Page 109 - MA-12

Retirement and Death of a Partner 4.39
Y having given notice to retire from the firm, the following adjustments in the books of the firm were
agreed upon:
(i) That Land and Building be appreciated by 10%.
(ii) Provision for Doubtful Debts is no longer necessary.
(iii) Stock be appreciated by 20%.
(iv) Adjustment be made in the accounts to rectify a mistake previously made whereby Y was credited
in excess by ` 16,200 while X and Z were debited in excess by ` 8,400 and by ` 7,800 respectively.
(v) Goodwill of the firm be fixed at ` 1,08,000 and Y’s share of the same be adjusted to the Capital
Accounts of X and Z who are going to share future profits in the ratio of 2 : 1.
(vi) The entire capital of the firm, as newly constituted, will be readjusted by bringing in or paying
cash so that the future capitals of X and Z be in the ratio of 2 : 1.
Prepare Revaluation Account, Capital Accounts of Partners, and Balance Sheet of the new firm showing
Y’s balance as loan.
[Hint: For Rectification: Dr. Y’s Capital A/c—` 16,200 and Cr. X’s Capital A/c—` 8,400 and Z’s Capital A/c—
` 7,800.]
3. P, Q and R were partners sharing profits and losses in the ratio of 4 : 3 : 3. The Balance Sheet of the
firm as at 31st March, 2015 stood as follows:
Liabilities ` Assets `

Creditors 10,000 Cash and Bank 20,000
Capital A/cs: P 30,000 Debtors 15,000
Q 15,000 Stock 17,000
R 15,000 60,000 Fixed Assets 52,000
Employees’ Provident Fund 20,000 Drawings: R 6,000
Reserves 10,000
Workmen Compensation Reserve 10,000
1,10,000 1,10,000
R retired on the above date and following terms and conditions were agreed upon:
(i) Fixed Assets are to be depreciated by ` 2,000 and Provision for Doubtful Debts is to be created
` 1,000.
(ii) A Liability of ` 4,000 for Workmen Compensation is to be created.
(iii) Goodwill of the firm is valued at ` 50,000.
(iv) New profit-sharing ratio of P and Q is 2 : 1.
(v) Final balance payable to R is to be treated as loan carrying interest @10% p.a.
(vi) Final balance of R is to be settled in three equal annual instalments plus interest and the first
instalment is payable on 31st March, 2016.
Pass Journal entries relating to R’s retirement. Also, show Balance Sheet of P and Q as at 1st April,
2015 and R’s Loan Account for 2015–16, 2016–17 and 2017–18.
4. Manoj, Naveen and Deepak were partners sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2017,
Naveen retired. On that date Balance Sheet was as follows:
Liabilities ` Assets `
General Reserve 6,000 Plant 30,000
Expenses Owing 2,000 Patents 3,000
Bills Payable 5,000 Debtors 9,500
Creditors 10,000 Stock 11,000
Capital A/cs: Manoj 12,000 Cash 500
Naveen 10,000
Deepak 9,000 31,000
54,000 54,000