Double Entry Book Keeping Ts Grewal Vol. I 2018 for Class 12 Commerce Accountancy Chapter 5

Question 73:

A , B and C are partners in a firm sharing profits in the proportion of 3 : 2 : 1 . Their Balance Sheet as at 31st March, 2018 stood as follows :

Liabilities		₹	Assets	₹
Sundry Creditors		2,60,000	Cash in Hand	42,500
General Reserve		1,20,000	Cash at Bank	2,14,500
Capital A/cs:			Debtors	1,63,000
A	2,00,000		Stock	17,500
B	1,20,000		Investments	1,32,500
C	80,000	4,00,000	Building	2,10,000
		7,80,000		7,80,000

B died on 30th June , 2018 and according to the deed of the said partnership his executors are entitled to be paid as under:
(a) The capital to his credit at the time of his death and interest thereon @ 10% per annum.
(b) His proportionate share of General Reserve.
(c) His share of profits fro the intervening period will be based on the sales during that period. Sales from 1st April, 2018 to 30th June , 2018 were as ₹ 12,00,000. The rate of profit during past three years had been 10% on sales.
(d) Goodwill according to his share of profit to be calculated by taking twice the amount of profits of the last three years less 20% . The profit of the previous three years were: 1st Year: ₹ 82,000; 2nd year: ₹ 90,000; 3rd year ₹ 98,000.
(e) The investments were sold at par and his executors were paid out in full.
Prepare B's Capital Account and his Executors' Account.

Answer:

B’s Capital Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
B’s Executor A/c	3,47,000	Balance b/d	1,20,000
		Interest on Capital A/c	3,000
		General Reserve	40,000
		Profit & Loss Suspense A/c	40,000
		Goodwill A/c	1,44,000
	3,47,000		3,47,000

B’s Executor Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Bank A/c	3,47,000	B’s Capital A/c	3,47,000
	3,47,000		3,47,000

Working Notes:

WN 1: Calculation of Interest on Capital

WN 2: Calculation of Profit Share up-to-death

WN 3: Calculation of share of goodwill

Question 74:

Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of ₹ 1,25,000 in Chetan's Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
(a) Interest on capital will be calculated at the rate of 6% p.a.
(b) The executor of deceased partner shall be paid ₹ 24,000 for his share of goodwill.
(c) His share of Reserve Fund of ₹ 12,000, shall be paid to his executor.
(d) His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were ₹ 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were ₹ 1,20,000. The profit of the firm for the year ending 31st March, 2012 was ₹ 2,00,000.
Prepare Chetan's Capital Account to be presented to his executor.

Answer:

Chetan’s Capital A/c
Dr.	Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Chetan’s Executor’s A/c		1,79,750	Capital	1,25,000
			Interest on Capital (for 6 months)	3,750
			Babita’s Share Capital A/c*	16,000
			David’s Share Capital A/c*	8,000
			Share of Reserve	12,000
			P & L Suspense A/c**	15,000

		1,79,750		1,79,750

Working Note: *

**Sales in the year 2011-12 = 4,00,000

Profit for year 2011-12 = 2,00,000 = 50% of Sales.

Therefore, Profit for the Period Apr 01 to 30^th Sep = 50% of Sales of the same period

Share of Profit to be divided = 50% of Rs 1,20,000 = Rs 60,000

Chetan’s Share of Profit = 1/4^th of Rs 60,000 = Rs 15,000

Question 75:

Sunny, Honey and Rupesh were partners in a firm. On 31st March, 2014, their Balance Sheet was as follows:

Liabilities		₹	Assets	₹
Creditors		10,000	Plant and Machinery	40,000
General Reserve		30,000	Furniture	15,000
Capital A/cs:			Investments	20,000
Sunny	30,000		Debtors	20,000
Honey	30,000		Stock	20,000
Rupesh	20,000	80,000		25,000
		1,20,000		1,20,000

Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
(a) Balance in the Capital Account of the deceased partner.
(b) Interest on Capital @ 6% per annum up to the date of his death.
(c) His share in the undistributed profits or losses as per the Balance Sheet.
(d) His share in the profits of the firm till the date of his death, calculated on the basis of rate of net profit on sales of the previous year. The rate of net profit on sales of previous year was 20%. Sales of the firm during the year till 31st December, 2014 was ₹ 6,00,000.
Prepare Honey's Capital Account to be presented to his executors.

Answer:

Honey’s Capital A/c
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Executor’s A/c	81,350	Balance b/d	30,000
		Interest on Capital	1,350
		Profit and Loss Suspense A/c	40,000
		General Reserve	10,000
	81,350		81,350

Working Notes:

WN1 Calculation of Interest on Honey’s Capital

WN2 Calculation of Honey’s share in profits

WN3 Calculation of Honey’s Share in General Reserve

Question 76:

R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:

Liabilities		₹	Assets	₹
Sundry Creditors		40,000	Goodwill	25,000
Bills Payable		15,000	Leasehold	1,00,000
Workmen Compensation Reserve		30,000	Patents	30,000
Capital A/cs:			Machinery	1,50,000
R	1,50,000		Stock	50,000
S	1,25,000		Debtors	40,000
T	75,000	3,50,000	Cash at Bank	40,000
		4,35,000		4,35,000

T died on 1st August, 2018. It was agreed that:
(a) Goodwill be valued at

2^{\frac{1}{2}}

years' purchase of average of last 4 years' profits which were:
2014-15: ₹ 65,000; 2015-16: ₹ 60,000; 2016-17: ₹ 80,000 and 2017-18: ₹ 75,000.
(b) Machinery be valued at ₹ 1,40,000; Patents be valued at ₹ 40,000; Leasehold be valued at ₹ 1,25,000 on 1st August, 2018.
(c) For the purpose of calculating T's share in the profits of 2018-19, the profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
(d) A sum of ₹ 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T's Executors' Account.

