J ~c rves

_jf £ · slw1viu," rl is Clwpte r, you should be able to wulerstmu! :

New Profit-Sharing Ratio and Gaining Ratio
Distinction betwe en Sacrificing Ratio and Gaining Ratio
Accounting Treatm ent of Goodwill when a Partner Retires or Dies
Accounting Treat ment for Revaluation of Assets and Liabilities
Accounting Treat ment of Reserves and Accumulated Profits
Adjustment of Capitals according to the New Profit-Sharing Ratio
Disposal of the Amou nt Due to the Retiring Partner
Hidden Goodw ill
CaJculation of Amou nt Payab le to the Representatives of a Decea sed /j
Partner

Retirement of a Partner
A partner has the right to retire from the firm after giving due notice in advance.
Old partnership comes to an end after the retirement of a partner, but the firm continues
and a new partnership comes into existence between the remaining partners.
A retiring partner is entitled to get the following :
1. Sha,·e in Goodwill : - Goodwill of the firm is valued and the retiring partne r's
share of goodwill is credited to his Capital Account.
2. Share in Reserves : - Reserves are the undistributed profits of the previous
years. Hence, the retiring partne r's share of reserves or undistributed profits is also
credited to his Capital Account.
3. Share in Revalu ation of Assets and Liabilities : - Assets and Liabilities are
revalued on the date of retirement and retiring partne r's share of profit is credited or
the loss is debited to his Capital Account.
Total amount due to the retiring partner, thus ascertained, is either paid off
immediately or is transferred to his loan account, to be paid afterwards.
Accoun til!g Problems : - Following accounting problems arise on the retirement
of a partner:
I. Calculation of new .pwfit sharing ratio and gaining ratio of;t:_r JrJ~ir~?~Pt ·;'
 - - - -
2. Treatment O(Goodw111. Revaluation of Assets and
. T ·eatment for
Liabilities. ~~ -- - --
--
cNt v •.,...,,.- - -- -

; fils_fRA TION 3.
- -
·r1ll£ M"' - - - - - - - - - •·••L1 ., 1 l.,.t:. l\.
- - - - - - -· - -
---- - - - -- - - - - - - -5.3
3. Accounting I fR .
. , . t ient o ese rves ' accumulated profits and loss f /_, A B and C are ~~ne rs m a firm sharing profits in
the ratio of s : 4 : 3. B retired
4. Accountmg 1,ea n es. " · was d1v1ded equally
d hiS share between A and c ·g
t to retirin g partner. . Calculate the new profi t shann
5. Paymen . . roportion to profit shari.ng ratios. an . f A and C.
ratio o -
6. Adj ustment of Capitals 111 p so£J,fiON: B 's share will be divided between A and C in
the ratio of 1 : 1.
• of New Profit Sha ring Rati o A will gain .!. of _i,_
Calcu lat10n . . 2
. g ratios of the rema mmg partners are not 2 12
I. If t!1e ~ew profit s11: 1; t the remain ing partners gi 12
conti nue to share Ven in the Henc e, A's new share
question, it will be _assume a 2.. + 2. = .2..
Profits il!Jd 12 12 12
losses in the old ratio.
. l of 4
Cw1·11 gam 2
~us iRA TIO Ni 2 12
. . .
ers sharmg profits and losses m the ratio of 3 : 2 .
12
X, Y and Z are partn C Henc e, C's new share 1-+2.=2...
. h · 1· alcuJ 12 12 12
the new ratios w en : ~
7 5
12 : C 12 or 7 : 5
(i) X retires, (ii) Y retires , (iii) Z retires. New Ratio A
--- --- -
SOL UTIO N: iiiifs jRATfoNi.
New ratio of the remaining partners will be calculated .../,B and C were partn ers shari ng profits in the ratio of 5 : 4: 3.
·· by striking out the sh C retire d and his
tI1e retmn g partner. Th us, areor share 'was taken up by A and B in the ratio of 3 : 2.
Find out the new ratio.
(i) When X retire s, the new ratio between Y and Z
is 2 : I so£uiiON: C's share will be divid ed between A and Bin the
ratio of 3 : 2.
(ii) When Y retires , the new ratio between X and
Z is 3 : l 3 3 9
A will gain
(iii) When Z retires , the new ratio between X and
Y is 3 : 2 5 of 12 = 60
Henc e, A's new share = 2-+ 1._ = 34
~si li'A rioj ti. 12 60 60
(,) ~, ~and ~ are partners sharin g profits in the ratio 2 3 6
of 1/2 : 1/3 : 1/6. Find out the B will gain 5 of 12= 60
new ratio 1f B retires .
4 6 26
(ii ) P, {! ~d R ~e partners sharing profits in the Henc e, B' s new share = 12+ 60 = 60
the new rat10 tf P rettres . ratio of 1/2 : 2/5 : 1/ 10. Find out
A 34 . B 26 l7 . l3 .
so[uTioi?-; New Ratio 60 · 60 or ·

(i) The ratio of A, Band c is _!_ . _!_ . _!_ i¥rA,RAT10Iis.

B and c are partn ers shari ng profits in the ratio of
2 . 3 . 6' 1/4 : 2/5 : 7/20. ~ retire s and
his share is taken up by B and C in the ratio of
This can be written as 3 : 2 : I l : 2. Calculate the new ratio.
6 or.,,., .· 2 .· I SOLUTION: A's share will be divid ed betw een Band C in the ratio
:. If B retire s th . of l : 2
.. ' e new ratw l
between A and C is 3 : I
B will gain
l = l
(11) The ratio of P, Q and R is_!_ : I . J_ 3 of 4 12
2
2 5 · 10 l 29
This can be written as ~ Henc e, B's new share = 5 +12= 60
10 or 5: 4: I 2
:. If P retires th
' e new ratio .
betw C will gain ½of¼ = 12
(2) Sometimes the rem . . een Q and R is 4 : I. 7 2 31
some specified . ammg Partn ers 20 + l2 = 60
added to th . proportions . In such cas thpurc hase Henc e, C's new share
the share of retiri ng partner ill. 29 .,., 31
e1r old share and the new _es . . e fraction of share ,, . 1
s purc hase d by theIIl is )1 .. p,Qn ln ,:lli)q,o "Jf T; 9 1
~.::v -6 ~ • C!!J~...:.. .I · ., ~
:!?'
ratio is calculated. New Ratio ~
 2_Tn::111m·nt or u ol""' ""_ evaluation of Assets and Liabilities. 1£NT Ull l)I~ \ l r:1_ :'._l'_A~ '~R2'~E R
5.3
)< l··r
' 1REl'v - - - --
~,z::¢ 'S r_RA-;I'ION 3. .
. T •a11nent tor R -- - - - - - - - - - - - - - - - - - - - - -
J · /\ccoun 11ng r~ d fi
· 1g Trc111111cnt o
t. Reserve.5, accumulate pro its and losses . .
➔ . /\ccoun t 11 . Iv 8 and C are ~~ne rs m a firm shanng profits in the ratio of S : 4 : 3. B retired
. • partner. •d A: hare was divided equally between A and C. Calculate the new
5. Payment to n::tinng hl S s profit sharing
. rtion to profit sharin g ratios . an . f A and C.
6. Adjust ment of·cap1·tals 111 propo . . rauo
~ - -o-,fioN
- -
: B's share WI'II bed'IVI'ded between A and C in the ratio of 1 : 1.
. of New Profit Shar mg Ratio
Calculation soLV . . 1 4
.. A will gam 2
_ . ratios of the remaining partne rs are not given
. 2 of 12
quesrwn.
I. Jf the new prolll sharing h remaining partne rs contin
· 1·1 will be assumed that t e
.
ue lo share pr ., 111 °'
o,11s ~a.J111 Hence , A's new share
12
5 2
- + - =7-
losses in the old ratio. 12 12 12
C wt'II gam
. I of 4 2
-=/.USTRA T/Ott i.
1
. I . 2 12
~LL . g profits and losses m t ,e ratio o t· 3 : 2 :
,r, yand z are partners s1iarm J Cai
12
· CUla~ Hence , C's new share 1- +2-=2...
the new ratios when : 12 12 12
(i) X retires. (ii) r retires. (iii) Z retires. New Ratio 7 5
A- · C -or7 :S
12 . 12
soDJrioN-; --,:
New ratio oftlie remaining partners will be calcul ated by strik
..
ing out the share or ILL
it .-RATI ON-;
d C were partne
. . . .
the retiring partne r. Thus, 8 rs sharing profits m the ratio of 5 : 4 : 3. C ~et1red and his
· antak up by A and Bin the ratio of3 : 2. Find out the
(i) When X retires. the new ratio berv,een Y and Z is 2 : l share was en new ratio.
.
(ii) When Y retires. the new ratio between X and Z is
- - - - -10N-
soLU T
C's share will be divided between A and Bin the ratio of3
: 2.
3:l · 3 9
3
(iii) When Z retires, the new ratio between X and r is 3 : 2 A will gain 5 of 12 = 60
- --- - -- - ---
ILI.;IJSTRATION 2. Hence , A' s new share =
S 9
12 + 60 = 34 60
V (i) A, Band C are partners sharing profits in the ratio
new ratio if B retires. of l /2 : I /3 : I /6. Find our the B will gain s2 of 123 = 606
4 6 26
(ii) P, Q and Rare partners sharing profits in the ratio Hence , B's new share =
the new ratio if P retires. of 1/2 : 2/ 5 : I/ I 0. Find ou1 12 + 60 = 60
A 34 . B 26 or 17 : I 3.
SOLUTION~ New Ratio 60. 60

1
(i) The ratio of.-1. Band C is J_ • 1
2 . J . 6.
iii
7u_;;ffi:
i, A.ri0Ns. . .
haring profits m the ratio o f 1/4.. 2/5 : 7/20. A. retires and
A, B and C are partne rs s . . f \ . Calculate the new ratio.
.
This b · J ·2 his share is taken up by B and C m the ratio · 2·
as . 6 .· I or 3 : 2 : I
O
can e wrmen . .
- - - - - - -
SOLU TION : A's share will be divided between B and C in the ratio of l . 2
.-. lfB retires, the new ratio betwe en A and C is 3 : I 1
(ii) The ratio of P, Q and R is..!. . l. J__ B will gain -l of I = -
12
3
4 2
2 . 5 . 10 I _ 29
This can be wrinen as S : 4 : l - Hence , B's new share = -5 +12- 60
~ or :, : 4 : I 2
.-. If p retires, the new ratio betw 2 \
Q . C will gain 3 of 4
2 . een and R 1s 4 · I
( ) Somettmes the remainin · ·
some specifi ed proportions er in Henc e, C's new share
1 , g/artne rs purch ase the share of retirin g partn .
added to their old share and. thne sue cas_es _the fraction of
share s purch ased by (hern I5
new ratio 1s calcul ated. New Ratio
 Jl?i usiRATION-6.
P. Q and R are partners shan~g prow
.tits in the ratio of 5 : 3 : 2. R retires and h"
- !U-' '.,:_-:..- - - - - - - - _ -_:•_: ~ l~ER
-
_

Calculation of Gaining R t· - - - - - - -
5.5

share i's entirely taken by P. CaJcu ate ne profit sharing ratio of p and Q. ts . .
Meaning of G amm R
g atio ·- It is c I I a to
- - -

W}len a P
artner retires or d' hi a cu ated
t· . hi h thies, s. s~are of profit iswhen a partner retires or dies.
s The ra 10 m w c e rema1rung taken over by the remaining
2 partner · . f • th f . Partn h . · ·
Share taken by P from R ratio. Gairung ra l~ i_s . e ra 10 m which the remaiers s are increases is called the gami ng
IO dwiil to the retm ng partner. ning partners will pay the amount of
2- + 2- = _2_ goo I . fG . . R f
Hence, P's new share IO JO IO Calcu ation ° ·
ammg a •0 :- This ratio is calculated by the
following two
3 rnethods : . . .
Q's new share To (Unchanged) I. If the_new_pro~t shanng ratios of the remai
ning partners are not given in the
7 3 questlo?, it will be_ assumed that the remaining
To: partners continue to share
New Ratio of P and Q To or 7: 3 profits 10 the old ratio. Thus, gain to the contin
uing partners is in the old ratio .
For example, A, Band C shared profits in the ratio
of 5 : 3 : 2. If B retires, his
IL
~L TRA TI0N 7. share will be taken by A and C in the ratio of
will also be 5 : 2. S : 2 and the new ratio in future
A, B and C are partners in . a firm shari·ng profits an d Iosses as - 7 I
, - and _I 2. If the new profit sharing ratio of the rema
15 3 ining partners is given in the
respectively. B retires and hi s share is taken 5
by A and C in the ratio of 3 : 2. question, gaining ratio is calculated by deducting
old ratio from the new ratio.
T
Immediatel y, D is admitted for rd share of profi
¼
t, th of which was given by A and
Gaining Ratio = New Ratio - Old Ratio
tlw remaining share was taken equall y from A
and C. Calc ulate new profi t-sharing
ji£TifrifArioN-s.
ra rio after D's admi ss ion. /Sharma, Verm a and Neetu .were partners sharin
g profits and losses in proportion
10
SOLU TION~ -f _!_ l and . Calculate the new profit sharing ratio between
o 4' 8 I6 continuing partners if,
A (a) Shar ma retires, (b) Vei:ma ~etire
C s, (c) Neetu retires. Also calculate their gaini
ratio in eac h of the above situation. ng
7
(i) Existing Share
15
I
5
I
soiuiioN:
(ii) Share acquired from B
- x -3 = -I I 2 2 The ratio of Sharma, Verma and Neetu 1s
· I
4 : 8 : 16.
)X5 = 15 I IO 1'his can be
3 5 5 wn'tten as
( iii) New Share (i + ii) 7 I 10 I 2 5 -1 2 · I0
_:__~- · - or2 : I : 5.
15+ 5= 15 5+ 15 =15 16
Since the new profit sharing ratio of the rema · · th
Thus, New Share of' A and C
~ ining partne_rs is _not ~1Ven
1
-= : ~ or 2 : ques ti on, it wi ll be assumed that the remaining m .e
I
1 1 partners have gamed m the1~ old_r~tto.
(u) Whe n Sharma retire s, the gaining
(i i•) .Share give n by A to I I ratio between Verma and Neet u ~s l • : ·
I)
-=- - x -= - I (h) Whe n Verm a retires, the gai ning ratio
J 4 12 between Sharma and Neet u ~s 2 : ) .
(c.:) Whe n Neet u retires, the gainin g ratio betw
(lo) l<c maining shnrc l o be acquired by /J I een Sharma and Verma 1s 2 : l .
J 12
-I =-4- I
- =-123
12 New ratio of the rema ining partn ers will be
calculated by striking out the share of
It is m:quircd by D equa lly from A nnd (' the retirin g partner. T hus,
.11 ;·
ws. ./\ acqlll.rcs -I ol. - 3 = -I each lrom
. (u) Whe n Shar ma retire s, the new ratio · b t
ewee n Verma and Neet u is
2 12 X '
4 and C . I : S. _
(h) Whe n Verm a retires, the new ratio · b Sharm a and
(11) Ncw Shar c:: ot'A 2 _J_ _ J_ _ 16 2 J II etween · Neet u 1s 2 : ) .
. ..,
1 12 8 2'-l - (c) Whe n Neet u retires, the new rati . b tw en Sharm a and Verm a 1 s .. : l .
o e e
Nev. Share of ( · I 8- J 5
J 8 = - 2➔ = 24 Ii' #,TRA TION9. . fi d losses in the ratio of 4 : 3 : 2. B retires.
I Jcnc:c. Nev. Pro/it .\haring Ratio of ti. C and D A, Ban d Care partn ers shan ng pro ,~s an .
A ~? C decided to share the pro fi ts and osses
=-- _!..!_ . 2- . J. = 11 future in the ratio of S : -4 . Calc ulate

J
24 . 2-t . 3 :5:8 m .,, , ri\:
gain ing ratio .
~~(t I,; t ~71- u@ ~
 -. - - - - - - -
LLL US TRA TIO N
--
6·
U · f .~ 3 2 R
• g prof its in the ratio o :, : : . reti·
P. Q ruuf R are p:.irtners s11arin w rofil sha ring rati o of p and Q. res and h·
shnn · is en1ird) taken by P. Calculate ne p I!\

--- -- --
SOL UT ION :
Sha re taken by P from R = -2
10
- 5 + - =7-
2
I fence, P's new share = 10 10 10
3
Q's new share = IO (Unc han ged )
73
New Ralio of P and Q = To :To or 7 : 3

q}kfRATi'oNi.
1
..,I . B· an d ( . arc p"'rt ner~ in a fim, sha ring pro fits and losses as 7 1
u J

15 , and -I
respective/) . B recires a11d his share is Laken 3
by A and C in the rati o of 3 : .;
it, ~ th of whi ch was giv en by A an:
lmmcdia 1e/). /J is admi1tcd for ~ rd shar e of prof
thl' remaini ng share was take n equ ally from A
and C. Cal cula te new profit-s harin
rn t10 atk r /J \ adm i~.s ion

SO --TIO---N--:
- L[I g

A C
(1) l:xi~ring Shnrc 7
15
5
(11} Shurl' ;icq11in.:d trorn Ii I J I I -, .,
J x~ - 5 -x =- 15-
1 ' 5 ---=
(111) Ne\\ Share (1 , ii) 7 I I0
+ -- =
➔ - = I '> )-
15 5 15 5 15 15
Thu s. Ne, , Sh,m.' ol t d l1d C
lO " "')
I~ 15 or - ·
( 11 I .\ha re gl\ l'fl h) / l o I) I I
>.. -
l ➔ I~
rI J l<l.'fllcllfl lllt' , harl' lo ht: tlC(j lllrL' d b, /) I
., I 4 )
j
12 =
lr ,~ au1 111rnl h> n 1.:quall) I~ 12
from / .tn<l c
1hu-. I> .icqu11c , 1 1 I
of
1 12 l':H:h from I .in<l ('
8
(it J ~l' \\ ">hJil nl ./ I l <, .,
l l II
11 N =-
~-1
Nl·\' . Sh lfl' of ( I I N
8 :➔
' ~~
5
lft1 h.t' ~ p
•<.''-\ ro1 1t \t,J rin1 RJ11n (I/ , ,
II
 RET ~_:_ <:::K_ U_:-~ l~ l ~~t~ l~ ~ ~ ~ . R]::ME NT U! _:>::-_: ~ ~ F A PARTNER
5.6 ------ fl t fl - - - - - - - - - - _ _ _ 5.7
- - ~ - When Madhu's share is take b - --:-- - - - - - - - - - - - - - -
soiur10N: New Ratio _ Old Ratio
(11) 1
surabhi will gain of 1
n up Y Surabh1 and Nikhil in the ratio of\ : \
~
• Gaining Ratio
A ' s Gaining ratio
5 4 _ _!_
9- 9 - 9
2 3
Hence, Surabhi's new share = .!_ + .!_ _ 2 + I 1
4 2 2 3 6 - -6- = 2
Cs Gaining Ratio 9- 9 - 9 Nikhil· wt·11 gam
. I of I = .!_
I 2 2 3 6
I : 2.
Gaining Ratio between A and C = 9 :9 or Hence, Nikhil's new share = .!_ + .!_ ==- ~ _
_\
3 6 6 - 2
. = S urabhi I : N1kh1l
New Ratio · · I or I : J
- - -STRA.1,jONJO. harin
. fits and losses in the ratio of l/3, 1/6, l/3 and 2 2
ers s gpro Gaining Ratio : Since Surabhi and Nikhil have acquired Madhu's share
A. B, C: and Dare parm d A B d D decide to share the profits and losses equally
J/6 respecnvely . C retires an , _an equally, the gaining ratio will be I : 1.
in future. Calculate the gaining ratio.
~~-;;;£,fJfATfON-12.
------N-:
SOLUTIO _!yL~,u~ and C were p~ners s~aring profits in the ratio of 3/8, 1/2 and 1/8. A retires
Gaining Ratio New Ratio - Old Ratio and surrenders 2~3 _of his _share m favour of Band remaining in favour of C. Calculate
Hence, A ' s Gaining Ratio .!. - .!. = 0 new ratio and gammg ratio. (NCERT)
3 3
1 1 1 saEuffrjf f:
B's Gaining Ratio 3 6 - 6
1 1 I
A's share will be divided between B and C in the ratio of½ :. ½
D's Gaining Ratio 3 6 - 6 . 2 f3
B will gam o
2
Thus, A gains nothing, whereas B and D gain l/6 each. Hence, Gaining Ratio 3 8 8
between A, B and D = 0 : 1 : 1. Hence, B's new share l +l = 4+2 = §.
2 8 8 8
}fiusriitrioiti1. . . . I
C will gam of 3
3 8
l
8
Madhu, Surabhi and Nikhil are partners without any partnership deed. Madhu
l l
retires. Calculate the future ratio of continuing partners if they agreed to acquire her Hence, C's new share -+- = -2
8 8 8
share (r) in the ratio 5 : 3 (ii) equally. Also mention their gaining ratio.
6 2
8 : 8 or 3: 1
New Ratio of Band C
SOLUTIO N : . 2 l
. ce A has surrendered his share of profit in the ratio of- : 3"
Gaining Ratio : Sm
(t) When Madhu's share is taken up by Surabhi and Nikhil in the ratio of 5 : 3 3
Surabhi will gain j off 2
~
The gaining ratio will be 2 : 1 between B and C.

Hence, Surabhi 's new share = 1 + 5 = 8 + 5 = 13 ' f ~ Tfo]{ 13. . finn sharing profits and losses in the ratio of
3 24 24 24 A, B, C and D were p~ers ma nd his share is acquired by Band C in the
Nikhil will gain l of l. 3 3 : 2 : 1 : 4. A decide_to retrre from the fi~ :late the New Profit sharing ratio and the
8 3 24 ratio of 3 : 2 accordmg to agreement. Ca c (NCERT)
gaining ratio .
Hence, Nikhil's new share = -l + -3 8+3
= - - = -II
3 24 24 24 soiur7off:
New Ratio = Surabhi Jl : Nikhil l.!_ or I3 · I I 3 f 3 - _2__
B w1·11 gam
.
5 o 10 - 50
24 24 .
Gaining Ratio: Since Surabhi and Nikhil have acquired Madhu's share in . 2 f 3 _j__
the ratio of 5 : 3, the gaining ratio will be 5 : 3. C will gam 5 ° 10 - 50
__J
 RETIR£M £N°:!: ~ K_U_:-~ 1~1 ~~l~ l'._:'~t!"E:il . . Efvl EN'f O K Ul.'..ATH O F A l'ARTNER
I ' 5.6 ----- ~ tlf t 1~ _ - - - - - - : - - - - - - _ _ _ _ _ 5.7
-· - ..) When Madhu s share is taken u - - .- - - - - - - - - - - - - - -
saiimaN: New Ratio - O ld Ratio
(" I
surabhi will gain - of -
I p by Surabh1 and Nikhil in the ratio of I : I
I
• Gaining Ratio
A ·5 Gaining ratio =
5
9- 9 -
.i - .!.
9
2
Hence. Surabhi ' s new share
3 6

4 2 2
Cs Gaining Racio 9- 9 = 9 . I of I
Nik.hit. w1·11 gam
I 2
2 3
Gaining Ratio between A and C = 9 :9 or I : 2. = .!._ + .!._ _ 2 + l
Hence, Nikhil's new share \
3 6- 6 = 2
i-iiosiRArio1v-io. . . New Ratio = Surabhi ½: Nikhil ½or I : I
.../ A. harin ofits and losses m the rauo of 1/3, I /6, 1/3 and
A. 8. l: and Dare ~ersd ~· 8 g/~ decide 10 share the profits and losses equaJly
Gaini.ng Ratio : Since Surabhi. ~d Nikhil have acquired Madhu's share
l/6 respectively. Crea.res an n. . an equally, the ga1mng ratio will be I : I .
in future. Calcu.la1e the gaining rauo.
~.-.::r£fifATION-12.
SOLUTION : _!},-L~_. .B. and C were partners sharing profits in the ratio of 3/8, \ /2 and 1/8. A retires
Gaining Ratio New Ratio - Old Ratio and surrenders 2/3 _of his _share in favour of Band remaining in favour of C. Calculate
new ratio and gaming rat 10 . (NCERT)
Hence, A ' s Gaining Ratio ..!. _ ..!.=o
3
I
3
I I
soEuiiotT:
B's Gaining Ratio 3 6 - 6 A ·s share will be divided between B and C in the ratio of½ : ½
I
D's Gaining Ratio 6 - 6 . 2 f3
B will gain 2
3 - o - -
3 8 8
Thus, A gains nothing, whereas Band D gai n 1/6 each. Hence, Gaining Ratio
I 2 4 +2 6
between A. B and D = 0 : I : I . Hence, B's new share -+ - = -- = -
2 8 8 8
. I f3 I
Jfrusrur10Jt1-; . . C wi ll gain o
3 8 8
Madhu.. Surabhi and Nikhil are partners without any partnership deed. Mad.bu I I
Hence, C's new share -+- = -2
retires. Calculate the future ratio of continuing partners if they agreed to acquire her 8 8 8
share (1) in lhe ratio 5 : 3 (i1) equaJly. Also mention their gaining ratio. 6 2 , \
New Ratio of 8 and C
8 : 8 or j :

SOLUTION : 2 I
Gaining Ratio : S·1nce A has surrendered his share of profit in the ratio of -3 : 3'
(0 When Madhu's share is taken up by Surabhi and Nikhil in the ratio of 5 : 3
The gaining ratio will be 2 : I between Band C.
Surabhi will gain / off = 2~
Hence, Surabhi ·s new share = I + 5 = 8 + 5 13 7 ~ Tfo1ti'"§'. . . refits and losses in the ratio of
A B C and D were partners in a finn shann~ p · · d by B and C in the
3 24 24 24 . . . . f the finn and his share is acquire
Nikhil will gain j off 24
3 3 : 2 : I : 4. A decide_to retire rom . Calculate the New Profit sharing ratio and the
ratio of 3 : 2 accordmg to agreement. (NCERT)
gaining ratio.
Hence, Nikhil 's new share I J 8+3 11
= 3 + 24 = 24 24 sofurioN~
New Ratio = Surabhi ..!l · Nikhil ..!.!. or 13 · 11 . 3 f3 _ _2_
24 . 24 . B will gam 5 IO - 50°
Gaining Ratio : Since Surabhi and Nikhil have acquired Mad.bu's share in . 2 f3-~
C will gam o IO - SO
the ratio of 5: 3, the gaining ratio will be 5: 3. 5
_J
 t ___ _ _ __ ~~~ .£'1: !: ~ R_D~~T~ _9!::_ ~P~~R
.___ f'fJRf:tvfE~ T_O! _!?~A_!~ ~F_A~ AR.TNER
5.8 _ _ _ _ _ _ _ _ _ _ _ - -G- - - - - _ _ _ _ _ 5.9
2 9 10+9 _12. ~ - - )- :;cw Profit Sharing Ra-tio- on ovind ' s death : - - - - - - - - - -
3 14
Hence, B's new share = 10 + 50 = 50 - 50
( i~ • , •

Govmd s share 1.e., - is tak

11 30 en over by Uda
/ 6 5+6 Y and Hari equally i.e. ,
C's new share= 10 + 50 = 5() = 50
14 I 7
4 30 x 2 = 30 each.
D's new share= 10 Uday's new share ::.!..+2..- 15
19 11 4 . . 30 30 -30
New Share of B, C and D = 50 : 50 : 10 or 19 . I 1 . 20
Kaushal' s new share = 2-.
30

I Gaining Ratio : Since Band C have acquired A's share

the gaining ratio will be 3 : 2 between
in the ratio of 3 : 2
Band C. ' Hari 's new share = _l_ + 2.. _ l 0
30 30 - 30
I Thus, New Ratio ofUday, Kaushal and Han. _
- l S : S : l 0 over 3 : l : 2
. _ _
i!Jii fi'RATION 14.
On J-J-2008, Uday and Kaushal entered mto _partnersh_1p
with fixed capitals of -iiiisiRArio-;r1s: .
j1

n,00,0 00 and n,00,000 respectively. They admitted Govm d as a new Partner 00 I A B and C are partners sharing profits. in the raf10 0 f 4 : 3 : 2. A retires from the I
sharing ratio ' d ·1 ·s decided that profit-sh ·
new_ profit art_mg ratio ?~tween Band C will be same as existing
J-/-20 JO. Gov ind brought ~ 10,00,000
decided was 3 : 2: 5. On 1-1-20 12,
as
anothe
capita
r
l
new
and the
partne r Han was admit ted with
equal ly fro;
firl11 an A
between an .
l I d B Calculate ne
w ra to and gammg ratio. \
he acquir ed
capita / of ~8,00,000 for J/J0th share in the profits, which over b saiuiiQN:
his share was taken
Uday, Kaushal and Govind. On 1-4-2014 Govind died and y Ratio between A and B = 4 : 3 \
Uday and Hari equally.
Hence, New Ratio between B and C will be 4 : 3
Ca/cu/ate :
he sacri~cing ratio of Uday and Kaushal on Govind 's
admission. Calculation of Gai ning Ratio :
~
Hari on Hari's Gaining Ratio = New Share - Old Share
Jin Ne"'. p'.ofit sharing ratio of Uday, Kaushal, Govind and
4 3 36 - 21 IS
adnusswn. .
8 Garns : 7 - 9 = _6_3 _ = 63
tJ}lf New profit sharing ratio ofUday, Kaushal and Hari on Govin d's death.
(CB.S E. 2015, All India) . 3 2 27 - 14 13
CGams: 7 - 9=- 6-3- = 63
--- ----
SOLU TION : . ofB and C = 15 : 13 = 15 : 13
. . Ratto
Hence , Gamrng
(I) Calc ufalion of ~acdf iring R;itio ; 63 63
_ 3 5 - 3 2·
Sacrificing Ratio of Uday --- - = - - = - Ratio
2 10 10 10
Dist incti on Between Sacrificing Ratio and Gaining
_ I 2 5 - 2 3 r's share of profits at the
Sacrificing Ratio of Kaushal - 2 - To = 10 = To Sacrificing ratio is the ratio of decrease in the old partne
g ratio is the ratio of gain in the
time of admission of a new partner, whereas the Gainin
Sacrificing Ratio =2 : 3 ent or death of a partner.
remaining partn er's share of profits at the time of retirem
:
Slwring Ratio of Vd:,y, Kaushal, Govind mid H;iri
1
There are following differences between the two :
1
~) • rn!,t
iji-,c-in_g_R_a_ti_o _ _ _ _ _ _G_a,_·n-in_g_R_a_u_·o- - - - ,j
Uday's new share = l.. _J_ _ U 8 S_a_c_r_
10 30 - 30 = 30 Basis of
Differ ence
Kaushal 's new share = 2 _J_ = U __J__
1
the
I. Meaning It is the ratio in which the old It is the ratio in whi~h
10 30 30 - 30 rs acquire the
partners surrender a part of their remaining partne deceased)
'1

g (retired or
Govind 's new share = 2 _J_ _ 15 - 1 14 ,' share in favour of new partner . outgoin
10 30 - 30 = 30 partner's share.

= J_+ J_+ J__ i S .fi . atio is calculated at I Gaining ratio is calculated at the
H~~ ~re
30 30 30 - 30
2. When
Calcu lated
acn_,c:~f
th e tun
the admission of a \ time of the retirement or death of
a artner.
Thus New Ratio = 8 : 5 : 14 : 3 P
new partner.
I
 ~ .. . ' • ""'IN c)'vf.£N" f UK tJt:./\ 111 Ur A l'ARTN
--- --- --- --- -- --- - - --- ~
RETIKJ:.Ml:.l'< J ' - ' " ~ · ' ' ' ••
1<£-r1fl i:_ _ - - - - - - - - - - _ __ER S.9
5.8
--- --- --- -- 2 9 10+9 19 - -1 ) ,N rw -. - - - - - _ - - - - - - - - - - -
Profit Sha riuo., R,_a 11·0 on -G, -ov1nd'
(- ~death ·
Hence. B's new share =,o + 50 = ~ = 50 . , . 14
Govind s share 1.e.. -30 is taken over b Ud ·
I 6 5+6 II Y ay and Hari equally i.e.,
Cs new share = ,a+ 50 =5() = 50
7
14 1
4 30 x 2 = 30 each.
D's new share = 10 Uday·s new share :: .!.+2-_ 15
30 30 - 30
- J.2. · JJ_ · ~
New Share of 8 . C and D - 50 . 50 . IO o
r 19 ·. I I .· 20
Kaushal ·s new share = 2....
30
ratio of 3 : 2
Gaining Raiio : Since Band C ha ve acquired A 's share in the ' =l.. +2- - 10
the gaining ratio will be 3 : 2 between Band C. Hari 's newsh are
30 30 - 30
Thus. New Ratio ofUday, Kaushal and Han. _- 15 : 5 : IO over 3 : I : 2

i#ii 'Ari oN i7 . . . -;iusii"Arior tzs.

