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Retirement of a Partner 4.13
Illustration 8.
Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3 : 1 : 1.
On 1st April, 2018, their Balance Sheet was as follows:

BALANCE SHEET OF KUSHAL, KUMAR AND KAVITA
as at 1st April, 2018

Liabilities ` Assets `
Creditors 1,20,000 Cash 70,000
Bills Payable 1,80,000 Debtors 2,00,000
General Reserve 1,20,000 Less: Provision for doubtful debts 10,000 1,90,000
Capital A/cs: Stock 2,20,000
Kushal 3,00,000 Furniture 1,20,000
Kumar 2,80,000 Building 3,00,000
Kavita 3,00,000 8,80,000 Land 4,00,000
13,00,000 13,00,000

On the above date Kavita retired and the following was agreed:

(i) Goodwill of the firm was valued at ` 40,000.
(ii) Land was to be appreciated by 30% and building was to be depreciated by
` 1,00,000.

(iii) Value of furniture was to be reduced by ` 20,000.
(iv) Provision for Doubtful Debts is to be increased to ` 15,000.
(v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred
to her Loan Account.
(vi) It is decided by Kushal and Kumar that General Reserve is to appear in the books
of the new firm at ` 80,000.

(vii) Capitals of Kushal and Kumar will be in proportion to their new profit-sharing
ratio. The surplus/deficit, if any in their Capital Accounts will be adjusted through
Current Accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of Kushal and
Kumar after Kavita’s retirement.

Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Building A/c 1,00,000 By Land A/c 1,20,000
To Furniture A/c 20,000 By Loss transferred to:
To Provision for Doubtful Debts A/c 5,000 Kushal’s Capital A/c 3,000
Kumar’s Capital A/c 1,000
Kavita’s Capital A/c 1,000 5,000
1,25,000 1,25,000