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Revaluation A/c	Dr.		10,000
To Machinery A/c				10,000
(Decrease in value of Machinery transferred to Revaluation Account)

Patents A/c	Dr.		10,000
Leasehold A/c	Dr.		25,000
To Revaluation A/c				35,000
(Increase in value Patents and Leasehold transferred to Revaluation Account)

Revaluation A/c	Dr.		25,000
To R’s Capital A/c				12,500
To S’s Capital A/c				7,500
To T’s Capital A/c				5,000
(Revaluation profit distributed among partners in their old ratio)

R’ Capital A/c	Dr.		12,500
S’s Capital A/c	Dr.		7,500
T’s Capital A/c	Dr.		5,000
To Goodwill A/c				25,000
(Goodwill written off among partners in their old ratio)

R’s Capital A/c	Dr.		21,875
S’s Capital A/c	Dr.		13,125
To T’s Capital A/c				35,000
(T’s share of goodwill adjusted)

Profit and Loss Suspense A/c	Dr.		5,000
To T’s Capital A/c				5,000
(T’s share of profit transferred to his capital account)

Workmen’s Compensation Reserve A/c	Dr.		30,000
To R’s Capital A/c				15,000
To S’s Capital A/c				9,000
To T’s Capital A/c				6,000
(Workmen’s Compensation Reserve distributed among partners in their old ratio )

T’s Capital A/c	Dr.		1,21,000
To T’s Executors A/c				1,21,000
(Amount due to T after all adjustments transferred to his Executor’s Account)

T’s Executor’s A/c	Dr.		21,000
To Bank A/c				21,000
(Amount paid to T’s Executor)

T’s Executor’s Account
Dr.					Cr.
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2018			2018
Aug. 01	Cash A/c	21,000	Aug. 01	T’s Capital A/c	1,21,000
2019			2019
Jan. 31	Cash A/c (25,000 + 5,000)	30,000	Jan. 31	Interest (1,00,000 ×10% for 6 months)	5,000
Mar. 31	Balance c/d	76,250	Mar. 31	Interest (75,000 ×10% for 2 months)	1,250
		1,27,250			1,27,250
2019			2019
Aug. 01	Cash A/c (25,000 + 1,250 + 2,500)	28,750	Apr. 01	Balance b/d	76,250
2020			Aug. 01	Interest (75,000 × 10% for 4 months)	2,500
Jan. 31	Cash A/c (25,000 + 2,500)	27,500	2020
Mar. 31	Balance c/d	25,417	Jan. 31	Interest (50,000 × 10% for 6 months)	2,500
			Mar. 31	Interest (25,000 × 10% for 2 months)	417
		81,667			81,667
2020			2020
Aug. 01	Cash A/c (25,000 + 417 + 833)	26,250	Apr. 01	Balance b/d	25,417
			Aug. 01	Interest (25,000 × 10% for 4 months)	833
		26,250			26,250

Working Notes:

WN 1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 2.5 = Rs 1,75,000

WN 2 Adjustment of Goodwill

Old Ratio (R, S and T) = 5 : 3 : 2

T died.

∴ New Ratio (R and S) = 5 : 3 and

Gaining Ratio = 5 : 3

T’s Share in Goodwill =

This share of goodwill is to be distributed between R and S in their gaining ratio (i.e. 5 : 3).

WN 3 Calculation of T’s Share of Profit

Profit for 2017-18 = Rs 75,000

T's Share of Profit for 2018-19 =

75, 000 \times \frac{2}{10} \times \frac{4}{12} = R s . 5, 000

WN 4

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Machinery		10,000	Patents	10,000
Profit transferred to:			Leasehold	25,000
R’s Capital A/c	12,500
S’s Capital A/c	7,500
T’s Capital A/c	5,000	25,000
		35,000		35,000

WN 5

T’s Capital Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Goodwill	5,000	Balance b/d	75,000
T’s Executor’s A/c	1,21,000	Workmen’s Compensation Reserve	6,000
		Profit and Loss Suspense A/c	5,000
		R’s Capital A/c	21,875
		S’s Capital A/c	13,125
		Revaluation A/c (Profit)	5,000
	1,26,000		1,26,000

Question 77:

Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:

Liabilities		₹	Assets	₹
Trade Creditors		40,000	Building	2,00,000
General Reserve		45,000	Plant and Machinery	80,000
Capital A/cs:			Stock	35,000
Akhil	1,95,000		Debtors	80,000
Nikhil	1,20,000		Cash at Bank	85,000
Sunil	80,000	3,95,000
		4,80,000		4,80,000

Sunil died on 1st August, 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
(a) Balance of Partners' Capital Account and his share of accumulated reserve.
(b) Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
(c) Share of goodwill calculated on the basis of three times the average profit of the last four years.
(d) Interest on deceased partner's capital @ 6% p.a.
(e) ₹ 50,000 to be paid to deceased's executor immediately and the balance to remain in his Loan Account.
Profits and Losses for the preceding years were: 2014-15 − ₹ 80,000 Profit; 2015-16 − ₹ 1,00,000 Loss; 2016-17 − ₹ 1,20,000 Profit; 2017-18 − ₹ 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil's Capital Account and Sunil's Executor Account.

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
General Reserve A/c	Dr.		45,000
To Akhil’s Capital A/c				15,000
To Nikhil’s Capital A/c				15,000
To Sunil’s Capital A/c				15,000
(General Reserve distributed among partners in their old ratio)

Akhil’s Capital A/c	Dr.		35,000
Nikhil’s Capital A/c	Dr.		35,000
To Sunil’s Capital A/c				70,000
(Sunil’s share of goodwill adjusted)

Interest on Capital A/c	Dr.		1,600
To Sunil’s Capital A/c				1,600
(Interest allowed on Sunil’s Capital)

Profit and Loss Suspense A/c	Dr.		20,000
To Sunil’s Capital A/c				20,000
(Sunil’s profit share transferred to his capital account)

Sunil’s Capital A/c	Dr.		1,86,600
To Sunil’s Executor’s A/c				1,86,600
(Amount due to Sunil after all adjustments transferred to his Executor’s Account)

Sunil’s Executor’s A/c	Dr.		50,000
To Bank A/c				50,000
(Amount paid to Sunil’s Executor)

Sunil’s Capital Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
		Balance b/d	80,000
		Interest on Capital A/c	1,600
		General Reserve	15,000
		Profit and Loss Suspense A/c	20,000
		Akhil’s Capital A/c (Goodwill)	35,000
Sunil’s Executor’s A/c	1,86,600	Nikhil’s Capital A/c (Goodwill)	35,000
	1,86,600		1,86,600

Sunil’s Executor’s Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Bank A/c	50,000	Sunil’s Capital A/c	1,86,600
Balance c/d	1,36,600
	1,86,600		1,86,600

Working Notes:

WN 1 Calculation of Sunil’s Share of Profit

Profit for 2017-18 = Rs 1,80,000

WN 2 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

∴ Goodwill = Average Profit × Number of Years’ Purchase

= 70,000 × 3 = Rs 2,10,000

WN 3 Adjustment of Goodwill

Old Ratio = 1 : 1 : 1

Sunil died.

∴ New Ratio = 1 : 1 and

Gaining Ratio = 1 : 1

Sunil’s Share in Goodwill =

This share of goodwill is to be distributed between Akhil and Nikhil in their gaining ratio (i.e. 1 : 1).