1p with fixed capitals of
On J-J-2008. Uday and Kaushal enrered mwpa rtnersh_ 1 - .
Govm d as a new partner 00 A 8 and C are partners sharing profits in lhe ratto of 4 : 3 : 2. A retires from the
n .00,000 and t J,00,000 respec tively. They admmed _ · d 1·t 1·5 decided that profit-sh · .
J-1 -20 1O. Govind brought f 10,00,000 as capital and the
new_profit sharing ratio tirrn an ai:ing rat,o between Band C will be same as existing
partne r Han was admin ed with !)<:tween A and B. Calculate new rallo and gaining ratio.
decided was 3 : 2 : 5. On 1-1-20 l 2. another new
. which he acquired equally fro;
capita/ of t8,00.000 for ll!Oth share in the profirs
d died and his share was taken over b soiuriQN:
Uday, Kaushal and Govind. On l -4-2014 Govin y Ratio bet\-Yeen A and B = 4 : 3
Uday and Hari equally . will be 4 : 3
1fence. New Ratio between B and C
Ca/cu/ are :
's admission. (';ikul:i lill': of Caini ug Ratio :
..µfrhe sacrifi cing ratio of Uday and Kaushal on Govind
Hari on Hari 's Gainin g Rati o = New Share - Old Share
JJn Ne\~ p'.ofir sharing ratio of Uday, Ka ushal, Govind and
4 3 36 - 21 15
admission.
death. 8 Gains : 7 - 9 = _6_3_ = 63
!})If New prolir sharing ratio of Uday, Kaushal and Hari on Govin d 's
(C B.SE. 2015. All India) . 3 2 27 - 14 13
C Gains : 7 - 9 = _ 6_3_ = 63

SOLU TION : . o fB and C "" 15 : 13 = 15 : 13

. . g Ra110
Hence, G,am111 63 63
( 1J Ca k ufation ofSa cr ifirin ~ l~111io :

Sacri ficing Ratio of Uday

Disti nctio n Betw een Sacrificing Ratio and Gaining Ratio
share of profits at the
Sacrifi cing Ratio of Kaushal Sacrificing ratio is the ratio of decrease in the old partner's
g ratio is the ratio of gain in the
time of adm ission of a new partner, whereas the Gainin
Sacrificing Ratio ent or death of a partner.
remaini ng partne r's share of profits at the time of retirem
\ ,.' :;, ,l1:1 rin!.! l~ntio of 1·,1 .~. 1 I /, c:m ind and fi:iri : There are fo llowin g differences between the two :
Uday's new share - 3 I 9- I 8 Gaining Ralio
Sacrificing Ratio
- JO 30
30 = = JO Basis of
Difference
Kaushal 's new share =2 _...l_ = ~ _ 2
the
lt · the ratio in which the old It is the ratio in whi~h
10 30 30 - 30 Meaning I
pa!er s surrender a part of their remai?ing p~er s acquire lhe
ed)
partner. outgoin g (reured or deceas
Govind 's new share = 2.. __!__ _ ~ /4 share in favour of new
partner 's share.
10 30 - 30 = JO
. . . is calculated at Gaining ratio is ca.lculated at the
Hari 's share = _!__ + ...l_ + ...l_ _ l._ 2. When Sacn_fic1ng rathuo d . ·on of a time of the retirement or death
of
JO JO JO - 30 the ume of e a m1ss1 1 a partner.
Calculated
Thus New Ratio = 8 : 5 : I -l : 3 new partner. 1
 ).lU . • rl\f\
FQf1111.1b ft>r colc-uiatulf uus rutw fo rtull.lJ for l't1lcuta~ - •.'~ r1 ~ r M1,1,rr O R IJl:'.A TI I OP A pAll. iN£11.
3. Formub for .isre;.-,
,· J/r, w-.; • •S ~ fclio\\ s : tbla ..
Ca)alJa1ioa ~ ~. G R · ~I u , N
(ioin 111g ,...auo - · ew Rati.Q
SW ricin~ Ra1J0 dilllTltl, "111 0 ~ Old ~ IO S.11
,n oiJ R3u<' '\'c" R.itio f\c1, Ra tJo _ Old
11

f' < ;a 11 1q - ~.> .!..1 - ~ - ~

_pa;tnt"r"~ sr..irt" ..,f gtl{);l\\1H ~ <~"?" tll pJid 10 retirin
:--·, , 1 15 Ts 11
4. Purpose of i.- J1 1J1.kd ~·:''~"'\:11 t~---· t)fd ):,. (\JI~ h~•_Uit remninj a 2 I (, ',

..::::5
I
t) ( j;ijnq , , -- - -
~
_ _.J-_C_alam
__tio_D_ _ P
_""""~ ,n " ' "" '"'" '"'"' "' '""' "·"'""" ruuo.
·' ' 15 I5
t\ < ~uch, g1.1 ining rn1 io hctwce-n /' atl(J Q- .
4
Accoun ting T reatmen t of Goodw ill , iht· (,11och, ill Arcmrut i\ aln.>:4<1" ,in , ,
\\ l • • J 1•1"- 1TI~ 111 tit t-,•, .
The retiring or decea.a;ed prumer is entitlt'd to his sh~ ~f goodwi ll at the . u sually, the goodw1 ll 1s not shown in the hook.< f ·
retiremenl ordc:uh bee!lu.~ the gooch,ill earned by t11e lmn 1s the resuJ t of th litncor
f
.
re11~111
ent or death of a partner it ann-.. . thes 0. a firm . Ho.wevc-r. if. at !he lime
• ,..,,....n in . balance: beet r fi . .
\
of all the existing pa.rmers in the P35!. Since 3 part of tJ1e tuture profits wi ll be : c;tr~ 0 . off by debit ing al l the partner's ca ital,
,,-nnen . . th d · 11
. . 5_ o· a rm. tt Wlll be
P acc:ountJi m thei r old profitsharing ratio
I
because of the presenr good\\ill :md the retiring or deceased partner wi ll not be ~
3J1d crediting e goo Wl account . In such a case • 11.- 'oll . .
uic 1, owrng ;ouma J entry is
.
furure profits. it \\111 be fuir 10 coru~nsme the ret iring or deceased partner for t h ~
At the time of retirement or dath of~ parmer._the goodwill is evaluated on
of agreement among the p;mners (:is discussed m Chapter 2).
th:~-
clSis
recorded :
All partner's C~pital Ncs
To Good~ !1N_c
Dr. (in old ratio)
(&oodwill ex~ting in the books)
(Goodwi ll ex1stmg m the books written oil)
As alre::1dy ci~~~ in d:e- p-re\ious cbp,er, Accounting Standard 26 (Ind AS-Jg
specilies th:!! !;llOG\,ill am be rerorced in the books only wben some considerati . ) j{L~pRATION-17._ . .
mouey °1: mane~ ·s \\ ~.rdl bas b..<>en p~id for iL Hence, only pur~hased goodwill c : : A, Band C are shanng profits m the rauo of 3 : 2 : I. Goodv.ill is appearing in the
record~d m the books ~ ili-e Good"'11l Acco un t can not be raised. b ks at a value of n ,40,000. B retires and on the day of B's retirement Goodwill is
v~~ued at t 6,00,000. A an~ C decided to share future profits in the ratio of 3 : 2. Pass
. As such. in case of retirement or death of a partner, the adj ustment for good
wil! be made th~ugh partn~r"s ca_pital_acco unts. The re~iring or deceased partn;'s•u the necessary Journal entnes.

cap'.tal account m_ll be cre~Hed_ with_his ~h_are of_ goodwill and continuing Partner's SOLUTION :
---- JOURNAL
capital accounts mll be debited m their gammg ratw . The following journal entry will
be recorded : Date Particulars LF Dr. (t ) c;Tuj
A's Capital Ale Dr. 1.20.000
Continuin g Partner's Capital A/cs Dr. (in the gaining ratio) B's Capital Ale Dr. 80,000
!? Retiring Deceased Partner's Capital Ale (with his share of goodwill) C's Capital Ale Dr. 40,000
(Retmng / deceased partner's share of eoodwill To Goodwill Ale 2,40,000
adjusted Lo continuing partners in the g;ining ratio) (Goodwill existing in the books written off in old ratio)
A's Capital Ale 60,000
Dr.
1,40.000
ij]:sfl fArioi r /6. _ C's Capital Ale Dr. 2,00,000
To B's Capital Ale (2/6 of6,00,000) .
P, Q and R are equal partners 1n a firm . R retires and the goodwill of the firm is · · partners m
(B's share of goodwill adjusted to remammg
valued at rJ,60,000 . No goodwill account appears as ye t in the books of the firm. P
their gaining ratio 3 : 7)
and Q ~grce lo share future profi ts in the ratio of 3 : 2. Pass necessary j ournal entry for ·---- -
goodw,11.
Gaining Ratio = New Ratio - Old Ratio
3 3 ~ = 1..
SOL-rlrio1r A Gains = 5- 6= 30 30
rn::;:-- ------ - -JO UR NAL
Date Part1culun _ _ _ _ _ _ _ __ ___. 2 I ~ = 2_
5 6 = 30
l.l· C Gains = - - 30
P's Capital Ale d 7
Dr. As such Gaining Ratio between A an C == 3 ·.
Q's Capital Ale
Dr.
'Io R's Capital Ne
!LLTii:fiArioNlB.
7 ~ f2. 3 : 5. Goodwill is ap~g . .
(f{cti:i~g partner's share of goodwill adjusted to rofits tn the ratio O ' '~ ~ re~rr"lerv.~
r,•mainmg p a ~n their ga~n~ng ratio_4 : J)
£

in their books at a value of t 6,0 ' -

•

. X. Y and Z are partners shanng 000. x ref!.-e s.,aP) tP} .,'.h-?}Jf$ 6

if U•~ ~ '1)
 , ~tREMENT O R DEA TH OF A p
RE _ _ - - - - - - - - __ _ ARTNER
w:r1d11g Note : - - - - - - -- - - -
(I) - -- - -- - - - 5.13
-
Dimple's Share of G00<1w·ll-
1 - ' 9.00,ooo x I t
6 3,00,000
Komal 's Share of Goodwill = f
9.00.000 x .!.
6 1,50,000

1iI}(sfRATlo"il20: 4,50,000

"- A. B, C and Dare Partners sh .

. anng profits · .
retirement of C, t he goodw11l was vat d m the ratio of 3 . 4 . 3 . 2 On th
D
future profits equally . Pass the necessaryue . at ,6,00,000. A, B and d~cided.to shar:
Journal entry fi th
__ - - - - - or e treatment of goodwill.
SOLUTION:
Calculation of Gaining Ratio .

Gairung Ratio of A == l _1_ == ~ _ 1

3 12 12 - 12
Gairung Ratio of B = .!_ _ _i_ _ 4 - 4
3 12 - 12 ::: 0
Gairung RatioofD = l _l_ _ 4 - 2 2
3 12 - 12 ::: 12
Date Particulars
A's Capital Ale
Dr. 50,000
D's Capital N e
Dr. 1,00,000
To C's CapitaJ Ale
1,50,000
~Cs sha~e ?f goo~will debited to the accounts of A and D
in the gammg ratio I : 2)

- -- t: aa ca ._ __ __ _
ILLU~RATION 21.
\(, B and C are partners sharing profits in the ratio of 4 : 3 : 2. B decides to retire
and surrenders his share to A and C in the ratio of 3 : l . The goodwill of the firm is
valued at 1.5 years purchase of super profits based on average profits of the last three
years which were t 2,00,000, ~2,40,000 and t3 ,10,000 respectively. The norma.l
profits for the similar ftrrn are f 1,70,000. Goodwill already appears in the books of the
fi rm at t 72,000. The profit for the first year after B's retirement was tS,40,000. Give
lhe necessary journal entries to adjust goodwill and to distribute profits.
__ _ a:11: _ _ _ _

SOLUTION :
Dutt!. Particulars L.F.
' C .- 1 N
A S apt.la
_ ._ __;'....::..::::.:::.:.....---~ Dr'.:"'".
C
,-T 32,000
i,& 00()
, Dr. 'Ti
B s Capital Ale t"'~
Dr. ~
C's Capital Ne
To Goodwill Ale
(Existing goodwill vlritten off in old ratio ~
 4 ,C Ari.
c-, A
To

\ \~'{' ~ , •i •, \ '-imuJ ProtiG

: : ' t\..~ ~ ., A-~ f ~0.000
,_-cr Pt~··~', \ , \)t ~QI·s pun:h:i._~
fl 00J' ' f 1..:0,000

~ 1-20.(:()(1 , ~' r~o.ooo

: l ~ ~ a•N ~RSQ s

~ .:_,-, j(-J ~f\~ccn I lJld C in l~ rauo of 3 I .

..' . 3 9

1 •3 3
-1.·- -
J 9 36
3 11
-2 - - - -36
9 36
2.5 B 11 ">5
\;C"- R:u10 = ..f 36 36 or - II

. ........STR4
rLll)
- - -22.-
..,,,,... -....TJO;Y
ratio of
- Krni. Ra\ '!. K..-::.z ~d Guru \\ere partners in 3 firm sharing profits in the
between
; . 2 2 I On I : 20, . . . Gwu retiRd and the new profit sharing ratio decided
finn was
(avi, Ra\ 1 and Kumar '-"'35 3 I : I On Guru·s retirement the goodwill of the
.aJued at t 3,60,000
of
Showing )Our \\ Orkmg not.es clearly, pass necessary joumaJ entry in the books
he firm for the treatment of goodwill on Guru 's retirement. ·
(C B.SE 2017, Outside Delhi)

, OLUT/ON : JOIJRNAL
L.J Dr. (f) Cr. (f J
Plil1fcwan
201 7
r.
Dr 81,000
Feb. I Kavi's C.Jpital Ne (3.60,000 /. 4; J
J8,000
To R.J\ i's Capir.aJ '\... (3,60,000 x 4~ )
tt l l l l( IM l·N I U K l )I A'rr1 c,,,

I 11 h. 11111111\ c
Pllu l A
•1
A l•AR'f N~R l
111 (11 11 11 ' \ (,, pu I
C fl,(if),fl(i{I '-

rl ,,..l,IH>n , I
2
41,)
5.15
----
18,000
'
II 1\11

{AdJustmcm uJ E,toocJwill ,. I
hf'l CI IJttJ' s •s.ooo
l t:Urt11ICl'l t j
,, " ' I llll! °\;11lt 1

( nlc11l11t1 on ul \ncnf,cc or ,..\ 1(111)

New Rull o Old Rati o
J 1
Kuv, -~ -k 24 IS
•IO
Rnvi I 2
~ l()
5 K
4()
I 2
Kumur
5 8
k
-
Ir,
-10
'l

~ ~cnfiec

iu uW!fArioN23.
.
~I. 8. C and Dare partners sharing fi ed and
~~ -in lhc ratio of I · 4 : 3 . 2. D retir
the goodwill is valued at ,2 '00 'ooo · D~ro ·11 · .
s S11urc of g000~, 1s 10 be adJusted m10 the
capital accounts of A, 8 and c who de ··d 10
4 : 3 : 3. Pass necessary journal entry.
c, c share future pro fits in the ratio o f

---- ---
SOLUTION :
JOlJRNAL
Date Partit:Mlon Lf {j,- (l ) C, tt)
A's C3pital Ale (3/10 of 2.00.000 ) Dr. 60,000
To B's Capital Ne {I, IOof 2.00,000 ) 20,000
To D's Capital N e (2/ 10 of 2,00.000 ) 40,000

(A gains 1~ th share or profi t whereas 8 losi:s Tolh share

;
orprofit and D loses 1-0Lh shan:' of profit A compensates
B and D for Lhc loss in share or pmlits)

Working Notes : ,
= '40.000.
( i) D' s share of goodwill = 2.00.000 x 1-0
(ii) Calcula tion or Gaining Rati o : B C D
A
_!
'
J
➔
New Ratio
-10 10 10
J 2
-10 I -1➔0 10 10
Old Ratio
0 1- (Sac rifice)
. = i_ tGain) l.( Sacrilice) 10
10 IO
New Rati o - Old Rau o
3 • will be debited and 8 and D will be credited .
· d - Hence .-,
Only A has game ,o·
~STRA TJON 24. (HOI~) . . .
A. B, c and D are partners in a finn shanng profits 1n the ratio of 3 : 3 .
espectively. D retires and A. Band C decide to share the future profits in the · ~ : 2
I : 2 : l. Good~ill of the firm is valued at f 6,00,000. Goodwi ll already appearra~•o of
>0oks at f 4,50,000. The profits for the first year after D ,s retirement ams in the
~ 12.00.000.
0
Unt to
Give the necessary jownal entries to record Goodwill and to distribute th
~how your caJculations clearly. (C.B.S.E. 20 J2, Outsi;eProfits .
... - - - - -- De/hiJ
;;QLUTION: JOURNAL
Date ParticuIarr; l.F. Dr ( t )
Cr. (')
A's Capital Ale Dr. l ,35,000
B's Capital Ale Dr. J .3 5,000
Cs Capital Ne Dr. 90,000
D"s Capital Ale Dr. 90,000
To Good·will Ale
(E~1sting good\vill written off in old ratio of 3 : 3 : 2 : 2) -t.so.ooo
.1 's Capital Ne
Dr. 1,20,000
B's Capital Ne
Dr. 20,000
To C's CapitaJ Ale
To D's Capital Ne 20,000
(Adjustment of goodwill on D's retirement) 1.20,00 0
Profit & Loss Appropriation Ale
Dr. 12,00.000
To A 's Capital Ale
ro B' s Capital Ne 6,00.000
ro C's Capita l Al e 4,00,000
( Profit distributed amo .o . 2,00,000
3:2: Il nb partne rs tn I.he ne,, ratio or
 ..
Kl• I.IKl-~tF NT t)R 1) 1·,\ fl IO
• I · /\ 11,\1\ l-.., :•• £! 'ff O K D E.A
,, I·....·1·1: JI rt--O--N-:
5. JS _ __ _ _ ,..,,,~ T! I O P A PAR'rNE
J{ R.
., IV'

~ 10.000: .....
.,t·s sh an: "' t, .os.ooo ' t <-;Oµ
-

-
S. 19
llu olu ,,r ,.
'
· Q
· a n ,1 [(
C s sh an: "' t 1.os.000 , ;1 -_ ~·_,.,0 00 JOU KN Al .
· /J<Jfl! Partk iJar,
2020 Ba d De bt s A l e
.
He·\ afu ut roD M ril I
of ..\",' crs. .in
• cJ Li:ihilitir~ To De bto rs N e
d li'ibilities a re re Dr
Ar th et im e of re ur. th
em en 1 •. :JSS(!IS·-an · va d (B ad De bt s writt en 5,000
ac count .s prep:m·d . ... . • \\:J d d . . lu.e · an.d a re va lu ar of t)
I as ·i nc as eo fa 1111 ss 1o no 1 a
ne w pa rt 10 0 pr ov isi on for Do ub s.oou
1 .
The only d1. 1le
in u,e s:.u
• h · n• · . .1~ om .: •
c:nt :in , pr o fit tful De bts N e
-
l 31 in l 35e. ol reu rem or lo Re va lu ati on Al e (
re nce 1s
divided among all th n'l r1 er s inc1Ud .
•
·•ie n:t•irin" partn
ss du e to re va lu a tione
n.
r. f S.000 - t4 ,0 00) Dr.
e r. . is To Ba d De bt s Al e 4 ,00 0
e ..- .n -· in! ! u
, ~ er do es no"' w he re as 111 c:a~~ Dr .
admi ssi on of a ne t s ha re s uc h pr of (T ra ns fe r of ba d de l.0 00
" partn er. the: ne it or lo'"" " Of bts)
i, P ss
revaluation. Re va lu ati on Al e (N 5.0 00

------ -- ---
!L/n
LI IS TR AT !ON 26.
/
on
To Pr ov isi on fo r
(P ro vi sio~ er ea ted
ote I)
Doubtful Debts N e
..@._ 5% on '7 5.000)
Dr. 3.7 50
P. O and R are pa · firm •h aring p ro fit 3_75 n
Shee t of the firm as rtners in a s in the ra ti.o o f Re va lu ati on Al e
at 3 J st March. :?0.'.!0
J
- 2 : 2 : I . Ba lan ce
was as und er : To St oc k N e Dr. 36 .15 0
BAL \ /\'CE SHEE To Pl an t Al e
T 8,0 00
Uabillru:s ,#m ow ll
To Pa ten ts Al e
As sets 10 .uOO
Amou"' (Red uc tion in th e
f va lu ~f assets) 18 .2 50
Credi1ors t Re va lu ati on Al e
5,, 00 0 Cash
Capital Accounts 30 ,750 To Pr ov isi on for Dr.
Debtors Re pairs Al e 5.0 00
p 80 .0 00 (P ro vi sio n ma de
1.50.000 l ess · Prov ision for for repairs) _ _ 5,0 00
Q 1,00.000
_
Do ubtful Ba nk N e
R 50.000 :;,00.000 To Re va lu ati on Al Dr .
DeblS e 6,0 00
4.0 00
Stock
Plant
Patents
76 ,000
90.00 0
J ,4 0,0 00
I (S ale of ol d co mp
Re va lu ati on Al e
ut er previously wr
itten om
o7."'
6.0 00

To Ba nk N e 20 .00 0
_ __ _ _

R rel ires o n this ~are

o of 3 : 2. Fo llo wr
3,55.000

an d P an d Q de cid
ed ro sh ar e fur ur e
18 ,250
I
3. 55 ,00 0
(C om pe ns ati on pa
P' s Ca pi tal Al e
Q 's Capi tal Al e
id to an inj ur ed em
ployee)

Dr . 24 .00 0
20 ,00 0

ng adjus tm en ts we pr of its an d lo ss
re ag re ed : es in th e R 's Ca pi tal Al e Dr. 24 .00 0
(i) An am ou nr of
~5 . 000 rnc
· Iude d Ill
· De bto To Re va lu atio n Al Dr. 12 ,00 0
(ii ) Pr ov isi on fo rs be wn.n e n o ff e
.. . r do ub tful de bt s be as ba d d ebts . (T ra ns fe r o fl os s 60 .0 00
ma in ta . d on revaluation )
•11 ) S roc k be
h .
m e a t I e e x1s t11. ---' -- -- -- -
re du ce d 10 ( 82,00 1g ra te . Dr.
0. RE VA LU AT ION
1 ) Pla - - - -P-a-r ,,-.cu
- la_r_s AC CO UN T
nt be re duce d bj
i I0,000. _ _ __ _ _-t_ Cr .
) Pa tents a re va lu
_ _ __ _'= -=ic:--ul7
po-r, ar-:s::-::.-:.-:.-:.~~T!'--_-_-_~l :---_-
ele ss . T o Ba d Debt s N
e 1.000 By Bank Ne
) A provision of To Pr ov isi on fo r 6, 00 0
~5 .000 be ma de fc Do ubtfu l By Loss on Revalua
. . De bt s N e tio n
or re pa irs
An old co m pu te r
previo us ly wr itte To Stoc k N e
3.1so I
transferred to :
An am o unr of f 20 n ff 8,000 p· s Capital N e 24 ,00 0
000 h .d To Pl a nt N e
. o wa s 10.000 I Q' s Capital N e 24 .00 0
ar e re qu ire d to gi' a to be pa ,d to an so ld fo r ~6.000 as sc ra p. To Pa ten ts N e
ve ne em I . . 18,250 R's Capit al N e 12 ,00 0 60 ,0 00
evaluation Ac co un t. .
P oy ee tn Ju re d m . To Pr ov iso n fo r
an ac ci de nt . Re pa irs N e 5,000
cess ar y jo urnal e To Ba nk A/ c
nt rie s fo
r a b ov e ad J. us tm 20 .000
en ts an d
________
66.000
__.L-=
- ~ - _...-;MF ~ " 66 ,0 00
a.' --
ttl
1lll l'.

I
~11•.N
'I' O R IJF./\TI I ~r _A~ ARTNL:.R
____ - - -
I\IIOilll . s /\/C • • .
roKon\l s Copll::il Ne
-
-- -
Dr. 1

30,0{)0 I
:.i1
-
"u·s -;hflrc of goodwill tr.1.nsforrcd to ...
( .Kfl,, 1v1anu'1 30,000
cupitol Ne) _

KANU' S CM•rr AL A( '(:< -

. • JIJN·1
----·- --l-- l
' ,-
1,16.000 By Bt1lancc bid
-' '
Cr.

By Rc~c I und 1.00.000

By Manu ! Captlal N e
I,36,000

:::--:4xr1oN-2B.
1~; :d Car~ partners in a firm sharing profits in the ratio of 2 : l : 4. On l lst
20 I9' A retires and Bdand C decided to share future profits · lb • f \
March •ng . . ·
balances appeare in their books on this date .
in e ratio o 2 : .
folloWI .

Profit and Loss (Dr.) n t000

Employee's Provident Fund 1,so',000
Workmen Compensation Reserve 45 000
General Reserve '
\.20,000
It is agreed that (i) workmen Compensation Reserve is no more required, and
(ii) 25% of the General Reserve is to be transferred to Investment F\uctuation Reseve.
Pass journal entries for the adjustment of these items on A' s retirement.

-------
SOLUTION: Books of A, B and C
JOURNAL
1 1 I
[ Date Particulan LF Ot (~l Cr t~l \
2019
March 31 A's Capital Ale Dr. 16,000
B's Capital N e Dr. 2.1.000
C's Capital Ale Dr. 32,000
To Profit and Loss Ale 72.000
(Accumulated loss u-ansferred to the_capita\ nccounts
of nil partners in old ratio on A's~ mem) l
- - . Dr. I -15.000
Workmen Compensation Resen e Ale \
\0,000
To A' s Capital Ne \

J
l S,000
To B's Capital Ale \ 20,000
To C's Capital Ale r dt
.
(Workmen Compensation e R "rve
st: trnns1erre
. )o
. •
ICapital Accounts in old ratio on
A's retirement
- o r. \.20.000 •
General Reserve Ale
· Reserve Ale
J 1 30,000
--'.lQ_(\Q(}
To Investm~nt Flucruallon .,..,1 , ~,0"/J ~ t ' J Ji ~ ~ ,,~
011
To A' s Capital Ale _! '-.: 'JI i~ ~ J 1- 1 · ..:J 2
 RF.llRFM FNT O R DEATI I ,
- 0 1· I\ ,,
-
To B's Capitnl Ale
l\ti.·1
~,.
10,fl
To ("'s Cnpitul A\· . .,
_ R
1 t'
.....~ cranslcm."Ci to Investment ·111,,~
' ·o a of Gencn.u •t'S
(~ '•
, l.11d b·1lru,cl' tronsferrc<l to
rtucn111uon R<:s.cl'\ ~ • ~.
Cup1tul ;.\ ccounts in olc.l rouo)
. Pro -d,.nt f und is :in lmtsidc: li.1bility and is not nn accu 1
"\ olc : E.mplo)t'C s \, c , arm-~ rnu llll!u
sUCh. ·,t ,:)· ll\)l Jistnhutc:d !lmong the p c . Prolit. '\•
,

iu'fisiiiArio~;-29.
v"'A. 8 :ind C are p:umen; in a fim1 sharing pro tits and losses in the ratio of .
3
c retires from the firm and A :ind B agret! to share future profits equally 0 . _· 2: 1
. t· 11 . . . lVe J O
entries on Cs retirement m th~ o o,, mg cases · llfll;i_
ta) Workmen Cornpensarion Rese:"e ~ppears in the books at t l ,OO,ooo h
there is 3 claim of t-l0.000 agamst 1t. , w e1i
tb) Workmen Compensation Reser\'e. appears . in the books at ~2 ,o0,000 ,..h
there is a cl3.im of t:2.75.000 agamst 1t. ' -v en

(c) tn,·esunem Fluctuation Reserve appears in the books at ~ 5

_ _..i. al ~ I 80 000) appear at t 2,00,000. O,OOO, Whe~
,,
lnvesanents {md.u ~et v ue , , ,
(d) Ln\'estmem Fluctuation Reserve appears in the books at t20,000
ln\'esonents (market value ~ l ,20.000) appear at ~2,00,000. ' When

