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M.6 An Aid to Accountancy—CBSE XII
B retired on 1st April, 2018 on the following terms:
(i) Provision for Doubtful Debts will be raised by ` 1,000.
(ii) Stock will be reduced by 10% and Furniture by 5%.
(iii) There is an outstanding claim for damages of `1,100 and it is to be provided in
the books.
(iv) Creditors will be written back by ` 6,000.
(v) Machinery be reduced by 5%.
(vi) Out of the fire insurance premium paid during the year, ` 3,400 be carried forward
as unexpired.
(vii) Goodwill of the firm is valued at ` 24,000.
(viii) B is paid his dues with the amount brought in by A and C in a manner that their
capitals are in proportion to their new profit-sharing ratio of 3 : 2.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of
the New Firm. An adjustment for goodwill is made at the time of retirement of B.
Or
A and B are partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet
as at 31st March, 2018 stood as under:

Liabilities ` Assets `
Capital A/cs: Machinery 33,000
A 35,000 Furniture 15,000
B 30,000 65,000 Investments 20,000
General Reserve 10,000 Stock 23,000
Bank Loan 9,000 Debtors 19,000
Creditors 36,000 Less: Provision for Doubtful Debts 2,000 17,000
Cash 12,000
1,20,000 1,20,000

On that date, they admitted C into partnership for 1/4th share in the profit on the
following terms:
(i) C brings capital proportionate to his share. He brings ` 7,000 in cash as his share
of goodwill.
(ii) All debtors are good.
(iii) Depreciate stock by 5% and furniture by 10%.
(iv) An outstanding bill for repairs ` 1,000 will be brought in the books.
(v) Half of the investments were to be taken over by A and B in their profit-sharing
ratio at book value.
(vi) Bank loan is paid off.
(vii) Partners agreed to share future profits in the ratio of 3 : 3 : 2.
(viii) A and B decided to allow a salary of ` 50,000 per annum for the extra efforts and
time devoted by him to the business.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet after
admission of C into the partnership. (8)