WN 4 Calculation of Interest on Sunil’s Capital

Sunil’s Capital Balance = Rs 80,000

∴ Interest on Capital (for 4 months)

Question 78:

B, C and D were partners in a firm sharing profits in the ratio of 5 :3 : 2. On 31st December, 2008, their Balance Sheet was as follows:

Liabilities		Amount (₹)	Assets	Amount (₹)
Creditors		43,000	Cash	10,200
Bills Payable		17,000	Stock	24,500
General Reserve		70,000	Debtors	27,300
Capital A/cs:			Land and Building	1,40,000
B	40,000		Profit and Loss A/c	70,000
C	50,000
D	52,000	1,42,000
		2,72,000		2,72,000

B died on 31st March, 2009. The Partnership Deed provided for the following on the death of a partner:
(a) Goodwill of the firm was to be valued at 3 years' purchase of the average profit of last 5 years. The profits for the years ended 31st December, 2007, 31st December, 2006, 31st December, 2005, and 31st December, 2004 were ₹ 70,000; ₹ 60,000; ₹ 50,000 and ₹ 40,000 respectively.
(b) B's share of profit or loss till the date of his death was to be calculated on the basis of the profit or loss for the year ended 31st December, 2008.
You are required to calculate the following:
(i) Goodwill of the firm and B's share of goodwill at the time of his death.
(ii) B's share in the profit or loss of the firm till the date of his death.
(iii) Prepare B's Capital Account at the time of his death to be presented to his Executors.

Answer:

(i) Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

∴ Goodwill = Average Profit × Number of Years’ Purchase

= 30,000 × 3 = Rs 90,000

Old Ratio (B, C and D) = 5 : 3 : 2

B Died.

New Ratio (C and D) = 3 : 2

B’s Share in Goodwill =

This share of goodwill is to be distributed between C and D in their gaining ratio (i.e. 3 : 2).

(ii) Calculation of B’s Share of Profit or Loss

Loss for the Year (2008) = Rs 70,000

(iii)

B’s Capital Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Profit and Loss A/c	35,000	Balance b/d	40,000
Profit and Loss Suspense A/c	8,750	General Reserve	35,000
		C’s Capital A/c (Goodwill)	27,000
B’s Executor’s A/c	76,250	D’s Capital A/c (Goodwill)	18,000
	1,20,000		1,20,000

Question 79:

The Balance Sheet of X, Y and Z as at 31st March, 2018 was:

Liabilities		Amount (₹)	Assets	Amount (₹)
Bills Payable		2,000	Cash at Bank	5,800
Employees' Provident Fund		5,000	Bills Receivable	800
Workmen Compensation Reserve		6,000	Stock	9,000
General Reserve		6,000	Sundry Debtors	16,000
Loans		7,100	Furniture	2,000
Capital A/cs:			Plant and Machinery	6,500
X	22,750		Building	30,000
Y	15,250		Advertising Suspense	6,000
Z	12,000	50,000
		76,100		76,100

The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
(a) Goodwill is to be calculated on the basis of three years' purchase of the five years' average profit. The profits were: 2017-18: ₹ 24,000; 2016-17: ₹ 16,000; 2015-16: ₹ 20,000 and 2014-15: ₹ 10,000 and 2013-14: ₹ 5,000.
(b) The deceased partner to be given share of profits till the date of death on the basis of profits for the previous year.
(c) The Assets have been revalued as: Stock ₹ 10,000; Debtors ₹ 15,000; Furniture ₹ 1,500; Plant and Machinery ₹ 5,000; Building ₹ 35,000. A Bill Receivable for ₹ 600 was found worthless.
(d) A Sum of ₹ 12,233 was paid immediately to Z's Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding.
Give Journal entries and show the Z's Executors' Account till it is finally settled.

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
Workmen’s Compensation Reserve	Dr.		6,000
To X’s Capital A/c				3,000
To Y’s Capital A/c				2,000
To Z’s Capital A/c				1,000
(Workmen’s Compesation Reserve distributed among partners in their old ratio)

General Reserve A/c	Dr.		6,000
To X’s Capital A/c				3,000
To Y’s Capital A/c				2,000
To Z’s Capital A/c				1,000
(General Reserve distributed among partners in their old ratio)

X’s Capital A/c	Dr.		3,000
Y’s Capital A/c	Dr.		2,000
Z’s Capital A/c	Dr.		1,000
To Advertisement Suspense A/c				6,000
(Advertisement suspense written off among partners in their old ratio)

X’s Capital A/c	Dr.		4,500
Y’s Capital A/c	Dr.		3,000
To Z’s Capital A/c				7,500
(Z’s share of goodwill adjusted)

Revaluation A/c	Dr.		3,600
To Sundry debtors A/c	Dr.			1,000
To Furniture A/c				500
To Plant and Machinery A/c				1,500
To Bills Receivable A/c				600
(Decrease in value of Assets transferred to Revaluation Account)

Stock A/c	Dr.		1,000
Building A/c	Dr.		5,000
To Revaluation A/c				6,000
(Increase in value of Assets transferred to Revaluation Account)

Revaluation A/c	Dr.		2,400
To X’ Capital A/c				1,200
To Y’s Capital A/c				800
To Z’s Capital A/c				400
(Revaluation profit distributed among partners in their old ratio)

Profit and Loss Suspense A/c	Dr.		1,333
To Z’s Capital A/c				1,333
(Z’s share of profit transferred his capital account)

Z’s Capital A/c	Dr.		22,233
To Z’s Executor’s A/c				22,233
(Amount due to Z transferred to his Executor’s Account)

Z’s Executor’s A/c	Dr.		12,333
To Bank A/c				12,333
(Amount paid to Z’s Executor)

Z’s Executor’s Account
Dr.					Cr.
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2018			2018
July 31	Bank A/c	12,233	July 31	Z’s Capital A/c	22,233
2019			2019
Mar. 31	Balance c/d	10,667	Mar. 31	Interest (10,000 × 10% for 8 months)	667
		22,900			22,900
2019			2019
July 31	Bank A/c (5,000 + 667 + 333)	6,000	Apr. 01	Balance b/d	10,667
			July 31	Interest (10,000 × 10% for 4 months )	333
2020			2020
Mar.31	Balance c/d	5,333	Mar. 31	Interest (5,000 × 10% for 8 months)	333
		11,333			11,333
2020			2020
July 31	Bank A/c (5,000 + 333 + 167)	5,500	Apr. 01	Balance b/d	5,333
			July 31	Interest (5,000 × 10% for 4months)	167
		5,500			5,500

Working Notes:

WN1 Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

∴ Goodwill = Average Profit × Number of Years’ Purchase

= 15,000 × 3 = Rs 45,000

WN2 Adjustment of Goodwill

Old Ratio = 3 : 2 : 1

Z died.

∴ New Ratio (X and Y) = 3 : 1 and

Gaining Ratio = 3 : 2

Z’s Share in Goodwill =

This share of goodwill is to be distributed between X and Y in their gaining ratio (i.e. 3 : 1).