SOL[f['JQN~
JOURNAL
Dau
(a)
PmicuJar5
Workmen Compensation Reserve Ale Dr.
L.F Dr. (f )
1,00,000
Cr (rJ -
To Provision for Workmen Compensation Claim N e
40,000
To A's Capital A c
30,000
To B's Capital A c
20,000
To Cs Capital Ale
10,000
~~~lus v,o~e~ compensation reserve credited to
. anne': Capital Accouni.S m their old profit-
shan ng ratio)
(b)
Workmen Compensation R1:;SC:rve Ale
Dr. 2,00,000
RevaJ uation N e
To Provision for Workmen C . . Dr. 75 ,000
(Provision made for workmen cl~mpensauon Claim N e 1,75.000
charged to Revalua11on A . m and shon fall
ccount)
A' s Capital Ne
B's Capital Ne Dr. 37.500
C's Capital A/c Dr. 25 .000
To Revaluation Ne Dr. 12,500
(Loss on revaluaLion deb't d 75.0011
A . I e to Partners· C .
i ccounts rn their old profit- h . . apnal
1 s an ng ratio)
 ·- ·- ~- .. I' , \ L f "\"-,\...V U l 'I I
or.
~-- Particulars f. Particulars1 t l
roD's Loan Ale IBy Balance bid 3,00,000
24,000
(Balancing Figure) 4,00,000 By A' s Capital Ale (Note 1)
By B's Capital N e 24,000
By General Reserve Ale 52,000
4,00.000 4,00,000

Note: ( 1) Value of Goodwill = f40,000 x 3 = f 1,20,000

D's Share of Goodwill f 1,20 000 x ~ = f48 000
=
' IO '
which is contributed by A and Bin their gaining ratio, i.e.. equally.

li(}fe'!RATiON-32. . . . . .
A. B and C were partners shanng profits and losses m the ratio of) : 3 : 2. Therr
Balance Sheet as at Ist April.2018 was as follows :
- I:.lablllties \' Ansts f
Sundf) Credttors ,. I0,000 1 Cash 2..000
Emplo)1ee·s Provident Fw1d 5,000 I Sundry Debtors'-" 8j000
Resen c Fund 6,000 Stock ✓ 40.000
Workmen's Compensation Furniture 13,000
Reserve 2.000 Patents 4,000
C'1pit~ls : 1 Buildings ./ 60.000 \' .:!
,,,,.
A 50,000 Goodwill 6,000
fl 35,000
C 25.000 I, l 0~000
1,13,000

C retires on above date and the partners agreed that :

( I) Goodwill is to be valued at two year's purchase of the average profits of last
four years. Profits for the years ending 31st March were : 2015 : l' l ~,400,
20 16 : ~20,000, 20 17 : t 10,000 (Loss), 20 18 : ~ 15,600.
(2) 5% provision for doubtful debts to be made on debtors. '-" 1}
(3) Stock be appreciated by 10%. ti)
 Date f _______._.;.P_.a;........
rt_icu_ 1_a_r..,_. _ _ _ __ 4 ,00C
6,000 I Dr
2018
April I Reserve Fund Ale
Dr. - particulars I By Stock Ale 12.00C
To Provision for Doubtful Debts 400 1 By Buildings Ale
To A's Capital Ne
To B's (,spiral N e Ne 4,000
To Cs Capiutl Ale T O Patents Ale 2,000
~ u-ansfer of Reserve Fund co Partner's Capital N cs T sundrY C reditors Ale
O
m their old profit shruing racio) T o profit tranSferred to
4,800
Dr. 2,000 A's Capital Ale
Workmen's Compensa11on KeserH' Ale 2.880
B' s Capital Ale 9,600
To A ·s Capital Ne 1,920
C s Capital N e
To B's Capital Ne 16,000
C:
To C's Capical N e
(The transfer of Workmen's Co mpensation Reserve to
Pan ncr's Capital Nesin their o ld profit sharing ratio ) Dr.
CA.PITA L ACCOUNTS
A B : c]
B C Parriculars
Particulars A f f
Dr. 6,400 1
Revaluation Ne
t t t
By Balance bid
so.oool 3s.oooj 2s.0 0
1,201
To Provision for Doubtful Debts Ne
To Goodwill N e 3.000 1,800 1,200 By Reserve Fund Ale 3,0001 1.8001
To Palc:nLS Ne
To Cs Capital Ne 2.500 1,5001 I
ro Sundry Creditors Ne 3 1.320 By Workmen's I I
( Decrease in the , alue of assets d . . To Cs Loan Ne Co mpensation
i.:rcd11ors) an mer~ 53,300 36,980 1,000 600 40
in To Balance c/d Reserve Ale
4 ,800 2 ,8 801' 1, 9 2'
Stud Al e By Revaluation Ale 2,50
Dr. 4,000 By A ' s Capital Ale
Building Ale
Dr. 1,50
12,000 By B's Capital Ale
fo Revaluation Ale
(Increase in the value of Assets)
58,800 ~o.2soj 32.52
58,SOOJ 40,28~ 32,520
Reval uation A,e -
Dr. 9,600 B ALANCE SH EET O F N EW FIRM (o f A and 8 )
-~o A ·s Capital Ale
_I o B 's Capital Ale as at I st April. 20 18
ro C's Cnpital tV~ ,Asse/1
(Prolit on revo lua1 Liabililies 2.00C
Ac)
.
ion transferred to .
panner s Capital
12,000 Cash
Sundry Creditors

- 31,320 Sundry Debtors 8,000

A. s Capnal Ale Cs Loan 5,000 Less : Provision for
B.s Capital N C Dr. Employee's Provident Fund doubtful d ebts 4 00
C s Capital Ne 3.000
Dr. Capitals :
1.800 53.300 1 Stock
To Goo<l\\ill '\. Dr. 4
1.200 90,280 Furniture
(Goociw,Ji ap · c
I ~rcmentJ pcanng in the books
B ~ Buildin gs
\Vfltten otr on C-s
1,38,600
 . . ·c, . -
To Loose Tools 4.000 By f'actory Premises 18,000
To Provision for doubtful debts 19,500 By Loss tra~ferred to :
Ram 's Capital Ne 3,QQQ I

Shyam's Capital N e 2,000

Mohan's Capital Ne 1,000 6.000
31,500 I
--
31.500

Dr. CAPITAL ACCOUNTS Cr.

~ors Ram Ram
f ' f f f f
io Revaluation By Balance bid 2.00,000 l ,S0,000 1,00,000
Ale 3,000 2,000 1,000 By Reserve fund I
To Shyam's Ale 52,500 3S,000 17.500 I
Cal)itaJ N e 37.500 12,500 By Workmen's
To lnvestment e-Ompensation
Ne 72,000 Reserve Ne 15,000 I0,000 5,000
To Cash Ale 50.000 By Ram's
To Shyam's loan Capital Ale
Ne 1,93,000 By Moban's
To Balance c/d 1,55.000. - l.09,000 Capital Ale
2,67,500 2,45,000 1,22,500

BALANCE SHEET
as ar I st April. 20 I 8

Trade Creditors 30,000 Cash-in hand

Bills Payable 27,000 Debtors
Expenses Owing 37,500 Less: Provision
Liability for Workmen• s Stock
 III I I ,I I I\
I!1 l'.itc nt.,
1" 1>rtl\'1.J lllll lor Dn uht lul DchL<.i ' ' I,: I

. 1,rov ,ston for I)1,c o,mt B) Prn1. 1-.1on for D1')(:oun1

10 on ( rcd1tors .) I
011 1)-.:btor., (3% on 19,000) -, 70 Hy Pre paid ln.su
r-ancc
10 tnvcstm~nL~ 4.(>00 B~ IrO~~ trun
-;fc rrcd to
10 \Vorkm cn · s Co mrx:n!\nl1on A' i, Ct1pll,d /\ 1c J 5 12 •6(J()
Lia bi Ii t) S,CJCJO /l' s Cap1wl A c 2 'S :.S ,400 21.CJ(I(
25.1 70
-·.17(
1 -;

Dr CA PIT Al ACc o u ,n \
(
Parlic11iars A 8 Partrcular., A IJ

To Goodwill '
9,000
t
6,000 By Balance bid
t
80.0<10
t
40.0"
To B 20, 000 - Hy Reserve f· und (3 . 2)
To Revaluation 7.2GO 4,8 ~l
12,600 8,4 00 By Pro fit & Loss A, c
To Investmcnts s,ooo (3 2) 14 •..:00 9.61,
To Cas h 5,000 By .,f
To Bank 47, 000
- .oo:
'1 ( 1

To Balance c/d 60,000

l ,0 1,600 74.~00 I .0 1.60 0 74.40

BA LANCE SH EET OF A
us ell I st October. 20 I S
Liabilities lf

' A .<St?I\ t
Employee's Provident Fund 18.noo Plant 75,00l
Sundry Creditors I 0.000 PatcnL~ 7.4 0(
Less : Provision for Sto(k 30.001
Di sco unt 300 9,700 In, cstment s 8.00(
Workmen 's Co mpensation O\!btors 20,000
Liabi lity 5,000 Less Provis ion for
Bank Loan doubtful debts l .000
(Secure d hy Plant and Stod,) 47.00ll l 9.000
Capi tal 60,000 Less : Provis ion for
discount 570 18,43(
Prepaid Insurancc: 87(
- --
l.1Q ,700 1,39,7 0(
 Accoun tin g Tre atm ent of Go odl \·ill
. ni!
The reun .: ...... ~seti n.1r1ncr cnt1 t k~ to his sh~ of t!ood \, ill at the t·
or ut:, t..~ t ~ -·
t~
• _
n:uremenr tlr lA:J._.,: ·"' 1-..-.,~~ chc ~Ol.l<h,iJl
. - •rne
che ~,i,
u1 l " - - eam t.
- d
unt? p.ir mer s m th~ ~ t Sin('t' J part 01 th~
~)
.
lh'-' fi
.
rm ,s lhc: resu
-
or
lt th.-.
~ c,rr- 1 1
•o
o ( :i11 - tu t ~ pro fi ts wi ll be accn, I\
bec:w.se of the rn:~ nr ;o,.xf" 11l .1I1d tht..· ret1nng J d
\.lr_ tX« :is~ partner \\1.1I not be shai
.
•\Jin
; '",...~ prolits. H " ill bt' r:iir to ~0mpens.1tc:- lhe , ~
u, UJ ~ reu nng or dec eas ed par tne r fo r the s ng
' the: urne of reurernent or d~:ith or
Ar •
d . . amt
J partnc:-r. Ult' goo "t 11 is eva lua
. tL....seu.~in ted on the b
of J!!Tt.'t'mc~nr Jmo n.:: :he r..iztnel'"" (.).$ u1sc
- . c·hJple r ?)
- - . ciS1s

, ~lre:idJ Jisct!SSC'd in w pn: -.a~ c;,~ i.:r. A,c

oun ting Sta ndard 26 ( Ind AS- Jt)
Sp!(. 'fies th31 1,•o<xh,ilJ can tlt" n. ..~rc
e-"' m i.."-e boo ks only v: hcn ~om e conside ratio
moue;-· o r ~ ·s worth h1s L~~, pi.! for t. Hen n tn
ce, ortl} purchased goo dwill can ~
t'P'C", i"'d-d in r.ht: boo ks :?nd me Goo d~
ill Accoun t can not be rais ed.

~ such. m ~ of rcun~ir.ent or deJLh of

a partne r. the adj us tme nt for goodwill
\\ ill be mJdc! thro ugh p4ftller ·~ c3pitaJ accounLS.
T he retiring or dec eas ed partner's
cap ital account \\ill be credired \\JUl his sha
re of goodwill and continuing partner 's
capiwl acc oun b \\ ill be deb ued in lheir gai njn g
ratio. T he follow ing journal entry wi ll
be recorded ·
ConunuinJ Parmer ·s Capital A cs Dr. ( in the gaini ng rati o)
To Rc:u nng Deceased Partnc:r's Capical Ne
(wi th his share of goodwill )
(Retiring dt.~eJSed partner's share of good\-vill
ndJusted ro conrrnurn6 panners in the gaining ratio)

-- -- ---- -. . --
1:!J!STRATION.....
16.
.
P. Q and R arc equal partner; ,n a finn. R reti res
and the goodwi ll of the firm is
•alucd ar f J,60.000. No goodv11ll account appe;ar
s as yet in the books of the firm . P
nd Q agree lO shar<: fuiur~ profits in the ratio of
3 : 2. Pass necessary journa l entry fo r
oodwill.
- - ..... - -
OL UTION.....:
ee J(J Uf< t !A l

l I· Dr (') Cr. (''

p· C;Jpi1r1I Ale
0 C~pital Ale /Jr 96.000
I O R's Capiu,J Ale l>r 24,000
(Jfo11n,_1g p,H11ler's share of g<1ocf,Nilf adjusted to J ,20,000

n ainmg p,1rtncrs in their gaining ratio 4 ; 1)

 5.33
?_F_A~)ARTNER
p.ETlREME~ T_O !- :> ~A2°~
-- - N's Capital Ale {Note l)-- -- -_--
_ _ __ __;
Jo,oooI
Dr.
G's Capital Ale 1.20,000
Ale Dr. 1,5 0,000
To M's Capital
gaining ratio of
(Adjustment for goodwill in the
l : 4)
Bad Debts Ale Dr.- 2.000
2,000
I
To Debtors Ne
I
(Bad Debts written off)
Provision .for Bad Debts Ale
-
--- ,
Dr. 2.850
2,000
To Bad Debts Ale 850
To RevaJuation N e (Note 2)
ation account)
(Excess provis ion credited to revalu
Dr. 55,000
Revaluation Ne - - - -
I

30.000
To Patents Ne 2,500
To Stock Ale 7,500
To Machinery Ne 5,000
To Building Ale I0,000
To Creditors Ale
in creditors)
(Decrease in assets and inc~ase
1
M's Capital Ale - - - - - -Dr:- I 27,075
Dr. I6,245
N' s Capital Ale Dr. 10,830 '
G' s Capital Ale S4, LSO
To Revaluation Ale
(Transfer of loss on revaluation)
Dr. 2.7 5.425
!vfs Capital Ale 2,75,425
To M' s Lo an Ne (Note 4)
his Loan Ale)
(Balance due to Mtransferred to - ----1.
-
--
Wo r kin g No te., :
(IJ G :.1in ing lb1 io :
2 3 4- 3 I
N - - - = -- = -
U'll) s 10 10 10
2 6- 2 4
lhiJ G -3s - -10 = -- = -
10 10
Gaining Ratio = 1 : 4

(2) Net Debtors : f4 5,000 - Ba

d Debts ~2.000
= 43,000'
2,150
Provision @ 5% on t43 ,00 0 == 3,000
0 - Bad Debts ~2 .000
les s : Existing Provision : ~5 ,00 850
valuation Account
Excess Provision Credited to Re
(3) Cr.
T
Dr. RE VA LU AT IO N AC CO UN
, Particllltn.
Particulan 850

)00
To Patents
To Stock
To Machinery
30,000
2,500
7,500
5,000
By Provision for Bad Debts
By Loss transferred to :
M's Capital Ale
N's Capital Ale
27,075
16,245
- J
l ~ ....,.•) ••
To Building "" (' r, , f' , r
£, .
./ . / ~, .' . 'j / ~ /
IKH,1EN'I' OR Of.A l'l I OP A PARTNl•.H 5.1
i•rolll on rcvulualion
tmn~fcrn:tl to :
M,000
l
1,5 Cupit.DI Ne
o·~ Cupltnl Ne M,000
C's ('npitl\l Ne 32~ 1,60,000
I,k5,000 1,85.00(

CAPr! AL ACCOUN"I S C
pnrticulurs A 8 C I'art/cula,, A IJ (
t t
0 Advertise- ' Hy Aal. bid
t t f
5,00,000 1,00,000 1.50.00
ment Sus• By General
pense Ale 24,000 24,000 12,000 Reserve 1,00,000 1.00.000 50,0()f
·0 Profit and By Rcvalua-
Loss Ne 6,000 6,000 3,000 tion Ale 64,000 64,000 32,0C
roB's Capital By A' s Capital
Ne (Good- Ale (Good-
will) 40,000 20,000 \\~II) 40.000
To B's Loan By C's Capital
Ne 4,94,000 Ne (Good-
To Balance will) 20,000
c/d 5,94,000 1,97,000
---
6,64,000 5,24,000 2,32,000 6,64.000 5,24,000 2.32,001

BALANCE SHEET
as ar I st April. 20 I 8
Liabilities Assers t
Sundry Creditors 4,60,000 Cash at Bank 10.001
B's Loan Ale Debtors 6,00.000
(4,94,000 + l ,80,000) 6,74,000 Less : Provision for
C's Loan Ne 1,20,000 Doubtful Debts 30,000 S.70,00f
Capital Accounts : Stock 3,20,00(
A 5,94,000 Of1ice Equipment (Computer) -45,00(
C 1,97,000 7,91 ,000 Land and Buildings 11.00,00(
20,45,000 20,45,00(

\ I) Computer purchased for t 50,000 was wrongly debited to Office Expenses Accoun
whereas it should have been debited to Office Equipment Account. Depreciation for 6 month
i.e. from I st October 20 I7 to 31st March 20 18 @ 20% p.a. has not been charged. Henc
~45,000 (i.e. ~50,000 - Dep. ~5.000) will be adjusted by passing the following entry :
Office Equipment Ne Dr. 45,000
To Revaluation Ne 45,000

, ! ) B' s share of Goodwill = f 1,50,000 x ½= f60,000. It will be adjusted by passing th

following entry :
 5.36 __ _ ___ _ - - - - -
- - - - -- - - - - ~ , I\ p
- - - - .....AJ\
2 Dr. 40,ooo ---~ ~
R£T[REM!~~ ~ R_?~A~~ ~F_A_P~RTNER 5.~
A's Capital Ne (60.000 x J) - -- -- - - - - - ------ --- -- --
I Dr. 20.000 Naresh's Capital N e 6.000
Cs Capital Ne (60.000 x 3 ) saurabh·s Capital Ale 3,000 t 8,000
To B's Capital Ne 60,0oo 24,100 24,10«

iiiusriirioti
.
37.d S urabh are partners shanng
· profits ·m the ratio of Or. CAPJTAL ACCOUNTS L
PankaJ Narcsh an a
.' r. th finn due to his illness. On Lhat date th e baJance sh 3 ·. <:
' I r'"" Particulan Panlcaj Naresh Saurabh Particulars Punknj Nart!S/z Sourab
Naresh retired 1rom e I ee1 of ·
tim1 was as follows : ~ ~ f ~ f ~ ~

II
liook, uf Panl-11j. :'1-are~h and ~:iurnhh
To Naresh By Balance bid 46.000 30.000 20,0l
BALANCE SHEET Capital N e 6.000 4,000 :!.Ou
By G<neral Re~M
as at March 31. 1018 14,000
(Goodwill) By Revaluation 9.000 6,000 3,00
f Assets~ To Naresh's I By Pankaj Capital

General Reserve
L,abilities
--~ 12.000 Bank
Loan N e
4
26,000 Ale (Goodwill) 14.000
7 To Bank A/c< l 28.000
Sundry Creditors 28,000 Debtors 6,000 ,fi,
To Balance c/d 47,000 25,000
Bills Payable 12.000 Less Provision for
61.000 54,000 25,00Q 61,000 54,000 25,00
Outstandi ng Salary 2,200 Doubtful Debts ~
5,61)
= =:=;=
- --~ = =
Provision for Legal Damages 6,000 Stock
22,(X BALANCE SHEET
Capitals : Furniture
41.{J(rj as at March 31. 20/ 8
Pankaj 46,000 Premises
so.~
Naresh
Saurabh
30.000
20,000 96,000 Bank Loan (See Note 4)
-----
Liabilities
20,400 1 Debtors
Assets
6.000
Sundry Creditors 28.000 LeH : Provision for
1,56.200 12,000 300 5, 701
I ,5o,21N Bills Payable Doubtful Debts
\d ditiuu al Information : Outstanding Salary 2.200 Stock 20.00t
Provision for Legal Damages 10,100 Furniture 45.001
(,) Premises arc undervalued by 20%. stock is overvalued b I o ••
for doubtful debts was to be made 5% on deb y O1/o _and provtSJoo Naresh's Loan Ale 26.000 Premises 1.00.001
damages is to be made for t4 I 00 d " . tors. Further prov1s1on for legal Capitals :
, an iumnurc to be brought "45 Pankaj 47,000
(11) Goodwill of the fi rm be val d " up to ' ,000
ue at , 42000 Saurabh 25,000 72,000
(iii) n6.000 from Naresh's C . I , . 1.70.70(
1.70,700
bean-ng .interest @i 12'¼ apna d account be tran sierre
" d .
to his loan accom
o p.a. an balance be .d h
necessary loan may be obi • d pa, t rough bank · if required \ \ 01 kin)! Nute, :
aine from Bank •
(iv) New profit sharing ratio of Pa k· . d .
n aJ an Saurabh . d 'd d
( I l Actual value of Prcmisl!s = 80.000 x
1
°°
80
= ~ 1.00,000
Give necessary led is ec1 e lo be 5 : I.
retirement. ger accounts and balance sheet ot· th 100
__ e firm after Naresh'1 (2 ) Actual value of Stock = 22,000 x Tio = no.ooo
soiurioii-
l)r . !.l) Calculation of Gaining Ratio for Adjustment of Goodwill :
R.EV
ALUATION ACCOUNT
Gaining Ratio = New Ratio - Old Ratio
Part1culUT1 5 3 2
ro S1ockll1 t Gaining Ratio of Pankaj =6 - 6 = 6
Ptn7rnJars
To Prov1~1on for Legal D 2 000
r 1, aniag.-s · B) Premises" 1 Gaining Ratio of Saurabh = .!.. - .!.. = 0
o rofi1lranslcrrcd lo 4,100 By Pro .. 6 6
Pankaj' s Capnal Ne B v1s1on for Doubtful Debts Hence, Naresh' s share of Goodwill f 14,000 (i.e., 42,000 x ¾> will be debited entirely 1
9,000 YFumit~
Pankaj Capital Ale, as he alone has gained on the rct.i..:.:e gliJ~~.() ul-e..-!, '/,n~ •till be' :'t,i
- 3'~ .., r -~ - ' =.J ...,
IKH,1EN'I' OR Of.A l'l I OP A PARTNl•.H 5.1
i•rolll on rcvulualion
tmn~fcrn:tl to :
M,000
l
1,5 Cupit.DI Ne
o·~ Cupltnl Ne M,000
C's ('npitl\l Ne 32~ 1,60,000
I,k5,000 1,85.00(

CAPr! AL ACCOUN"I S C
pnrticulurs A 8 C I'art/cula,, A IJ (
t t
0 Advertise- ' Hy Aal. bid
t t f
5,00,000 1,00,000 1.50.00
ment Sus• By General
pense Ale 24,000 24,000 12,000 Reserve 1,00,000 1.00.000 50,0()f
·0 Profit and By Rcvalua-
Loss Ne 6,000 6,000 3,000 tion Ale 64,000 64,000 32,0C
roB's Capital By A' s Capital
Ne (Good- Ale (Good-
will) 40,000 20,000 \\~II) 40.000
To B's Loan By C's Capital
Ne 4,94,000 Ne (Good-
To Balance will) 20,000
c/d 5,94,000 1,97,000
---
6,64,000 5,24,000 2,32,000 6,64.000 5,24,000 2.32,001

BALANCE SHEET
as ar I st April. 20 I 8
Liabilities Assers t
Sundry Creditors 4,60,000 Cash at Bank 10.001
B's Loan Ale Debtors 6,00.000
(4,94,000 + l ,80,000) 6,74,000 Less : Provision for
C's Loan Ne 1,20,000 Doubtful Debts 30,000 S.70,00f
Capital Accounts : Stock 3,20,00(
A 5,94,000 Of1ice Equipment (Computer) -45,00(
C 1,97,000 7,91 ,000 Land and Buildings 11.00,00(
20,45,000 20,45,00(

\ I) Computer purchased for t 50,000 was wrongly debited to Office Expenses Accoun
whereas it should have been debited to Office Equipment Account. Depreciation for 6 month
i.e. from I st October 20 I7 to 31st March 20 18 @ 20% p.a. has not been charged. Henc
~45,000 (i.e. ~50,000 - Dep. ~5.000) will be adjusted by passing the following entry :
Office Equipment Ne Dr. 45,000
To Revaluation Ne 45,000

, ! ) B' s share of Goodwill = f 1,50,000 x ½= f60,000. It will be adjusted by passing th

following entry :
 5.36 __ _ ___ _ - - - - -
- - - - -- - - - - ~ , I\ p
- - - - .....AJ\
2 Dr. 40,ooo ---~ ~
R£T[REM!~~ ~ R_?~A~~ ~F_A_P~RTNER 5.~
A's Capital Ne (60.000 x J) - -- -- - - - - - ------ --- -- --
I Dr. 20.000 Naresh's Capital N e 6.000
Cs Capital Ne (60.000 x 3 ) saurabh·s Capital Ale 3,000 t 8,000
To B's Capital Ne 60,0oo 24,100 24,10«

iiiusriirioti
.
37.d S urabh are partners shanng
· profits ·m the ratio of Or. CAPJTAL ACCOUNTS L
PankaJ Narcsh an a
.' r. th finn due to his illness. On Lhat date th e baJance sh 3 ·. <:
' I r'"" Particulan Panlcaj Naresh Saurabh Particulars Punknj Nart!S/z Sourab
Naresh retired 1rom e I ee1 of ·
tim1 was as follows : ~ ~ f ~ f ~ ~

II
liook, uf Panl-11j. :'1-are~h and ~:iurnhh
To Naresh By Balance bid 46.000 30.000 20,0l
BALANCE SHEET Capital N e 6.000 4,000 :!.Ou
By G<neral Re~M
as at March 31. 1018 14,000
(Goodwill) By Revaluation 9.000 6,000 3,00
f Assets~ To Naresh's I By Pankaj Capital

General Reserve
L,abilities
--~ 12.000 Bank
Loan N e
4
26,000 Ale (Goodwill) 14.000
7 To Bank A/c< l 28.000
Sundry Creditors 28,000 Debtors 6,000 ,fi,
To Balance c/d 47,000 25,000
Bills Payable 12.000 Less Provision for
61.000 54,000 25,00Q 61,000 54,000 25,00
Outstandi ng Salary 2,200 Doubtful Debts ~
5,61)
= =:=;=
- --~ = =
Provision for Legal Damages 6,000 Stock
22,(X BALANCE SHEET
Capitals : Furniture
41.{J(rj as at March 31. 20/ 8
Pankaj 46,000 Premises
so.~
Naresh
Saurabh
30.000
20,000 96,000 Bank Loan (See Note 4)
-----
Liabilities
20,400 1 Debtors
Assets
6.000
Sundry Creditors 28.000 LeH : Provision for
1,56.200 12,000 300 5, 701
I ,5o,21N Bills Payable Doubtful Debts
\d ditiuu al Information : Outstanding Salary 2.200 Stock 20.00t
Provision for Legal Damages 10,100 Furniture 45.001
(,) Premises arc undervalued by 20%. stock is overvalued b I o ••
for doubtful debts was to be made 5% on deb y O1/o _and provtSJoo Naresh's Loan Ale 26.000 Premises 1.00.001
damages is to be made for t4 I 00 d " . tors. Further prov1s1on for legal Capitals :
, an iumnurc to be brought "45 Pankaj 47,000
(11) Goodwill of the fi rm be val d " up to ' ,000
ue at , 42000 Saurabh 25,000 72,000
(iii) n6.000 from Naresh's C . I , . 1.70.70(
1.70,700
bean-ng .interest @i 12'¼ apna d account be tran sierre
" d .
to his loan accom
o p.a. an balance be .d h
necessary loan may be obi • d pa, t rough bank · if required \ \ 01 kin)! Nute, :
aine from Bank •
(iv) New profit sharing ratio of Pa k· . d .
n aJ an Saurabh . d 'd d
( I l Actual value of Prcmisl!s = 80.000 x
1
°°
80
= ~ 1.00,000
Give necessary led is ec1 e lo be 5 : I.
retirement. ger accounts and balance sheet ot· th 100
__ e firm after Naresh'1 (2 ) Actual value of Stock = 22,000 x Tio = no.ooo
soiurioii-
l)r . !.l) Calculation of Gaining Ratio for Adjustment of Goodwill :
R.EV
ALUATION ACCOUNT
Gaining Ratio = New Ratio - Old Ratio
Part1culUT1 5 3 2
ro S1ockll1 t Gaining Ratio of Pankaj =6 - 6 = 6
Ptn7rnJars
To Prov1~1on for Legal D 2 000
r 1, aniag.-s · B) Premises" 1 Gaining Ratio of Saurabh = .!.. - .!.. = 0
o rofi1lranslcrrcd lo 4,100 By Pro .. 6 6
Pankaj' s Capnal Ne B v1s1on for Doubtful Debts Hence, Naresh' s share of Goodwill f 14,000 (i.e., 42,000 x ¾> will be debited entirely 1
9,000 YFumit~
Pankaj Capital Ale, as he alone has gained on the rct.i..:.:e gliJ~~.() ul-e..-!, '/,n~ •till be' :'t,i
- 3'~ .., r -~ - ' =.J ...,
 , IS.\!!tS
~ ASSt! fS
l 1abdi11es
30.000 Buildings
0 Capitals :
X 36,000
Bui ldings 30.0() (
Xs Capital Plant & Machinery 15,001
25,0oo z
}" s Capital 20.000 Plant & Machinery ~ 57,600 Debtors 10.001
I 5,00Q Sundry Creditors 7,000 Stock 6,0(11
Z- s Capita.I 20.000 lnvesunents
10.000 Debtors to.ooo Bills Payable 3.000 Cash at Bank 6,60•
General Reserve 10.000 67.60(
67,600
Sundry Creditors
Bills Payable
7.000
3,000
Stock
Cash at Bank
s.o00
\\ orkin ~ Note, :
-- I
2s.00o
90.000 Entry for sale of Investments :
-- ~
~
( 1)
Bank Ale Dr. 22,000
. .... ,,, ,r tir. nh 1 tlf \\. Pl To Investments 22.000

and to Z for t4,0 00. 12 ) Entry for transfer of profit on Investments :

(a) Y se lls his share of goodwi ll to X for t 8,000 Investments Ale Dr. 12,000
5,000. 12,000
(b) Stoc k to be appr eciated by 20% and buildings by ? To Revaluation Ale

(c) Inve stme nts were sold for t22.000. C

BANK A/C
Dr.
(d) )' is paid off in cash. f Partic11/ars
Parti cular s
40.40(
Partn ers and the Bala nce Sheet 25,000 By Y's Capita l Ale
Prep are Reva luati on Account, Capital Acco unts of T O Balance b/d 6.60(
of the new firm . 22,000 By Balance c/d
To Investments Ne 1 -17,001
47.000 =
SOL UTI ON :
Dr. REYALUA flON ACCO UNT Cr.
--- - - -- 75J139 . -
Parti culars Parti c ulars f JLLU STRAT · . h ·n rofits & losses in proportion to the
To Profit trans ferred to : By Stock Ale 1.000 A, 8 & C were partners m a firm s
as at arc .
:;1
gh ~ I 2017 was as follows:
fi xed capit als. Their Balan ce Sheet
X' s Capital Ale 9,000 By Build ings Ale 5.000 BALANCE SHEET
Y' s Capit a l Ale 5,400 By Investmen ts Ale as at March 3 1. 2017
Z"s Capit al Ale J .600 18,00 0 (Profit on sale of Investmen ts) 12.000
f
Assets
Liabil ities 21 ,001
18,000 18.000 Bank 9,004
Capitals: Stock
Cr. 5.00,000 15,000
Dr. PARTNERS· CAPITAL ACCOUNT A Debtors
3,00,000 Provis ion for
Partic ulars X } Z Particulars X y z 8
2,00,000 I0,00.000 l ess : Doubtful Debts _!.2QQ 13,'ilU
C 75,000 "'5.5ll1
t t t t t f
23 000 A's Loan
General Reser ve 2.00.001
To Y's Capi ta l Ale By Balance bid 30,00 0 20,00 0 20.000 Creditors / 000 Plant & Machinery
(Goo dwill ) 8,000 4.000 By General Reserve 5,000 3,000 2.000 Outstanding Salary . ... • ~ I • • - ··1• •J -
.J!,
I
__ •

To Bank 40,400 By Revaluation Ale 9.000 5,400 3,600

'
I
I ' 11(1'1 L JJ1J ~\. Hui ldi11s

I l.~().OOd
l'n• tit .~ LP~ Ac. :ou m ( for ll-tc:
.' i:._ir e ml111,s ~ I :- 1 {I. l,U't
:/t .,
-

· - 0 17)
"
- - p~~
':-,.
J{I rmF MF NT O R DF.A

u
TI I op A
c:, c:, c::>
- ,. °' §
,r, •rj .,...
-
__ l'AR TNE R
-- -- - - --
- 1:1
..;
.,: co r I v :
On the dare- of .1txl, e- Ba.J :m"' t'
Sh<."t:'t. C n:ti n:d thm1 the firr n '-...J ....
- ,...., ,...
u
§~
ren ns 00 ... g~
I~
I / ,~
lhe fo110 ....,
~ I "'
(i ) Go,..-xiH11/ o(l he tirm " ill be ,.1/ ""'
~! 8 ,-t

Pro fics of l:.isc c:hn-e _, e:us. Thrc•

ued :it t\\O year·s pur cha se ofu
-i ~ CCI .... ,., "1. "1 IS?,
~l
f'\
~ ~ §

~,
Pro fits for Lhe _vcar e nde d Ma
1\ bn: h 31. :?0 /6 Hen - ~4. 00. 000 rch e A.vcra IIO ... 8
& t3. 00. 000 res pec rive /y . 31 .,., ,..;
, 201 s! ,..,
r- 8~
( 11) Pro ns1 on tor &d [)eb ts ,.., ,...,
" ill Ix rru inta ine d at 5% of lhe De .,; ""' 00
,-.: .,.; §
I
Ii
~
bro rs. ,...,
(111) Lan d & Bw ldm g "il l
00
'¥, ., 8
be :ipp nx1 3te d b) (90 . 000 and
Plane & M ach i
I be red uce d co ( I. SO. 000. "'
ner y W'tJJ
( n-) A ~ co rep:3_, his
Loa n.
( i ·) The lo:m rep aid b_\ A H'3S co be uul
,ze d co pay C. The bal anc e of
pay abl e co C '''35 th
£r.JnSterred co hjs Loa n Acc oun
:J.nI 1UC il. t bea rin g in teresc @el~ 0
Unt
OJJeT
Pre-pa.re Re , all..l3.0on Acc oun t.
Par me r's Cu rren t Ac cou nts ,
Ac cou ms and che Bah mc e She Par tne r's Capita]
et of lhe rec ons tiru red firm .

(C B. SE Sam ple Pap er, 20/B)

so Lu =r lo V .,..
c:,

r•
-r.
Dr r' I
RE VAL UA TTON AIC
Pa lrlic u/a r Cr. c:, 0

fl
0
r Par //cular s 0
0
T O P /.a.nl & .\.fi:Jchi.nery ,4; C o. ,..,
20 000 B> Pro visi on for Do ubt ful ~

To Pro 61 f l ~e rred LO . De bts

Ale o o 0
0
0
C
A's C iuren1 Ale 750 V)
~ ,
0 q o.
35. J 75 By Lan d & Bu j/di ng Ale ~ 00 0
V)
0 C
90,000 1Y o.,... q
B 's Curreni / V e 212 25
f-i< '! or

t
C s CUJTenI Ale I ~. I 50 70 750
90 7'i0 90,750
 5.73
.r-.Jf OR~ ~.!'2. D_F_A..:~':T~
•
E! ·r
. .
rJllgME - - iring pa rtner s Ca pi1 •1t , o11 -
is f 4,5 0,0 00 ,and 1f
1tE - - - - le if ret 0· th . . ' u cr ull 11cljus tm cn ts . .
-- - f or e~aJTlP be' pa1·d f 5•00 •00 , l: ex' cess. PU·il1. /.,• , · f 50,000 will he 111s share o
. ag reed 10 ·11 be recorded
hy dc hit
ing <.:o nii11ui 11g pu rln cr' ·s C··arital nc.co un ts .in
15 is WIered'11m • re1mn · · g pnrrnl•r's . . cx pluincd with
ht' d,,'1·11 · Th . d g cn pitul ncco11n1 • II ca n he
0 . - ·
go . 1110. 0 an • folfowmg I 11 us tmt1011 :
, 11;nrng
i; 11 r I1
l l:
1
1ht' hC p ... - - - -
__ ~f ~ RATION 57.
its · I • s an d
·
his
of t 1c rn110 or I : 2
partn ers sh ari ng pr : J . C retire
JLLl fLB nnd c· ·tre
111
. . . . · . n sta nds al
,/ ' . ts for res er ve s un -'u pro 1•II on rcva 1ua t1o
. · tl r 111'1k111g adJ US lm cn •
.
. ,1I :1 t' •J /] ag reed to pn y h1111 ~ I '50,000 ·111 1·uII sc ttlcmcnl of his claim . Reco rd
_.,ip 11, ·
· , l ooo.A an< ~ntf)' for .
the tre atm en t of g 00d ·11 i· f the new pro fit sharing rati o 1s
• · · I
~1.J , . 111 1 w1
lll'ri:~sitrY ,101.•~ c
'd d nf I . J .
dl•r1 c "
sdiuifoil ~ ~

full settlement l ,50,000

Amount agreed to be paid in 1,20,000
justments)
Less : C's Ca pital (after all ad
30,000
Hidden Goodwill
JOURNAL
L.F Dr. (t') Cr. (t')
Particulars
Date Dr. 5,000
A's Capital Ale Dr. 25 ,000
B's Capital Ale 30,000
To C's Capital Ale
ted to the capital accounts
(C's share of goodwill adjus
io I : 5)
of A and B in their gaining rat

:
Calculation of Gaining Ratio
I I 3 - 2 I
= 4 - -
A Ga ins 6 12 12

3 2 9 - 4 - 5
B Ga ins = 4 - 12
6 12

Death of a Partner
am ou nt pa yable to him is to be paid to his legal
the
On the death of a partner,
representatives. .Sl'·d
ou nt du e fo fhc 1·c 1n·rs,'11talih's of thl' d l~' f.':l
l u1cult1fu1 of thf.' 1o
t~I am
in the
rtn er, acco un ts in the bo oks of the finn are maintained
On the death of a pa er. Th us the legal representative
s of the
ire me nt of a pa rtn
same way as on the ret follow ing amounts, which are cre
dited to his
titled to cla im the
deceased partner are en
cap ita l account :
e am ount stand ing to the credit of his Capital Ale.
I. Th
of the inc rea se in the va lue of Goodwill of the finn.
2. His share
erest on Ca pital, if pr ov ide d in the partnership deed .
3. Int
r I I Rf TIR F M l· NT O R DE AT
II I 5.7 ◄
I I Ut= A I'1\H, , .
1 ., .
- . the rt'' ~lu J t1o . n :,fa ss cls an d liu hil it ics
4. his s h,..
_.1 ·
...,.,.... of pro h t on . l ..

I I ,, ~ .
) . Hi s shan:
, of the unJ1s mbut1.: r ·d rof it,
. or rcs cn .c~
•.
.
j , _ h. dn tc: o f his de n th.
I
•
·- h ~ ofp ro tit up w t c
6. H1!i s arc .
. • d
ts ,, il l lx: t.:..... l =-<l w the ac co un t o .
Th e follo" 1ng :11nou.n. l•IC f the dl' l:c asc d p:irt n .
. . •'-e am ou nt due: to I!> h . . k1.H 1l rcp rcs cn tnt i, cs : 1:rh,
asc ert am ing u• - r
I. Dr a" ings
2. lnrcre.st o n ~" '" £5
; His sha re of loss on Ult.:.:. ., 3 IU.3tion of ass ets an d li3 bil iti es.
'lJ
'I I /
·
4. His sh ~ o f und1s
n.:
. .b ,d los s su ch as de bit.
tn u11.: • · ba lan ce of Profi t and 1-iJ ,
,

I' . I
Ac co un c.
5 l lis stu n: of the rt-<luctjon f dw i II
in lhc ,·a lue o go o .
A 11 o t·.1
u ,c-. .'.l bo, c, me n iro ne d 3 d ·us un cn ts are first ma
··.- ' .1 . de in the de ce as ed Pa nner'
cap1W J ac co un l an u . , .a.. ,. the ba lan ce of . r
' I I uic 0 his ca pit al ac co un t 1s tra
\
ex ec uw r·s ac co un t ns ,e rre d 10 h'l'.l
The: l<!g :il rep res enta ti, e
of a de ce ase d pa rtn er is en
inreresc al 60 0 p.a . on the am t itle d , a t hi s dis cre tio n, to
ou nt du e fro m the da te of
f co lhar po rtio n of pro fit de a~ to the da te of pa y me
\\ hic h is ea rne d by the fir nt or
dece as ed p:i rtn er. m wi th the am o un t du e to the
r . ,, ,,I: ,!: ... fr ., - ff the de ath of a pa rtn er oc
year, the ex ec uto rs of the de ceas cu rs on an y day du ring the
ed pa rtn er wil l als o be en tit
ea rne d by the firm from the led to the sh are of profits
be gin nin g of the ye ar till the
may be asc ert ain ed from an da te of his de ath . Su ch pro
} of lhe followi ng me tho ds fit
(A ) On Time Ba sis . :
( B) On Turno ve r or Sales Ba
sis .
(A ) , ' n Tr r· p J ; : -
fn thi s method, we have to
profit o f the las t ye ar and the tak e into co ns ide ratio n tht
time for wh ich he remai ned
year. On the ba sis of last year 's a partn er du rin g the c urrent
profi t we shall calculate the pr
the da te of death and I.hen ca op or tio na te profi t upto
lculate I.he deceased partner 's
s ha re :

·- -- -- -
IL LU ST RA.. TION....58.
_A, Band Care partners in a fin
n wh os e bo ok s ar e cl os ed
A died on 30th Jun e 2018 and o n M ar ch 3 1s t ea ch year.
according to the ag re em en t
de cease d partn er up to the date the sh ar e of pr of its of a
average profi ts for th,• r of the de ath is lo be ca lcul ateo on ,
h,.. h "'" ;
 • hhJt; f .)

Capitals : Dank
A 5,00.000 Stock
B 3.00,000 8.00,000 Debtors
~o l p .. . 15 ,000
C's Loan 2.06,6..1 t!SS : rov1s1on tor D. Debts
75 1
Creditors 23.000 Plant & Machinery -2
Outstanding Salary 7,000 Land & Building
B· s Loan 15.000 A's Current Ale
B's Current Ale
l 0.5 J,650

\ ' ,.n ttin;! Note :

Valuation of Goodwill :
A vera p fi _ 4.00,000 + 3,00.000 (- ) 2,41 ,000 (Given in BIS)
ge ro Jt - 3 = fl .53,0oo
Goodwill at 2 year's purchase = f 1,53,000 x 2 = <'3.06,000
2
Cs share = J,06,000 XJO =f 6 J ,200
E ntry for Goodwi 11 :
A's C urrent Ne (6 1,200 x !) Dr. 38,250 I

B ' s Current Ne (6 I ,200 x ~ Dr . 22,950

I
To C' s Current Ale 6 1,200 I

-ILLUSTRATION
-- - ----- ............
40.
I
I
Parth, Angad and Leesha are partners in a fi.nn sharing profits and losses in the
ratio of 3 : 2 : I respectively. Angad retires and rus clcurn, including Capital and /
e ntitle m e nts from the firm including his share of Goodwill of the firm, is f 50,000. f
After this amount was determined. it was found tha t there was an unrecorded piece
of furniture valued at ~ 12,000 which had to be recorded.
U po n record ing thi s piece of furniture, the revised amount due to Angad was
dete rmined and settled by g iv ing him this piece of furniture and the balance in cash.
You are require d to give the journal entries for recording the pay ment to Angad in
the books of the firm . (IS C 2018/

--
..,. ....
....SOL - ---
Dare
U T l ON :
Parriculars
JOURNAL
LF Dr. (f') Cr rm
Furnjrure Ale Dr. 12.000
1~.ooo
T o Re va luation Ale
( U nreco rded ass<:_t reco rded )
 To Provision for doubtful debts Ale I - -- --
To Outstanding legal charges Ale . . ... I N e (Goodwill)
10,800
of assets and increase 1n lla~1~ 1
(Decrease in th!! \'llue
s,ooo =9,(50
Land and Building Ale - Dr. I YBalance bid
To sank Ale J,.350
To Revaluation Ale (Balancing fi gure Y Bank N e
(lncrease in the value of ossrts) To Balance d d Balancing figure
3,600
Revaluation Ale Dr. I
To ,.f's u pital Ale
To B's Capital Ale
-- .
BALANCE SHEET (After B, s Ret1remenl)

To C's Capital Ale

(Profit on revaluation J.ra11Sferred 10 partner's capital Ale)
Lnvestmcn ts Fluctuation Reserve Ne
To Investments Ale
Dr.
7,500
3,
2,
-sundry Creditors
Liabilities

Outstanding legal charges

as at 1st April. 2018
f

770 Sundry Debtors

19,800
4
6,900 Cash at Bank( l
A:s.rets

less : Provision
l
5,000 I
250
lJ
4,700

4,750
7,520
To A's Capital Ale B's Loan Stock
l Capillll Accounts : 8,500
To B's Capital Ale Investments
A 17,500 30,000
To Cs Capital Ale

'3,,1
10,500 28,0001 Land and Building
(Decrease 10 the value of investments met out of C 55,410
Investments Fluctuation R.;servc)
55,4701
Dr. 1,950
A's C:ipitnl Ale Dr. 1,650 \\ orJ..in)! ;\ otc, :
Cs Capital Ale
To B's Capital Ale t 11 Calculation of Gaining Ratio on B's retirement :
(B's share of goodwill adjusted 10 the accounts of Gaining Ratio = New Ratio - Old Ratio - 32 13
continuing partners in their gaining ratio 13 : 11 )
5 4 -45 = 72
=s - 9 = 72
Dr. 19,800 A Gains II
B's Capital Ale 19,a(j =l _I = ~ =
72 72
To B's Loan Ne C Gains 8 9
(The transfer of B's Capital Ne to B's Loan N e/
A ' s Capital A/c(l) - Dr 2, 150 Hence. Gaining Ratio between A and C = ~~ : ~~ or 13 : 11
2,150
To Bank Ne
(Toh~ amo°:nl returned 10 A. to bring his capll.al to profit 1ll Adjustmcnl of Capitals according 10 new profil sharing ratio :
s anng ratio) Total Capital of the new firm = f 28.000 5 = fl 7,500
1,350
Bank Ale()) Dr Therefore. A's Capital in the new finn should be 8 th of ns,ooo = f19,650
1,lSO
To C's Capital Ale
(Thfie arno~l bro~ght in by C 10 n11se his capital lo
pro II shan ng ratio) _J
A's exis1ing capital
Hence, A will be returned
-
= f 2,150

= f!0.500
3
Cr. 1.' ) Cs capi1al in the new firm should be 8 th of f28,000 = f9,150
Dr. CAPn AL ACCOUN IS
Part/cu/an 8 C Parrtculurs ti B cl
t
Cs existing capital
Hence, C will bring in
= ~

? t Cr.
9.000
ro B's Capital
Ne
(Good\~111)
1.950
B~ Balance b. d
I,l.l 50 Dy Re,allllltion
Ale
18,000

1,600
I J ,500

1.200 &00
(-4 I

Dr.
Calculation of Bank Balance is as follows :
BANK ACCOUNT
, Particulars-- t7
1.150
Par1icu/arJ 5,500 By A's Capital N e 4,700
To B' s Loan N e
I o Balanc.: c/d I lJ,650
19,800 B} ln\estrnents
9•I'iO Fluctuauon
Reserve
By A' s Capital
:?.000 1,500 1,000
To Balance bid
To C's Capital Ale
J .350 By Balance cld

6,850
~
-
6,SS0

N e (Good~ill} 1.950
By C's Capital
 K l•T IR EMF.N T O R DEATI I O r, A PARTNER
lilt Ale (5% on t4.07,000) 5.
To Profit on Rcvaluntion 20,350
tmnsferrcd to :

!
JO
Leena's Capitol N e
Modan's Copilal N e
Naresh 's Capital Ne
21,900
2 1,900
32,8S_Q 76,650
IO
2,47,000
0 2,47.00
0 i - '

0
Dr. ---- ---.. .--- PARTNFRS' CAPITA L ACCOUN TS C
Partic,,/ars Leena Madan Naruh Panin,/ar, LMna Madan Naru~

To Deferred
f ~ t t t f
Advcrtisemen~ By Balance bid 12,50,000 8.00,000 IO,5O,OC
Expenditure By Revaluation
'S Ale A/c (Profit) 21,900 21,900 32.8:
28,S7 t 281571 42,858 By Leena's
s To Madan's
Capital A/c( 2l 1,60,000 16,0(
Capital A/c<2 > 1,60.000
To Naresh's
Capital A/c<2 > 16,000
To Invest-
ments Ale 1,00.000
To Bills
Payable Ale 8,53,329
To Bal. c/d 10,67,329 - - ~ 10,55,992
lVI .900 9,8 l.9OO I0.98,850 12,71.900 9,81 ,900 10,98.8~
==== -=-
To Bal. c/d<3> l 9.20,000 12,80,000 By Balance bid I0.67,329 10,55,9CJ
By BankA/c
(Bal. Fig.) 8.52.67 l 2.24,00
19,20,000 l 2.80,000 IQ,2O.OOO 12,80,00
== =5 : i _ _ __ .
= = =! =
BALANC E SHEET
as at Jst April. 2015
Liab,lities ~ Asseu
-----,
Trade Creditors 1,6O.OOO Land and Building 12,40.00
Bank Overdraft 44.000 Machinery 4,50,00
8.53,329 Furniture 7,00,00
Bills Payable
4 ,OO,OOO Closing Stock 7,00,00
Long-ten n Debts lnvesLments
76 ,000 1,00,00
Employees Provident Fund Sundry Debtors 4,O7,ooo
Capitals : 19-20 •000
Leena
0 less · Provision for I
Naresh 12,80.000 I 32,00,00 I . Doubtful Debts 2O.3: O
lii
3,86,65-
1
Bank (Working Note 4) 11 ,56,67'
I 47J3_.32
i 47~,329 .,..J c ~ l o - !.. wL, 1 ~15. ¥~f-:
 1tt 1lltl \II , 11 \It 111 \ 111 1,1 \ I•.\- ~

~I 11"1 '"· ,I''" Ill >;111 1,r A r•11, rP , ► ,l

//" , I IJ"ll.11 Ill lht Jll'W firm ,h{JUkJ !)( l,.. (),f/1() , ; f I / -.1).00()

I · , I ,1p11al In LllC'.' l"IC'w Orm ihould he 2:Hll l(MJ , ~ C IW.000

1knu·. 1 11 ~h 111 ht- hwui1h1 111 h)' n l 1.W ltllJ t 1 .u, rf11 , :o.oon
l ,1, h Ill he w11hurawn tr, ( r 1,()0 ,000 l ~J 1.i()(J f ).() fl()()
1 1
' ' 1--.... n 1kd
1, h /111 I('• \I
,.,..des ,r
IJ.wU. \ C
I>: lO riOO
r ~ 8 ii Cap1Lu \,
\ 1-\ Jlll)U(\l broui;ht m b) 8 h;s c--..pil;I) Ill pn,(11
~ l« IJL"-...!" Ill l'\ilic
~h:lnng ra11ol
I= , LJ:;"'!1. \ . •-.: 1.• , ,z 1 Dr 1.70.000
( -b ( .1r1L\l I\ ~ l>r :ZU,000
To llJnl-. Ac 20/UJ
1.60.~ t 1\ n1ounl \Hthdrnv.n b) C' 10 bnna hu c:.1p1Lll Ill rn,fo
fo \.~ \ C~ \ , 5 !'Cl.v..() , ~ I ,h:tnng r.1110)
16,~
L ~ .,: t:r Pr::x:rs c ~ \ "" 1- ...-m

Lcc--J°, l"°rc2l (~.;.(•l..L.00 • ~. ! 19.~0.000

1uusiiArio-;i4-:j_
.\' )' and Z an: partners in u r1m1 sharing pr,,li L, in lhc r.iuo o l l :! I On
- f I ~.80,000 Apnl
1st :!O 18. )' retires from lhc fim1. X aml L a11,rcc that the , j p11:1l ot 1hc nc"- fi
rm s.h.111 be
fixed al n. 10 ,000 in the profit sharing ratio. ·1h,· cap11JI acrnunts ot .\ J.nd
L at1a all
Dr adjustments on the date of retirement showed h.1!..1 111:.:, ol { 1.-4\000 .md
BA..\.K ACCOU','T ~b 1.000
Cr. respcc1ivcly. S1a1c lhc amount of uctuol cash to he hrought in rir tu be pa1J
p~ off t,) t.hc
Tolli-=c cbtd
l
W.000 To Balanc.- e, d
Part,culOl3
,7 pJrtner.,.
11 .56,679
To Lccn:!'s up:t=t ;..,
To Nmesfl"s C:pb! A.,
<:_h"I
::;,1m ----
SOLUT---
ION :
I I.S6.6it; New Ratio of,\' and L alter )"s retiremen t .1
I I ,56,67Q

iLiusr liXrioJtii ,\"s Capital in the nc,, firm should be . ~.10.001) , ~ I. ,~ ,500

""""~= ,.....,.,ng
d. A. B. and C are ,-u~, -'--- profits in lhc f . ,\" s existing capital
3 ~ustmcnts relaung 10 revaluall .
ratio O 2 2 : I. A retJres and after aJI I lcnce. Ca5h to be broug.ht in ti~ .\"
acc?un1 of B showed a cred11 baJ~g~w11l and accumulated profits the
capital
~
dec~ded to adj ust the capi1als of Band C in 1,40.000 and that of C t 1,00,000
. It was l's Capital in the new Jinn should he 2. 10.llUO,
capitals of the partners and n:cord their profit shanng ratio. Calculate the new
- ~ entry for bri · · () , .000
soD.f l'ION~ •
ng,ng In or withdrawing cash.
l' s existing capital
I 0.500
~knee, Cush to he wi1hdrll\rn b) /
Total Capital of Band C after II
a adJustmcn1s
= ? I ,4-0,000 + t 1,00,000 i1lusTFM1'/0N 45.
This Capital should be in th . " tl,40,000. F.,lto,iin
g is the IJulanc,· Sh.',·t or /\run,1. K u~lllm und ~urn~u as at 3 (st March,
e1r profit shari . 20 IX. whn havt: ugrccd tu sluu~ prolits und losses 111 proport1,m ol 1hc1r capitals
ng ratio, i.e.. 2 : I. .
 1111/>i/11/e.s
Lnnd and Building 2,oo,ooo
~ 'ap1 L:ils ·
Aruno 2,00.000
Mnchincry
Closi ng Stock
I
I 1,00,() fJ(J

J,00.000 J.00,000
KarunJ I, I 0,000
1,00.000 7.00.000 Sundf') Debtors
Vnnmn
3'\,000 /.t1SS : Provis ion lor
<,cn<:rol Reser'\ c 15,000 Douh11i1l Jcb ts l 0,000 , ,00.000
\\ orkn1cn Comp~n5:ttJon Rest.•rvt
50,000 Cash nl Bnnk , ~00.000
Sundr) Creditor.;
8~0.000
8.00.000
I
ret ire from lhe · .
fi m1 and the rema1n1n
rch
On 31st f\.1a · - JQ 18 Ar una des ired lo
d g
. assets an
It was agree lo revalu e the
1artne rs decided to carry on the business. d
liabilitie s on Ult' follo,ving basis :
~e-assess the
(i) Land and building to be appreciate
d by 30%.
(ii) Machinery be depre,iated by 20o/o.
(iii ) Th,ere \\ere bad debts of f 17,000
.
·s co mpensation ,va s estimated at f 8,000.
(iv) The claim on account of ,-.ork.men
od wi ll of lhe firm \\ as , alu ed at f 1.4 0.000 and Aruna 's share of Goodwill
( ,,) Go
uns t the Ca pira l Ac cou nts of lhe con tinuing partners Karuna
be adjusted agr
ure profits in the ratio of 4 : 3
and Varuna who have decided to share fut
res pee ti \'e Iy .
ne, , firm in tot al 1,.,~II be the sam e as be tore the retirement of
( ,·i) Capital of lhe
una and ,vii i be in the new pro fit sha ring ratio of the continuing partners.
Ar
to Ar una be set tled by pay ing f 50. 000 in cas h an d the balance by
(vi i) Amount due
be paid later on .
transferring to her loan account which will
val uat ion Ac cou nL Ca pita l Ac cou nts of partners and Ba lance Sheer of
Prepare Re
the firm after Aruna ·s retirement.
-- -- -- -
SOL UTIO N : Cr.
Dr. RE V/\ LUATION ACCOUNT

articulars f Purtrculars
 1,500 By Balance bid 1...~-i-. (x7f,
~ odwill AIC (~ of f 3,000)

To fu rni ture Ne 2.060 By M ohit's Capital Ne

(Goodwill) 4.500
To Keshav·s Loan Ale
- r rans fer 2 l .640 By Revaluation Ale
(~ of ~2.060) I JJ3 0

By General Reserve Ale

~ of ( ? 2.000 - t400) 80 0

25,200 25.200

Dr. KESHA V' S LOAN ACCOUNT Cr

Date Particulars f- Date Particu/an r
L-,;2_0_1_7 -t- ---"------ - - .-----,-20 16
March 31 T o Bank Ale Apri l l 1
13y Keshav's
(t 8,000 + f 1,082) 9.082 Capital Ale 2 1.6-l l
March 31 To Balance c/d 13,640 20 17
March 3 1 By Interest Ale

(~1.640 X "
100 ) I.OS :
22.722
2018 20 17
March 3 I \To Bank Ne Apri l I By BaJa nct: bid 13.Ml
(t 8.000 + ~682) 8.6S~ 20 I~
March 31 To Ba lance c/d 5.MU M arth J I By lnte resl Ale
~
(f l J 640 X - -- )
68 :
. I 00
14 .3~2
=- - 14. 3~:
20 19
20 18
fvlurch 3 l To Bank Ne ~
),
9,,
-- .-\pri I I By Balance bid
5.6 41
'.!U IQ
t,. fan.: h 3 I By Lnteresl N e
5 28.
( ? 5.640 X - )
100

- 5,922
--
 "I ... "'

t
2s.00o
I r-n, fu.r , l

~fw Dc.:rus
I ~ ,
' I
'
\I . dill. .r,. I
mid Build1tg
- •
I

s "'..pro : I ~ ~JJJ<.~l LO L1w lullo,\ 1ng adJustments :

..; I~ IZA.: ~~ ti ~ m! .,'(e{! b~ If~ 0

.. , fu-X\\' · be \ ala:d az f 5~.000.

...__.,...,. rar Dooil'JJ Dtbts to~ rJJ~d lo IO~o of the debtors, the e>.c<"
pro-, ............ heir. .. citt'x c trom GencrJI Re!>en c. The balance of the Gene ..
Rescn C tu CC d:stnoote-u 2Jnong.sl lhc! panners. ..
~ Cred,. :s a: t j.())J \\~r~ pa!<l b~ Pihu for \,\hich she is not to be reimb~

~, The CO!ll!fii.!In~ ~..r.ers LO shan: profits and losses in future in the ratioo
5 ~
v·, N1~ to be pllrl f :9.800 on rd?rement and lhe remaining amount in four eqt~J
serai-...tt.-r...:.I nse:.mrnts toettht r "1th interest @l 0% per annum on ll-t
ootsm.ndire beJ2raet rre til'Sl inst..aJmcnt of Nita's Joan to be prud on3 '"
r-.wch. :o I6
You .:.:c req _ red to prepare
( 1) Re\ '1L~uao AccOU!It
( 11 J PGr"ute:-s' C'1pttal Acco mLS
( 111) "-nl3' s Lo.m Accoun, ult it L lilldll: closed.
(/.SC :o:,
---·
-SOL---(/ T/0,V (.I
Dr ~J VAi.i /., f ff,•, A( ( (JI N'I

l o Land dnd Uuildrr.g ,\. c 000 H ( reditorn

Porrlcu/ar,s
'
Uy I ,t~5 cm Revuhmtion
•rnnrf rrcd to ;
l'thu .., Laphnl Ne 4,jOO
 201 ~ I 201 )
June 30 To Bank Ne
( f 35,000 +,
1,750)
Apri l I
36.7S0 June J(J
Dy Lecia 's Capital Ale •
By Interest Ne
70,001
Sept 30 To Bank Ale I I 10
(f 70 000 X -
' 100
r
(f 35.000 + t875) I 35,875 ! I 3 1,7 51
X )2) I
Sept 30 By Interest Ne
10
( t' 35.000 x JOO
--
72,62'i
I

X
3
12 l S7!
, n .62 1
- !
Notc (I): Leela's share in Goodwill = f 1.40,000 x l_ = t'42.000, which is contributed
10
by Khushboo and Meena in their gajning ratio of 5 : 2.
_ __ __ ____ _
_..
ILLUS TRATI ON 49.
On March 31, 201 6, the balance sheet of Pawan, Qatir and Ra.Ia who were sharin
profits in proporti on to their capitals stood as follo\vs :
BALANCE SHEET
as at March 3/, 10/6
r
Creditors
£;abilities
~

I
'
48.200 i Land and Buildings
.{ t..f c tl
'
.':i0,00(
General Reserve 6,000 Cash at Bani,. lO,OOl
Capitals : Debtors 40.000
Pawan 30,000 Less : Pro \ ision for
Qatir 30,000 Doubtful dc:bt$ 2.000 1~.ooc
15.000 75.000 Stock 14.00(.
Ram
Emplo)ec's P.F. 17.000 ~tathincl") 8.200
I
Protit ..mu Lo~ 6.00C
I
-
1,46,200
I,46,:!00
=-
Qatir retires and the following readj ustments of tht! assets and liabilitie s have bee,
agreed upon before the ascertainment of th~ amount payable to Qatir :
(i) That out of the amount of insurance which was debited entirely to profit an1
loss account , f 4,320 be carried forward as unexpired insurance.
 (vi) Thal the entire capita l of th!.'. tinn as newt) 1..v11M 11L11~u u .... ., ,,,.u 411 ,; ou 0 -------+--~
L,l(,U ,I II If I &.,..J
Assets
44,800
between Pawan and Ram in the proportion of three-fourth and one-fourth ' AOO 48,200 Cash at Bank
. . d' . I I
passing entries in their accounts tor a ~ustment, 1.e. actua cas 1 to be paid
al1er Creditors
Employee's P.F. 17,000 Debtors 30.000
1,soo
II 28,500
Qatir's Loan 33,800 less : Provision
or to be brought in by the continuing partners as the case may be. off 14,000
Capital : Stock
(vii) That Qatir be paid t5,000 in cash and the balance be transferred to his 1
. I I .LI .
account payabk in two equal annual insta ments a ongwt , interest @ 8% p.a
oa.n Pawan
Ram
45,000
15,000
Unexpired Insurance
60,000 Machinery
I 4,320
7,380
60,000
Land and Buildings
Prepare nece~~ ace~~~ ~d the balance sheet of Ll,e firm of Pawan and Ram. 1,59,000 1,59,000
Also prepare Qat1r s loan till tl 1s ltnally set1led. ·
--------
SOLUTION : Not e ( I) Accounting treatment of Debtors :
Dr. REVAL UATION ACCOUNT JOURNAL
r - --:--:--:-----------::------::--:---:-------,.- - Cr.
Partic,Jars f P-:a_rt_ic_u_Ja_r.-"-~-----+-- .l
' """'"
r Date Particulars LF. Dr. (f) Cr frZJ
To Bad Debts N e 8.000 By Unexpired Insurance 4.320 I'
To Provision for Doubtful Debts By Land and Buildings l 0,000
2016
I Bad Debts Ne Dr. 10.000 I
Ne
To Machinery
1,500
820
April I
l To Debtors Ne
(Bad debts written oft)
10.000

To Profit transferred 10 Dr. 2,000

April I Provision for Doubtful Debts Ne
Pawan 's Capital Ne 8,0QQ 1
Revaluation Ne (~ I 0,000 - ~2.000) Dr.
(215) 1,600 10,000
Qatir' s Capital Ale To Bad Debts Ne
(215) 1,600 (Part of bad debts met from provision for doubtful
Ram's Capilal Ale debts and balance debited to Revaluation Ne)
Dr. 1,500
(115) 800 -4,000 April I I Revaluation Ne 1,500
14,320 14,320 To Provision for Doubtful Debts N e
(Provision created @5% on remaining debtors of
Ir rr - "'l:f\ l"\fl (\\
- ---- ---- ---- ---- ---- -~0 I)t
·, .ou - - - - .. ' 1~1 ~
1

l J ,t Mun h In~ Interest 011

t 16,900 ~,~ 8% p.a.

ILLUS----
---- ----50.
TRATION
x. yand z were in partner.;hip shanng profits in thl! ratio of 3 : 2 : I. On Ist I\ .
2015 the Balance Sheet of the tinn stood :is follows : Pril,
f Assets t
l.1.ab1lthrs
Provision for Doubtful Debts I.JOO Cash nt Bank 10,000
I

Sundr) Credi tors 15.000 Debtors 16,000

Capiul s : Stock 20,300
X 78.750 Machinery 60,oo0
r 70.000 L.'.lnd and Building 1.20.000
z 61 .250 2.10.000
I 226 -Joo
:!.26,JOO
- - - - - - - ---~ ===== - - - - - - - - - - - - 1_ : ~
z retires on the above date and the new profit sharing ratio between X and y will
-
be 5 : 4. Following terms were agreed :
( I) Land and Buildings be reduced by I 0%.
(2) Out of the insurance premium paid during the year f 5,000 be carried forward
as unexpired.
(3) There is no need of any provision for doubtfu l debts.
(4) Goodwill of the finn be valued at t54,000.
(5) X and Y decided that their capitals will be adjusted in their new profit sharing
ratio, by bringi ng in or paying cash to the partners. l's ale wi ll be transferred
to his loan ale.
(a) Pass necessary journal entries; prepare the capital accounts and the new
balance sheet.
(b) Z is pajd t 9,300 on the date of retirement and the remainfog amount in
three equaJ instalments together with interest at the rate of I0% p.a. on the
outstanding balance . Show Z' s loan ale for 3 years.
-. ----
-.SOLU --~
TION : (a ) JOURN AL ENTRI ES
Da1e Pan,culars L.F. Dr (~) Cr. (f LJ
2015 Prepaid Insurance Ne Dr. 5,000 T
April I Provision for Doubtful debts N e Dr. 1,300 1
To Revaluation Ne I
6.100
(Increase in the value of assets)
Revaluation Ne Dr. I2,000
12,000
To Land and Buildings Ne
~ D:_crease in the value of assets)
 RE"l~REMENT OR DEA TH OF A p,. b
.62
-- -- -- - - - -- - - - - ,,,, l'
.X
}'
75,000
60.000
Stock
I.35,000 Prepaid Insurance
Machinery
I/ ~!:~
20,3,11
5.r,rJfJ

Land and Buildings ~o.o,JfJ

1
I ~.O(JO
2, I0,000 2
_, ::::::.•1.....O~ OoIJ

~\ or kin~ i\ otC'~ :
o
I) Calc ulation of Gaining Rati o = New Ratio - Old Rati
5 3 =
Gain lo X = - - -
9 6 18
2
Gain lo Y = -4 - -2 - -18
9 6
I 2
Hence, Gaining Ratio = :
18 18 = I :2

f 2) Adjustment of Capitals of . rand r according to new profit sharing ratio

+ f62 , I oo
= Total Capital of ✓Y and Yafter aJI the adjustments = f72 ,900
= f 1,35,000
Th.is Capital should be in their profit sharing ratio, i.e.. 5
:4
~

Therefore. the Capital of X in the new finn shouJd be ~ th of 1,35,000 - 75,000

But the existjng Capital of Xis

= 72,900
Hence, X v..i ll bring in - 2, I00
- 60,000
The Capital of r in the new firm should be : th of I,35,000
- 62, I00
But the existing Capital of Y is
Hence. Y will withdraw
= 2, I 00

(/JJ Sc itlrn u nt of Loan :\ccoun l :

Cr.
Dr. Z's LOAN ACCOUNT
Im:-: Dare Particulars ~]
 ·Tl REM ENT OR DEATH OF A PARTNER
K~ - - - - - - - - - - - - --- -
soCtfr7°,r.
""'""JJ I l) m · 1_0 <,1 rcJh ari:
c;,rJh ari's Capita l

Share of Goodwi ll : I, 14,000 x 2..

15
·
Share of RevaJuation Profit : 6,000 x 2..
15
Share of GeneraJ Reserve : 30,000 x 2..
15

Dr. GIRDIIARl' S LOAN AJC

Particulars 1
Dale
20 14
' 2014
Datt Parllculan

March 31 To Balance c/d 1,50,00 March 31 By Girdhari's Capital

0
Ale
1,50,000
-===
~() I .., 2014
M:irch 11 To Bank 75,000 April I By Balance bid
Mnrch J I f'o Balance c/d 90,000 20 15
March JI By Interest on
1,50.000 @ I0%
1,65,000

2016 2015
Morch J I To Banlc 75,000 April I By Balance bid
March JI To Balance c/d 24,000 201 6
March J I By lnlercsl on 90,000
@ 10%
99,000
a=

20 17 201 6
March J I To Bank 26,400 April I By Balance bid
20 17
March J I By lnlercsl on 24.000
@ 10%
26,400

-- --- ---
ILLU STRA TION 53.
X, Y and Z were partners in a finn sharing profits as in the ratio of 5
31-3-2015 their Balance Sheet was as follows :
H:il:tn rc Sheet of .\'. I a nd Z m :it J ht March . 2015
l.,ah/11/ies
' ~ J
Creditors 21,000 Land and Buililing
 RETIREMENT OR DEATI I o r A pl\R.'r
; ,1,6

I0,000 Motor Vans

--20-~"' RETIR EMEN'J~OR~~A! I~ ~ r-_A~'~RTNER _
56
l.m esunent Fluctuation Fund
l'rofit & Loss Account 40,000 lnvesLmcnls
Machinery
lg ro Bolnncc c/d 68,400 I -,
;,2~0- - ~~~wi~)- - - - - - - - - - - -
Capitals 1 5,100 1
\' S0.000 Stock By Z' s Capital
l5i
)' 40,000 Debtors
I, I0,000 l ess : Provision
40,000 I Ale
z 20,000 ~ (Goodwill) 10,200 1
Cash 75,000 70,JOO 3Q,OOO
75,000 70,300 30,00(
1.81.000 To X's Current By Balance bid 68,400 19,20(
On the above date. I' retired and .\' and Z agreed to continue the business on the
Ne (Bal.
figure) 15,840
By Z's Cum:nt I I
Ale 15,84(
I
following 1em1s :
I. Goodwill of Lhe fim1 was valued at f S1,000.
To Bal. c/d(2) 52,560 I
68,400
35,040 (Bal. figure) I
35,040 68,400 35,04(
2. TI1ere was a claim of ?4.000 for Workmen' s Compensation.
BALANCE SHEET OF X AND z
3. Provision for bad debts was to be red uced by f 1.000. as at 3 I st March, 20 I 5

4. Y will be paid ?8,200 in cash and Lhe balance will be transferred in his liabilities t Assets
account which wi ll be paid in four equal yearly insta lments together ~
interest @I 0% p.a. With
1
Creditors
Claim for Workmen's
21,000 Land & Building
4,000 Motor Vans
'
62,00(
20,00(
Compensation
5. ~ e new pro~t sharing ratio ~twee~ X and Z will be 3 : 2 a nd their capitals
ibvill be ,_n their new profit shanng rat 10 . The capital adjustments will be done
r sLoan 61,200 Investments 19,001
Partners' Capitals : Machinery 12,001
y opening current accounts.
X 52,560 Stock 15,001
Prepare ~evaluation Account, Partners' Capita l Accounts and the BaJance Sheet z 35,040 87,600 Debtors 40,000
~~~ : c~o~~uted firm. (C B.SE. 2016, Delhi) X's Current Ale 15,840 l ess : Provision 2,000 38,oo,
SOLUTION : Cash (' 16,000 - , s.200) 7,80
Dr Z' s Current Ale 15,84
REVALUATION ACCOUNT
1,89,64
Particulars f Particulars
To Claim for Workmen's
Compensation Ale By Provision for bad debts Ne
4,000 By Loss transferred to : I 11 Calculation of Gaining Ratio of X and Z :
X's Capital Ne 1,500 X's Gain = l - 2- = 6 - 5 = ...!... . 2 2 4- 2 2
Z's Gain = 5 - To =10 = to
5 10 10 10
Y' s Capital Ne 900 Gaining Ratio ofX and Z = I : 2
l's Capital Ne 600 \il j11, 1111ent nf( ;oo1hvill:
4.ooo'
-=- Y' s share of Goodwill on I 5,300 i.e., ( t 51,000 x 3/10) adjusted between X and Zin the
Dr
PARTNER'S CAPITAL ACCOUNTS gaining ratio of I : 2, i.e., X : , 5, I 00 and Z : f I 0.200.
Punicu/ar~· Cr.
X y L 121 Total Capital of the firm after Y's retirement (f68,400 + "9.200) = ,s7.600
Particulars X y
i ~ ~ X's adjusted capital = f87,600 x ¾= '52,560
To Revaluarion ~ ~
Ale (Loss) 1,500 900
Oy Balan1.:c bid I 50,000 40,000
To r5 Cafiilal 6001 Oy Investment z·s adjusted capital = f87,600 x ¾= f35.040
Mc1 I 5,100 Pluc1uation
loC.i.,hAJc 10,200 Fund 5,000 3,000
hiusriiAr1o'tts7.
1,, r , 1,<,,;)J1 8,200
Dy Profi1 & Naresh, David and Aslam are partners sharing profits in the ratio of 5 : 3 : 7. C
Ne Loss N e April Ist, 2012, Naresh gave a notice to retire from the finn._David and Aslam d~cid,
61,200 20,0001 12,000
Uy x•~Cupital to share future profits in the ratio of2: 3. The adjusted capital accounts of David at

