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Retirement of a Partner 4.27
5. Following is the Balance Sheet of A, B and C as at 31st March, 2018, who have agreed to share profits
and losses in proportion of their capitals:
Liabilities ` Assets `
Sundry Creditors 2,00,000 Cash at Bank 4,10,000
Employees’ Provident Fund 1,40,000 Closing Stock 4,00,000
Profit and Loss A/c 1,00,000 Sundry Debtors 4,40,000
General Reserve 80,000 Less: Provision for Doubtful Debts 40,000 4,00,000
Investment Fluctuation Reserve 60,000 Land and Building 8,00,000
Workmen Compensation Reserve 60,000 Machinery 12,00,000
Capital A/cs: Investment (Market Value ` 2,70,000) 2,00,000
A 8,00,000 Advertisement Expenditure 30,000
B 12,00,000
C 8,00,000 28,00,000
34,40,000 34,40,000
On 1st April, 2018, A retired from the firm and remaining partners decided to carry on the business. It was
agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
(i) Land and Building to be appreciated by 30%.
(ii) Machinery be brought down by 30%.
(iii) There were Bad Debts of ` 60,000.
(iv) The claim on account of Workmen Compensation Reserve was determined at ` 32,000.
(v) Goodwill of the firm was valued at ` 5,60,000 and A’s share of Goodwill was adjusted against the
Capital Accounts of the continuing partners B and C who have decided to share future profits
in the ratio of 3 : 4 respectively.
(vi) Continuing partners decided to record the effect of reserves (after adjusting claim on account
of Workmen Compensation Reserve) and accumulated profits/losses without effecting their book
values.
(vii) Capital of the new firm in total will be the same as before the retirement of A and will be in
the new profit-sharing ratio of the continuing partners.
(viii) Amount due to A be settled by paying ` 2,00,000 immediately and balance by transferring to
her Loan Account which will be paid later.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the firm after Kusum’s
retirement.
6. The Balance Sheet A, B and C who were sharing profits in the ratio of 3 : 1 : 2 respectively stood as
follows on 31st March, 2017:
Liabilities ` Assets `
Bills Payable 1,20,000 Cash 70,000
Sundry Creditors 1,80,000 Stock 2,20,000
General Reserve 1,80,000 Sundry Debtors 2,00,000
Capital A/cs: Less: Provision for Doubtful Debts 10,000 1,90,000
A 3,00,000 Building 4,00,000
B 3,00,000 Machinery 3,00,000
C 2,80,000 8,80,000 Furniture 1,20,000
Advertisement Suspense A/c 60,000
13,60,000 13,60,000