WN3 Calculation Z’s Share of Profit

Profit for 2017-18 ( Immediate Previous Year) = Rs 24,000

∴ Z’s Profit Share

WN4

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Sundry Debtors		1,000	Stock	1,000
Furniture		500	Building	5,000
Plant and Machinery		1,500
Bills Receivable		600
Profit transferred to:
X’s Capital A/c	1,200
Y’s Capital A/c	800
Z’s Capital A/c	400	2,400
		6,000		6,000

Question 80:

X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:

Liabilities		Amount (₹)	Assets	Amount (₹)
Creditors		2,00,000	Building	2,00,000
Employees' Provident Fund		1,50,000	Machinery	3,00,000
General Reserve		36,000	Furniture	1,10,000
Investment Fluctuation Reserve		14,000	Investment (Market value ₹ 86,000)	1,00,000
Capital A/cs:			Debtors	80,000
X	3,00,000		Cash at Bank	1,90,000
Y	2,50,000		Advertisement Suspense	1,20,000
Z	1,50,000	7,00,000
		11,00,000		11,00,000

X died on 1st October, 2018 and Y and Z decide to share future profits in the ratio of 7 : 5. It was agreed between his executors and the remaining partners that:
(i) Goodwill of the firm be valued at

2^{\frac{1}{2}}

years' purchase of average of four completed years' profit which were:

Year	2014-15	2015-16	2016-17	2017-18
Profits (₹)	1,70,000	1,80,000	1,90,000	1,80,000

(ii) X's share of profit from the closure of last accounting year till date of death be calculated on the basis of last years' profit.
(iii) Building undervalued by ₹ 2,00,000; Machinery overvalued by ₹ 1,50,000 and Furniture overvalued by ₹ 46,000.
(iv) A provision of 5% be created on Debtors for Doubtful Debts.
(v) Interest on Capital to be provided at 10% p.a.
(vi) Half of the net amount payable to X's executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X's Capital Account and X's Executor's Account as on 1st October, 2018.

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Machinery	1,50,000	Building	2,00,000
Furniture	46,000
Provision for Doubtful Debts	4,000

	2,00,000		2,00,000

X’s Capital Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Advertisement Suspense A/c	50,000	Balance b/d	3,00,000
X’s Executors A/c	5,05,000	General Reserve	15,000
		Y’s Capital A/c	1,12,500
		Z’s Capital A/c	75,000
		Profit & Loss Suspense	37,500
		Interest on Capital	15,000

	5,55,000		5,55,000

X’s Executors Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Bank A/c	2,52,500	X’s Capital A/c	5,05,000
X’s Executors Loan Account	2,52,500

	57,000		57,000

Working Notes:

WN1: Calculation of Share in General Reserve

$Reserve = \frac{36, 000 \times 5}{12} = Rs 15,000$
WN2: Calculation of Interest on Capital

$Interest on capital = \frac{3, 00, 000 \times 10 \times 6}{100 \times 12} = Rs 15,000$
WN3: Calculation of Profit & Loss Suspense

$Profit & Loss Suspense = \frac{1, 80, 000 \times 5 \times 6}{12 \times 12} = Rs 37,500$
WN4: Calculation of Share in Goodwill

$\begin{array}{l} \begin{array}{l} Gaining Ratio = New Ratio - Old Ratio \\ Y's Gain = \frac{7}{12} - \frac{4}{12} = \frac{7 - 4}{12} = \frac{3}{12} \\ Z's Gain = \frac{5}{12} - \frac{3}{12} = \frac{5 - 3}{12} = \frac{2}{12} \\ Goodwill = Average Profit \times No. of years' Purchase \\ = 1, 80,000 \times 2.5 = Rs 4,50,000 \\ X's share in Goodwill = 4,50,000 \times \frac{5}{12} = Rs 1,87,500, should be contributed by Y & Z in gaining ratio i.e. 3:2 \end{array} \end{array}$

Question 81:

X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Z died on 30th June, 2018. The Balance Sheet of the firm as at that 31st March, 2018 is as follows:

BALANCE SHEET as at 31st March, 2018
Liabilities		Amount (₹)	Assets	Amount (₹)
X's Capital A/c	2,40,000		Machinery	2,40,000
Y's Capital A/c	1,60,000		Furniture	1,50,000
Z's Capital A/c	80,000	4,80,000	Investments	40,000
X's Current A/c		16,000	Stock	64,000
Y's Current A/c		5,000	Sundry Debtors	50,000
Reserve		60,000	Bills Receivable	22,000
Bills Payable		34,000	Cash at Bank	37,000
Sundry Creditors		40,000	Cash in Hand	22,000
			Z's Current A/c	10,000


		6,35,000		6,35,000

The following decisions were taken by the remaining partners:
(a) A Provision for Doubtful Debts is to be raised at 5% on Debtors.
(b) While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
(c) Advertising Expenses ₹ 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
(d) Goodwill of the firm is valued at ₹ 60,000.
(e) X and Y are to share profits and losses equally in future.
(f) Profit for the year ended 31st March, 2018 was ₹ 8,16,000 and Z's share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March, 2018.
(g) The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners' Capital Accounts.
Prepare the Revaluation Account, Partners' Capital Accounts and prepare C's Executors's Account to show that C's Executors were paid in two half-yearly instalments plus interest of 10% p.a. on the
unpaid balance. The first instalment was paid on 31st December, 2018.

Answer:

Revaluation Account
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Machinery	24,000	Furniture		7,500
Provision for Doubtful Debts	2,500	Stock		6,400
		Prepaid Advertisement Expenses		4,200
		Loss transferred to:
		X’s Capital A/c	4,200
		Y’s Capital A/c	2,800
		Z’s Capital A/c	1,400	8,400
	26,500			26,500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Current A/c			10,000	Balance b/d	2,40,000	1,60,000	80,000
Revaluation A/c	4,200	2,800	1,400	Current A/c	16,000	5,000
Z ’s Capital A/c		10,000		Reserve	30,000	20,000	10,000
Z ’s Capital A/c		34,000		Y ’s Capital A/c			34,000
Z’s Executors A/c			1,22,600	Y ’s Capital A/c			10,000
Balance c/d	2,81,800	1,38,200

	2,86,000	1,85,000	1,34,000		2,86,000	1,85,000	1,34,000

Z's Executor Account
Dr.				Cr.
Date	Particulars	J.F.	Amount Rs		Date	Particulars	J.F.	Amount Rs
2018-19					2018-19
Dec. 31	Bank A/c (61,300 + 6,130)		67,430		Jun. 30	Z’s Capital A/c		1,22,600
Mar. 31	Balance c/d		62,832.5		Dec. 31	Interest $(1, 22, 600 \times \frac{10}{100} \times \frac{6}{12})$		6,130
					Mar.31	Interest $(61, 300 \times \frac{10}{100} \times \frac{3}{12})$		1,532.5
			1,30,262.5					1,30,262.5

