Page 88 - ISCDEBK-12

Retirement of a Partner 4.15
Illustration 9.
On 1st April, 2016, P retired from active partnership and his share of the following was
ascertained:
`
Goodwill 20,000
Interest on Capital 500
Salary 1,500
Drawings 20,000
Interest on Drawings 2,000
Share of Profit 25,000
Capital 75,000
The amount due to P was to be retained in the firm as a loan bearing interest @ 10% p.a. and was
to be paid to P by annual instalments of ` 50,000 each, interest being calculated @ 10% p.a. on
the unpaid balances. The first instalment was paid on 31st March, 2017.
You are required to prepare P’s Capital Account and also P’s Loan Account until the
payment of the whole amount due to him was made.
Solution:
Dr. P’S CAPITAL ACCOUNT Cr.
Particulars ` Particulars `
To Drawings A/c 20,000 By Balance b/d 75,000
To Interest on Drawings A/c 2,000 By Partners‘ Capital (Continuing) A/cs 20,000
To P’s Loan A/c 1,00,000 (Goodwill)
—Transfer By Interest on Capital A/c 500
By Partner’s Salary A/c 1,500
By Profit and Loss Appropriation A/c 25,000
(Share of Profit)
1,22,000 1,22,000

Dr. P’S LOAN ACCOUNT Cr.
Date Particulars ` Date Particulars `
2016 2016
March 31 To Balance c/d 1,00,000 March 31 By P’s Capital A/c 1,00,000
2017 2016
March 31 To Bank A/c 50,000 April 1 By Balance b/d 1,00,000
March 31 To Balance c/d 60,000 2017
March 31 By Interest A/c @ 10% p.a. 10,000
1,10,000 1,10,000
2018 2017
March 31 To Bank A/c 50,000 April 1 By Balance b/d 60,000
March 31 To Balance c/d 16,000 2018
March 31 By Interest A/c @ 10% p.a. 6,000
66,000 66,000
2019 2018
March 31 To Bank A/c 17,600 April 1 By Balance b/d 16,000
2019
March 31 By Interest A/c @ 10% p.a. 1,600
17,600 17,600