r~ ~)111. ~ 1 /~
,.10
El's (;apttal Ale
-1---
f(I•. t_lK.- l', /Yll~J'i
-- - -
I ~ 1\ L l t:. f'\ J l
--·-:-'~l~l~J\.R~ ...
7,92o r - .:- ~
T,
I
TIREMENT OR DEATH OF A PARTNER
5.7
1~ifus---
--- -- --- - - - --
WN--56.- - - --- - ---- - ---
To Ounk Ale I 7,9. ---
, ('l he amount due to 8 paid ofl) rRAT
:
The Balance Sheet of X. Y and Z who were sharing profits in the ratio of 5 : 3
r) r CAPITAL ACCOUNTS as at March 3 I, 2018 :
Partlq1,lars A B C Part/<;11/ars A .
B ~I Cr, Liab1.
'lities ! t Assets t
f t ~ f t r- itors 50,000 Cash at Bank
I
40,00(
~
To 1<ev11 luatlon 4k0 480 4801By Balance b/d 8,000 6,000' ' 10,000 Sundry Debtors 1,00,00(
Employee 's Provident Fund
To /I' ll
Capi ta l /\/c 1,225
By Gen. Reserve
175 By A's
1,000 1,0001 ~:~ Profit & Loss Ne 85,000 Stock 80,00(
60.00(
Capital Ncs : Fixed Assets
11)1)
fo nalnncc c/d 7,295 7,920 4,3451 Capital Ale
.,
40,vvv
1,225 y
By C's 62,000
Capital Ne
z 33,000 I,35,000
175
CJ,000 R,400 S,(JOO -=---- ~ 2,80,001
9,000 MOO 5,00o
·1o Bunk = ==i in future in tl
7.920 - By Balance b/d 7,295 7,920 4,345
X retired on March 31 , 2018 and Y and Z decided to share profits
To Bali"'cc c/d 8,790 5,274 By Bank 1,495
ratio of 2 : 3 respectively.
929
1$,790 7,920 5,274
D9o The other terms on retirement were as follows :
-- ~ 5)74
,:,-
=:. (i) Goodwill of the firm is to be valued at t80,000.
(ii) Fixed Assets are to be reduced to t57,500.
11/\LA NCP. SII EET OF TH E NEW FIRM .
11.1· at 3 !st March, 20 I ~ (iii) Make a provision for doubtful debts at 5% on debtors
(iv) A liability for claim, included in creditors for n
Uahillliu.v 0,000, is settled and paid :
f
(;rtlditors
7,0% Cash at Bank
Assets
t7 t 8,000 .
their Capitals a1
0 1Ht landln1i Rent
260 Debtors
1,000 The amount to be paid to X by Y and Z in such a way that
f'111;ital~ : 9,000 e oft 15,000 in the Bar
le.f,1• : Provision proporti onate to their profit sharing ratio and leave a balanc
II k,790 450 8,550 Accou nt.
(' Stock
52:Jj 10,070 Capital Accounts.
14,0f,4 Purniture
1,800 Prepare Profit and Loss Adjustment Account and Partners '
2 1,420
21,420 solurroff-
Dr.
: ~ PROF IT AND LOSS ADJUSTMENT ACCOUNT C
T1 ,t11l Cupi tal nf ll1e new fi rm after IJ' n reti rement ~hould be
llrnount requ ired to r,uy ofT /J f Particulars t Particular,r r
ildtl . fix,sti ng Copitu l of II 7,920 To Fi xed Assets Ale 2,sool By Creditors Ale 2,00
ilrld · 1'. xi/lt ir,g ( :aplt11 I <•f' ( ' 7,295
To Provisio n for Doubtful By Loss tra~sferred to :
4,3 45
11,ld . ( :or.h required us worki ng capital
1,000
Debt s Ale I
5,000 1 X's Capital Ne 2,750
/ ,1',Y,1• · ( 'nsh at ll1t11k /cx iqli 11g i11 l:l11 l1mcc Sl,cc t/ To~s6o I
Y's Capital Ale 1.6s o I
lhc litW lir111 Z's Capital A/e I, 100 , 5,50
I r,1111( '11r,1,i1 ( 11' 6,496
I 7,50
A and ( · : 14.064 7~ 00/ I
I hl Ar 'upilnl ~hr,u lrl ht• it1 the lit:W pro Iii shuri11g rntio of 1
llr. PARTNE R' S CAPI TAL ACCOUNTS
'I lwrtJ f<,1 1•. /l 'q new C-111,it11I qf11,11ld he 14 OM
,
Y :, -
H
8 790
• Particulars - X
r
}' z Particulars
,- X V L
r "q iww ( apilul ~hou ld he ~ t t I ~ f ~
- 14,or,4
llrtt1J1t11l lo 1,t:' h11,uµht 111 liy II And ( ·
\2 74 ·i O l'rofit & Loss' Bv Bal. b/<l j 40.000 62,0()0 33. 0(
I n1,lt11 I 11>q11ln ti i11 lhe new li111,
I n .t Pxi qflru! ( ·uplt ;,I H.7110
l\ dj u.~Ln1cn1 /\/I 2.75<1 l.65Q 1, Iod s;, Pro ti t & Los~
Ne ! 42,50(.j 2~ .50Q l 7.i1(
:i ,274 lu X q Capita l
7,2 9 ~ 4, 14 _<; Ale (Goodwii l)j .
8.00~
32:000 By r s Capital l
l .44 ~ l I
1~9~ Ale (Goo<lwilll 1 8.00(1
Q2l/ o Ba l. c/<l I 1.19,75 ~ 77,85
 RET IKl:.M r,1~ i V l\. uc..n l n ~ r A p
I\Il
- ~ ....
5J l 5.73
{::_:__- / B: ; ; ~ pita! /
I TNER
- - - - -/ ~ RETIREMENT OR DEATH OF A PAR
C~ ital ~~r~11 adj ~s~ ;si ;t4,5
Ale (Goodwill) 32,000 0~0O0- ~d if
- - Fo; :X~ ple , if retiring partn~r~ his share of
1,22 ,500 the excess paid, i.e., t50, 000 will be
1.22,soo · s1.sool so,ooo he is agreed to be paid f 5,00,000;
debiting continuing partner's Capital
ac~ounts . in
/By Bal. bid 1,1 9,750 goodwill. ~his will ~ ~ecord~~ by amed With
I l,19,7501 = = ner's capital account. It can be expl
ToB ank. Nc
By Bank Ale gaining rat10 and creditmg retmng part
:
the help of the following illustration
(Note)
To Bal. c:/d f 79,00011,18,SOO ILLii sii Xifoft sz his
in the ratio of 1 : 2 : 3. C retires and
l ,19,750{ 79,000 :1,18,500 ,18:.
w/1,:.,,;
I ,.,,v::=== A, B and Car e partners sharing profits
= I I l,19,750 === for reserves and profit on revaluat
ion stands at
I I capital, after making adjustments Record
\\ 011..1111,? ~otr , : ,000 in full settlement of his claim.
: . t 1,20,000. A and B agreed to pay him t 1,50 ing ratio is
(I) Calculation of Gaining Ratio nt of goodwill if the new profit shar
necessary journal entry for the treatme
Gaining Ratio = New Ratio - Old Ratio
2 3 4-3 I decided at l : 3.
r = :s-w = JO = To
so£urioN:
3 2 6- 2 4 t
z = :s-w = JO = JO
Amount agreed to be paid in full settl
ement 1,50,000
Gaining Ratio = 1 : 4 1,20,000
Less : Cs Capital (after all adjustments)
30,000
{2) Adjustment for Goodwill : Hidden Goodwill
00, which is to be contributed by Y
and z JOURNAL
X's share in Goodwill= 80,000 x 1~ = 40,0 L.F Dr. (f) Cr. (f) l
in their gaining ratio of I : 4 as under :
Y =
1
40,000 XS = ~ 8,000
Date
A's Capital Ne
Particula rs
Dr.
Dr.
I I .5,000
25,000
1
B 's Capital Ale 30,000
z 4 To C's Capital Ale
40,000 XS = ~32,000
(C's share of goodwill adjusted to the capit
al accounts
(.l) Calculation of Proportionate Capital : of A and B in their gaining ratio I : 5)
ment should be :
Total Capital of the new firm after X's retire t
Amount required to pay off X Calc ulation of Gaining Ratio :
unt 1,19,750 3 - 2 I
Add : Existing Balance in Y's Capital
Acco I
Add : Existing Balance in Z's Capital
Account 77,850 A Gains 4 6 = 12 = ii
16,900
Add : Required Cash Balance 3 2 9 - 4 5
15,000 -
- = - - = 12
2,29,500 B Gains 4 6 12
l ess : Cash at Bank (~40,000 - ~8,000) 32,000
Total Capital of the new firm l ,97,5 00 Dea th of a Partner
ng ratio of Y and Z:
This capital should be in the new profit shari payable to him is to be paid to his
legal
x j On the death of a partner, the amount
Therefore, Y's new capital should be : 1,97,500 79,000 representatives.
Z's new capital should be : 1,97,500
x f 1,18,500 l aku latio n of the tor.al amo unt
due to the representatives of the
dcc<'aSt'd
fl:lrlncr: in the
y z the books of the firm are maintained
On the death of a partner, accounts in es of the
t f a partner. Thus the legal representativ
Capital required in the new firm same way as on the retirement of ited to his
79,000 1,18,500 the following amounts, which are cred
less : Existing Balance in Capital Acco
unt
16,900 deceased partner are entitled to claim
Amount to be brought in 77,850
1,150, by
l,0I,600 capital account : of his Capital Ale.
ltiddo, ( ••>od• Ill : 1. The amount standing to the credit
e of Goodwill of the firm.
, in
retiring or deceased part ner s acc oi:.1 2. His share of the increase in the valu
Sometimes the ftnn agrees to settle the s the partnership deed.
amourit is in excess of his capital and 3. Interest on Capital, if provided in
payment of a lump sum amount. If such
be treat,d as his share of goodwill.
ceserves / revaluation etc. the excess wil)
 RETIREMENT OR DEATH or A PA_
5.74 - - - .....
RETJKEM ~1:'l ·t~ O! _f?~A_T'=!. C2P_A_!'~R.:!'~~~ _ _ _____ __s.75
4. His share of profit on the revaluation of assets and liabilitie s.
5. His share of the undistributed profits or reserves. saiu110N:
Total Profit = f 14,000 + 18,000 + 16,000 - I 0,000 + 16,000 == 54,000
6. His share of profit upto the date of his dea th . Average Profit = f54,000 + 5 = fl0,800
The following amounLS will be debited to the account of the deceased 3
, 3 Month 's Profit i.e. from I st April 2018 to 30th June 2018 = I 0,800 x
ascertaining the amount due to his legal representatives : 12
partner r,.
= U,700
I . Drawings
2. Interest on drnwings .!. rd share of A upto the date of death = 2,700 x .!. = f900
3 3
3. His share of loss on the revaluation of assets and liabilities. ( ,, (i) When there is no change in the profit sharing ratio of Band C:
4. His share of undistributed loss, such as debit balance of Profit and Loss
JOURNAL ENTRY
Account. Particulars L.F. Dr. (f} Cr. (f)
5. His share of the reduction in the value of goodwill. Date
All of the above mentioned adjustments are first made in the deceased partner' 2018 900
Dr.
June 30 Profit and Loss Suspense Ale
capital account and then the balance of his capital account is transferred to
hi: To A's Capital Ale
900
executor's account. (A's :_hare of profit till ~e date of his death) _ _ ~
The legal representative of a deceased partner is entitled, at his discretion, to When there is change in the profit sharing ratio of Band C and their new
interest at 6% p.a. on the amount due from the date of death to the date of payment or
c.,~c (ii)
to that portion of profit which is earned by the firm with the amount due to ratio is 3 : 2.
the Gaining Ratio == New Ratio - Old Ratio
deceased partner.
Calc ulation of Profit :- If the death of a partner occurs on any day during the 3 I 9- 5 4
year, the executors of the deceased partner will also be entitled
BGains =5- 3=15= 15
to the share of profits
earned by the firm from the beginrung of the year till the date of his death. Such 2 I 6- 5
profit CGains =5-3= 15=15
may be ascertained from any of the following methods :
(A) On Time Basis. Hence, Gaining Ratio of B and C == 4 : 1
(8) On Turnover or Sales Basis. JOURNAL ENTRY
(A) On Time Basis : - ln this method, we have to take into consideration Particulars LF. Dr. ~,nouni ~ ounI
the Date
profit of the last year and the time for which he remained a partner t t
during the current 2018
year. On the basis of last year's profit we shall calculate the proportionate profit 720
upto June 30
4
B's Capital Ale (900 x )
the date of death and then calculate the deceased partner's share : 5
!80
C's Capital Ale (900 x ¼) 900
ILLUST RATION 58. To A's Capital Ale
(B's share of profit debited to remaining
A, Band Care partners in a firm whose books are closed on March 31st each year. partners in their gaining ratio of 4 : I)
A died on 30th June 20 I 8 and according to the agreement the share of profits
of a
deceased partner up lo the date of the death is to be calculate d on the basis of tbe
average profits for the last five years. The net profits for the last 5 years have been
20 14 tl4,000; 2015 <18,000; 2016 <16,000; 2017 <10,000 (loss) and 2018 tl 6,00~
: ----- -------
ILLUST RATION 59.
A, B and C were partners in a firm sharing profits in 3 : 2 : I ratio. The firm closes
Calculate A's share of the profits upto the date of death and pass necessary journ its books on 31st March every year. B died on 12-6-2017 . On B's death the goodwill
entry assuming :
of the firm was valued at ~60,000. On B's death his share in the profits of the finn till
(a) there is no change in the profit sharing ratio of remaining partners; the time of his death was to be calculated on the basis of previous year's profit which
(b) th ~re is change in the profit sharing ratio of remaining partners, new
~
was 1,50,000. Calculate B's share in the profit of the firm. Pass necessary journal
ratio entries for the treatment of goodwi II and B's share of profit at the time of his death.
bemg 3 : 2.
 ,'
5.77
SOLUTION:
Working Notes :
- .. - - --~ - - - ·- - -- -·· -- - - - -- - - - - - - - - -- - - - -- ·- -
RETIREM ENT OR DEATH OP A PARTN F.R
-- -· ,.._
II
30
(ii) Profit upto the date of death 1,20,000 IOO "' ?36,000
(,) B's share of Goodwill = ~60,000 x ¾= ~20,000. It will be
debited to th
0
X
. . . . . e CapillJ
accounts of A and Cm theJT gammg rat10, i.e. 3 : I. (iii) Sara' s share of profit "' 36,000 X ½"" t 14,400 I
(ii) Number of days from March 31 to June 12 == 73 .
73 2
B's share of Profit = 1,50,000 x -365 x -6
JOURNAL