2019-20					2019-20
Jun. 30	Bank (61,300 + 3,065)		64,365		April 01	Balance b/d		62,832.5
					Jun. 30	Interest $(61, 300 \times \frac{10}{100} \times \frac{3}{12})$		1,532.5
			64,365					64,365

Working Notes:

WN1: Calculation of Profit & Loss Suspense

$Profit & loss Suspense = \frac{8, 16, 000 \times 1 \times 3}{6 \times 12} = Rs 34,000$
WN2: Calculation of Gaining Ratio and Share of Goodwill

$\begin{array}{l} Gaining Ratio = New Ratio - Old Ratio \\ X's gain = \frac{1}{2} - \frac{3}{6} = 0 \\ Y's gain = \frac{1}{2} - \frac{2}{6} = \frac{1}{6} \\ X:Y = 0:1 \\ Z's share of goodwill=60,000 \times \frac{1}{6} = Rs 10,000 should be given by Y \end{array}$
Note:
Z’s share of profit is adjusted through Y’s capital A/c because there is change in profit sharing ratio of remaining partners.

Question 82:

X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2018 was as follows:


Liabilities		Amount (₹)	Assets		Amount (₹)
Sundry Creditors		18,000	Goodwill		12,000
Investments Fluctuation Reserve		7,000	Patents		52,000
Workmen Compensation Reserve		7,000	Machinery		62,400
Capital A/cs:			Investment		6,000
X	1,35,000		Stock		20,000
Y	95,000		Sundry Debtors	24,000
Z	74,000	3,04,000	Less: Provision for Doubtful Debts	4,000	20,000
			Loan to Z		1,000
			Cash at Bank		600
			Profit and Loss A/c		1,50,000
			Z's Drawings		12,000
		3,36,000			3,36,000

Z died on 1st April, 2018, X and Y decide to share future profits and losses in ratio of 3 : 5. It was agreed that:
(i) Goodwill of the firm be valued

2^{\frac{1}{2}}

years' purchase of average of four completed years' profits which were: 2014-15

—

₹ 1,00,000; 2015-16

—

₹ 80,000; 2016-17

—

₹ 82,000.
(ii) Stock is undervalued by ₹ 14,000 and machinery is overvalued by ₹ 13,600.
(iii) All debtors are good. A debtor whose dues of ₹ 400 were written off as bad debts paid 50% in full settlement.
(iv) Out of the amount of insurance premium debited to Profit and Loss Account, ₹ 2,200 be carried forward as prepaid insurance premium.
(v) ₹ 1,000 included in Sundry Creditors is not likely to arise.
(vi) A claim of ₹ 1,000 on account of Workmen Compensation to be provided for.
(vii) Investment be sold for ₹ 8,200 and a sum of ₹ 11,200 be paid to executors of Z immediately. The balance to be paid in four equal half-yearly instalments together with interest @ 8% p.a. at half year rest.
Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm.

Answer:

Revaluation Account
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Machinery		13,600	Creditors	1,000
Profit transferred to:			Stock	14,000
X	5,000		Provision for Doubtful Debts	4,000
Y	3,000		Investment	2,200
Z	2,000	10,000	Bad Debts Recovered	200
			Prepaid Insurance	2,200
		23,600		23,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y		Z
Goodwill	6,000	3,600	2,400	Balance b/d	1,35,000	95,000		74,000
Drawings			12,000	Revaluation	5,000	3,000		2,000
Profit & Loss A/c	75,000	45,000	30,000	IFR	3,500	2,100		1,400
X’s Capital A/c		8,750		Y’s Capital A/c	8,750			14,000
Z ’s Capital A/c		14,000		WCR	3,000	1,800		1,200
Loan to Z			1,000
Z’s Executors A/c			47,200
Balance c/d	74,250	30,550
	1,55,250	1,01,900	92,600		1,55,250	1,01,900		92,600

Z’s Executors Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Bank A/c	11,200	Z’s Capital A/c	47,200
Z’s Executors Loan Account	36,000

	57,000		57,000

Balance sheet as on April 01, 2018 after Z’s death
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		17,000	Patents	52,000
Z’s Executors Loan A/c		36,000	Machinery	48,800
Workmen Compensation Claim		1,000	Stock	34,000
Capital A/cs:			Debtors	24,000
X	74,250		Prepaid Insurance	2,200
Y	30,550	1,04,800
Bank Overdraft (600 + 8,200-11,200 + 200)		2,200
		1,61,000		1,61,000

Working Notes:

WN1: Calculation of Gaining Ratio and Share of Goodwill

$\begin{array}{l} Gaining Ratio = New Ratio - Old Ratio \\ X's gain = \frac{3}{8} - \frac{5}{10} = - \frac{5}{40} (Sacrifice) \\ Y's gain = \frac{5}{8} - \frac{3}{10} = \frac{13}{40} \\ Z's share of goodwill=70,000 \times \frac{2}{10} = Rs 14,000 \\ X's share of goodwill=70,000 \times \frac{5}{40} = Rs 8,750 \end{array}$
WN2: Calculation of Goodwill

$\begin{array}{l} Goodwill = Average Profit \times No. of years' Purchase \\ = 28,000 \times 2.5 = Rs 70,000 \end{array} \begin{array}{l} Average Profit = \frac{Total Profits of past years given}{Number of years} \\ = \frac{1, 00, 000 + 80, 000 + 82, 000 - 1, 50, 000}{4} = Rs 28,000 \end{array}$

Question 83:

X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On 31st March, 2018, their Balance Sheet was as follows:

Liabilities		Amount (₹)	Assets	Amount (₹)
Trade Creditors		1,20,000	Cash at Bank	1,80,000
Bills Payable		80,000	Stock	1,40,000
General Reserve		60,000	Sundry Debtors	80,000
Capital A/cs:			Building	3,00,000
X	7,00,000		Advance to Y	7,00,000
Y	7,00,000		Profit and Loss A/c	3,20,000
Z	60,000	14,60,000
		17,20,000		17,20,000

Y died on 30th June, 2018. The Partnership Deed provided for the following on the death of a partner:
(i) Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were ₹ 3,20,000 (Loss); ₹ 1,00,000; ₹ 1,60,000; ₹ 2,20,000 and ₹ 4,40,000 respectively.
(ii) Y's share of profit or loss from 1st April, 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March, 2018.
You are required to calculate the following:
(a) Goodwill of the firm and Y's share of goodwill at the time of his death.
(b) Y's share in the profit or loss of the firm till the date of his death.
(c) Prepare Y's Capital Account at the time of his death to be presented to his executors.

