# Question 47 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 47 Chapter 6 of +2-A

Question 47 Chapter 6 of +2-A

47. X, Y, and Z are partners in a firm sharing profits in the ratio of 3: 1: 2. On 31st March 2019, their Balance Sheet was:

 Liabilities Amount Assets Amount Bills Payable 12,000 Freehold Premises 40,000 Sundry Creditors 28,000 Machinery 30,000 General Reserve 12,000 Furniture 12,000 Capital A/cs: Stock 22,000 X’s Capital 30,000 Sundry Debtors 20,000 Y’s Capital 20,000 Less: Provision for Doubtful Debt 1,000 19,000 Z’s Capital 28,000 78,000 Cash 7,000 1,30,000 1,30,000

Z retired on 1st April 2019 from the business and the partners agree to the following:

1. Freehold Premises and Stock are to be appreciated by 20% and 15% respectively.
2. Machinery and Furniture are to be reduced by 10% and 7% respectively.
3. Provision for Doubtful Debts is to be increased to 1,500.
4. Goodwill of the firm is valued at 21,000 on Z’s retirement.
5. Continuing partners to adjust their capitals in their new profit-sharing ratio after the retirement of Z. Surplus/deficit, if any, in their Capital Accounts will be adjusted through Current Accounts.

Prepare necessary Ledger Accounts and draw the Balance Sheet of the reconstituted firm.

## The solution of Question 47 Chapter 6 of +2-A: –

 Revaluation Account Particular Amount Particular Amount To Machinery A/c 3,000 By Freehold Premises A/c 8,000 30,000 × 10% 40,000 × 20% To Furniture A/c 840 By Stock A/c 3,300 12,000 × 7% 22,000 × 15% To Prov. for Doubtful Debts A/c 500 1,500 – 1,000 To Profit transferred to X’s Capital A/c 3,480 Y’s Capital A/c 1,160 Z’s Capital A/c 2,320 6,960 11,300 11,300

 Partners’ Capital Account Part. X Y Z Part. X Y Z To Z’s Capital A/c 5,250 1,750 – By Balance B/d 30,000 20,000 28,000 By General Reserve A/c 6,000 2,000 4,000 By X’s Capital A/c (Goodwill) – 10,200 – To Z’s Loan A/c – – 41,320 By Y’s Capital A/c (Goodwill) – 20,400 – To Y’s Current A/c – 7,500 – By Revaluation A/c 3,480 1,160 2,320 To Balance c/d 41,730 13,910 – By X’s Current A/c 7,500 – – 46,980 23,160 41,320 46,980 23,160 41,320

 Balance Sheet Particular Amount Particular Amount Bills Payable 12,000 Freehold Premises 48,000 Sundry Creditor 28,000 40,000 + 8,000 Z’s Loan A/c 41,320 Machinery 27,000 Y’s Current A/c 7,500 30,000 – 3,000 Furniture 11,160 12,000 – 840 Stock 25,300 22,000 + 3,300 Debtors 20,000 Less: Prov. For D/D 1,500 18,500 Capital A/cs X’s Capital 41,730 Cash A/c 7,000 Z’s Capital 13,910 55,640 X’s Current A/c 7,500 1,44,460 1,44,460

#### Calculation of Gaining Ratio

Old Ratio of X, Y, and Z = 3: 1: 2

Z retires from the firm.

New Ratio is not given in the question that’s why to assume that the old ratio left after the retirement of Z will be their new ratio and then gaining will become the same with the new ratio. We will show you by calculating it as following: –

New Ratio of X and Y = 3:1

#### Gaining Ratio =  New Ratio – Old Ratio

 X’s Gaining Share = 3 – 3 4 6 = 9 – 6 12 = 3 12
 Y’s Gaining Share = 1 – 1 4 6 = 3 – 2 12 = 1 12

Gaining Ratio = 3:1

Goodwill of the firm = Rs 21,000

 Z’s Share of Goodwill = Firm’s Goodwill X Z’s share = 21,000 X 2 6 = Rs 7,000

Gaining Ratio = 3: 1

 X will pay = Z’s Goodwill X Share of X = 7,000 X 3 4 = Rs 5,250

 Y will pay = Z’s Goodwill X Share of Y = 7,000 X 3 4 = Rs 1,750

#### Calculation of Addition/withdrawal of Capital by the Amit and Balan

 Balance of Capital Amount after all adjustments = Opening Balance of Capital Account + All Credits – All Debits

 Balance of X’s Capital Amount after all adjustments = 30,000 + 6,000 + 3,480 – 5,250 = 34,230/-

 Balance of Y’s Capital Amount after all adjustments = 20,000 + 2,000 + 1,160 – 1,750 = 21,410/-

 Total Capital of the firm = X’s Capital Balance + Y’s Capital Balance = 34,230 + 21,410 = 55,640/-

#### Calculation of Total Capital

The total capital of the Firm= Rs 55,640

New Profit Sharing Ratio = 3:1

 X’s New Capital = Firm’s New Capital X Share of X = 55,640 X 3 4 = Rs 41,730/-

 Y’s New Capital = Firm’s new Capital X Share of Y = 55,640 X 1 4 = Rs 13,910/-

Calculation of Addition/withdrawal of Capital by the X and Y

 Addition/withdrawal by X’s in/from Capital A/c = New Capital Amount – Balance of Capital Amount after all adjustments = 41,730 – 34,230 = 7,500/-

 Addition/withdrawal by Y’s in/from Capital A/c = New Capital Amount – Balance of Capital Amount after all adjustments = 13,910 – 21,410 = (-)7,500/-

The negative value so he will withdrawal Capital.

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. 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