= i IO 000
'
Date
2017
I
June 30 Pro fit & Loss Suspense N e

JOURNAL
Dr 14,400

,j
~
Cl
I
To Sara's Capital Ale 14,400 _J
--
Bate
2017
Particulars l.F. (Sara's share of profit upto the date of'dealh )
J
j
;, I
June 12
-::.
(i) / A's Capital Ale
Dr. 15,000 ILLU STRA TION 61. ....
C's Capital Ale and losses in the
~
Dr. 5,000 Danish , Ana and Pranjal are partners in a finn sharing profits
To B's Capital Ale year.
ratio of 5 : 3 : 2. Their books are closed on March 31 st every
(B's share of goodwill adjusted into the Capital Ales of
I
are entitled to :
A and C in their gaining ratio, i.e. , 3 : 1) Danish died on September 30th, 2019. The executors of Danish
(i) His share of Capital i.e., t5 ,00,000 along-with his share
of goodwill. The total
(i,) Profit and Loss Suspense Ale Dr.
To B's Capital Ale 10,000 goodwill of the firm was valued at ~60,000.
(ii) His share of profit up to his date of death on the basis
of sales till date of death.
I (B' s share of profit up to June 12, 2017) and profit for the
Sales for the year ended March 31 , 2019 was t2,00,000
of 20% and
(B) On Turno ,·cr or Sales Basis : - In this metho
d, we have to take into same year was I 0% on sales. Sales shows a growth trend
after, the profit of the percentage of profit earning is reduced by I%.
consideration the profit and the total sales of the last year. There
and the sales upto the (iii) Amount payable to Danish was transferred to hi s
executors.
curren
date year is estimated on the basis of the sales for the last year
oft death.
.
Pass necessary Journa l Entries and show the workings clearly
-----------
ILLU STRA TION 60.
(C B.SE. Sample Paper, 2020)
and losses in the ratio
Sara, Sita and Meena were Partners in a firm sharing profits SOLU TION : JO URN AL
closes its books on l I•
of 2 , 2, I. Sara dies on 30th June, 20 I7, whereas the finn f Date Particulars L.F. Dr. (f) Cr. (f)
's representatives would
Man:h every year. According to their Partnership Deed Sara
on sales basis. Sales 2019
be entitled to get share in the interim profits of the finn calculated Sept. 30 I Ana's Capital Ale Dr. 18,000 I
tively and sales in
and profit for the year 20 I6-17 were f 6,00,000 & f J, 80,000 respec
000. Pranjal 's Capital Ale Dr. 12,000
the year 20 I7- I8, ti II the date of her death amounted to f 1,20, To Danish 's Capital Ale
30,000
You are required to :
(Danish' s share of goodwill adjusted in Capital I
(i) Calculate Sara 's share of interim profit. Accounts of Ana and Pranjal)
Dr. 5,400
of interim profit. Profi t and Loss Suspense Ale
Ur) Pass the necessary journal entry for giving Sara her share To Danish',s Capital Ale
5,400
soiurioN-_. (!SC Specimen Quest ion Paper, 20I B) (Danish's Share of Pro fit up to elate of his death
account)
I
transfe rred to his capital
-- --- - --
Dr. 5,3S,400 I
(i) Ratio of Profit to Sales
Danish 's Capital Ne
To Danish's Executor' s N e
I 5,35,400
== Profit (Last Year) x JOO
(Amount due to Danish transfe rred 10 his
Sales (Last Year)
executo r's account)
== 1,80,000 X 100 = 30%
6,00,000
Iii.,,
 The Balance Sheet of Sudha, Rahim and Kartik who were sharing profit .

I ratio of 3 : 3 : 4 as at 3 Jst March, 20 I 2 was as follows :

Liabilities
--
Amount
f
Assets
lI1 the

A,;;;;;;;;;.
..
General Reserve
t
10,000 Cash
Bills Payable 5,000 Stock
16,ooo
Loan 12,000 fnvestments
44,ooo
Capitals :
47,ooo
Sud.ha 60,000 Land & Building
60,000
Rah im 50,000 Sudha' s Joan
I 0,000
Kartik 40,000 1,50,000
I, 77,000 I, 77,000

Sudha died on June 30th 2012. The partnership deed provided for the following on
the death of a partner :
(a) Goodwill of the firm be valued at two years purchase of average profits for the
last three years.
(b) Sudha's share of profit or loss till the date of her death was to be calculated on
the basis of sales. Sales for the year ended 31 st March, 2012 amounted to
f 4,00,000 and that from 1st April to 30th June 2012 to f 1,50,000. The profit
for the year ended 31st March, 2012 was f 1,00,000.
( c) Interest on capital was to be provided @ 6% p.a.
(d) The average profits of the last three years were f 42,000.
Prepare Sudha 's Capital Account to be rendered to her executor. (C.B.S. E. 2013)

SOLUTION :
Dr. SUDHA 'S CAPITAL ACCOUNT Cr.
Particulars f' Particulars _ f __J
-~~~-

To Sudba's Loan Ale l 0,000 By Balance b/d - ~ - - -- , 60,000

To Sudha's Executor's Ale 90,350 By General Reserve 3,000
By Rahim ' s Capital Ale
(Share of Goodwill)
( ~25,200 X 3/7) I 0,800
By Kartik 's Capital Ale
 RE~ ~ ~- O_! P~A_TH OF A PARTNER
--
Dr.
-- - -- - - - - --- -- - ------------s.:
A's CAPITAL ACCOUNT (
Ptrtiallan f
To Advertisement Suspense Ale
By Balance b/d 30,00
5
( J2,000 X l2 ) 5,000 By Reserves (6,000 x ~ ) 2.50
1
To A ' s Executor 's ~vc
51,500 By B's Capital N e (Goodwill)

(18,750 X ¾) 11,.251

By Cs Capital N e (GoodwiJI)
2
5) I
(18,75o x 7,501

IBy B's Capi~ J Ne (Share o f Profit) I

(3,750 XS) ~ 5l
By Cs Capital Ne (Share o f Profit)
2
(J, 750 X S ) 1.501
By Interest on Capital

Dr.
56,500
L
~----=-----
A 's EXECUTOR'S ACCOUN T
00 x l~OO x I~)

______.____
1.501

56.501

Plll'lkldan f PartltNJ11n
To Bank Ale
'Jc, 11•s Executor'$ Loon N e
25,750 By A's Capi tal Ne '
51.50

- Transfer 25,750
~-~ _j 51.500 SI.SO

'wrl. : It has bee11 as:sumed tJ1nt due to shortage of cash, bunk overdraft of the requi:n
amount tus bc:en tak.en ro mnkt' payment 10 A's Exc:c uror' s.

ILLUSTRATION 64.
Sita, Recto ond Gcct.n arc partners in a finn sharing profits and losses in the rai
of •l ; J : I. A.-. J)(!r the fcrms of Partnership deed on the death of any partner. Good\, 1
of dc:,c:.L'k!d Purtncr \V'J.'i lo be valued at 50% of the net profits credited to that Partnet
Capic:tl Ale: <luring lhc la.-;t tJm.!c completed years before her death. Books are dosed ,
3 Ist December each year. Sita died on 29th February 20 16. The profits for the l3Sl fi,
ycm were :
201 1 f 60.000. 20 12 -- f9 7,000, 201 3 - , 1.05,000, 2014 - t' 3QOOO ~
20 l 5 - ~84,000
On the date of Sita 's death, Building was found under ,•aJued h) f ro.000,. \,tu.
1Ata., to be con.,idered. Calculate the amount ofSitn 's share ofGlxxt\\1lt ml~ llnn tt
record the adj ustmenr Journal Entries of Goodwill and revah.1anon tlf t\uitrung I
Ik~ prr,fit sharing ratio between Ret!l:.t and Ge.et.a will be c.~urli
 RE~ ~ ~- O_! P~A_TH OF A PARTNER
--
Dr.
-- - -- - - - - --- -- - ------------s.:
A's CAPITAL ACCOUNT (
Ptrtiallan f
To Advertisement Suspense Ale
By Balance b/d 30,00
5
( J2,000 X l2 ) 5,000 By Reserves (6,000 x ~ ) 2.50
1
To A ' s Executor 's ~vc
51,500 By B's Capital N e (Goodwill)

(18,750 X ¾) 11,.251

By Cs Capital N e (GoodwiJI)
2
5) I
(18,75o x 7,501

IBy B's Capi~ J Ne (Share o f Profit) I

(3,750 XS) ~ 5l
By Cs Capital Ne (Share o f Profit)
2
(J, 750 X S ) 1.501
By Interest on Capital

Dr.
56,500
L
~----=-----
A 's EXECUTOR'S ACCOUN T
00 x l~OO x I~)

______.____
1.501

56.501

Plll'lkldan f PartltNJ11n
To Bank Ale
'Jc, 11•s Executor'$ Loon N e
25,750 By A's Capi tal Ne '
51.50

- Transfer 25,750
~-~ _j 51.500 SI.SO

'wrl. : It has bee11 as:sumed tJ1nt due to shortage of cash, bunk overdraft of the requi:n
amount tus bc:en tak.en ro mnkt' payment 10 A's Exc:c uror' s.

ILLUSTRATION 64.
Sita, Recto ond Gcct.n arc partners in a finn sharing profits and losses in the rai
of •l ; J : I. A.-. J)(!r the fcrms of Partnership deed on the death of any partner. Good\, 1
of dc:,c:.L'k!d Purtncr \V'J.'i lo be valued at 50% of the net profits credited to that Partnet
Capic:tl Ale: <luring lhc la.-;t tJm.!c completed years before her death. Books are dosed ,
3 Ist December each year. Sita died on 29th February 20 16. The profits for the l3Sl fi,
ycm were :
201 1 f 60.000. 20 12 -- f9 7,000, 201 3 - , 1.05,000, 2014 - t' 3QOOO ~
20 l 5 - ~84,000
On the date of Sita 's death, Building was found under ,•aJued h) f ro.000,. \,tu.
1Ata., to be con.,idered. Calculate the amount ofSitn 's share ofGlxxt\\1lt ml~ llnn tt
record the adj ustmenr Journal Entries of Goodwill and revah.1anon tlf t\uitrung I
Ik~ prr,fit sharing ratio between Ret!l:.t and Ge.et.a will be c.~urli
 201 6
..=;;...._;;==:__---------------r~-, ~ • . \' I
2020 t
Feb. 29 , Building N e June IS Furniture Ne Dr. 6,000
Dr. 80,000
To Revaluation N e Investments Ne Dr. 70,000

(Increase in the value of Building) I To Revaluation Ne 76,0u

I (Increase in the valu.:_ o~assetsj
Reval uation N e Dr. 80,000 i----

To Sita's Capital Ne , Revaluation Ne Dr. ' 35,000

To Patents A/c 20,00
To Reeta's Capital Ne
To Plant Ne 15,00
To Geeta's Capital Ne
(Decrease in the value o~as~~ts)
(Transfer of profit on revaluation to partners capital
accounts in their old profit sharing ratio ) W;kmen Compensation Reserve Ne Dr. 1,00,000
- - ---- Revaluation Ale Dr. 20.000
Reeta's Capital N e
Dr. 13,688 To Claim for Workmen Compensation Ale 1,20.001
Geeta's Capital Ne
Dr. 41,062 i (Provision made for wor~en claim)
To Sita's Capital Ne
54,750 ~Revaluation Ale Dr. 21 ,000
(Sita 's share of goodwill adjusted in the capital
accounts of gaining partners in their gaining ratio To P's Capital Ale I0.50(
of 1 : 3) To Q' s Capital Ale 7,00(
--- To R's Capital Ne 3,500
ILLUSTRATW}t6S: I

(Gain on revaluation dis~ buted)

P, Q and R were Partners in a firm sharing profits in 3 : 2 : I. Following was their
Balance
r Sheet as at 31 st March, 2020 ..
P' s Capital Ale
Q's Capital Ale
Dr.
Dr.
l 15,000
10,000

Creditors
liahilitie3
' -~---------- An etJ
R's Capital Ale
To Advertisement Expenditure Ale
Dr. I 5,000
30,00C
76,000 Cash at Bank I J\d w ni ~ement expenditure written of1)
 I I ~N
-- -- --- --- ---
--- - ---
Dr.
Profit & Loss Ale A PA . .
MENT OR DEATH OF
To P's Capital Ale -1< ETIIW- -- - ---- - _ __R_! ~ER S.85
To Q's Capital Ale Worldn1i Noles :
To H's Capita/ Ale ., 110
(i) Cakula lion of (i;iining "a .
:

(Profit distributed) D
Dr. 3, 125 E F p
Profit & Loss Suspense Ale
4
To R's Capital Ale 3,1 New Ratio 6 s
15
(Share of profit till rhc date of death) IS
-- -- IS

,
Dr. 66,625 5
I R's Capital Ale Old Ratio 4 3 2 J
15
To R's Executor's Ale 66,cs: 15 IS IS JS

(Capital Account transferred to R's New Ratio I , . 2

Executor's Ale) - Old Ratio 15 (Sacrifi ce) is (Gain) is2 (Gain) ~ (Sacrifice) 1~ (Sacrifice)
1

Working Notes :
(1) Actual value of Furniture : 54,000 x ~~O = i60,000 -----------
ILLU STRA TION 67.
O, B 311 O and transfer to
A and B are ~artners sharing profits in the ratio of A 511
(it) Actual value of Plant: 90,000 x /gg = n5,000 fi JI
reserve 2/ l 0. Their balance sheet as at 31st March, 2020 was as o ows .
•

Aue,s t'
Liabilities
x ~} x ¾= f3,125 10,800
(ii,) R's share of profit till the date of his death : 90,000 Sundry Creditors 16,000 Cash at Bank
9,600 Sundry Debtors 20,000
3,125 = f66,6 25 Workmen Compensation Reserve I
(iv) Total amount due to R = 50,000 + 3,500 - 5,000 + 15,000 + Capitals: Fixed Assets 1,00,000
Goodwill 15,000
80,000

TION--
------ A
---STRA
ILLU 66.
the ratio 5 : 4: 3: 2 : 1
B 40,200 1,20,200
1,45,800
D, _E, F, P and Z were partners in a finn_ sharing ~rofits in
car accid ent in which b th and reserves, B's legal
respectively. Unfortunately, P and Z met with a tragic 0~ B died on l st April, 2020. Besides his capital
~~ representatives are entitled to his share of goodwill, based
on the total profits of the last
three years, which were f 10,300; ~ 15,100 and ~ 13,600
and F decided to share .
The good_will of th_e finn was valued at ( 1,50,000 and D, E
_
future profits m the ratio of 4 : 6 : 5 respectively. Assets were revalued as follows:
a provision of 5% is to
Fixed Assets f 1,20,000; ~2,000 out of debtors are bad and
Give journal entry to record goodwill. s. Prepaid insurance is f490
be made for bad debts and 2% for discount on debtor
riter not recorded in the books
and outstanding salaries ~3,000. There is an old typew
JOURNAL valued at f4,000 .
S OLUTi ON: legal representatives.
L.F I Dr. (f) Prepare Revaluation Ale and B's Ale to be rendered to his
Date Particulars

E's Capital Ale ( 1~ off 1,50,000)

20,000 -------
SOLU TION :
Working Note: f39,000
20,000 Total Goodwill = fJ0,300 + fl5,IO0 + f!J ,600
Fs Capital Ale ( 1~ oHl ,50,000)
B's share of Goodwill = 39,000 x f = t 14,625
__ of r 1 50 000)
To D's Capital Ale(__!15 B's share of Goodwill will be adjusted to A's Capital Account. Cr.
' '
REVALUATION AIC
To P's Capital Ale ( 1~ oHl,5 0,000) Dr.
Particulars 20,000
ets
490
ToZ's Capital Ale ( 1~ off 1,50,000) To Debtors (Bad Debts) Prepaid Insurance
To Provision for Bad Debts
(Sacrificing partner's goodwill borne by gaining
partners E and F)
 F.TIREME~ l'_s:>~ ~~!I-.!_ ~'!i PARTNER 5.87
(iv) Provision for doubtful ~cbt~ ~ 1~ -be - d- - 5% of Debtors.
· ma eat
.
(v) Claim of workmen compensation was estimated at ?5,000.
. executors.
Prepare Robert's capital account to be prcscntcd to his
(C. B.S.E. 2014, Campti.}
-----------
~QLU110N:
J r. ROBERT'S CAPITA L ACCOUNT Cr.
,.....
Particulars J
To Robert's Executor' s Ale ' '
Partfc1lltn
3,42,000 I13y Balance b/d
f
, 3,00,000
By Ram 's Capital(! )
I (30,000 x 2/5) (Goodwill) 12,000
By Rahim's Capital
(30,000 x 3/5) (Goodwi ll) 18.000
Oy Work.men Compensation
Reserve (15,000 x l/6) 2,500
2 7,500
By Profit & Loss Suspense Nc< >
By Revaluation N c(J) (Profit) 2,000
3,42,000 I 3,42.000

Working Notes :

(1) Average Profit = 45,000 + 90,000 + 1,35,000 = ?90 000

3 '
Value of Firm's Goodwill = ?90,000 x 2 = ? 1,80,000
Robert's share of Goodwill = ? 1,80,000 x ¼= ?30,000
Which is contributed by Ram and Rahim in their gaining ratio i.e. 2 : 3.
(2) Robert's Share of Profit till the date of his death = t90 000 x
'
_i_ x .!.. =
12 6
n ' 500
(3)

Dr. REV ALUATIO"N\CCOUNT Cr.

Particulars t Particulars ~
- - -
To Stock
- - - -- - -- 8,000 ByLand 25,000
I
To Provision for DoubtfulDebts
(5% of 3,00,000) - I0,000 s,ooo I
ToProfiton Revaluation :
Ram 'sCapitalNc 4,000
Rahim 'sCapitaWc 6,000
Robert'sCapit aWc 2,000 12,000
25,000 25,000

-----------
ILLUSTRAT ION 69.
A, Band C were carrying on business with the following assets with effect from
Ist April, 2018 : Furniture t 18,000; Machine t72,000; Cash n 0,000; Debtors
t20,000. Their profit-sharing ratio was 5 : 3 : 2. Capital is also shared in the same ratio.
B died on 30th September, 2018. His son claimed his father's interest in the firm.
 5.88 _______ _- - - - - - - - - - - - - - -
- The following was the settlement :
RETlR~!~~ O_R J ~A_!H OF A PARTNER 5.
( ) Allow his capital to his credit on the date of death.
1 --- - - ----..---- ---------- ----------
( ) Give S% p.a. interest on his capital. months 63 By C's Capital (Goodwill)
2 To B's Executor's Ale-
(J) He had been drawing@ t600 per m?nth which h~ withdrew at the Balance transferred 49,437 .
of each month. He be allowed to retam these drawmgs as a Part ofhi~~
profit.
(4) Interest@6% p.a. be charged on his drawings.
~~ -moo
(S) Goodwill was evaluated twice the average of profits which were
iiiusriiirioii70.
Following is the Balance Sheet of Pushpa, Rashi and Seema who are sharin
Prepare B's Personal Account. t21, profitsin2: I :2asatMarch31,2018 :

-------
SOLUTION:
I. Balance Sheet of the firm will have to be prepared in order to asce . Creditors 38,000 Goodwill
· I 11
t I 11
Employee's Provident Fund 2,000 Land & Building
11
Capitals of the partners. rtain Profit & Loss Account 60,000 Stock
11
BALANCE SHEET Capitals : Debtors
11
Pushpa 1,20,000 Cash and Bank
Liabilities t Asse Rashi 80,000
Capital Ale (Balancing figure) 1,20,000 Cash Seema 1,00,000 3,00,000
11 II
5 Debtors 4,00,000
A 1,20,000 x JO = 60,000 Furniture
' . ~

Machine Pushpa died on June 12, 20 I8. According to partnership deed, the executors ar
B 1,20,000 X JO3 =36,000 entitled to :
2 (I) Her capital as per Balance Sheet;
C 1,20,000 x JO =24,000
(ii) Interest on capital @ 8% p.a. upto the date of death.
1,20,000 (iii) Her share of profit upto the date of death on the basis of average profits for th
past 3 years.
11. Goodwill 2) ,000 X 2 42,000 (iv) Her share of goodwill valued on the basis of two times the average profits c
B's share of Goodwill 42,000 X JO3 12,600 the past 3 years.
Profits for the past three years were t30,000; t70,000 and t80,000 respective!)
B's share of Goodwill will be adjusted into the capital accounts of A and C in the
Rashi and Seema acquired Pushpa's share in the ratio of l : 5.
gaining ratio of 5 : 2.
Prepare Pushpa's Ne to be rendered to her executor's. Also calculate the nei
Ill. Interest on B's Drawings: profit sharing ratios.
On ~600 for 6 months 3,600 Products
On ~600 fo r 5 months
On ~600 for 4 months
3,000 Products
2,400 Products soiuiioiT: C
On ~600 for 3 months 1,800 Products
On ~600 for 2 months 1,200 Products
On ~600 for I month 600 Products 2018
16,000 April I By Balance bid
12,600 Interest = 12 600 x
'
~
100
x J_ = W
12
June 12 To Goodwill (Written off) June 12 By Profit & Loss Ale
June 12 To Pushpa's June 12 By Interest on Capitaifll
Executor's Ale • rqmtal A/, (l)
Dr. B's CAPITAL A/C 1,82,720 June 12 By Rashi s ""t'' c
(Balance transferred) (Profit)
·c s By seema's Capital Ale
To Drawings 3,600 By Balance bid (Profit)
To Interest on drawi ngs 6% on By Int. on Capital
~3,600 for 3
I By P & L Suspense A/c
2 average By A's Capital (Goodwill)
 5.9~ _ - - - -- -- -- -- - - - -· · ,-1\1\
June 12 By Rashi's Capital Ale - --.. .... ,
(Goodwill)
June 12 By Seema 's Capital Al RETIREME ~r_oR DF !T~
~;!' PARTNER 5,<;
(Goodwill) c ~- - Liab ilities - - - , t l
1,98,720 ~ ry Creditors 21,000 Buildings 26,00{
Ernployee's Provident Fund 4,000 Investment 15,00(
Calculation of new profit sharing Ernployee's Com pensatio n Debtors I 5,00(
ratio :
Pushpa's share (I) Rese rve 8,00 0 Bills Receivable 6,00{
5 has been acquire d by Rashi and Seema in th contingency Reserve 12,000 Stock 12,00(
e ratio
. of
. ·11 . I f 2 Capitals : Cash 6,00 (
gam - o - = 1
i ,,.I Rashi W1
6 5 15- I :S p 15,0 00
10,000
r., Seema wt·11 gam
. -5 of 2
Q
6 -5 =-31 R 10,000 35,000
>I ,
I
I 1 80,000 80,000
•1 I Hence, Rashi 's new share 3+ 1 4 = =
=5 + 15 = - 1-5- = 15 The partnership deed provides that
the profits be shared in the ratio of2
6 that in the event of death of any : I : I an,
Seema 'sne wsh are =I5 +L
3 -- +5 -_ 15
15 11
partner, his executors will be enti
tled to be paid out :
(a) The capital to his credit
New Ratio of Rashi and Seema at the date of last Balance Sheet;
= 4 : 11 (b) His proportion of Reserve
at the date of last Balance Sheet;
Working Notes :
(c) His proportion of profits to
the date of death based on the aver
(l) Interest on Capital :
the last three completed years, plus age profits o
Number of days from March 31 to I0%, and
June 12 = 73 (d) By way of goodwill, his
proportion of the total profits for
Interest on Capital = I 20 000 x - 8 the three precedin:
' ' - x .I}_
100 365 = ~ 1,920 years.
(e) The net profit for the last thre
(2) Share of Profit : e years ending 31st March were
:
30,000 + 70,000 + 80,000 2016 n6, ooo
Average Profit = ~60,000 2017
3 tl6 ,000
2018 t!S ,400
Pushpa's
. share upto the date of death = 60 000 R died on 1st July , 2018. He had
, x .I}_
365 XI
5 -- ~ 4,800 withdrawn tS,000 to the date of
Note: This ai~ount _of ~~.~00 will be cred investments were sold at par and his death. Th
ited to Pushpa and debited to Ras R's executors were paid off.
Seema m the1r gammg ratio of I : h' nd Prepare Partner' s Capital Accoun
Suspense Account because the prof
5. It should not be debited to Prof
it
it sharing ratio of continuing part
la
the surviving partners P and Q.
ts, R's Executor's Account and Bala
nce Sheet o
between them, does not remain the same. n Lo~s
(3) Valuation of Goodwill :
Goodwill
ers, m
----TIO
SOLU --N:- PARTNER'S CAPITAL ACCOUN C1
=Average Profit x 2 Dr. TS
Goodwill =60,000 x 2 = tl ,20,000 Particulars p Q R
Particulars p Q R
f
I

t I t t
= ~ 48,000
~ushpa 's share = 1,20,000 x t t \
't
Rash1 and Seema ha_ve gained in the To R's Capital Ale By Balance bid I
15,000 10,000 \ 1o,ooc

Hence, amo un t of goodwill debi

ratio of I : 5
ted to Rashi =48 000 x _!_ = t 8,000
(Share of
Goodwill) 7,900 3,950
By Employee's
Compensation
I I
' 6 To Bank Ale
Reserve 4,000 2,000 \ 2,00 (
amount of goo dwill debited to Seem 5,000 By Contingency
a = 48,000 X 1 = N0 ,000 (Drawings) 3,000 3,00(
6 22,936 Reserve 6,000
To R's Executors
17,100 11 ,oso By P& L
iLiusTRATION1i. (H oi§j To Balance c/d
Suspense Afc
(See Note I) l,08f
was On3 lstM
as und er :arch ' 2018' the B a Iance She
et of P, Q and R who were partners in a fiM By P's Capital Ale
 RETIREM ENT OR DEATH OF A
- . - - ... P.\J\
5.92 -------------- -

I ~i
II
/\ l'ARiN[a S.9J
I< 1 rrlU Ml N1 < IC Uf!A Tl I Ofl
1

By N, 1' - 1• .
hi:J dtadt (Dr# wu,p ) S.OOO
( ) Withdrew by /( to the <We r,f
(Share of 16.ooo
~oodwill )
"'
I 25,0oo I is OO(j
- ,
( 1 Amount r« 1uirtd lo l"lY off 11·,
P.~,Uklfs
I~ Rcqm rtd
22,936
6.9'.36
25,000 15.000 27.936 of bank
- - - = . - : -I - ---.......:..i.;~ be prepared 10 asccrtnin t h e ~
Allernn1i vc ly, n Bonk Account mil) '

R'S EXECUTOR 'S ACCOUNT lo:ir1 :

Dr. Cr.
Particulars Dr
BANK ACC Ol!NT

To Bank Ale
Partialkn
22,936 By R's Cupiml N e r__ __ _ P-~- -- -~~' '
~~ ,.,.An
6,000 By ll'D~ J Ne (Drawf_np)
:f ' :]
,,ooo
22,936 To Cash Ale 22.936
To lnve.stmenlS Ale I S,000 By /l's ~ CC\ll0f'3 Ale

BALANC E SHEET OF P AND

as at /st 111~1·, 2018
Q To Bank Loan [Bafandng Figun:)

1
~1
27,936
=
~

Assets
liabilities ILL UST RA TIO N 72. 3 : 2 : I and
21,000 Buildings sharing profi1s in the proportion of
Sundry Creditors Arti, Bharti and Seema are partners :
4,000 Debtors 2015 stood as follo ws
Employee's Pro, idenr Fund their Balance Sheet on March 31,
Bank Loan <>
3 6,936 Bills Receivable BALANCE SHE ET
Stock as at March 31, 2015
Capitals : I
p 17.100 Profit & Loss Suspense Ne
28,150 Liabilities
Q 11 ,050 t
f
60,086 21,000
Bills Payable 12,000 Buildings
12,000
Creditors 14,000 Cash in Hand
13,700
Working Notes : Contingency Reserve 12,000 Bank
12;,000
it : Debtors
(1) Ascertainment of R's share of prof Capitals : 4.300
= ~ I6,000 + ~ I6,000 + ~ 15,400 20,000 Bills Recei vable
Total profits for the last three years Arti
Stock
1,750
= ~47,400 Bharti 12,000
13.250
~47 400 = ~I 5,800 Seema 8,000 40,000 Investment
Average Profits = -- j- 78,000
78,000
-== -
Profit (From Ist April 2018 to 1st July, 2018 ) = ~15,800 x 2. = ~3 950
rding to the deed of the said partners
hip her
12 ' Bharti died on June 12, 2015 and acco
under :
R's share in Profit = ~3 950 xl4 = ~ 987 .50 exec utors are entitled to be paid as eon @ 10%
time of her death and interest ther
' (i) The capital to her credit at the
Add : l 0% of ~987 .50 = ~ 98.75 per annum.
= ~ 1,086.25 or 1,086 (approx.) rve fund.
(ii) Her proportionate share of rese
sales during
(2) R's Share of Goodwill : vening period will be based on the
(iii) Her share of profits for the inter ng past
s = ~47,400 as ~ 1,00,000. The rate of profit duri
Total profits for the three preceding year that period, which were calculated
I .
R's share of profit (Goodwil l) = ~ J J 850
= ~47,400 X -4 three years had been I0% on sales e the
' rding to her shar e of profit to be calculated by taking twic
(iv) Goodwill acco
R' s share of goodwill - ~ ' 50 ' which is contributed by P and Qin the ratio
11 8 • . its of the
last three years less 20%. The prof
of 2 : I. - amount of the average profit of the
previous years were :
(3) Calculation of Bank Loan . ~ 2013 ?8,200
Available Cash . ?9,0 00
6,000 2014
Rece ived from sale ofl 2015 ?9,8 00
(+) nvestments 15,000
21,000
'.~-------;;,----------;;,;te::;;;,~;i~I~-;,~ ~
To Profit and Loss
l\_t, J lJ\.J:.IVU., l

24,000 By Profit and Loss Suspense

~ I \JI'- LJt',f\

tL ~,;:--
l'fi

~~ 5.97
I 22 880 --9~ ~El'!~~~ ~~R!~E~ - - -- --- -- - - - ---
(t60,000 X 2/5) ,
· , Executor s Ale
To Pun1ta s
' '
(Note 2)
By Rashi's Capital (Goodwill)
C
- Seth
RE~~~T
RE_TI_
~2,00,000 - --- -
Machfoery
1,70,POO
30,000
~5,00,000 10,00,000 Stock
By Seema's Capital (Goodwill) Mehta 1,20,000
General Reserve 1,00,000 Debtors
45,000
1,90,880 Loan from Seth 50,000 Cash
60,000
=- 75,000 Profit and Loss Account
Creditors 12,25,000
12,25,000
vorking Notes =.
(i) Interest on Capital : 8 3 On 14th March 2019, Seth died.
On t 1,44,000 for 3 months == 1,44,000 x 100 x 12 The partnership deed provided that on the death of a partner the executor of the
8 3 deceased partner is entitled to :
On t I 00,000 for 3 months == 1,00,000 x 100 x 12 (i) Balance in Capital Account;
(ii) Share in profits upto the date of death on the basis of last year's profit;
(Since drawing is made against capital, the capital will (iii) His share in profit/loss on revaluation of assets and re-assessment ofliabilities
be reduced to that extent)
which were as follows :
(ii) Share of Profit till the date of death : (a) Land and Building was to be appreciated by fl,20,000;
~
70,000 (b) Machinery was to be depreciated.to tl,35,000 and Stock to f25,000 .
Profit 20 I 0-11
80,000 (c) A provision of2.5% for bad and doubtful debts was to created on debtors;
Profit 201 1-12
Loss 2012-13 (60,000) (iv) The net amount payable to Seth's executors was transferred to his loan
90,000 account which was to be paid later.
Prepare Revaluation Account, Partners Capital Accounts and Seth's Executors
Average Profit = 90,000 + 3 = ~30,000 Ale. Khanna and Mehta decided to continue the business keeping their capital balances
Profit for six months (upto 30th Sept.2013) = 30,000 + 2 = ~ 15,000 in thei r new profit sharing ratio. Any surplus or deficit to be transferred to current
Punita's share of profit = 15,000 x ¾= ~6,000 accounts of the partners.