Answer:

Y’s Capital Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Profit & Loss A/c	1,28,000	Balance b/d	7,00,000
Profit & Loss Suspense (Share of Loss)	32,000	General Reserve	24,000
Advance to Y	7,00,000	X’s Capital A/c Z ’s Capital A/c	64,000 32,000
		Y’s Executors A/c	40,000

	8,20,000		8,20,000

Working Notes:

WN1: Calculation of Share in General Reserve

$Reserve = \frac{60, 000 \times 2}{5} = Rs 24,000$
WN2: Calculation of Share in Goodwill

$\begin{array}{l} Goodwill = Average Profit \times No. of years' Purchase \\ = 1, 20,000 \times 2 = Rs 2,40,000 \\ Y's share in Goodwill = 2,40,000 \times \frac{2}{5} = Rs 96,000, should be contributed by X & Z in 2:1 \end{array} \begin{array}{l} Average Profit = \frac{Total Profits of past years given}{Number of years} \\ = \frac{1, 00, 000 + 1, 60, 000 + 2, 20, 000 + 4, 40, 000 - 3, 20, 000}{5} = Rs 1,20,000 \end{array}$
WN3: Calculation of Profit & Loss Suspense

$Profit & loss Suspense (Loss) = \frac{3, 20, 000 \times 2 \times 3}{5 \times 12} = Rs 32,000$

Question 1:

A, B and C were partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of the remaining partners if C retires.

Answer:

Old Ratio (A, B and C) = or 5 : 4 : 1

As we can see, no information is given as to how A and B are acquiring C's profit share after his retirement, so the new profit sharing ratio between A and B is calculated just by crossing out the C’s share. That is, the new ratio becomes 5 : 4.

∴ New Profit Ratio (A and B) = 5 : 4

Question 2:

Ram, Mohan and Sohan were partners sharing profits in the ratio of 1/5, 1/3 and 7/15 respectively. Sohan retires and his share was taken by Ram and Mohan in the ratio of 3:2. Find out the new ratio.

Answer:

Old Ratio (Ram, Mohan and Sohan) = or 3 : 5 : 7

Sohan’s Profit Share =

Ram and Mohan decided to take his share in the ratio of 3 : 2

New Profit Share = Old Profit Share + Share taken from Sohan

∴ New Profit Ratio (Ram and Mohan) = 36 : 39 or 12 : 13

Question 3:

From the following particulars, calculate new profit-sharing ratio of the partners:
(a) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 : 5 : 4. Mohan retired and his share was divided equally between Shiv and Hari.
(b) P, Q and R were partners sharing profits in the ratio of 5 : 4 : 1. P retires from the firm.

Answer:

(a)

Old Ratio (Shiv, Mohan and Hari) = 5 : 5 : 4

Mohan’s Profit Share =

His share is divided between Shiv and Hari equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share + Share taken from Mohan

∴ New Profit Ratio (Shiv and Hari) = 15 : 13

(b)

Old Ratio (P, Q and R) = 5 : 4 : 1

P’s Profit Share =

As we can see, no information is given as to how Q and R are acquiring P's profit share after his retirement, so the new profit sharing ratio between Q and R is calculated just by crossing out the P’s share. That is, the new ratio becomes 4 : 1

∴New Profit Ratio (Q and R) = 4 : 1

Question 4:

Sita, Geeta and Meeta were partners in a firm sharing profits in the ratio of 7:6:7. Geeta retired and her share was divided equally between Sita and Meeta. Calculate the new profit-sharing ratio of Sita and Meeta.

Answer:

Old Ratio (Sita, Geeta and Meeta) = 7 : 6 : 7

Geeta’s Profit Share =

Her share is divided between Sita and Meeta equally i.e. in the ratio of 1: 1

New Profit Share = Old Profit Share + Share taken from Geeta

∴ New Profit Ratio (Sita and Meeta) = 20 : 20 or 1 : 1

Question 5:

R, S and M are partners sharing profits in the ratio of 2/5, 2/5 and 1/5. M decides to retire from the business and his share is taken by R and S in the ratio of 1 : 2. Calculate the new profit-sharing ratio.

Answer:

Old Ratio (R, S and M) = 2 : 2 : 1

M retires from the firm.

His profit share = $\frac{1}{5}$

M’s share taken by R and S in ratio of 1 : 2

$S h a r e t a k e n b y R : \frac{1}{5} \times \frac{1}{3} = \frac{1}{15} S h a r e t a k e n b y S : \frac{1}{5} \times \frac{2}{3} = \frac{2}{15}$

New Ratio = Old Ratio + Share acquired from M

$R' s N e w S h a r e : \frac{2}{5} + \frac{1}{15} = \frac{6 + 1}{15} = \frac{7}{15} S' s N e w S h a r e : \frac{2}{5} + \frac{2}{15} = \frac{6 + 2}{15} = \frac{8}{15}$

∴ New Profit Ratio (R and S) = 7 : 8

Question 6:

A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. A retires, assuming B and C will share profits in the ratio of 2 : 1. Determine the gaining ratio.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

New Ratio (B and C) = 2 : 1

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 3 : 1

Question 7:

Kangli, Mangli and Sanvali are partners sharing profits in the ratio of 4:3:2 . Kangli retires . Assuming Mangli and Sanvali will share profits in the future in the ratio of 5:3, determine the gaining ratio.

Answer:

Old Ratio (Kangli, Mangli and Sanvali) = 4 : 3 : 2

New Ratio (Mangli and Sanvali) = 5 : 3

Gaining RatioNew Ratio − Old Ratio

∴Gaining Ratio = 21 : 11

Question 8:

X, Y and Z are partners sharing profits in the ratio of 1/2, 3/10, and 1/5. Calculate the gaining ratio of remaining partners when Y retires from the firm.

Answer:

Calculation of Gaining Ratio

$\begin{matrix} X & : & Y & : & Z \\ Old Ratio & = & \frac{1}{2} & : & \frac{3}{10} & : & \frac{1}{5} \\ = & \frac{5 : 3 : 2}{10} \end{matrix}$

New Ratio after Y's retirement = 5 : 2

Gaining Share = New Share – Old Share

$X' s Gain = \frac{5}{7} - \frac{5}{10} = \frac{15}{70} Z' s Gain = \frac{2}{7} - \frac{2}{10} = \frac{6}{70}$

Gaining Ratio = 15 : 6 or 5 : 2

Question 9:

(a) W, X, Y and Z are partners sharing profits and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decide to share the profits and losses equally in future.
Calculate gaining ratio.
(b) A, B and C are partners sharing profits and losses in the ratio of 4 : 3 : 2. C retires from the business. A is acquiring 4/9 of C's share and balance is acquired by B. Calculate the new profit-sharing ratio and gaining ratio.

