| Expenses Owing | 45,000 | Debtors | 1,50,000 | ||
| General Reserve | 1,35,000 | Stock | 1,20,000 | ||
| Capital A/cs: | Factory Premises | 2,25,000 | |||
| X’s Capital | 1,50,000 | Machinery | 80,000 | ||
| Y’s Capital | 1,50,000 | Loose Tools | 40,000 | ||
| Z’s Capital | 1,50,000 | 4,50,000 | |||
| 7,05,000 | 7,05,000 | ||||
The terms were:
- Goodwill of the firm was valued at 1,35,000 and adjustment in this respect was to be made in the continuing Partners’ Capital Accounts without raising Goodwill Account.
- Expenses Owing to be brought down to 37,500.
- Machinery and Loose Tools are to be valued @ 10% less than their book value.
- Factory Premises are to be revalued at 2,43,000.
Show Revaluation Account, Partners’ Capital Accounts and prepare the Balance Sheet of the firm after the retirement of Y.
The solution of Question 35 Chapter 6 of +2-A: –
| Revaluation Account | |||||
| Particular | Amount | Particular | Amount | ||
| To Machinery A/c | 8,000 | By Expenses Owing A/c | 7,500 | ||
| (80,000 × 10%) | By Factory Premises A/c | 18,000 | |||
| To Loose Tools A/c | 4,000 | ||||
| (40,000 × 10%) | |||||
| To Profit transferred to | |||||
| X’s Capital | 6,750 | ||||
| Y’s Capital | 4,500 | ||||
| Z’s Capital | 2,250 | 13,500 | |||
| 25,500 | 25,500 | ||||
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| Partners’ Capital Account | |||||||
| Part. | X | Y | Z | Part. | X | Y | Z |
| To Y’s Capital A/c (Goodwill) | 33,750 | – | 11,250 | By Balance B/d | 1,50,000 | 1,50,000 | 1,50,000 |
| By General Reserve | 67,500 | 45,000 | 22,500 | ||||
| By Revaluation A/c | 6,750 | 4,500 | 2,250 | ||||
| To Y’s Loan A/c | – | 2,44,500 | – | By X’s Capital A/c (Goodwill) | – | 33,750 | – |
| To Balance c/d | 1,90,500 | – | 1,63,500 | By Z’s Capital A/c (Goodwill) | – | 11,250 | – |
| 2,24,250 | 2,44,500 | 1,74,750 | 2,24,250 | 2,44,500 | 1,74,750 | ||
| Balance Sheet | |||||
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 30,000 | Cash in Hand | 15,000 | ||
| Bills Payable | 45,000 | Cash at Bank | 75,000 | ||
| Expenses Owing | 37,500 | Debtors | 1,50,000 | ||
| Stock | 1,20,000 | ||||
| Y’s Loan A/c | 2,44,500 | Factory Premises | 2,43,000 | ||
| Capital: | Machinery | 72,000 | |||
| A’s Capital | 1,90,500 | Loose tools | 36,000 | ||
| B’s Capital | 1,63,500 | 3,54,000 | |||
| 7,11,000 | 7,11,000 | ||||
Working Note:-
Calculation of Gaining Ratio
Old Ratio of X, Y, and Z = 3:2:1
New Ratio of N and S = 3:2
Note:- “Because the new ratio or gaining ratio is not given in the question so they will share gain in the old sharing ratio. So the gaining ratio will be:”
Gaining Ratio of X and Z = 3: 1
Adjustment of Goodwill
Goodwill of the firm = Rs 1,35,000
| Y’s Share of Goodwill | = | 1,35,000 | X | 2 |
| 6 | ||||
| = | Rs 45,000 |
Gaining Ratio of X and Z = 3: 1
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| X’s gain | = | 45,000 | X | 3 |
| 4 | ||||
| = | Rs 33,750 |
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| Z’s Sacrifice | = | 45,000 | X | 1 |
| 4 | ||||
| = | Rs 11,250 |
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