(iii) Goodwill :
--------
SOLUTION : Cr.
~ REVALUATION ACCOUNT
Dr I
Profit
Profit
2009-10
2010-11
30,000
70,000
I Particulars ' "
Particulars "
1,20,000
35,000 By Land & Building Ne
Profit 2011-12 80,000 To Machinery Ne
5,000
Loss 2012-13 (60,000) To Stock Ale
To Provision for Doubtful Debts 3,000
1,20,000
To Profit transferred to :
Average Profit 1,20,000 + 4 = no,ooo Khanna's Capital Ne 23,100
Total Goodwill 30,000 X 3 = ~90,000 Seth·s Capital Ne 15,400
Mchta's Capital N e 38,500 77,000
1,20,000
Punita's share ofGoodwill 90,000 x ~ = n 6 OOO 1,2Q,OOO
5 '
. ratio. i.e. I : 2.
. profit sharing
n6,000 wi ll be borne by Rash.I and seema .m their
PARTNER 'S CAPITAL ACCOUNTS Cr.
Dr.
ILLUSTRATION-74.( HOTS) Seth Mehta Particulars KJumna Seth Mehta
Particulars f(hanna
• f
3 : 2Khanna, _p_and Mehta were partners .m a fmn
: 5. On Seth sharing profits in the ratio of f
f f f f
31 - 20 18 th e Balance Sheet of Khanna, Seth and Mehta was as follo-WS: 60,000 1,50,000 y Balance bid 3,00,000 ,00,000 5,00.000
To Goodwill Ne 90,000 I
J2,000 1 30,000 By General
To P&L Ne 18,000 I Reserve 30,000 20,000 50,000
Capitals : l
Khanna ~3.00,000
Goodwill
Land and Building
To P& L
:.:~~ (; / ~~' g J ~ !)-:~i(!l
 L,UJV M VIV

To Bank Ale I0,600 I June 30 By C's Capital Ale 70,60

July I
2017 20 17
4,50
Mar. 31 To Balance c/d 64,500 Mar. 31 By Interest
75, I00
-75,10

201 7 2017
April I IBy Balance b/d 64,50
June 30 To Bank Ale 1,50
(t20,000 + t4,500 , June 30 By Interest I
I
+t 1,500 26,000 I 2018
201 8
I
Mar. 31 IBy Interest I 3,00

Mar. 31 To Balance c/d 43,ooo I

69;oo
69,Q0Q I
I

2018 I
20 18
43,00
;s or June 30 I To Bank Ale
! April I By Balance bid I OO,
I (20,000 + 3,000 I June 30 By Interest '
I + 1,000) 24,000 201 9
I Mar. 31 By Interest I so,
'
2019 1

Mar. 31 To Balance c/d 21,500 I -45,50

45,500
20 19
20 19 21 ,50
April 1 IBy Balance bid
1

I
June 30 To Bank Ale 50 1

(20,000 + 1,500 June 30 By Interest

+ 500) 22,000
22,001
22,000 ---=

--------------
ILLUSTRATION 75 (BJ.
___________,..-- - ------------ -
Following is the Balance Sheet of A, B and C as at 31st March, 2014 :
Liabilities t Assets
--
18,000 Tools
6,00(
Sundry Creditors 48,00(
19,200 Furnitw-e 36,00(
Workmen Compensation Reserve
Stock
Capital Accounts : 36,00(
of 60,000 Debtors 30,00
A
tal 30,000 Cash at Bank 1,20
B
Ii 30,000 Cash in hand
C 1,57,20
1e, 1,57,200
1st
B died on 30th June 20 I4. Under the partnership agreement the executor of B wi

entitled to :
tJ
 Date 1,8(
2014
Workmen Compensation Reserve Ale 62.200 62.2C
June 30 Dr. 6,400
To B's Capital Ale 2015 2015
(Transfer of B's share of reserve to his Capital Ale) June 30 To Bank Ne April I By Balance bid 41 ,80
([ 0,000 + 1,800 + 60_0) f 2,400 June 30 By Interest Ne
June 30 Interest on Capital Ale Dr. 375
2016 6 3
To B's Capital Ale 40,000 x JOO 60i
March 31 To Balance c/d 31,350 X 12
(Interest credited to his Capital Ale) 2016
March 31 ,BY Interest Ne
June 30 A's Capital Ale Dr. 10,500
C's Capital Ale Dr. 10,500 30,000 x l ~O X I~ !
1,35(
, To B's Capital Ale
43,75 0 43,75 (
(Adjustment of B's share of goodwill into the
Capital A/cs of A and C in their gaining ratio i.e.,
=
2Ql[ 6 2016
equally) June 30 To Bank Ale April I By Balance b/d 31 ,35(
Dr. 2,625 (I0,000 + I,350 + 450) 11,800 June30 By Interest Ale
June 30 P & L Suspense Ale
2017 6 3
To B's Capital Ale I 30,000 X l QQ X l2 450
March 3 1 To Balance c/d 20,900
(Transfer of profit till his death)
20 17
June 30 B's Capital Ale 60,400 March 31 By Interest Ale
Dr.
To B's Executor's Ale 6 9 900
j 20,000 X IQQ X l2
~ mount due to B transferred to his Executor's Ale)
32,700 32,700
July I r •s Executor's Ale ----- Dr7 20,400 -
To Bank Ale . I 201 7
2017
April I By Balance bid 20,900
\(Amount paid to B's Executor) June 30 To Bank Ale
------ ( I 0,000 + 900 + 300) 11,200 June 30 18y Interest N e
) r. B's CAPITAL A/C 3
2018 I 20,000 X l ~Q X
300
Date March 31 To Balance c/d 10,450 I 12
Particulars t Date Particulars
2014 I
20 18 I
2014 March 31 1By Interest Ale
June 30 !To B's Executor's 60,400 ' April l By Balance b/d I I 6 9 4,;o
10.000 X I00 l2
Ale (Balance June 30 By Workmen Compen~ I X

..
transferred) '21 ,6 ~10
sation Reserve J 21.650 1 I
.,. r
I June 30 Bv Interest on Ca .>
ftl·'.'r!IU~MENT O R D ~ATI I OP A PARTNER _ ~.103

(). H. State any two it_e ~ :l of <lec.luction that may ha:c to be made r:O; the amount
payable to a rctmng pc1rtncr.
Am,. The . fol lowing deductions arc t..-ntcrcd on the debit side of retiring Partner' s
Capital Account :
(/) His share of loss on revaluation of assets and reassessment of Iiabilities.
(ii) His share of existing goodwill written off.
Q. 9. What is the basis of calculation of deceased partner's share of profit fro·m the
date of last bal~ncc s_h~et to the date of his death? (C B.SE. 2019, Kera/a)
Ans. (i) On th e bas is of ftme : i.e. On the basis of last year's profit or average
profit of past few years, or (ii) On the basis of Sales.
Q. 10. Name two items which are credited to the Capital Account of a partner upon I
his death.
Ans. (i) His share of life policy, (ii) His share of undistributed profits or reserves. !•
Q. 11. What journal entry wi ll be recorded for deceased partner's share in profit from
the closure of last balance sheet till the date of his death?
(CB. SE. 2015, All India)
Ans. Profit and Loss Suspense Account Dr.
To Deceased Partner's Capital Account
Q. 12. What journal entry will be recorded for writing off the goodwill already
existing in Balance Sheet at the time of retirement of a partner?
Ans. All Partner's Capital A/cs (including retiring) Dr. (in old ratio)
To Goodwill Ale
Q. 13. State two basis for determination of Profits from the date oflast Balance Sheet
to the date of death/retirement.
Ans. (i ) On Time Basis (ii) On Sales Basis.

if;de~ta-;;di;g
Q. 14. Why is Gaining Ratio calculated?
Ans. Gaining ratio is required because the continuing partners will pay the amount
of goodwill to the retiring partner in their gaining ratio.
Q. 15. Give any one distinction between sacrificing ratio and gaining ratio.
(C B.SE. Sample Paper, 2015)
Ans.
~
Basis of I Sacrificing Ratio Gaining Ratio
Difference
lt is the ratio in which the It is the ratio in which the
I. Meaning
old partners su~ end~r a part remaining partners acquire
of their share m favour of the outgoin g ( retired or
new partner. deceased) partner's share.

. b'lities revalued at the time of retirement of_ a partner?

Q 16 Why are assets and Ita 1 ,

· · J lo?) OJ 1 °~/ ~ w 1J ~ : &~

-
5. ~
J{ E'l'fREM_! :~l~O~ !?l~A! I!._ ~~ ~A_l<'_!:~~R -
- - - - - - - ·- - - - - - - - - - -
-· A;,:. lier share of Goodwill.
Give thc ,jou ~~ I ent'"?' t~ dis tribute •workmen Compensation .Reserve' ?f
(). 24.
jan, when there is no claim agafost it.
~60,~00 at the time of retirement of Saj (C.B.S .E. 201 3)
and Kavita .
The f trm has three partners Rajat, Sajjan
Ans. --"r """" :'-- :;,'! "'!
JOURNAL
J)ii le
Workmen Compensation Reserve A/c
To Rajat's Capital N e 20,000
To Sajjan's Capital Ale
20,000
To Kavita' s Capital Ne 20 ~
erve)
(Transfer of Workmen Compensation Res

e the jou rna l entry to distribute ' Workmen Compensation Reserve' of

Q. 25. Giv
0 at the tim e of retirem ent of Neeti when there is a claim of f25 ,00 0
t70 ,00
eena, Neeti and Rajat.
against it. The firm has three partners Rav
(C B.S E. 2013, Outside De lhi)

Date
Dr. 70,000
Workmen Compensation Reserve Ale
To Liability for Workmen Compensation 25, 000
Claim Ale
15,000
To Raveena's Capital Ale
15,000
To Neeti 's Capital Ale
15,000
To Rajat's Capital Ale
erve)
(Transfer of Work.men Compensation Res

Q. 26. A, B and C are partners sha

ring profits in the ratio of~ : ! :!.What will be

the new ratio on the retirement of B?

An s. 2 : I

fits in the ratio, of ; ,~ and 1~ . Find the

Q. 27. X, Y and Z are partners sharing pro
res. (C B.S E. 2014)
new ratio of remaining partners if Z reti

Ans. Old ratio of X, Y and Z = ½:}:

1
~ or 5 : 4 : I.
n X and Y will be 5 : 4.
Hence, if Z retires, the new ratio betwee
3 9 Wh
fits ·
m the .o o f l :
ratt : . at w1"II be
Q. 28. A, Ba nd Ca re partners sharing
pro 4 10 20
the new ratio on the retirement of C?
Ans. 5 : 6
Q. 29. A, Ba nd ca re partne~ sharing
profits_ in the ratio_o~5 : 2: \ If the new ratio
l be the galillng ratio.
on the retirement of C 1s 5 : 2, what wil

An s. 5 : 2
~@ }} .@ /~ /f r . lj !) ~ ~ (:}
 __R!:12R~~E_!J~ ~R_D_E~?!_-1_9~ ~ />~
. r:r,.r roRDEATII Ol' Al'Al<TNE R 5. 107
I II 106 __ - - - - - - - - .- ~;fits in the ratio of 5 : 4 : 3. Q reti; --~ f{ t:Tff{lsM•o
__:5 - - -P.- -;; ~d fl are partners sharing fits equally. What will be the Gainin es~~ ,1lso a _partner. - I fence, tJ1c loss mw,t be adjusted against Investment
Q. JO. , ~ 'd to share fuwre pro g ~r
~/l~e ~ fluctuation Reserve and on ly the rcmainj,:,11~·rcscrve of l'90,000 should be
shared by_all th c_n;n:\w,cni in lhcir old profit ~ha-ring ratio.
Ans. I : 3 . •1 ratio of 5 : 4 : 3. R retires and the new
i? hare profits in u1e . I "151 b . ,..lclij J:-. P. Q a~1d R ~er~ part~crs in a linn sharing profits in the ratio of 5 : .4 : 3
Q. JI . P, gan d . s . i!fl a.s__Pc9.o.dwill.,whRt.unl • . . • 1t:Joumal entry? 04
5 : ·' Tf.R.15-"'d,Yf'n .U,_0 - Dr. 5,000 <)· respec11vely. lhc1rcap1talswerc f50,000, l' 4 ooooand no,OOOrcspect1vely.
State the ratio in which the goodwill of the fi,;, amoonting to t6,00,000. will
A lls. P's Capital Ne Dr. 1,000
be adjusted in the capital accounts of the remaining partners on the retirement
{l's Capital Ne 6,000
To R's Capital Ne . of Q. (C.B.S.£. 2014, CJ

I bh
Q. 32. A a 8:1
d Beena were Partn
tlley
ers sharing profits and losses m the ratio of
decided
I 3 •i
to admit Chanda for 1 5th share in the Pro · .
.\n:- .
·
On the r~tirement ~f Q, goodwill of the finn amounting to t6,00,000 v.-~11. be
adjusted m the capital accounts of the continuing partners in their gaming

1
1st 70 13
On Apnl - ' f ns ooo which tlley wanted to show in the• lits. ratio i.e. 5 : 3.
They bad a reserve o , d. 1r lle11,
da agreed and we necessary a !JUStments were made .
balance sheet. Ch an • ·d d d' lll 1/ie ; 6. On the retirement of Hari from the finn of 'Hari, Ram and Shanna' the
/st 2013 Abba met WlUl an acc1 ent an 1ed. Beena balance sheet showed a debit balance of t 12,000 in the profit and lo~s I·I
books On 0 cto ber ' · · h · ¾d (). ·
. d ·d d to admit Abba 's daughter Fiz.a m t elf partnership ",L account. How will you deal with this balance? (C. B.S.£. 201))
rl Chan da eci e
agreed to bnng , ,
deaw .
, h
SE S.
•
• n 00 000 as capital. Calculate Abha s s are m the reserv
' ·••10
(CB. . . ample Paper, 20J~0
eo ;\ilS, It will be transferred to the debit of capital accounts of Hari, Ram and Sharma
~ d~o fh ~ · in their profit sharing ratio i.e. equally.
A ns. A bha,s share in Reserve <l 2,000.
O. 37. Kumar, Verma and Naresh were partners in a finn sharing profit & loss in the
Workinu Note : New Ratio of Abba, Beena and Chanda 12 : 8 : 5. Hence, Abha's
~ 12 ~ ratio of3: 2 : 2. On 23rd January, 2015 Venna died. Verma's share of profit
share in Reserve = ns,ooo x 25 = ?12,000. till the date of his death was calculated at ?2,350.
Pass necessary jownal entry for the same in the books of the firm. _
Q. 33 . Khushi, Surekha and Vipasa w~re partners sharing P_ro~~s and losses in (C.B.S.£. 201 j)
3 : 2 : I. Khushi retired and on this day, an unrecorded liability off I ,50,000
was found in the books. Khushi was of the opinion that since she has retired Particulars LF. Dr. (!)_ Cr. f!)
Date
she should not be debited for her share of the liability. Surekha and Vipas:
2015
convinced Kbushi that unrecorded liability has to be borne by all of them to Jan. 23 Profit & Loss Suspense Ale Dr. 2,350
which Khushi agreed. What argument must have been put forward by Surekha To Verma's Capital Ale 2,350
and Vipasa which convinced Khushi? (Venna's share of profit upto 23rd
A11s. Surekha and Vipasa would have given the argument that unrecorded liability January, 2015)
belonged to the period when Khushi was also a partner. As such, she should Akash Naveen and Zaid are partners sharing profits in the ratio of 3 : 2 :hi~·
( ' 1° 0
also bear the loss according to her share. <"-· - · ,., d b the finn to s
Zaid died on 1st September, 2016. The total amoun~ o~e Y ual
Q. 34. Rachit, Shekhar and Tarun were partners sharing profits in the ratio of executors was f60,000. The finn decided to pay him m three equalbe ann
· mterest
· @60" with Ist Septem r, 2017
2 : 3 : 4. Shekhar retired on I st April, 20 I 8 on which date the Balance Sheet instalments carrymg -,, op.a. beoinning
o· f7~;d' ·
of the finn showed the following position : • b trans tion on the date o L..a1 s
Pass the journal entry for recordmg the a ove - ac (C.B.S.E. 2017 Comptt.)
< death.
Investments (Market Value f2,60,000) 3,00,000
If
Investment Fluctuation Reserve 1,30,000 L.F Dr. ~ ) _ Cr. (r) .
Particulars
Date ii'I
Shekhar was of the opinion that ~ 1,30,000 should be credited to the Capital 2016 60,000
Dr.
accounts of aJJ the partners in their profit sharing ratio whereas Rachit and s t l I Zaid 's Capital Ale 60,000
ep . I
Tarun were of the opinion that ~90 000 instead of ~ 1 30 000 should be To Zaid's Executor's Ale .
(Amount due to Zaid transferred to his
credited to the Capital accounts ofall the partners to which Sh:khar ultimately
executor's account)
agreed. Explain what argument must have been put forward by Racbit and
Tarun that convinced Shekhar. . a finn sharing profits and losses in
d Leena were partners m • . _ · ... th
!\11s. Rachit and Tarun
· d 1. .
ec me m the 1 Of ·
th •
mus ave given the argument that loss of f40 000 due to
'
Q. 39. Jayant, Kartik an
t .
th era100 fS . 2. 3 Kart1k 1e an
. · ·
/ . J ~ ij ,· ~
._ , ,l
- . d. d dJayantand 'i..ea\8,~,er-~iajt.of<:D~~, e
/ '/.
,-l .. "')l
f) !) • ~(.!
va ue investments is related to the oeriod whP-n .% ekhar was
 .-\ns. Gaining Ratio 5 : 3; Ne ('---.JJ .S.E. 2018.. ra ~~ the new rati·o I· f X retire
• ' ··· ...... ,:,s naring profi L
s. 'l in the rati o of 2/3 : I/4 : 1/1
w Ratio 5 : ;3 . , C% 2 . Ca lcul ate
[A n,. 3 : I]
Q. ➔ 1. Dinkar, Navita and IJ)f,J
Vani were partners shari Q. 3. l , Ma nd O were par
of 3 : 2 : I. ~a vita die ng profits and losses in . tne · fi
d on 30th June, 2017 .. He . .
rs in a •rm shann
r share of pro fitthe ~ retir~d and_his share was g pro ts .in the rati.o of 3 : 2 . 2 M
intervening penod was ba
sed on the sales dunng shann g rat10 of L and 0. divide d equally between L andfiO. - ·
Calculate the new profit
f6 ,00,000. The rate of profit that period, Whic for 'lit
during the past four years ( An s. 4 : 3]
The firm closes its books on had been l O¾ h Were
31st March every year. 0
n saJ~ Q. -t A, B and C are par
Calculate Navita 's share of tners sharing profits in the
profit. his share was taken up by ratio of 4 : 3 : 2. B retires
(C B. SE . 2019 R . A and C in the ratio of 3 : 2. and
.-\u _ Navita 's share f2 Find out the new rat io.
0,000. ' Cl] <lsthc,, 1
[ Ans. 29 : 16]
~
Q 5 (A)._A, Ba nd Care par
tners sharing profits in the
SH O RT ANSWER Q U ES and his share is taken ove
r by Band C equall y. Calcu
ratio of 4 : 3 : I. A retires
TI O N S late the new ratio.
(Questions Carrying 3 M ( .\n s. 5 : 3]
arks)
Re~;;,,beri;(g-(Kn~;l;dg;ba":e& ,.). 5 (B). A, Ba nd C are
partners sharing profits in
B retires and his share is tak the ratio of 1/2 : 1/3 : l/6
. Wh y a retiring or decea en by A and C in the ratio of .
sed partner is entitled to [ Ans. 17 : 7] 5 : 3. Calculate the new ratio.
filfI] ] ?. a share of goodwill of th
e ~. 6. X, Y and Z are partne
2. Discuss the method of rs sharing in the ratio of 2
treatment of Goodwill at is entirely taken by Z. Ca : 2 : l . Y retires and his sha
the time of retire ment of lculate the new ratio. re
partner. a [ Ans. 2: 3]
3. What are the adjustmen
ts required on retirement Q. 7. P, Q and _R are in p~
of a partner from the firm? ers hip_sharing pr_ofits and
los~es as I/2,_2/6 ~d _1/6
.J. What is gaining res pectively. R retrres and
ratio? How is it calculated his share 1s taken by P
at the time of the retireme Immediatel y, Si s admitte and Q _m the ra_t10 of -
partner? nt ofa d for I/4th share of profit, · I.
the remaining share was \/3rd of which was given by
taken equally from P and P ~d
5. Give an y three points ratio after S' s admission Q. Calculate new profit-shann
of distinction between sac . g
ratio. rificing ratio and gaining
[ Ans. Ne w Profit Sharing
Ratio of P, Q and S = 16 :
6. How would you calcu 11 : 9.] .
late the amount payable Q. 8 (A). A, Ba nd C were par .. · t·10 0 17 · s · 3 Fmd out
to the representative of tne rs sha 10 th
deceased partner? a the gaining ratio and new rin ~ pro
ratios when (i) A retires , (11)
i'.~s ~ ra ... · r~ti~es
B re~1res or (111) C .
7. If a partner dies durin g [ Ans. Gaining Ratios -
the ye ar, ho w will you fin (i) 5 : 3; U_i} 7 : ~; (i_i_i_) 7
the deceased partner? d out the share of profit of Ne w Ratios - ~ :·
(i) 5 : 3; (u) 7 : J; (rn )7
· )]
8. Name five items which d
Q. (B ). X, Y an Z share profits m .
are credited to the accoun
0
the rati.o ot• I11 - , J II o• \/'i.. . Calculate the
.,
calculating the amount du t of a deceased partner wh gai nin g ratio and new rat
e to his legal representative ile ios when : .
s. (i) X dies, (ii) y dies or (iii
) Z dies. .. .
PRACTICAL QUESTIO [ A ns • Gaining Ratios - (i) J : _; ( 1••1) 5.. •. 2 (iii) 5 : 3.
., ?
(Q. No. 1 to 75 are strictly NS . ( ") ,, . ? · (II) ): -, : ~ ...) ~ . ]
in th e se ria l or de r of Illustrations) Ne w Ratios - 1 1 \Ill -' · 3·
J · - ,
Q. I (A). A, Band Ca re pa rtners shanng pro 1.its in
. . the ratio of 5 : 4 : 3 :
rtners sharing profits in the Q . 8 (C)·. p' O. R and S were pa I.
new profit sharing ratios if ratio of 6 : 5 : 4. Calculate ~ ti Calculate the gam . . f o and new profit shann . . f
(i) A retires; (ii) B retires; p and S retire from the mn ing mi g rat io o
(iii) C retires. .
[ Ans. (i) 5 : 4; (ii ) 6 : 4; (iii
) 6 : 5] Qand R.
 J.!. l\'I C.1
0 • ,_, ,. u~ •
- - - - - - - - - • • • • V I ' J\
l'J\.R
-:- - - - .- - - -
s.110__ __ _ --
-- :- - - - - - - - - - 1'~
.Ja nd Ne wR at io - 4. 3 .J ~
-- [Ans. Ga•inin · g Ratio - . 420· 18 t ,·rtREMJ~N'I' O
R DP.ATH OJI A_PA
11 (A), on Jst Apnl: Ashis h, Namish and Am ....._ 1 1 (} J'i X RTNER
f ?/S and J/5 respe an were partners sh · - · ·. Y• and Z. arc partner h ·
rotits · ·
9 d Josses in the ratio o 215, - ctively . On this date . s s anng pro- - s. 111
Q an
h . ratio of As N ~na he firlll an d 1t 1s dcc
11.lcd that new profiil·S armfits in the ratio-of- -5 : 4 : 3.
- X- reu
- -:res
- -fro-;
P. Th new profit s art hish and Aman w1·11 t , ist
ex h- . g raU.O between y an dz~ WI
be 3/ 4 andlltn1Sb · in g between X .

II◄
reures .. e C Jculat ng . and Y. Calculate new ·11 be :,a
~~.ne
,v as
e gaining ratio . [An~ - New Ratio
rat o an
·, d ga.mi.ng rat io.
.
respectively. a S : 4; Gaining Ratio
· 8 : 71

A~~
An~- 7 : I .] . A B and C were partn () . ." ' (A ). L. M
ao
d N "" lhrne partno,,
[ ers sh an ng pro I ts an respecuvely . M_ retire , ha,ing l"o"~ in lhe
Q. 9 (B). On 1Q20 d c'v
18 s and the goodwill is "t io of 4 : 3 : 2
~
. ti d los .
~
1st respe cti appears as et m valued at t I 08 000 .
the ratio o_(A 0, : 10 ve ! y. On this da te B ret . the bo ks f he firm No go odwi ll ac
A d ,.;u be A 315 and ires. The"'' . L and N will share
511 Y • fits in future ·in theco unt
0 0 1
C 2/5. Calculate gain of 5 , 3 respecuvely . Pass Jo,mal En • pro
profit shanng ratio in g ratio. "" - [Ans. M_s share of go try ro, gooJwill. ratio
·
o an odwill will be adjusted
[Ans. I : 2)A B to the Ca pital A/cs (N CEth
RJ )
d ca re partners shari. Gai nin g Ratio I 3 : 11 of Land N in eir I
~- IO (AA). 'd B~ cid ng profits m . the ratio . Q . 16 (B). Ashok,.] 11
1/2 : 1/3 : 116
c retues and an e e to share future profits equally . Calculate of the gaining rat · · the ratio of 2 : 2 : I.
Rakesh and Mukesh we
?~ re partners sharing pro
fits and losses in
I
Ist April , 2018, their
p ns. A gains nothing being no account for goodwill was val ued
; B gains J/ 6.J it m the books. On thi at tJ ,00 ,000: there
Q. c
(B). A, 8 , and
Dare partner.; s!,ari
ng profits in the ra
10.
record goodwill.
s dale Rake sh retired.
Pass the Journal Entry
.
10 dB c and D decid tio of 5 : 4: : 3 10 [Ans. Rakesh's sh
2. A reores an , e to share the prof are of goodwill will be
its and losses equa adjosU:d to the Capital
lly in futur and Mukesh in their
Calculate the gaining Gaining Ratio 2 : I.] Ales of Ashok
ratio . e. 'I\Q• 17. A,
[Ans. Gaining Ratio B and Care sharing pro
fits in the ratio of 4 :
~I Q. . Rekb a. Ruchi 2 : 5 : 8]
and suruchi ar~ partn
in the books al a value
oH 42,000. C retires an 3 : 2. Goodwill is
appearing
contimU11ng partner.; acquired er.;. Ruchi retires . Ca is va lued at t6 3 ,000. d on the day of C' s ret
her share m the ratio lctdate new ratio ii Pass the necessary jou irement Good..;11
of 2 : 3. Also mentio rnal
n the gaining
[Ans. U) Goodwill
of H 2,000 will be wr entries.
ratio. Goodwill o!t63,000 itten off in 4 : 3 : 2;
[Ans . New Ratio 7: i.e ., n4 ,000 will be
adjosted into the Capit UO C' s share of
8; Gaining Ratio 2 : ga ining ratio of 4 : al N es of A and Bi n
3.]
Q. 12. X, Y and Z are
partner.; sharing prof 0. J,t((A). P, Q3.]
its in the ratio of and Rare equal partn
z reties and surrender.; 1/ 9: 1/3 and 519. at t'i;oo,ooo . R ret ers . Goodwill is ap
pearing in their bo
314th of this share in ires and on the day oks
favour ofX and rem of R' s ,eti<emenl Go
Calculate new ratio an ainin g in favour of y t2 ,50,000. Pass the od..;11 is valued at
d gaining ratio. , necessary journal en
[An~. New Ratio ~ ). A, B and tries.
l 9 : I 7; Gaining Ra C are partners sharing
tio 3 : 1.] 2 : 2 : I. C decided to pmfits and losses in
Q. 13. P, Q, Rand retire and on this date th e ratio of
S were partners sh pass entries when go go od ..;11 of the firm tS value
S retires and his share aring profits in the od..;11 aceount is alrea d at tZ,00,000.
is acquired by Q an ratio of 2 : 3 : 5 : dy appearing in the bo
d R in the ratio of 2. oks at t 1,5 0,000
and gaining ratio .
3 : 2. Calculate new
ratio
f Q. 19 (A): P, R_and
S are in partnership
[Ans. New Ratio JO: respectively . It ts pm sharing pmfits 4/8 ,
vtd 3/8 and \/8
21 : 29; Gaining Ra
tio between Q and his share of goodwill ed under the partnership deed Iha! on the
Q. 14. A and B were R 3: 2.] is to be valued at one-h de~th of any partner
partner.; sharing prof during the last 4 comp aIf of the net profits cre
its in the ratio of 5 : 3. On leted years (books of d•ted 10 hts account
they admitted C as a ne Isl April , 2'14 accounts are dosed on
w partner for I/4th sh
are which he acquire
R died on !st April, 20 3 I st March}
ratw of 3 : 2. On 1s d from A and B in the 18. The firm 's profits
t April 2015, anothe 20 I 5 (Profits t 1,20, for lhe last 4 years we
which he acquires J r new partner D wa 000); 20 \ 6 (Profits t6 re as follows :
/10 from A and 1/15 s ad m itt ed for 116th 0,000) ; 20 l 7 (Losse
from C. On l st Ap share s tZ0,000) and 20 I
share was taken over ril , 20 J6 A dies an (Profit 8
by B, C and D equa d his I. sDet8ter
0,m00ine
0). the
amount that should be
lly. eredited to R in respe
Calculate : ct of hts. share
goodwill. . of
(I) New profit shari try for the adjustmen
ng ratio of A, Band t of goodwill, assuming
(ii) New profit shari
Co n C' s ad m iss io
n. ratio2bePa twsseeJo
n ur an1den
p na
that profit sh an ng
.
ng ratio of A, B, C S in future will be 3 : 2. ki
and D on D's adm
iss Sh oW
·11 NS 000· to be debityour wor ng c earIY. . 1
(iii) New profit shari ion. ed to p and Sm the
ng ratio of B, C and [Ans. R' ss ha re of go d ratio of 4 : 11 .]
'. 8[A D on A' s de ath . o Wl art'ners '
: 37
ns.: (i)
35]A.. B .· C = 19 .· 11 · IO 11
~
·' ( "")A : B: C : D in a firm sharing prof
Q.1 its and losses in the
~ 3) ~) Q; ; ,) : ».W: 11®~
45 : 33 : 22 : 20; (iii/ B, Ca nd D ar eP ratio
B : C: D
~
 ,u;T/T< EME NT O- R- DEA TH OP A PAR ·
- - - fNER 5. I IJ
- - - - -
nto the Cap ·t J - - - - - - - -
- d-:-- t d ,·. I a acco unts ofA /J, - -
- - - - - - - - - - - - - - - - -
l.l IJUS c the trea tme nt
• ' . a~d D. Pass nec essary entr y for
o f g oodw1JJ whe n new pro fit sha ring ratio ,s d .d
_ec, cd at 9 : 2 : I.
[An s. Onl y A gain s 4112. 8 has , ited by
also sacrificed 1112 . Hen ce A will be deb
f I 2 0,0 00 and Ban d C will be ercd.ited b f 30 0
,
. A , B, C and D arc Par, y • 00 and f90,000 resp ecti vely .]
tners s · . the
Goo dwi ll was va/u e.Ll a.~m g pro fits in the ratio o f_4 : 3 : 2 : l . On
re t of B , 9 tinu e the
. " ~ 0~ . A, C and D dec ide to con
firm sha ring pro fits equ ally . Pass th e nec essa ry Jou rnal entry
·
[An s.