Answer:

(a)

Old Ratio (W, X, Y and Z) = or 2 : 1 : 2 : 1

New Ratio (W, X and Z) = 1 : 1 : 1

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 0 : 1 : 1

(b)

Old Ratio (A, B and C) = 4 : 3 : 2

C’s Profit Share =

A acquires 4/9 of C’s Share and remaining share is acquired by B.

New Profit Share = Old Profit Share + Share acquired from C

∴ New Profit Ratio (A and B) = 44 : 37

Gaining Ratio = New Ratio − Old Ratio

∴Gaining Ratio = 8 : 10 or 4 : 5

Question 10:

Kumar, Lakshya, Manoj and Naresh are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kumar retires and his share is acquired by Lakshya and Manoj in the ratio of 3 : 2. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Answer:

$\begin{array}{l} Kumar' s share = \frac{3}{10} (acquired by Lakshya and Manoj in 3:2) \\ Share acquired by Lakshya = \frac{3}{10} \times \frac{3}{5} = \frac{9}{50} \\ Share acquired by Manoj = \frac{3}{10} \times \frac{2}{5} = \frac{6}{50} \\ Lakshya' s New Share = \frac{2}{10} + \frac{9}{50} = \frac{19}{50} \\ Manoj' s New Share = \frac{1}{10} + \frac{6}{50} = \frac{11}{50} \\ Naresh' s share (as retained) = \frac{4}{10} or \frac{20}{50} \\ New Profit Sharing Ratio = 19 : 11 : 20 \end{array}$

Gaining Ratio = 3:2 (as given in the question)

Question 11:

A, B, C and D were partners in a firm sharing profits in 5:3:2:2 ratio. B and C retired from the firm . B's share was acquired by D and C's share was acquired by A . Calculate new profit-sharing ratio of A and D .

Answer:

Old Ratio (A, B, C and D) = 5 : 3 : 2 : 2

B’s Profit Share =

C’s Profit Share =

B’s Share was acquired by D and C’s share was acquired by A.

∴ D’s New Share = D’s Old share + Share of B

A’s New Share = A’s Old Share + Share of C

∴ New Profit Ratio (A and D) = 7 : 5

Question 12:

A, B, and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up equally by A and C. Find the new profit-sharing ratio.

Answer:

Old Ratio (A, B and C) = 8 : 4 : 3

B retires from the firm.

His profit share = $\frac{4}{15}$

B’s share taken by A and C in ratio of 1 : 1

$S h a r e t a k e n b y A : \frac{4}{15} \times \frac{1}{2} = \frac{2}{15} S h a r e t a k e n b y C : \frac{4}{15} \times \frac{1}{2} = \frac{2}{15}$

New Ratio = Old Ratio + Share acquired from B

$A' s N e w S h a r e : \frac{8}{15} + \frac{2}{15} = \frac{10}{15} = \frac{2}{3} C' s N e w S h a r e : \frac{3}{15} + \frac{2}{15} = \frac{5}{15} = \frac{1}{3}$

∴ New Profit Ratio (A and C) = 2 : 1

Question 13:

A, B, and C are partners sharing profits in the ratio of 5 : 3 : 2. C retires and his share is taken by A. Calculate new profit-sharing ratio of A and B.

Answer:

Old Ratio (A, B and C) = 5 : 3 : 2

C retires from the firm.

His profit share = $\frac{2}{10}$

C’s share is taken by A in entirety

New Ratio = Old Ratio + Share acquired from C

$A' s N e w S h a r e : \frac{5}{10} + \frac{2}{10} = \frac{7}{10} B' s N e w S h a r e : \frac{3}{10} + 0 = \frac{3}{10}$

∴ New Profit Ratio (A and B) = 7 : 3

Question 14:

P, Q and R are partners sharing profits in the ratio of 7 : 5 : 3. P retires and it is decided that profit-sharing ratio between Q and R will be same as existing between P and Q. Calculate New profit-sharing ratio and Gaining Ratio.

Answer:

$\begin{array}{l} Calculation of Gaining Ratio \\ P :Q :R = 7 :5:3 (Old ratio) \\ Q :R=7:5 (New ratio, same as between P & Q) \\ Gaining Ratio = New Ratio - Old Ratio \\ Q's Gain= \frac{7}{12} - \frac{5}{15} = \frac{35 - 20}{60} = \frac{15}{60} \\ R's Gain= \frac{5}{12} - \frac{3}{15} = \frac{25 - 12}{60} = \frac{13}{60} \\ Q :R = 15 : 13 \end{array}$

Question 15:

Murli, Naveen and Omprakash are partners sharing profits in the ratio of 3/8, 1/2 and 1/8. Murli retires and surrenders 2/3rd of his share in favour of Naveen and remaining share in favour of Omprakash. Calculate new profit-sharing ratio and gaining ratio of the remaining partners.

Answer:

$\begin{array}{l} Old Ratio = 3:4:1 \\ Murli' s share = \frac{3}{8} \\ Share acquired by Naveen = \frac{3}{8} \times \frac{2}{3} = \frac{2}{8} \\ Remaining Share = \frac{3}{8} - \frac{2}{8} = \frac{1}{8} (acquired by Omprakash) \\ Gaining Ratio = \frac{2}{8} : \frac{1}{8} = 2 : 1 \\ Naveen' s New Share = \frac{4}{8} + \frac{2}{8} = \frac{6}{8} \\ Omprakash' s New Share = \frac{1}{8} + \frac{1}{8} = \frac{2}{8} \\ New Profit Sharing Ratio = 3 : 1 \end{array}$

Question 16:

A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from the firm. Calculate new profit-sharing ratio of A and C in the following circumstances:
(a) If B gives his share to A and C in the original ratio of A and C.
(b) If B gives his share to A and C in equal proportion.
(c) If B gives his share to A and C in the ratio of 3 : 1.
(d) If B gives his share to A only.

Answer:

Old Ratio (A, B and C) = 4 : 3 : 2

B retires from the firm.

His profit share =

Case (a) B gives his share to A and C in their original ratio.

Original Share (A and C) = 4 : 2

New Ratio = Old Ratio + Share acquired from B

∴ New Profit Ratio (A and C) = 36 : 18 or 2 : 1

Case (b) B gives his share to A and C in equal proportion.

New Ratio = Old Ratio + Share acquired from B

∴ New Profit Ratio (A and C) = 11 : 7

Case (c) B gives his to A and C in the ratio 3 : 1.

New Ratio = Old Ratio + Share acquired from B

∴ New Profit Ratio (A and C) = 25 : 11

Case (d) B gives his share to A only.

