Question 45 Chapter 6 of +2-A
45. Amit, Balan, and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3, and 1/6 respectively. Chander retired on 1st April 2014. The Balance Sheet of the firm on the date of Chander’s retirement was as follows
| Liabilities | Amount | Assets | Amount | ||
| Sundry Creditors | 12,600 | Bank | 50,000 | ||
| Provident Fund | 3,000 | Debtors | 30,000 | ||
| General Reserve | 9,000 | Less: Provision | 1,000 | 29,000 | |
| Partner’s Capital A/cs: | Stock | 25,000 | |||
| Amit’s Capital | 40,000 | Investments | 10,000 | ||
| Balan’s Capital | 36,500 | Patents | 5,000 | ||
| Chander’s Capital | 20,000 | 96,500 | Machinery | 48,000 | |
| 1,21,100 | 1,21,100 | ||||
It was agreed that:
- Goodwill will be valued at 27,000.
- Depreciation of 10% was to be provided on Machinery.
- Patents were to be reduced by 20%.
- Liability on account of Provident Fund was estimated at 2,400.
- Chander took over Investments for 15,800.
- Amit and Balan decided to adjust their capitals in a proportion to their profit-sharing ratio by opening Current Accounts.
Prepare Revaluation Account and Partners’ Capital Accounts on Chander’s retirement.
The solution of Question 45 Chapter 6 of +2-A: –
| Revaluation Account |
|||||
| Particular |
Amount | Particular | Amount | ||
| To Machinery A/c | 4,800 | By Investments A/c | 5,800 | ||
| To Patents | 1,000 | By Provident Fund A/c | 600 | ||
| To Profit transferred to: | |||||
| Amit’s Capital A/c | 300 | ||||
| Balan’s Capital A/c | 200 | ||||
| Chander’s Capital A/c | 100 | 600 | |||
| 6,400 | 6,400 | ||||
| Partners’ Capital Account |
|||||||
| Part. | Amit | Balan | Chander |
Part. |
Amit | Balan | Chander |
| To Investments A/c | – | – | 15,800 | By Balance B/d | 40,000 | 36,500 | 20,000 |
| To Chander’s Capital A/c | 2,700 | 1,800 | – | By Revaluation (Profit)A/c | 300 | 200 | 100 |
| To Chander’s Loan A/c | – | – | 10,300 | By General Reserve A/c | 4,500 | 3,000 | 1,500 |
| To Balan’s Current A/c | – | 5,900 | – | By Amit’s Capital A/c | – | – | 2,700 |
| By Balan’s Capital A/c | – | – | 1,800 | ||||
| By Current A/c | 5,900 | – | – | ||||
| 50,700 | 39,700 | 26,100 | 50,700 | 39,700 | 26,100 | ||
Working Note:-
Calculation of Gaining Ratio
Old Ratio of Amit, Balan, and Chander = 1/2: 1/3: 1/6
= 3/6:2/6:1/6 (make base equal)
Chander retires from the firm.
New or Gaining Ratio of Amit and Balan,= 3:2 (as per old ratio)
Adjustment of Goodwill
Goodwill of the firm = Rs 27,000
| Chander’s Share of Goodwill | = | Firm’s Goodwill | X | Chander’s share |
| = | 27,000 | X | 1 | |
| 6 | ||||
| = | Rs 4,500 |
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| Amit will pay | = | Chander’s Goodwill | X |
Share of Amit |
| = | 4,500 | X | 3 | |
| 5 | ||||
| = | Rs 2,700 |
| Balan will pay | = | Chander’s Goodwill | X | Share of Balan |
| = | 4,500 | X | 2 | |
| 5 | ||||
| = | Rs 1,800 |
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 Amit’s Capital Amount after all adjustments | = | 40,000 | + | 300 | + | 4,500 | – | 2,700 | |
| = | 42,100/- | ||||||||
| Balance of Balan’s Capital Amount after all adjustments | = | 36,500 | + | 200 | + | 3,000 | – | (1,800) | |
| = | 37,900 | ||||||||
| Total Capital of the firm | = | Amit’s Capital Balance | + | Balan’s Capital Balance |
| = | 42,100 | + | 37,900 | |
| = | 80,000 |
Calculation of Total Capital
The total capital of the Firm= Rs 80,000
| Amit’s New Capital | = | Firm’s new Capital | X |
Share of Amit |
| = | 80,000 | X | 3 | |
| 5 | ||||
| = | Rs 48,000 |
| Balan New Capital | = | Firm’s new Capital | X | Share of Balan |
| = | 80,000 | X | 2 | |
| 5 | ||||
| = | Rs 32,000 |
Calculation of Addition/withdrawal of Capital by the Amit and Balan
|
Addition/withdrawal by Amit’s in/from Capital A/c |
= | New Capital Amount | – | Balance of Capital Amount after all adjustments |
| = | 48,000 | – | 42,100 | |
| = | 5,900/- |
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| Addition/withdrawal by Balan’s in/from Capital A/c | = | New Capital Amount | – | Balance of Capital Amount after all adjustments |
| = | 32,000 | – | 37,900 | |
| = | 5,900/- |
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