C's Capital Ale

D 's Capital Ale J
&m111
. •1 ~ I

To A 's Capital Ne 20,0 00

To B 's Capital Ne 90,000J I
y and Z are partners shann . fi 3 : 2 : I. Y
;rt( X, Jts and losses in the rati o of
•~ ""1i·
retues
A

se mg
hi
s s
h
are to X and z for
g pro
f 1 60 000 i 1 00 000 be• ·d b X .d

f60 ,00 0 by ~ The pro fit for the yea r afte r Y's
;etir;men't is' f2,40,~ ~i.pat y an

share to X and z and (b) distribute the

Pas s ent nes to (a) record the sale of Y's '
pro fit bet wee n X and Z
[Ans. Ne w pro fit sharing ratio 17 : 7.]

Revaluation of Assets and Liabilities

the rati o of 5 : 3 : 2.
OM . A, B and C wer e partners sharing profits and losses in
anc e She et as at 31st March, 2020 :
Fo l~i ng was their Bal
. .,,,....
~¥ -,·. . ' . ~ '~ -~ -
Ziqj1. ~-,... Ah ~~:..•~~~-
~

I 1,20,00 0 I Cash at Bank 34,0 00

S undry Cred·t
1 ors

Capital Ale s : Sundry Debtors l,50 ,00 0

A 4,00,000 Less : Provision for
B 2,50,000 Doubtful
1,50,000 8,00,000 Debts 9,0 00 J,41,000
C
Stock 1,45,000
Plant 2,00,000
Land and Building 4,0 0,00 0

9,20,000 9,20,000

ents were agreed upon :

A retires on this date and the following adjustm
De bts am oun ting to f 10,000 wer e to be written off and provision for
(i) Bad
.
doubtful debts be maintained at existing rate
(ii) An unrecorded creditor of f20,000 wil
l be taken into account.
ages amounting to f25 ,000.
(iii ) Provision is to be made for legal dam
(iv) There is a liability for f 15,000 for out
standing salaries.
I

(v) Sundry creditors be reduced by ~8,000

being a liability not payable.

] r,w~@ / fj)J~ Y · U®li~@

 RET rnEM ENT OR DEA-i'l·I OP A PAR l' 5.115
- ·- - - - - - - - - - ~ER
( An... Debi t A's Capital A/ b f - .. - - - -:
·- - - - - - - - - - - - - -
C's Cupi lal Ale by f20,000.J c y JO,OOO; Cred
it B's Capital Ale by f I0,00 0 and
. .
Q. ]J.d , Ban d C arc partners sh . profits in the ratio of 5 ; J : 2. C retir es and
. anng
A •1'rrr.f1J ag{!rC<e to shar e liutu re pro fiIts in th • t' f
'
year 's purc hase of the avcra ,c ~ c ra 10 0 6 : 4. Goodwill is to be take n at two
ref
• L{t~
g
t25,0 00; f 15,000 (loss); r 36 00p ofits of e
th last S year s, whic h were f J 0,00 0;
a nd f 44,000 respectively.
,_ '
c,,ase .
At the date of Cs retirem en t ' fi0 11 owm g balances appe ared in the book s of the
5,ooa finn :
~
Gen eral Rese rve J ,20,0 00
Prof it & Loss Acco unt (Dr.) 30,0 00
C's Capital 2,00,000
in the book s of the finn and
YouC~eCreq_uirleAd to record nece ssary journ al entri es
prep are s ap1ta ccou nt on his retire ment .
IJ t2,26 ,000 .]
[Ans . Amo unt due to C trans ferre d to his Loan Ne
ts and losse s equa lly. The
s Q. 32 fl<). X, Y and Z are partn ers in a firm shar ing profi
d as follo ws:
ba l~e et of the finn as at 31st Marc h, 2020 stoo
I
Liab ilitie s t Assets
Creditors I,09,000 Cash in hand and Cash at Bank 86,0 00
Gene ral Rese rve • 60,000 Debtors 2,00 ,000
Provident Fund 20,000 Stock 1,00,000
Capitals: Investments (at cost) 50,00 0
X 3,00,000 Freehold Property 4,00 ,000
y 2,00,000 Trade Mar.ks 20,0 00
z 2,00,000 7,00, 000 Goodwill • 33,0 00

8,89, 000 I 8,89,00Q

nts :
Z retires on 1st April, 2020 subject to the following adjustme
(i) Freehold Property be valued at is,80,000. P
ed at i94,000; L
(ii) Investments be valued at i47,00d'; and stocks be valu
(iii} A provision of 5% be made for doubtful debts. l-
(iv) Trade Marks are valueless. t,..
(v) An item off 12,000 included in creditors is not likel
y to be claimed. p
(vO Goodwill be valued at one year's purchase of the
average profit of the past three
; 2019 f 1,00,000 and
years. Profits ending 31st March were: 2018 il,20 ,000
2020 f95,000.
nce sheet of the remaining
Pass journal entries, give capital accounts and the bala
partners.
f2,95,000; Capitals X
[Ans. Profit on Revaluation f 1,53,000; Z's Loan Ale
~'3,42,500; Y ~2,42,500; BIS total f9,97,000.]
Hints : (t) Goodwill appearing in the assets at f 33,000 writt
en offamong all partners in old
ratio .
ing ratio i.e., equally.
(ii) Z's share of goodwill f35,000 debited to X and Yin gain
\tl- THtPM l~N T O H
IW /\T II 011, .
" ti/ \ I(
fNl!.R
Show necessary jt,urna
l c lr'
and Openi•ng 8 a\uncc n
Sheet of co1cnts.· Pr.ep•arc R -
S.J 11

~
l \ n,. Loss on Revaluation 1nu1n& partn.
4S.200; N~vccn n S.4
8 'I ev
cr
al
s.
uation Account Capital Accoun-
• ts
00; 13/S lo ~ ~ \~ c. ~ ~
\I in t : Goodwill amou ·.; Loan N e '1 6, I00; Cap
ntinu to ., itals : Manoj
and Oeepa k. s sharc .m ,2 .
. I. 4 . 3 1 ,000 owi ' 3,000 will be .
ll bed b'
rauo W en ofT among old
e., - • c itcd to the ·aritt
ccounts f M . partncn in old ratio
o anoJ and Nave . .m.g
en in gam
() . 3- t The following
was the Balanc
2 020 : e Sheet of Ram and Sh
yarn as at 31st March.
t Liab
-Rz:n 's Capital J

Shya::a's Capital 30,000 Plan

t & Machinery ' 1 \
~ eo 27 ,500 Patents 50,000
Em~~ yee' s Pro...~d 6,000 Stock in Trade Z.000
ent Fund
crec--__o::-s 500 Debtors 23.000 \
Net Pro:i;..s 10,000 Cash 4~000
6,000 1.000

Ram retired from th

t l0,000. Toe Patents
1Q0/o. A pro" is io n of
e business on 1st Apr
were valueless, Plant
il, 2020 . Goodwill is
and Machinery is to be
~0 00

to be valued at
-
5% for Doubtful Debts deprec1ated by
that these adjU::>7:men is to be created on Book
ts are duly carried out, Debts . Assuming
S'~ t o f Shyam after show the Capital Accou
Ram ha s been paid of nts and Balance
se.:urity of Plant and f. Shyam borrows mon
Machinery to pay off ey from his bank on
Ram.
[Ans. Loss on Revalua
tion <7,200~ Amount pa
and t3 6,400 by taking id to Ram t37,400 (t l
,000 in Cash
a loan from the bank).
~71,800.) Shyam's Capital t2 4,90
0~ BIS Total

Q. 35. Samee r, Yasm

in and Saloni were pa
lesses in the ratio of rtners in a finn sharin
4 : 3 : 3. On 31.3.2016, g profi~ and
their Balance Sheet wa
s as follows ·
BALA.i~ CE SH EET OF SAMEER, Y
ASMlN AND SALON1
as at 31.3.2016
lA ff fi n
t
crec:::::s
~ .:-al ~ ~
1,10,000 Cash
60,000 Debtors 90,000
'
80.,000

Ca::::i.s : Less : Provision l0,000 80,000

S- e:.:r 3.00.000 Stock t,00,000
y ,., n 2.50,000 Machinery 3,00,000
S.::.:.x:.i l .50.000 7.00,000 Building 2,00,000
Patents 60,000
Profit and Loss Accoun 50,000

-- - - ---~i"~70.~~~-~1.·~~::: ~;~;
t
JOJ

J}W/ ~ I i 1 / ~ .I !))
1 ct)~ • "
)~
£ ;)
 - - - - - ~T_!_R~~E~~ <?_R_D~~ 1:I OF I\ f.5
118 • . - - - - . dh - ... ~Ai..
·. - · S er retired and 1t was agree t at: -.. ~'I\~
h above date, ame ',, R£TIR£ME~T_O! E~AI~ OF A PARTNER 5.119
Ont e will be written off as bad debts and a prov·s. -.;
- -Q~3~ (A ). X, Yan~ Z~;r; ; ;n~r;i~; ~ ~~; p~ofi~
4 000
(i) Debtors of t d, d doubtful debts will be maintained.
0
' ' nors, ~3- :~ ~5 On ~ti;
debtors for ba an . Yi 3 Ist March, 2020 ~ retired from the firm. On the date of Z' s retirement the Balance
d editor of t20,000 will be recorded. \
(11•') An unrecorde er Sheet of the firm was as follows:
• b mpletely written off and 5% depreciation will b BALANCE SHEET OF X, yAND z
(iii) Patents wtl 1 e co . . e char
chinery and building. &Ccj as at 3Ist March, 2020
stoc k, ma fi . h . ~
. d S IOni will share future pro its m t e ratio of 3 : 2 Liabilities
(iv) Yasmin an a · , . t ·
. f the firm on Sameer s rettremen was v1aued at f 5 40 0 Creditors 27,000 Bank
Assets
'
80,000
(v) Goodw1 11 o . . ' , Oo. sills Payable 13,000 Debtors 20,000
. mat entries for the above transactions m the books Outstanding Rent 22,500 Less : Provision for
Pass necessary JOU (C B SE 2017 of the 6 Provision for Legal Claims 57,500 Doubtful Debts 500 19,500
on Sameer's retirement. · ·· · · Outside-,.. ~ Capital A/cs : Stock 21,000
valuation t I 08,300; Amount transferred to Sameer' L ue/~i
[Ans. Loss on Re ' s oari i X 1,27,000 Furniture 87,500
y 90,000 Land and Building 2,00,000
t4,76,680] >ii,
Hint. Entry for bad-debts and provision for bad debts : z 71 ,000 2,88,000
Provision for Bad Debts Ale Dr. 5,700
4,08,000
To Debtors Ale 4,000
1,700 On Z's retirement it was agreed that :
To Revaluation Ale
(i) Land and Building will be appreciated by 5% and furniture wiU be
Q. 36 . Following i~the Balance Sheet of X, Y and Z as at 31st March, 20 IB. ~ depreciated by 20%.
(ii) Provision for doubtful debts will be made at 5% on debtors and provision for
shared profits in the ratio of 3 : 3 : 2.
legal claims will be made ~60,000.
Liabilities f Assets
(iii) Goodwill of the finn was valued at t60,000.
Sundry Creditors 2,50,000 Cash at Bank
1

80,000 Bills Receivable (iv) no,000 from Z's Capital Account will be transferred to his loan account and
General Reserve
Debtors 80,000 the balance will be paid to him by cheque.
Partners Loan A/cs :
X 50,000 Less : Provision for Prepare Revaluation Account, Parmer's Capital Accounts and Balance Sheet of X
y 40,000 Bad debts 4,000 76,oa. and y after Z' s retirement.
Capital A/cs : Stock 1,24,r.» [Ans. Loss on Revaluation ~ I0,500; Balance a~ount paid to Z}Y .chequ~ 1

X 1,00,000 Fixed Assets 3,00,(WJ ,::j 1t,-fiRP,· captia1 1 J-1.'\.'C"ulli!tS" Av ~i:14;.l:>if ano' r" QsL,j)if;' tflllanCe ;:,neet !Ulal

)' oif,l/W' 1 Advertisement Suspense Ale i6,i ~3 ,89,100.]

z 50,000 1 2, I0,000 Profit and Loss Ale 4,~
Q. 37 (8). A. B and Care parmers sharing profits in the ratio of their Capitals.
6,30,000 6,30,~
=- Their Balance Sheet as at March 31 , 2020 is as under :
Assets
On I st April, 2018 Y decided to retire from the finn on the fol lowing terms : Liabil11res
Bank
(a} Stock to be depreciated by t 12,000. Capitals :
A 2,00,000 I
Sundry Debtors
(b) Advertisement Suspense Account to be written off
B 2 00 000 1 Stock
(c) Provision for Bad and Doubtful Debts to be increased to t6,000. I:00:000 j 5,00,000 Furniture and fittings
C
(cf) Fixed Assets be appreciated by I 0%. Res.er:e Fund
40,000
(e) Goodwi ll of the finn be valued at f80,000 and the amount due to the retiriDs Sundry Creditors I 20,000
2,800
partner be adjusted in X's and Z's Capital Accounts. Outstanding E>.-penses 1- 5,62.800
5.62,800
Prepare the Revaluation Account, Partner's Capital Accounts and the Bal- ,

Sheet lo gi ve efTect to the above.

A retired on this date.
!An,. Prolit on Revaluation ~16,000; rs Loan Ne n s&,500 (i.e. t 40,000 +
t l,18,500); Capitals X t I, 10,500 and Z f 57,000; BIS Total t6,26.000.]
 ~ (Ji Op
- _R_!: l_~t:.~ ~~ ~' : ~t - - .....
A
~ P~

__ __ __ __ __ __
5.120
', ~
I 0.
;,orermanadtiofintt:mgs were undervalued by (4 ,00 , was d
;l~mtu '
ii<W(i);nFur 1
nn, a debtor
from Mr. Ar oub ~
f ~ 12 000 due . tfiJJ
{Ii) An am oun t o \ , cre dito rs
. . for the same is reqwred. 1,00,000
prov1s10n (ienern / Reserve 98,000
90 %. U/J8 : Provision 2,000
(iii) Stock be valued at Ctipiwl Nc s : 90,000
. d .11 f the firm be valued
°
at (60 ,000. . . A 3,60,000
2,40,000
Stock
Machinery
2,40,000
(1v) Goo W1 ount bearmg mterest @ 1O~ ll
cransferred to A's loan acc draft be 1,20,000 7,20,000 Land and Buildings 5,00,000
00' 000 be arranged, if require~P-a, ~
C
Bank over io.oi,ooo
M bal fl'
ance be paid tJirough ban
k. . . 10,08,000
~

) Ba nd Cw ill sha re future profits m 5 : 3. and the remaining partners

(J11
lance sheet of the firm
2 18 nts to retire from the firm
/edger accounts and ba after On I st April, 0 , B wa nts of assets and liabilities have been
Prepare necessary -1'
decide to carry on. The following re-adjustme able to B :
ertainment of the amount pay
1
~ agreed upon before the asc I 7-18, ~ 10,000 be
retirement. id to A f 1,24,800. Bank 0 Premium paid during 20
[Ans. Loss on Revaluat
ion (38,000; Amount pa lan ce Sh ee/1'~ (I) that'. out of the Fire Insura nce
89,900. Ba red.
l Ac c?u nts B f 1,87,300 and C f T~ camed forward as unexpi JO%.
tS0,00 0; Capita ldings be appreciated by
inin g Ra tw 9: 7.J (ii) that the land and bui t upto 5% on debtors.
N,80,0 00 . Ga doubtful debts be brough
in the ratio of 3 : 2 : 1 (iii) that provision for
Q. 38. A, Band Care in
partnership sharin_g profits 8G be depreciated by 5%.
ce Sheet on this date ·~2 (iv) that the machinery ng bill for
retire s from the finn. TheJT Balan ~ in respect of an outstandi
Februa ry, 201 7 C
(v) that a provis ion for <15,000 be made
fu &M : repairs. re of the same
Assets
ill of the ent ire firm be at <1,80,000 and B's sha
tfrJ/Jililies (vi) that the goo dw
C who share future pro
fits in the proportion of
ed in the Ale s of A and
adjust
Sundry Creditors 314th and /14th respective
ly; and
rred to his Loan Ale .
Outstanding Expenses B be pai d <5 0,0 00 in cas h and the balance be transfe
(vit) that the
Profit & Loss Account nts, Capital Accounts and
Partner's Current Accou
Capital Accounts : Prepare Revaluation Ale, and C
of A
A 5,00,000 Balance Sheet of the finn ,20,000; Current Accounts
:
B 3,00,000 Profit on Re val uat ion <30,000; B's Loan Ale n 0,000 ; BIS Total
[Ans. 60,000 ; C <1,2
2,00,000 I 0,00,000 ,000 (Cr.); Capitals: A <3,
C A f60 ,000 (Cr.) and C <20
<10,03 ,000) Bihari retires and his
and Shi vin are equal partners in a firm .
Q. 40. Anan d, Bih ari 0. He is paid in kind, a
upon : ital and his sha re of goodwill is <40,00
The following was agreed claim including his cap of the finn till the date of
share ofgoodwill to,( ,00 0 wh ich is unrecorded in the books
of the fin n is valued at (1,50 ,000. C sells his vehicle valued at <20
(1) Goodwil l e in cash.
retirement and the balanc ment to Bihari in
and Bi n the ratio of 4 : J. the jou rna l ent ries for recording the pay
at ( 1,50,000. You are required to giv e
(I.SC Sample Question Pa
per 2015)
rev alued at n ,00 ,000 and debtors are revalued
(ti) Stock is the books of the fmn. ued <20,000 and
es be brought down to (3
,000.
ari is settled by giving him vehicle val
'iii) Outstanding expens [Ans. Amount due to Bih
at a Joss of 10%.
iv) Investments are sold f26 ,667 in cash.]
'v) C is paid of f in full.
eet of the new Adjustment of Capitals
t, Ca pital Ac counts and the Balance Sh and Z who were sharing pro
fit in pmportion of
·epare Revaluation Ac co un
Q. 41. The Balance Sheet of x, Y

,000; Amount paid to

C f2 52 000· A' s Capital capitals is as follows :
Re valua tion (12
ns. Pro fit on b~ l~ ce ;43,000.J
pital ?3 ,49 ,000; BIS Total (10,33,000; Bank Liabilities
'OO; B's Ca
d C sharing pro.its Sundry Creditors
31st rch, 2~ 18 the Balance Sheet of Mis A, B an Capital Ales :
~;-i On ~a s:
ed capitals stood as follow
, n proport10n to the1r fix
 Uv) Provision for D. , ,•. " \I f\ , ,
' O U
- - -R~~l:R
(v) Sundry crct\i\o btfu\ \)
rs or~ cbtg\~-. mad --
--
;Ii------------
--•·
(\'i) Goot\wi\\ of
th . 65 ,0oo ~ Writ
c hr
g,oot\wi \\ be adiust •. m b<: t
e a~
O
on Debtors.
- ~. 123

, \
en
, . , va\ucd at ~ of f
\
u ure profns an
J Cu 1n the 5.
1 • -)•r\ d\ . ac ,60, 0()0 . d l . •
, " 11 ,e \ota\ capita\ ofoshscs 1n th counL'i of ,)a
l ·.
man anan \a
bc adJu. · c ratio of 3 . d M n sh s share of the
sted \ c new\ 2 eeta who will share
(viii) Amount duby open· Yconstituted· fir·m
.
the
e lo H '~g Current
ansh w Accounts wi\l be ~35,00,000,
favour payab\e af -· which w i\\
ter 4 mo~~~tt\cd
Prepare Revaluati by acccptin~ a bi\\
h on A c of exchange in his
t e new timn on H .
ansh's retircoem unt, Partners' C .
ent.
lAns. Profit on R apital Accounts and
Balance Sheet of
Capit · ev a\ uat· ~ (C
a\ A/cs : Saman ~2 ion "'2 60 000· B' . B.S.E. 2016 Comptt.
l oo OO O d, ' ' ills Delhi)
~9,6\,7\4 and M ' Paya
eeta (Dr.)~\, an, Meeta ~ \ 4 o ble accepted n 2 \
I 428·
. 49 . B / '
.. 7 4
Q. 43. AJay , ViJay an ' ' , S Total ~6 I ,56,428.
, 0,000; C ur rent Ncs Saman '(Dr.)'
d Sa njay )
the ratio o f 5 : 4 :
3. Vijay retires Aftare a .
goodwill and accu p rt~ers m a ~nn sh .
• aring profits and \oss
b lance o f ~2 00 mulated 6 er makmob al. l adJus t es in
000 d p~o 1ts, et ments re \atm •
g .
to revaluatio
a . l f A' ' ' c. _the capital accoun n,
d S
capita s o Jay an a~ t at of SanJay ~ \ ,0 t of A jay showed a credit
. anJay in the·\r p r:t 0,000. lt was decide
the new capital of ro 11 sh · ·. d to adjust the
the partner's and re armg ratio Y -
cord necessary entryou are reqmred to calculate
lAns. Ajay wil\ withdraw for surplus/deficit.
~ \ 2,500 and Sanjay
Q. 44. X, Y and Z will bring in ~ I2,500.
are partners in a fin )
Apri\ l st 20 l 8, X n sharing profits in
retires from the firm the ratio of 3 : 2 : \. O
shall be fixed at ~ , Y and Z agree that th n
2, l 0,000 in the prof e capital of the new fir
after al\ adjustmen it sharing ratio . The C m
ts on the date of re apital Accounts of Y an
~63,000 respectiv tirement showed bala dZ
ely. State the amou nces of ~ \,4 5,000 an
nt of actual cash to be d
the partners. brought in or to be pa
id to
lAns. Y will withdraw
~5,000 and Z will br
F ing in ~7,000.1
ol
Q· 45· lowing is the Balance Sheet
20 \ 8, who have ag of Kusum, Sneh and
reed to share profits Usha ~sat 3_\st March
and losses m· ·
proportion of the1r capitals
Balance Sheet of .
Kusum, Sneb and
Usha
as at 31st March , 20
18
Liabilities t i.t,seu
Capitals : Land and Building 4,00,000
Kusum 4,00 ,000 Machinery 6,00,000
Sneh 6,00,000 Closing Stock 2,00 ,000
Usha 4,00 ,000 14 00 000 Sundry Debtors 2,20,000
: ,70, 000
Employee's Provid Less : Provision for
Workmen Compens
Reserve
Sundry Creditors
ent_F und
ation
'
30 ,000
1,00,000
Cash at Bank -
Doubtful debts 20,000 2,00 ,000
2,00,000

\6 00 ,000
~

~-
\6 00 ,000 ' -
 ,,uswn ani1\Wl11oe m we uc;;)'V, v1vui. i>.l.1All l.l6 .a.Q"ffi• VJ. •U:tc ~~ ·
(vi~ f6Hnaunt due to Kusum be settl~d by pa~ing ~ 1,P0,000 iD c ,
transferring to heJi loan Ale which will be paid later on..
' ,
Pre~ tgevaluat10n Account, Capital Accowits Partners and BM
new mm afte1 K:usum 's retirement.
H,Ans. Lass on~yaluatian f?S,000; Kusum's Loan Ale ,3,62 ,Q
0£ Sn.eh ,~ ,00,000 and Usha , \8,00,000; Amount brought in. b~
irlsJia f4,9~,,142; B3Dk balance f6,22,857; B/S Total f 19,47,8,57 w] ,
Sn ,
RetiFement and Settlement of Loan .
Q. 46. ~ and Care partners sharing profits in 4 : 3 : 3. Thei n,
· ,as follows: · ;

·. an<d A and B decide to s ,

•

filim i& Vrilued at f HQ,000.

. is Qlldery,i}:ued iv
ir
'1 00 ~ an~
"'' ,,"""
..a
 A R TN E R s. 12 1
R D E A T H O F_A ~ _ _ _ ___ _
R E T IR E M E N T_ O -ts-th - -- - - - - - - - - - - _ _
. v e n ec e ss ar y l e d g er ac co un 8 1 et o ft h e fi rm af te r G 's re ti re m en t
G1 ;._ce S he
an A cc o u n t ti ll it is fi na li y :aidaoa.;
an d G 's L o
R ev al ua ti on ~ 1 20 0 . 8 n A le on I st A pr il , 20 15

s:
[A n s. L o ss o n daJanc e o f G 's L oa 0
u n ts : K ~ 20 00 0 ' gh t in by K f I 0, 90
TW ~ l
; C ap it a) A cc o S,OO O; C as h br ou
f 18 ,0 00
t7 ,9 5 0 ; C as h B al an ce ~5 70 0., otaI f 66 , 70 0]
an d W .
' .
an·
.
H in f : 4 : 3 1s
no t the ne w profit sh ng ratio.
B al an ce S he et o fX y d Z ar e sh ar in g pr of it s & lo ss es in th e
Q . 5 0 ( A ). T he 3 : J/6 re sp ec f 1' an w ho
ow s as at 3 l st M ar ch 20
l5 :
n o f I / 2 : 11 iv e Y w as as fo ll , I
ro po rt io t
t A ss et s
P
- - Li ab il it ie s
LS undry Creditors 12,9 00 Cash at B an k
25 ,6 50
5, 40 0
6, 00 0Bills Receivable
17 ,8 00
B ills P ay ab le 1, 50 0Book Debts
22 ,3 00
R es er ve Fu nd 3,00 0 Stock
3, 50 0
Profit & L os s A le Furniture 24,0 00
C ap it al s : 40,0 00 Buildings 9, 75 0
X
y 25 ,0 00 Machinery
20,0 00 1,08 ,4 00
z
I 1, 08 ,4 00
be
, 20 l 5 an d hi s sh ar e in th e fi rm is to
A pr il ;
bu si ne ss fr om l st 0; F ur ni tu re fJ ,0 00
.Y re ti re s fr om th e as fo ll ow s : S to ck f2 0, 00
bt s.
in e d on a re va lu at io n o f th e as se ts 0 ar e to be pr ov id ed fo r do ub tf ul de
as ce rt a 0 ; an d t8 5 0 in
ne ry f9 ,0 00 ; B ui ld in g f2 0, 00 at f6 ,0 00 . X is to be pa id fl 1, 05
M ac hi be va lu ed st at
go o d w ill o f th e fi rm is ag re ed to eq ua l an nu al in st al m en ts w it h in te re
T he th re e
on re ti re m en t an d th e ba la nc e in
ca sh till fi na l
a . al A cc ou nt an d hi s L oa n A cc ou nt
5 % p. n A cc ou nt, X 's C
ap it
S ho w R eva lu at io 1st A pr il , 20 15
f X 's L oa n A le on
p ay m e nt . al an ce o
. L o ss o n R e va lu at io n t8 ,4 0 0 ; B
[:\11,
o of
f 30 ,0 0 0 .J ar in g pr of it s an d lo ss es in th e ra ti
rs sh d as
d R w er e pa rt ne et o f th e fi rm st oo
. 5 ( B ). P . O an , 20 18 th e B al an ce S he
2 re sp ec ti ve l y. A s at 3 I st M ar ch
5 :J :
 ~-::~(a)Go;d~¥ill:,;s ~aJued at fl9 ,000;
(b) Fixed assets were valued
at f30,000; RE2·1~E~ E~T_O~ ~~A!I-!
__~ !
(c) Stock was considered as -- [ /\ ns. Net amount payable ~to~
ARTNER
__ __ _ ~ ~
1
worth t I 0,000. ~; ;~ - - - - - - - - __ __
was to be paid through cash, bro (including interest)]
ught in by P and R, in such ' ' OO; Payment made in third yea
. r t 1,36,950
eir c als proportionate to their new pro fiits h .
. Q api·t . a
th anng ratio which wa Wa"J as Q. 53.
ratio of3 : IKus hal , Kumar and Ka 'ta
: 1. On Ist April,
R 2/5. s to be 1~'II llli.t 201 /:h .w;rc partn~rs in a firm
sharing profits in the
e1r alance Sheet was as follo
Record these matters in the jou J> 315" Balance She et of K I
ws .
rnal of the finn and prepare the u, ia l, Kumar and Kav ita
Sheet. resuJ Iii as at /st April. 20/2
.

[Ans. Profit on revaluation t4,000 !ant ll,i,. Liabilltiu

p f27 ,000, R f I 8,000 and Bal ; Amount paid to Q t J 7 800
·
Hints:
ance Sheet total t 51,000 ; Ga
Total Capital of the new firm
inin g Ra t·' Cap
10 1 itat
: 2.]
"I
A,
'V~
creditors
Bills pay able
I ,20,000 Cash
l ,80,000 Debtors 2,00,000
'
70,000
= ~21 ,600 + ~J 17,800 + ~5,600 == f 4 5,000
Gen eral Reserve l,20,000 less : Provision
10,000 1,90,000
P's Capital in the new firm = ~45 ,000 X -5 Capitals : Stock 2,20 ,000
== f27,ooo Kushal 3,00,000 Furn iture 1,20,000
R's Capital in the new firm = NS ,ooo x I5 Kumar 2,80,000 Building 3,00,000
= fI8,0oo Kavita 3,00 ,000 8,80,000 Land 4,00 ,000
Cash brought in by P = ~27,000 - ~21 ,600 13,00,000
== f 5,400 13,00,000
Cash brought in by R = ~ 18,000 - ~ 5,600 == t 12,400
. Q. 51. P, Q and Rare partners On the above • date Kav
ita retired and the "'oll
in a finn. R retires from the (i) Goodwill of the firm was
11 ow·mg was agree d :
retuement, t3,00,000 is due to finn 0 valued at N0,000.
him . It is agreed to pay him_ (ii) Land was to be appreci
at the end of the year. Prepare in ins tal ~en : tbe date or ated by 30% and building was
R's Loan Account in the foll to be depreciated by
owing cases : every Y~ tJ ,00 ,000 .
(i) Five yearly instalments (iii) Value of furniture was
plus interest @ 15% p.a . to be reduced by t20 ,000 .
(ii) Instalme~ts of< 1,00 ,00 (iv) Bad debts provision
0 which is to be increased to t 15,000.
?utstandmg balance for the firs already includes interest @ 15% (v) I 0% of the amount payable
to Kavita was paid in cash and
t four years and the balance the balance was
m the fifth year. includ·p.a._ on ~ transferred to her Loan Accoun
· ( vi) Capitals of Kushal and t.
mg mteresi Kumar will be in proportion to thei
(Ans. First Method : Interest ratio. The surplus/deficit, if any r new profit sharing
: !st year t45 ,000; 2nd yea in their Capital Accounts will be
<27 ,000; 4th yea r< 18,0 00; 5th r <36 000 · 3 adjusted
yea r <9,000 ; through Current Accounts.
Second Method : Interest : ' ' rd Year Prepare Revaluation Account,
t 27 ,263 ; 4th year <16,352; 5th yea 1st year <'45 ,000; 2nd year <'36 750· 3r Kushal and Kumar after Kavita'
Partner 's Capital Accounts and
Balance Sheet of
r <'3 ,805; Final Pay ment f29 s retirement.
31stit!h~:i .
;nd C ~re partners _in a finn
C retlfed . Following balances
sha ring pro
, J70 ]'
fits in the ratio of 3
' d year [ Ans. Loss on Revaluation
A/cs : Kushal t4,98, 000 ; Kum
tS,000; Kavita's Loan Accoun
ar ti,6 6,000; Current A/cs : Kus
(C.B.S.E. 2014)
t U,97,900; Capital
were disclosed by the Firm's: 2 : I. On Kumar ~ 1,3 5,000 (Cr.); Balanc hal n ,35,000 (Dr.);
Sh ee t on th1s date : Balance e Sheet Total ~ 13,96,900.]
Q. 54. A, B and C are partner
(i) Capitals: A < 10,00,000; s sharing profits in the ratio of 50%
B <'6,00,000 and C <4,40, B reti res and after all adju , 30% and 20% .
000 . stments relating to accumulated
profits , goodwill and
d at~ 1,90 ,000 ; ~ 1,50 ,000 and t80
(iz) Profit & Loss (Dr. Balanc revaluation etc . their capitals stoo
e) <'45,000. It was decided that entire sum ,000 respectively .
(iii) Ad vertise ment Expend payable to B is to be brought in by
iture < 15,000 . so as to make their capitals pro A and C in such a way
portionate to their profit sharing
Rev alua amount to be brought in by A ratio . Calculate the
tion of
On the retirement ofAss and C and pass entries for the
C ets
g and
d re- . ~ssessment ofliab . ,ht1
. .. same. Also pass entry
, oo w1 11 is valued at < 1,80,0 es resulted in a loss oH60,000, relating to payment to B.
00. [Ans. Amount brought in by A
<2,00,The amount payable to C is tJ,10,000 and C t40 ,000 .]
000 each includ,·ng . t a
greed to be pai.d m .
two yearly instalments of
Q. 55. P, Q and R are in partner
ship sharing profits in the ratio ofJ
lfst two years and the b m rest @ J Oo/c0 , 2 , I. R retires.
fi . .
st March every year. a1ance mcludmg j p.a . on the outstanding balanc
e dun•ng the Following balances appeared
31 nterest m· the thJr . d year.
Books are closed Oil
in their books :
t
Prepare C's Loan A 12,000
ccount till it is finally paid. Goodwill
 5. IJU
-- -- -- I U,UUU

Bank 70,000
Other Assets
Creditors
14,ooo
Capitals :
p 40,000
Q 20,000
R 92,000 ~
92,00
---.:...::.0
~ OOO . Sufficient money is to be introduc
·11 . agreed at ' 30' d
Goodwi is 4 000 in cash at bank. p and Q are to pro . e
aid off and leav e t , vide such sso lfiat h
P . .
itals proport10na te to their share of profits . l.lfll as
make theII cap . and the new balance sheet. \
Pre are necessary entnes .
p .d R ~21 ' OOO · fina l Capitals P t36 ,000;
Amount pa1 to '
[Ans. d O tl0 000. BIS tota l t74,000.]
in t5,000 an _ '
Q. 56. A, Band C we
re equal partners. Their Balance Sheet as at 31s
tM
was as under : arch, 201·
BALANCE SHEET
as at 31- 03- 201 7

Liabilities t __ Ass ets

~
- --
BIP 20,000 Ban k
Creditors 40,000 I Stock
General Reserve 30,000 I Furniture 20,()0j
P/L 6,00 0 Debtors 28,0f1J
I 45,000
Capitals : Les s: RB DD
5,000 40,0~1
A 60,000 Land & Building
B 40,000 1,20,0fXJ
C 32,000 1,32 ,000
I
2,28,000

B reti red on 1st Apri I, 2017. A and C decide

d to continue the business sharini
profits in the ratio of 3 : 2. Following terms wer
(a) Goodwill of the firm was valued
e agreed :
at ~57 ,600.
l
(b) Reserve for bad and doubtfuLdehts. !/\~
~~ ?,;cni1Jaw~ u\1l 'l'ih1 01Jn"'dt:otors.
(c) Land and building to be increased
to ~ 1,32,0 00.
(cl) Furniture to be reduced by ~8,000 .
(e) Rent outstanding (not provided for as
Remaining partners decided to bring sufficient
yet) was ~ 1,500.
cash in the business to pay off 8
I
and to maintain a bank balance of ~24 ,800. The
y also decided to readjust their capitals
as per their new profit sharing ratio.
Prepare necessary Ledger Accounts and Balanc
e Sheet.
[ · Profit on Revaluation : t 3,000; Cash pai
d to B t72 ,20 0; Final Capitals Al
t l,Os ,4so and C t70 ,320; A brings in ~47 840 and
t 2,37,300 .] C brings in t29 I 60· BIS Tota 1
' ' '
 ~-::~(a)Go;d~¥ill:,;s ~aJued at fl9 ,000;
(b) Fixed assets were valued
at f30,000; RE2·1~E~ E~T_O~ ~~A!I-!
__~ !
(c) Stock was considered as -- [ /\ ns. Net amount payable ~to~
ARTNER
__ __ _ ~ ~
1
worth t I 0,000. ~; ;~ - - - - - - - - __ __
was to be paid through cash, bro (including interest)]
ught in by P and R, in such ' ' OO; Payment made in third yea
. r t 1,36,950
eir c als proportionate to their new pro fiits h .
. Q api·t . a
th anng ratio which wa Wa"J as Q. 53.
ratio of3 : IKus hal , Kumar and Ka 'ta
: 1. On Ist April,
R 2/5. s to be 1~'II llli.t 201 /:h .w;rc partn~rs in a firm
sharing profits in the
e1r alance Sheet was as follo
Record these matters in the jou J> 315" Balance She et of K I
ws .
rnal of the finn and prepare the u, ia l, Kumar and Kav ita
Sheet. resuJ Iii as at /st April. 20/2
.