A’s New Share = A’s Old Share + Share of B
C’s Share
∴ New Profit Ratio (A and C) = 7 : 2

Question 17:

L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M retires and the goodwill is valued at ₹ 72,000. Calculate M's share of goodwill and pass the Journal entry for Goodwill. L and O decided to share the future profits and losses in the ratio of 5 : 3.

Answer:

Journal
Particulars		L.F.	Date Amount Rs	Credit amount Rs
L’s Capital A/c	Dr.		13,000
O’s Capital A/c	Dr.		11,000
To M’s Capital A/c				24,000
(Adjustment M’s share of goodwill made)

Working Note:

WN 1 Calculation of Gaining Ratio

Old Ratio (L, M and O) = 4 : 3 : 2

M retires from the firm.

New Ratio (L and O) = 5 : 3

Gaining Ratio

New Ratio − Old Ratio

∴ Gaining Ratio = 13 : 11

WN 2 Adjustment of Goodwill

Goodwill of the firm = Rs 72,000

This share of goodwill is to be debited to remaining Partners’ Capital Accounts in their gaining ratio (i.e. 13 : 11).

Question 18:

P, Q, R and S were partners in a firm sharing profits in the ratio of 5 : 3 : 1 : 1. On 1st January, 2017, S retired from the firm. On S's retirement the goodwill of the firm was valued at ₹ 4,20,000. The new profit-sharing ratio between P, Q and R will be 4 : 3 : 3.
Showing your working notes clearly, pass necessary journal entry for the treatment of goodwill in the books of the firm on S's retirement.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	R’s Capital A/c	Dr.		84,000
	To P’s Capital A/c				42,000
	To S’s Capital A/c				42,000
	(Goodwill adjusted)

Working Notes:

Gaining Ratio = New Ratio – Old Ratio

$\begin{array}{l} P = \frac{4}{10} - \frac{5}{10} = - \frac{1}{10} (sacrifice) \\ Q = \frac{3}{10} - \frac{3}{10} = 0 \\ R = \frac{3}{10} - \frac{1}{10} = \frac{2}{10} \end{array}$

$\begin{array}{l} P' s share = 4, 20, 000 \times \frac{1}{10} = 42, 000 \\ R' s share = 4, 20, 000 \times \frac{2}{10} = 84, 000 \\ S' s share = 4, 20, 000 \times \frac{1}{10} = 42, 000 \end{array}$

Question 19:

Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retired and goodwill of the firm is valued at ₹ 1,80,000. Aparna and Sonia decided to share future profits in the ratio of 3 : 2. Pass necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Amount (₹)	Amount (₹)
	Aparna’s Capitals A/c	Dr.		18,000
	Sonia’s Capital A/c	Dr.		42,000
	To Manisha’s Capital A/c				60,000
	(Manisha’s share of goodwill adjusted to Aparna’s and Sonia’s Capital Account in their gaining ratio)

Working Notes:

WN1: Calculation of Manisha’s Share in Goodwill

$\begin{array}{l} Manisha' s share = Firm' s Goodwill \times Manisha' s Profit Share \\ Manisha' s share = 1, 80, 000 \times \frac{1}{3} = 60, 000 \end{array}$

WN2: Calculation of Gaining Ratio
Gaining Ratio = New Ratio − Old Ratio

\begin{array}{l} Aparna's gain = \frac{3}{5} - \frac{3}{6} = \frac{3}{30} \\ Sonia's gain = \frac{2}{5} - \frac{1}{6} = \frac{7}{30} \\ Gaining Ratio=3:7 \end{array}

Aparna' s share = 60, 000 \times \frac{3}{10} = 18, 000 Sonia' s share = 60, 000 \times \frac{7}{10} = 42, 000

Question 20:

Hanny, Pammy and Sunny are partners sharing profits in the ratio of 3 : 2 : 1. Goodwill is appearing in the books at a value of ₹ 60,000. Pammy retires and at the time of Pammy's retirement, goodwill is valued at ₹ 84,000. Hanny and Sunny decided to share future profits in the ratio of 2 : 1. Record the necessary Journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Hanny’s Capital A/c	Dr.		30,000
	Pammy’s Capital A/c	Dr.		20,000
	Sunny’s Capital A/c			10,000
	To Goodwill A/c				60,000
	(Old goodwill written-off in old ratio)

	Hanny’s Capital A/c	Dr.		14,000
	Sunny’s Capital A/c	Dr.		14,000
	To Pammy’s Capital A/c				28,000
	(Adjustment for goodwill in gaining ratio)

Working Notes:

WN1: Calculation of Pammy’s Share in Goodwill

\begin{array}{l} Pammy' s share = Firm' s Goodwill \times Pammy' s Profit Share \\ Pammy' s share = 84, 000 \times \frac{2}{6} = 28, 000 (to be borne by gaining partners in gaining ratio) \end{array}

WN2: Calculation of Gaining Ratio

Gaining Ratio = New Ratio − Old Ratio

\begin{array}{l} Hanny' s gain = \frac{2}{3} - \frac{3}{6} = \frac{1}{6} \\ Sunny' s gain = \frac{1}{3} - \frac{1}{6} = \frac{1}{6} \\ Gaining Ratio = 1:1 \end{array}

Question 21:

A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B's retirement, the goodwill of the firm was valued at ₹ 90,000. Pass necessary Journal entry for the treatment of goodwill on B's retirement.

Answer:

Journal

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

A’s Capital A/c

Dr.

Double Entry Book Keeping Ts Grewal Vol. I 2018 for Class 12 Commerce Accountancy Chapter 5 - Retirement Death Of A Partner

Page No 5.100:

Question 73:

Answer:

Page No 5.100:

Question 74:

Answer:

Page No 5.100:

Question 75:

Answer:

Page No 5.101:

Question 76:

Answer:

Page No 5.101:

Question 77:

Answer:

Page No 5.102:

Question 78:

Answer:

Page No 5.102:

Question 79:

Answer:

Page No 5.103:

Question 80:

Answer:

Page No 5.104:

Question 81:

Answer:

Page No 5.104:

Question 82:

Answer:

Page No 5.105:

Question 83:

Answer:

Page No 5.80:

Question 1:

Answer:

Page No 5.80:

Question 2:

Answer:

Page No 5.80:

Question 3:

Answer:

Page No 5.80:

Question 4:

Answer:

Page No 5.80:

Question 5:

Answer:

Page No 5.80:

Question 6:

Answer:

Page No 5.80:

Question 7:

Answer:

Page No 5.80:

Question 8:

Answer:

Page No 5.80:

Question 9:

Answer:

Page No 5.81:

Question 10:

Answer:

Page No 5.81:

Question 11:

Answer:

Page No 5.81:

Question 12:

Answer:

Page No 5.81:

Question 13:

Answer:

Page No 5.81:

Question 14:

Answer:

Page No 5.81:

Question 15:

Answer:

Page No 5.81: