Question 37 Chapter 6 of +2-A
37. X, Y, and Z are partners sharing profits in the ratio of 4: 3: 2. Their Balance Sheet as of 31st March 2019 stood as follows:
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 24,140 | Cash at Bank | 3,300 | ||
| Sundry Debtors | 3,045 | ||||
| Capital A/cs: | Less: Provision for Doubtful Debts | 105 | 2,940 | ||
| X’s Capital | 12,000 | Stock | 4,800 | ||
| Y’s Capital | 9,000 | Plant and Machinery | 5,100 | ||
| Z’s Capital | 6,000 | 27,000 | Land and Building | 15,000 | |
| Y’s Loan | 20,000 | ||||
| 51,140 | 51,140 | ||||
AY retired on 1st April 2019 after giving due notice. The following adjustments in the books of the firm were agreed:
- Land and Building be appreciated by 10%.
- Provision for Doubtful Debts is no longer necessary since all the debtors are good.
- Stock be appreciated by 20%.
- Adjustment is made in the accounts to rectify a mistake previously committed whereby Y was credited in excess by 810, while X and Z were debited in excess of 420 and 390 respectively.
- Goodwill of the firm is valued at 5,400 and Y’s share of the same be adjusted to that of X and Z who was going to share in the ratio of 2:1.
- It was decided by X and Y to settle Y’s account immediately on his retirement.
Prepare: i) Revaluation Account; ii) Partner’s Capital Accounts and iii) Balance Sheet of the firm after Y’s retirement.
The solution of Question 37 Chapter 6 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| By Land and Building A/c | 1,500 | ||||
| (15,000 × 10%) | |||||
| By Prov. for Doubtful Debts A/c | 105 | ||||
| By Stock A/c | 960 | ||||
| To Profit transferred to | (4,800 × 20%) | ||||
| X’s Capital A/c | 1,140 | ||||
| Y’s Capital A/c | 855 | ||||
| Z’s Capital A/c | 570 | 18,000 | |||
| 2,565 | 2,565 | ||||
| Partners’ Capital Account |
|||||||
| Part. | X | Y | Z |
Part. |
X | Y | Z |
| To Y’s Capital A/c(Goodwill) | 1,200 | – | 600 | By Balance B/d | 12,000 | 9,000 | 6,000 |
| To X’s Capital A/c | – | 420 | – | By Revaluation A/c | 1,140 | 855 | 570 |
| To Z’s Capital A/c | – | 390 | – | By X’s Capital A/c | – | 1,200 | – |
| To Y’s Loan A/c | – | 10,845 | – | By Z’s Capital A/c | – | 600 | – |
| To Balance c/d | 12,360 | – | 6,360 | By Y’s Capital A/c | 420 | – | 390 |
| 13,560 | 11,655 | 6,960 | 13,560 | 11,655 | 6,960 | ||
| Balance Sheet |
|||||
| Liabilities |
Amount | Assets | Amount | ||
| Sundry Creditors | 24,140 | Cash at Bank | 3,300 | ||
| Sundry debtors | 3,045 | ||||
| Stock | 5,760 | ||||
| Plant and Machinery | 5,100 | ||||
| Land and Building | 16,500 | ||||
| Y’s Loan | 9,155 | ||||
| Capital: | |||||
| X’s Capital | 12,360 | ||||
| Z’s Capital | 6,360 | 18,720 | |||
| 42,860 | 42,860 | ||||
Working Note:-
Calculation of Gaining Ratio
Old Ratio of X, Y, and Z = 4:3:2
Y retires from the firm.
Gaining Ratio of X and Z = 2:1 (Given)
Adjustment of Goodwill
Goodwill of the firm = Rs 5,400
| Y’s Share of Goodwill | = | 5,400 | X | 3 |
| 9 | ||||
| = | Rs 1,800 |
| X’s Share of Goodwill | = | 1,800 | X | 2 |
| 3 | ||||
| = | Rs 1,200 |
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| Z’s Share of Goodwill | = | 1,800 | X | 1 |
| 3 | ||||
| = | Rs 600 |
Computation of final settlement amount payable to/ receivable from Y after his retirement:
Existing Loan against Y = 20,000
Capital Account Balance Payable = 10,845
|
The amount payable to/receivable from Y |
= | Existing Loan against Y | – | Capital Account Balance Payable |
| = | 20,000 | – | 10,845 | |
| = | 9,155/- |
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
