Page 101 - ISCDEBK-12

4.28 Double Entry Book Keeping (Section A)—ISC XII

On 1st April, 2017, C retires from the firm and the partners agree to the following terms:

(i) Building and Stock are to be appreciated by 20% and 15% respectively.
(ii) Machinery and Furniture are to be reduced by 10% and 7% respectively.
(iii) Provision for Doubtful Debts to be increased to ` 15,000.

(iv) A computer previously written off is sold for ` 5,000 plus CGST and SGST @ 9% each.
(v) A provision of ` 5,000 be made in respect of outstanding legal charges.
(vi) Goodwill of the firm is valued at ` 2,10,000.
(vii) The continuing partners have decided to adjust their capitals in their New Profit-sharing Ratio
after retirement of C. Surplus/deficit, if any, in their Capital Accounts will be adjusted through
Current Accounts.
Prepare necessary Ledger Accounts and the Balance Sheet of the reconstituted firm.
7. Vijay, Kriti and Reeti are partners sharing profit and loss in the ratio of 2 : 2 : 1. Reeti retired on
30th June, 2019. Balance Sheet of the firm as at 31st March, 2019 stood as follows:
Liabilities ` Assets `
Capital A/cs: Building 20,00,000
Vijay 12,00,000 Investments 2,50,000
Kriti 12,00,000 Stock 5,00,000
Reeti 8,00,000 32,00,000 Sundry Debtors 8,00,000
General Reserve 8,00,000 Cash in Hand 2,00,000
Sundry Creditors 2,00,000 Cash at Bank 4,50,000
42,00,000 42,00,000

To determine the amount due to Reeti, it was mutually agreed that:

(i) Building to be appreciated by ` 4,00,000.
(ii) Investments to be valued at ` 2,00,000.
(iii) Stock be taken at ` 6,00,000.
(iv) Goodwill be valued at two years’ purchase of the average profit of the past five years.

(v) Reeti’s share of profit up to the date of retirement be calculated on the basis of average profit
of the preceding three years.

The profits of the preceding five years ending 31st March, were as under:
Year 2015 2016 2017 2018 2019

Profit (`) 4,00,000 4,70,000 6,00,000 5,50,000 6,50,000

(vi) Amount payable to Reeti to be transferred to her Loan Account carrying interest @ 8% p.a.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet as at 30th June, 2019.