Page 140 - DEBKVOL-1

Chapter 6 Retirement of a Partner 6.7
.
Illustration 6.
Jyoti, Ruchi and Yogesh were sharing profits and losses in proportion to their capitals. Their
Balance Sheet as at 31st March, 2018 was:
Liabilities ` Assets `
Capital A/cs: Building 1,00,000
Jyoti 80,000 Machinery 48,000
Ruchi 60,000 Stock 18,000
Yogesh 40,000 1,80,000 Debtors 20,000
Sundry Creditors 21,600 Less: Provision for Doubtful Debts 400 19,600
Bank 8,000
Cash 8,000
2,01,600 2,01,600

Ruchi retired on 1st April, 2018. They agreed to the following adjustments in the books of
accounts to decide Ruchi’s share:
(i) Building to be appreciated by 20%.
(ii) The Provision for Doubtful Debts to be increased to 5% on Debtors.
(iii) Out of total insurance premium paid, ` 3,000 to be treated as Prepaid Insurance. This
amount was earlier debited to the Profit and Loss Account.
(iv) Machinery to be reduced by 20%.
(v) Goodwill of the firm is valued at ` 72,000. Ruchi’s share to be adjusted in the accounts of
Jyoti and Yogesh.
(vi) Jyoti and Yogesh also decide that the total capital of the firm after Ruchi’s retirement be
` 1,80,000 in their profit-sharing ratio, i.e., actual cash to be brought in or paid to a partner
as the case may be.
You are required to prepare Revaluation Account, Capital Accounts of all Partners and the
Balance Sheet of Jyoti and Yogesh.
Solution: In the Books of Firm
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `
To Provision for Doubtful Debts A/c 600 By Building A/c 20,000
(` 1,000 – ` 400) By Prepaid Insurance A/c 3,000
To Machinery A/c 9,600
To Gain (Profit) transferred to:
Jyoti’s Capital A/c 5,689
Ruchi’s Capital A/c 4,267
Yogesh’s Capital A/c 2,844 12,800
23,000 23,000

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Jyoti Ruchi Yogesh Particulars Jyoti Ruchi Yogesh
` ` ` ` ` `

To Ruchi’s Capital A/c 16,000 ... 8,000 By Balance b/d 80,000 60,000 40,000
—Goodwill (WN 1) By Revaluation A/c 5,689 4,267 2,844
To Bank A/c ... 88,267 ... —Gain (Profit)
To Balance c/d (WN 2) 1,20,000 ... 60,000 By Jyoti’s Capital A/c ... 16,000 ...
By Yogesh’s Capital A/c ... 8,000 ...
By Bank A/c (Bal. Fig.) 50,311 ... 25,156
1,36,000 88,267 68,000 1,36,000 88,267 68,000