[Ans. Profit on revaluation t4,000 !ant ll,i,. Liabilltiu

p f27 ,000, R f I 8,000 and Bal ; Amount paid to Q t J 7 800
·
Hints:
ance Sheet total t 51,000 ; Ga
Total Capital of the new firm
inin g Ra t·' Cap
10 1 itat
: 2.]
"I
A,
'V~
creditors
Bills pay able
I ,20,000 Cash
l ,80,000 Debtors 2,00,000
'
70,000
= ~21 ,600 + ~J 17,800 + ~5,600 == f 4 5,000
Gen eral Reserve l,20,000 less : Provision
10,000 1,90,000
P's Capital in the new firm = ~45 ,000 X -5 Capitals : Stock 2,20 ,000
== f27,ooo Kushal 3,00,000 Furn iture 1,20,000
R's Capital in the new firm = NS ,ooo x I5 Kumar 2,80,000 Building 3,00,000
= fI8,0oo Kavita 3,00 ,000 8,80,000 Land 4,00 ,000
Cash brought in by P = ~27,000 - ~21 ,600 13,00,000
== f 5,400 13,00,000
Cash brought in by R = ~ 18,000 - ~ 5,600 == t 12,400
. Q. 51. P, Q and Rare partners On the above • date Kav
ita retired and the "'oll
in a finn. R retires from the (i) Goodwill of the firm was
11 ow·mg was agree d :
retuement, t3,00,000 is due to finn 0 valued at N0,000.
him . It is agreed to pay him_ (ii) Land was to be appreci
at the end of the year. Prepare in ins tal ~en : tbe date or ated by 30% and building was
R's Loan Account in the foll to be depreciated by
owing cases : every Y~ tJ ,00 ,000 .
(i) Five yearly instalments (iii) Value of furniture was
plus interest @ 15% p.a . to be reduced by t20 ,000 .
(ii) Instalme~ts of< 1,00 ,00 (iv) Bad debts provision
0 which is to be increased to t 15,000.
?utstandmg balance for the firs already includes interest @ 15% (v) I 0% of the amount payable
to Kavita was paid in cash and
t four years and the balance the balance was
m the fifth year. includ·p.a._ on ~ transferred to her Loan Accoun
· ( vi) Capitals of Kushal and t.
mg mteresi Kumar will be in proportion to thei
(Ans. First Method : Interest ratio. The surplus/deficit, if any r new profit sharing
: !st year t45 ,000; 2nd yea in their Capital Accounts will be
<27 ,000; 4th yea r< 18,0 00; 5th r <36 000 · 3 adjusted
yea r <9,000 ; through Current Accounts.
Second Method : Interest : ' ' rd Year Prepare Revaluation Account,
t 27 ,263 ; 4th year <16,352; 5th yea 1st year <'45 ,000; 2nd year <'36 750· 3r Kushal and Kumar after Kavita'
Partner 's Capital Accounts and
Balance Sheet of
r <'3 ,805; Final Pay ment f29 s retirement.
31stit!h~:i .
;nd C ~re partners _in a finn
C retlfed . Following balances
sha ring pro
, J70 ]'
fits in the ratio of 3
' d year [ Ans. Loss on Revaluation
A/cs : Kushal t4,98, 000 ; Kum
tS,000; Kavita's Loan Accoun
ar ti,6 6,000; Current A/cs : Kus
(C.B.S.E. 2014)
t U,97,900; Capital
were disclosed by the Firm's: 2 : I. On Kumar ~ 1,3 5,000 (Cr.); Balanc hal n ,35,000 (Dr.);
Sh ee t on th1s date : Balance e Sheet Total ~ 13,96,900.]
Q. 54. A, B and C are partner
(i) Capitals: A < 10,00,000; s sharing profits in the ratio of 50%
B <'6,00,000 and C <4,40, B reti res and after all adju , 30% and 20% .
000 . stments relating to accumulated
profits , goodwill and
d at~ 1,90 ,000 ; ~ 1,50 ,000 and t80
(iz) Profit & Loss (Dr. Balanc revaluation etc . their capitals stoo
e) <'45,000. It was decided that entire sum ,000 respectively .
(iii) Ad vertise ment Expend payable to B is to be brought in by
iture < 15,000 . so as to make their capitals pro A and C in such a way
portionate to their profit sharing
Rev alua amount to be brought in by A ratio . Calculate the
tion of
On the retirement ofAss and C and pass entries for the
C ets
g and
d re- . ~ssessment ofliab . ,ht1
. .. same. Also pass entry
, oo w1 11 is valued at < 1,80,0 es resulted in a loss oH60,000, relating to payment to B.
00. [Ans. Amount brought in by A
<2,00,The amount payable to C is tJ,10,000 and C t40 ,000 .]
000 each includ,·ng . t a
greed to be pai.d m .
two yearly instalments of
Q. 55. P, Q and R are in partner
ship sharing profits in the ratio ofJ
lfst two years and the b m rest @ J Oo/c0 , 2 , I. R retires.
fi . .
st March every year. a1ance mcludmg j p.a . on the outstanding balanc
e dun•ng the Following balances appeared
31 nterest m· the thJr . d year.
Books are closed Oil
in their books :
t
Prepare C's Loan A 12,000
ccount till it is finally paid. Goodwill
 5. IJU
-- -- -- I U,UUU

Bank 70,000
Other Assets
Creditors
14,ooo
Capitals :
p 40,000
Q 20,000
R 92,000 ~
92,00
---.:...::.0
~ OOO . Sufficient money is to be introduc
·11 . agreed at ' 30' d
Goodwi is 4 000 in cash at bank. p and Q are to pro . e
aid off and leav e t , vide such sso lfiat h
P . .
itals proport10na te to their share of profits . l.lfll as
make theII cap . and the new balance sheet. \
Pre are necessary entnes .
p .d R ~21 ' OOO · fina l Capitals P t36 ,000;
Amount pa1 to '
[Ans. d O tl0 000. BIS tota l t74,000.]
in t5,000 an _ '
Q. 56. A, Band C we
re equal partners. Their Balance Sheet as at 31s
tM
was as under : arch, 201·
BALANCE SHEET
as at 31- 03- 201 7

Liabilities t __ Ass ets

~
- --
BIP 20,000 Ban k
Creditors 40,000 I Stock
General Reserve 30,000 I Furniture 20,()0j
P/L 6,00 0 Debtors 28,0f1J
I 45,000
Capitals : Les s: RB DD
5,000 40,0~1
A 60,000 Land & Building
B 40,000 1,20,0fXJ
C 32,000 1,32 ,000
I
2,28,000

B reti red on 1st Apri I, 2017. A and C decide

d to continue the business sharini
profits in the ratio of 3 : 2. Following terms wer
(a) Goodwill of the firm was valued
e agreed :
at ~57 ,600.
l
(b) Reserve for bad and doubtfuLdehts. !/\~
~~ ?,;cni1Jaw~ u\1l 'l'ih1 01Jn"'dt:otors.
(c) Land and building to be increased
to ~ 1,32,0 00.
(cl) Furniture to be reduced by ~8,000 .
(e) Rent outstanding (not provided for as
Remaining partners decided to bring sufficient
yet) was ~ 1,500.
cash in the business to pay off 8
I
and to maintain a bank balance of ~24 ,800. The
y also decided to readjust their capitals
as per their new profit sharing ratio.
Prepare necessary Ledger Accounts and Balanc
e Sheet.
[ · Profit on Revaluation : t 3,000; Cash pai
d to B t72 ,20 0; Final Capitals Al
t l,Os ,4so and C t70 ,320; A brings in ~47 840 and
t 2,37,300 .] C brings in t29 I 60· BIS Tota 1
' ' '
 TNE R
Hl-:'l'll{EMEN'f' O R fWA'fl I O1~A PAR 5. I JJ

/l 's C11p i1al 6.00 0

12,000 Debtors
("s ( ':ipilUl 6,900
k,OOO <'osh al 0 ank
8,000
62,ooo
-.......__
.
Advertisement Su! J:)CflSe

-
--
62,0 00

A died on 30-9-2020 and Band C cl cc,d o of

cd to share future pro fits in the ratiwer
: J. Under the partncrs hi a ,r d partner e
7 . d to . p g cement the executors of a decease
ent1t1e •
. account.
to the credit of part ner ,s capital
(a) Amount standing .
(b) Interest on capital at 12% per ann um.
( c) Share of goodwill on the bas1s · of four years purchase of last three years I
average profit.
the cl · f th . r to the date of death
(d) Share of pro . fit from . osrng o e last financial yea
year 2018, 20 I9 and 2020 were
on the basis of last year's profit. Profits for the J
f 8,000; f 12,000 and f7,000 respectively.
to his executors.
Prepare A 's Capital account to be rendered
190.]
[Ans. Amount due to A's Executor's f44 ,
to A and
Hin t: A's shar~ of g~o d~il l ~ 18,000
and share of profit t 1,750 will be credited
it should not be debited to
deb ited to B and Cm the1r gaming ratio of 4 : l . A's share of prof
remain the
it sharing ratio between Ban d C does not
Pro fit & Los s Sus pen se Ne because prof
ged from 3 : 2 to 7 : 3.
sam e. The ir pro fit sharing ratio has chan

Q. 64. Ram, Ghanshyam and Vrinda wer

e partners in a firm sharing profits in the
1st February,
on 31st March every year. On
ratio of 4 : 3 : 1. The firm closes its books n
2015 Ghanshyam died and it was dec
ided that the new profit-sharing ratio betwee
ship Deed provided for the following on the
Ram and Vrinda wil l be equal. The Partner
death of a partner :
the basis of half of the profits credited
(a) His share of goodwill be calculated on
pleted years :
to his account during the previous four com
e.
The firm's profit for the last four years wer
,000, 201 2-13 - f40,000, and
2010-11 - fl ,20,000, 2011-12 - f80
2013-14 - f80 ,000 .
(b) His share of profit i~ the year of his
death was to be computed on the basis of
average profits of past two years.
ess ary Journa l entr ies relating to goo dwi ll and profit to be transferred to
Pass nec
w your workin gs clearly.
Ghanshyam's Capital Account. Also sho (C B.SE. 2016 Comptt. Delhi)

s. Gh ans hya m 's sha re of Goo dwi ll t60 ,000, whi ch will be debited entirely ~o
[An l
of profit till the date of death t 18,750 wil
Vrinda 's Capital Ale ; Ghanshyam 's share
Ale.]
also be debited entirely to Vrinda 's Capital
adjusted through Profit & Loss Suspense
• t : Ghanshyam ,s share of' profit will not be . .
Hm of contmumg partners.
N e becaus e of change in profit sharing ratios
the Balance
artners in a finn A died on 31.3 .2018 and
Q. 65. A, B and C were P
Sheet of the firm on tha t date was as und
er :
· "
·.2 Q)~@ / @t/11 P 1 ~@ !) :
 _R~·12R~~t:_"~ ~"_u_c~ J~ i5_)F I\ fl
- - - . C -- "R·
5 134 - - - - - - - -A-NC,;SHEET OF A. BAND ~ ' ,J
I II/ · - ·- -- -- BAL ?OJS
a.f al 3/.J.-

_----:~;;:;::=--- r
f
--~ -:== s
s
~
:~~Ae,~
'IS~ == ~
ii ,, ,. ''--~~~=·=---T
cremtors
~ t'l
7,000 Ca.sh at Bank
9,000 Debtors
' f umjrure
---,._
12.r ,
32 ,.
General Reserre .
WorkJDen ·s Compensaoon I0,000 Plant lO.<.,
Rese1,:e 6.000 Parents 40,ry
Profit & LosS Account 8,o·
Capitals : 40,000
A 30.000
B 20.000 90.000 I
C
' 1,22.000 ~
~ I

. d th •twas found that patents were valueless, furniture was to be b

On A s ea I plant was to be reduced by f 10, 000 d th rou '
~?4 000 an ere was a liab·1·
1 1ty
g/Ji
do\rn to , - , , . 0
<7 000 on account of workmen's compensation. f I
' Pass the necessary journal entries for the above at the time of A's death. f
(CB.S E 2019, Delhij /
[Ans. Amount due to A's Executors f38,000 .]
I t'f Q. 66_A, B, c and D were partners sharing profits in the ratio of 5 : 3 : 2 : 2. Bdied
on lsr Marc~ 2018. Goodwill ofthe firm was ~alued at f6,00,000. A, C and D decided
ro share future profits equally. Give necessary Journal entry.

, . [Ans. Debit C and D by f 1,00,000 each and Credit A by f50,000 and B bv

<1,50,000.] '
Q. 67 (A). Brown and Smith are partners. The partnership deed provides:
(i) That the Accounts be balanced on 31st December each year.
(ii) That the profits be divided as follows: Brown 1/2; Smith 113 and carried toa /
Reserve account 1/6.
(iii) That in the event of the death of a partner, his executors be entitled to be paid I
out:
(a) The Capital to hjs credit at the date of death.
(b) His proportion of Reserve at the date of last Balance Sheet.
(c) His proportion of profit to date of death based on the average profits of /
the last three completed years.
(d) By wa~ of goodwill his proportion of the total profi~ for the three
preceding years.
On 31st December, 2017, the ledger balances were :
~ f
Brown's Capital
9,000
Smith 's Capital
6,000 I
Reserve
3,000

l
Creditors
3,000
 5 _"13 7

I
ft_J-. · i · s KJ~. M E ~ - r <..>R l.>EAT J-1 <>FA ~AR ""_!"NER
- - - -- - -
(a) f:Jala ncc in Capit. aJ Accou nt.;
ge o f the pa:.s14 year .. s
(b) Share oC goodw ill value d on the basi s of't.hr ic e the avera
profit s;
( c.: ) Sh_a.rc in profit s up le..> the d.at.e of' de-c.1.th on t..he basi
s of' avera ge profit s Cor t:he
past 4 yea.rs ;
(d) Int.ere -st on capita l accou nt@ 12% p . a .
Profi ts Jor the years endin g on Marc h 31 01·20 14 20J5
.. 2016. 2017 respec t.iveJ y
were ~15,.0 00,. ~17,.0 00,. ~19,.0 00and ~13.0 00 . ..
B's legal repre senta tives were to be paid the arnou. rrt
due . A and C cor.rti nued as
partn ers by_ t.a.k..in g over B"s share equal ly . Work. oui the
repres entat. 1 ves.
a..rnou .rrt payab le to ~ s legal 1
[ Ans- Amou nt paid to B's repres entati ves ~44 .. J 58. ]
I lint, : ( l ) Share in profit s Cor 2 . 5 month .s "°' J ,.333 .
d t..o A and C in tlx:::ir g;a:uri. ng
(2) B ' s sh.are o r profit "°' 1,.333 wilJ be credit. ed to Band debite
ratio i . e . equal ly .
of 3 : 2 : I - As at 31st
Q. 7 t _ X, Y and Z were partn ers sharin g profit s in t..be ratio
M.a..rc h., 20 1 8, their Bala.n ee Sheet stood as under :
f
Sundr y C redito rs
Liabi lUie.s ~

4-4,.00 0 Ca.sh at. Bank

#co AP
22,,.00 0
1.20..000
- f

90, 000 St.ock 64~00 0

Reser ve Debt.o rs
C apit.aJ s : 2...50~ 000
2 , 00 ,.000 Jnvest.. rn.enU:.
X 1 J,..2"8., . 0 00
y 1 , 50, 000 Fixed A.sset.s
z J , 0 0,00 0 5 ~84.. 000

d ·d t=hat. ilie exec1. .rtors oft.he

d es
y died on 31st. July .. 20 I 8 . The partne rship ee prov1
decea sed partn er a.re entit.l ed t.o :
(i) The Capit al to his credit at the time of hjs death. ;

( ii) I-I.i s share o f reserv es; th b don the avera ge profit s o f the last
•d
( i i i ) 1-lis share o f profit s t.o the date 01. ea a.se
---- mr,,lc> te.d v ears, less 10%, a.n_d three
~E_!l~MEt:!_T__ORE~~J:!. ?_F_ApAR.TN£R
R died on 30thApril, 20 16 "n;;---- --- _____________ ~-139
death of a partner : · Partnership deed provided for the following on the
(i) Goodwill of the finn wa t
O
profits of the last 5 y s be valued at 3 year's purchase of the average
ears. The p fits ~ .
31-3-20! 4, 31-3-2013 and 3 3 ro 1 ,or the years endmg 31-3-2015,
U ,20,000 respectively. l- -2012 Were {80,000; {80,000; n ,10,000 and
(ii) R's share of profit or loss t'll th
1
· of the profiit ortoss for theeYear
bas1s date ending
of his death was to be calculated on the
31-3-2016.
You are required to calculate the following :

(i) Goodwill of the firm and R's share of goodwill at the time of his death.
(ii) R's share in the profit or loss of the firm till the date of his death.
Prepare R' s Capital Account also at the time of his death to be presented to his
executors.

[Ans. R's share of goodwill {89,100; R's share in loss (for one month) f6,000;
Amount due to R's Executors ~4,38,100.]

Q. 74. G, E and F were Partners in a firm sharing profits in the ratio of 7 : 2 : l.

The Balance Sheet of the firm as at 31st March, 2018 was as follows :
BALANCE SHEET OF G, E AND F
as at 31st March 2018
r Liabilities l
'
·- -~
Capitals :
G 70,000
;

' Goodwill
Ass,e~ -•·•·
'
40,000
I
Land & Buildings 60,000
E 20,000 Machinery 40,000
F 10,000 1,00,000 Stock 7,000
General Reserve 20,000 Debtors 12,000
Loan from E 30,000 Cash 5,000
Creditors 14,000
1,64,000 1,64,000
I I

2018 Partnership deed provides for. the settlement of

E died on 24th August . . . . to his capital as under .
I
. on the death of a partner m addrt10n
c aims to be computed upto the date of death
. The share of profit of deceased partne~t three years which was t 80,00_0: .
(I) the basis of average profits of t~e p d re-assessment ofliab1ht1es
on . tit/loss
1 on revaluat1on of assets an
(ii) His share m pro . hinery at '38,000 and
which were as follows . revalued at t94,000, Ma~ debtors for bad and
Land and Buildings we_r~ f2 5% was to be create on
0 A prov1s10n °·
Stockatf5,00 . dt hisLoanAccoun~
doubtful debts. E's executors was transferre o
(111 ayable to A/
...) The net amount p d E's Executor c.
to be paid later on. · I Accounts
Partner's Capita . ·ta1anbalances in therr
· ne'='
w -
· Account,
Pre are Revaluation_ the business keeptn _,
G and Fp dec1.ded to continue
· g their
/ 1Q ffl re, , _,
~ j - /~ I _l I U~ J :'M-1
caP.l .,J !
1 /:"' · i>te\
 :· · l\ p
-.~r deficit 10 be tmn~lcrrcd lo current u .... ~'l'tl
- -
1~0 ___ __ - - - - - - 1
rofit sharing ratio. Any surp us
""'"'111~
J(l rtRFMl· N r ( lk. lW/\l f l op A P,\R 'I ~-1
t· r, ,y 29 700:- E's share of.profit ~6.400·, ,.:.,.-; 11 l! ' 5. J4(
~
j, J!
artners. f• Reva 1ua 10 ' • . ..
7H. l IJ 011d (' were Piirtnc r!! .1
I'
. .
interest lo11n <l.
[Ans. Pro ,ton to his Loan N e t59,060 (mcludmg 011 ° profits in the ralm of 8 : 4 : J.' B
·tire : 111111 hiri ~hnrc is tukcn up ~( l!;I 1'f 11y 1l • •H•I( • gt , •
t1Lfirrn ~harin
~c :S!~~s
bal~ ~ Capit al t I0,970 .) t7~~1>1 IC
l,\ 11 •,. 1~ ., 11
,. I I ti L - ·
a•..., r ind lhc new pro 11 su.inng rallo.
✓apital ~ ' · .d 3plt3 . 1SO 1. r'IJ' ... " ''"' urc the smne us .shown
r "u"·' •'
unv amount to their Current
by. their Cop·
Ac .·counts.
' llttl
A , -~
1
o . 71) . Shi v, Mohan ttfl{J Hur, w . _ .
Hint : AdJuste c . ·fcrrin u ~ ., . . ~~~c pa.rine rs 10 11 firm thating profit., in the rat10 of
knee there is no need ot tr.ins , . <; • ;t Mohu11 retired 1,ntJ 111 s < f '<led h' and H·ar,,·
· 1·s the Balance Sheet ol Ram. Mohan and
Sohn~,.. as at l ., , • • !1 'l,.:i rc Wi1
. '" 1 equally between S rv
c 11
Q. 75. The io owmg ( ··t1cul atc the new profit ~harirtu0 ,~,ii, ' 11 f ,,...
,1 111 1/ and 11,rrr.
'
- -- 1- '
IAn,. 15 : l) J
v1arch, 2017 : . •
, Asset () 80 A, FJ and C were 1nnnnc
---~." '
i. •. •
Uahililies
Sundry Creditor.; I 0,000 Tools · . .' C . . .
y, s
n:tirc_ aoci his
1
.• • r
11
share was
''"'""It
taken up by ;1 and 8 in
1/5, 1/J and 7/1 :,
prnfi u1 in the rat io ofthe' ratio of 3 : 2.
n:spc ct ivd
7.500 Furniture Ca lculate the new ratw.
Reserve Fund
Capitals : Stock [,\ns. 12 : 13J
Ram 20,000 Debtors
ratio of 4/9 : 3/9 : 2/9. X
Moha n 10,000 Cash at Bank (). 81 . ~- Y and Z were partners sharin g profit~ in the lj
rati<, of 2 : I. Find out the new ratio.
Soh:J.n I0,000 Cash in hand retires and his share was taken up by Yand l in the
[Ans. 17 : 10] ll
57,500
Q. 82. A, B and C were partners sharin g pro fi ts in the ratio of 4 : 3 : 2. 8 rt-tires
firm . Calculate the new ratio, if
s in the ratio of 2 : 2 : I. 8ohari from the
Ram, Mohan and Sohan shared profits and losse of 2 : I.
ment the executor of Sohan Was (i) B's share was taken up by A and C in the ratio
died on 30th June, 2017 . Under the partnership agree (ii) B's share was taken up by A and C equall y.
entitled to :
Account. (iii) B's share was taken up by A only.
(a) Amount standing to the credit of his Capital
[Ans. (i) 2: I; (ii) 11 : 7; (iii) 7 : 2J
(b) Interest on Capital which amounted to ~ 150.
in the ratio of 4 : 3 : 3. On
(c) His share of goodwill ~5,000. Q. 83. H, P and S were partners in a firm sharin g profits
His 20% share was acquir ed by /-I and remaining by S.
last financial year to the date of August I, 2017, P died.
(d) His share of profit from the closing of the (C B. SE Sample Paper. 2018)
death which amounted to nso . Calculate the new profit sharing ratio.
[Ans. New Ratio 23 : 27]
and the balance in four equaJ
Sohan ' s executor was paid t 1,400 on 1st July, 2017
June, 2018 with inter est@ 6% p.a. Calculation of Gaining Ratio :
yearly instalments starting from 30th g profits _in the ra_tio of
n' s Account to be rendered to his Q. 84. Kangli, Mangli and Sanvali are three panners sharin
Pass necessary Journal entrie s and draw up Soha ing Mangl i and Sanva li will share profits m future 111 the
Acco unt till it is finall y paid. 4 : 3 : 2. Kangli retires. Assum
executor and Sohan ' s Execu tor's
ratio of 5 : 3, determine the gaining ratio.
his Executor's Ale ~17,400;
[Ans. Balance of Sohan 's Capital Ale transferred to [Ans. Gainjng Ratio 21 : 11]
st allowed in four yeclfs f960;
Annual instalment (excluding intere st) ~4,000. Intere Q. 85. A, Band Care partners sharing profits and losses
eq~l y. B ~ies. A and C
in four years (inclusive of interest) gammg ratio.
~720; ~480 and n40 respecti vely; Amount paid agree to share future profits in the ratio of 7 : 5. Calcu
late the
~4,960; t4,720; ~4,480 and t4,240 respectively.]
[Ans Gaining Ratio 3 : I]
and Care artners with capital s oft 1,00,0 0~; ns_,ooo and _tSO,O~O
CE) . retires, His
their capital. Char'
ADDITIONAL QUESTIONS (FO R PRA CTI A, B p .
Q.t. I They share profits an osses m
86. d I , the ratio of
ate the new profit s
.
mg ratio
respec ,ve y. . , of? - .
· I· Calcul
Calculation of New Profit-~,h:iring Ratio : share is acquired by A and 8 m the ratio
.
ratio of 4 : 3 : 2 : I. A and and gaining ratio.
Q. 76. A, B, C, and Dare partners sharing profits in the . 16 . 11 · Gainin g Ratio 2 : I]
sharing ratio of Band D. OOO· ns 000 and t50,0040
C retire from the firm . Calculate the new profit [Ans. New Ratio · ' 'ers with . . .t
capita 1s o1 1,00 , , ' .
[Aus. 3 : I] Q .87. A, Band Care p n . art , •redb yAan dBin thera hoof 6: -
.is acqu1
' . t his share
1/2 : 3/8 : 1/S. respectively . On C s rellremen '. d gainin.g ratio.
Q. 77. A, B and C are partners sharing profits in the ratio of Ascertain new profit sharing ratio an .
Calculate the new ratio if C retires.
. 8 7· Gaining Ratio 3 . 2], J (.lHK' l i):• I • ;
l{;j ~ ¥01
1 •
[Ans. 4 : 3] [Ans. New Ratio : • ~
..=--&i'.6~~r!!J~ ~_,
~F'rtREMENT OJ{ Df:.ATH ()IJ A P-'R·r
" Nf!M S.143
goodwill ur.the flrm wos vnlucd ot { . - - -
1
r ti _ .20,000. f'a.1s ncces...-.ary ;oumal entry for the
l rcutmc11t ol goodwill on 1., ·~ · c rement.
I \11'1 . o·s C.:opilal A/c(l ,20.000 X2JL.
T0 l , r • ,,) Dr 40.000
J li '--"Pilnl Air. ( I 20 000 , . .
T0 M'8 C , , x 116) 20,000
apitnl 1\/c ( 1,20.000 x I /6) 20,000J
\\'or l,iug Nott~ : 0 ( iaim, r _I ., ~
3 6 6
i\4 Sacrifice I 3
3- 6 - t,
Thus O gains¾ which includes i sacrificed hy Min favour of 0 . Hence. 0 is required 10

compensate M for such sacrifice.

Q. 94. X Y and Z are in partnership sharing profits in the proportion of 3 : 2 : I .

There is no goodwill Ne in the books of the firm.
As from l st April, 2020, it was agreed that x should gjve only part of time, to the
business and that in consequence he shouJd receive in future only one half of his
'
1

previous share, the remaining half being divided equally between Y and Z. The
goodwill to be valued for this purpose, at t40,000.
Show the new share of partners and pass necessary journal entry.
(Ans. New Profit sharing ratio of X, Y and z will be 6 : 11 : 7 respectively.
Entry will be :
Y's Capital A/c Dr. 5,000
Z's Capital Ne Dr. 5,000
To X's Capital Ne 10,000]
Q. 95. Kavya, Manya and Navita were partners sharing profits as 50%, 30% and
20% respectively. On 31-3-2016, their Balance Sheet was as under : •
.. Liabilities Amount Ae~e•·
.,,,,.,. ,., Amounl

t t
8,90,000
Creditors 1,40,000 Fixed Assets
2,00,000
General Reserve 1,00,000 Lnvestments
Stock 1,30,000
Capitals : 4,00,000
6,00,000 Debtors
Kavya
5,00,000 Less : Provision for
Manya 30,000 3,70,000
4,00,000 . 15,00,000 bad debts
Navita 1,50,000
Bank
17,40,000
17.40,000
- - - - - - .- ;-;-Manva and Navita agreed to continue the
On the above date, Kavya retire an .
business on the following terms : 'F60 000 and it was decided to adjust Kavya's
. , d ·11 was valued at , , . .
(a) Ftrm s goo w1 . . e ca ital accounts of contmumg partners.
share of goodw1ll m th p ' nsation to the extent off 4,000.
. f workmen s compe
(b) There was a claim or
lued at t2,13,000.
(c) Investments were reva 1-~a' r§JIJ@IJ 7/
~ ~~ ~
,, ~ 1~ - - - - - - - - - - - -
(a, FilXed
-
Assf't5 wer e to
paid
to be f20
~
.
.000
;~;~,.,cia-red- by IO"t,o.
thro ug
-

h .___ 1, ·"- fl _a nd the bal

a_lhl.ll A w~
ber loan acc oun t ·wruch will be paid
m two eq Unce "'°
(e) Kavya was llal <lnri1,~
uansferred w tber ~"ith interest @ l O~o p.a. '"'ij
msta1ments wge
and Kav ya' s Lo:.........' Ac ,
"-- ' . Ale Par tner ·s Cap ital acc oun ts (C B
p~ re ,u:v41ua 11on ' · .S.£ . 2018 tau.I)
_. ...,:,- - •c1
f 80.000; Kavya 's Loa n f 6,2 0,000; Capi· l\j
~o'>rp,r;
till it is nm:1"!.:!'3:n Revaluation 000 Cs
[ An5 . LU-> -' .
•
r4 88 000 and Navitachf 3,92 ,
00 + Inte rest f62 ,00 0
Manya ' '.d 00 3151 Mar 201 7 : t J , 10,0
st March 2018 : tJ , 10,000 + Inte rest fJl,
000 ]
Am oun t~d 31
t Am otm t pru on
t ~ sha ring pro fits in the ratio 2 : 1 .
Q. 96 _Kanika. Disba and Kab ir \,\,·er e par tne
er . .I
On 31-3-2016. their Balance Sheet v.135 as und
Ass ets A ........__
A.mmmt
'- --~= == == -- -- ,--;-f-- -r -- -- --
LJal,i/itia -- , ~
f
53,000 Bank 60,00o
Trade creditors 47,000 Debtors 60,<>oo
Employees Providem fun d Stock
2,00,000 1,00,00o
Kanika 's Capital Fix ed Assets 2,4o, 000
1,00,000
Dish.a's Ca.pit.al Profit & Loss Ale
80,000 20,00o
Kabir's Capit.al
_ _ _ _ _ _ _ __!_ _::: 4,=80=,0=0=0- - - - - - - - - -- L~ ~
- pos e, the following adjustments were
reti
Kani.kared on 1-4-2016. For this pur
agreed upon :
rs ' pur cha se of ave rag e profits of
(a) Goodwill of the firm was valued at 2 yea
reti rem ent . The profits for the
three completed years preceding the date of
yea r:
e fl,3 0,0 00 .
2013-14 were f 1,00,000 and for 2014-15 wer
,00 0.
(b) Fixed assets were to be increased to f3 ,00
(c) Stock was to be valued at 120%.
sferred to her loa n acc oun t.
(d) The amo unt payable to Kanika. was tran
ts of the par tne rs and the Balance
Prepare Revaluation Account, Capital Acc oun
(CB .SE . 2017 Comptt.)
Sheet of the reconstituted firm .
[Ans. Profit on Revaluation f80 ,00 0; Kanika
's Loa n Ne f3,0 0,0 00; Capital Ncs
000 .]
Disha f80 ,00 0 and Kabir f60 ,000; BIS Total f5,40,
Hint. Kanika's share of goodwill ~70,000.
pro fits in the rati o of 5 : 3 : 2.
Q. 97. K, L and M were par tne rs in a firm sharing
follows :
On 31.3.2016 the Balance Sheet of the firm was as
Liabilities f Assets ~ l
20,000
Creditors 30,000 (Bank
I
K's Capital 40,000 t Debtors 16,000
l's Capital 36,000 /Less : Provision for
 Liabilities ~ Assets \ ).
'I

Creditors 70.000 Bank

Capital Accounts : Debtors
p 80.000 Less : Provision for
40,ooo <t s,,11._J
y~

Q 70.000 doubttul debts

R 60,000 2. l0.000 Stock ~ 3s,OO(
Building so )
Profit and Loss A le I ,UQo
Ao 01
. in
___ ___ ___ _..:::::::::===-- 2.80.000
- - _ ~ 00()
I 21o,Oo'
On the above dare R retired from the firm due to his i11ness on the f~ o
. owing t
( 1) Building \Vas ro be depreciated by f 40,000.
ellns:
(ii) Provision for doubtful debts was to be maintained at 20% on debtors.
(iii) Salary outstanding tS,000 was to be recorded and creditors t4 ooo .
claimed. ' Will not be
(iv) Goodwil l of the firm was valued at f72,000.
(v) R was to be paid f 15,000 in cash, through bank and the balance w
transferred to his loan account. as to be
Prepare Revaluation Account, Partner' s Capital Account s and the Balance Sh
of P and O after R 's retirement. eet
[Ans. Loss on Revalua tion f 44,000; R's Loan Ale f 54,000; Capital Accounts : P
f54,800 and O f32,200; BIS Total f2, 12,000.]

Q. 100. A, B and C were in partners hip sharing profits in proporti on to their

capitals. Their Balance Sheet as at 31-3-20 18 was as follows :

Creditors
Liabilities {

15,600 Cash
Assets ~J
16,000
Reserve
A's Capital
6,000
90,000
Debtors
Less : Provision for
20,000 I
B's Capital 60,000 Doubtful Debts 400 19,600
C's Capital 30,000 Stock 18,000
Machinery 48,000
Buildings 1,00,000
2,01 ,600 I 2,01 ,600
---
On the above date B retired owing to ill health and the following adjustments were
p-eed upon:
(a) Buildings be appreciated by 10%.
(b) Provision for bad and doubtful debts be increased to 5% on debtors.
(c) Machinery be depreciated by 15%.
3/ 6 : L ,/ V • - (

L ia b il it ie s l ,.50JJOO
-- - 52,000 Plant
l 0,000 Stock
8 0 ,0 0 0
Cr e d it o r s 7 0,0 0 0
Outstanding E
x p enses Deb1ors
12 . 0 0 0
Bank
Capitals : 2 ,0 0 ,0 0 0 Jc
P rofit & L o s s .A -0-0
A
I,6 0,00 0 , - -
B 0 ,0 0 0 5~621'0
1 ,4 0,0 0 0 5,0
C
I s~62,ooo
s e re a g r e e
d:
te r m \V
, 2 0 1 8 a n d th e following
st A p r il 0JJO0.
B r e ti r e s o n 1 a lu e d a t f I .5
l o f th e f ir m h a s been v t o c k r e v a l u e d at
w il 00 a n d s
( i) T h e G o o d e d a t f 3 ,0 0 ,0
a c h in e r y h a s been r e v a lu
M
(it) Plant a n d s t o b e w ritten
e bad a n d w a
f 1,2 0 ,0 0 0. a s a g r e e d t o b
f J 0 ,0 0 0 o u t o f debtors w
(iii) A s w n o f 0 0 i s t o b e b rought
off. o n t o t h e e x t e n t o f f 8 ,0
r w o r k m e n 's c o m p e n s a ti
o
( iv) L i a b i l i t y f profits and
into the books. es s a n d s h a l l share
e to c a r r y on the busin
A a11d C w il l continu
(v )
q ually in fu ture . c a r r y i n g i n t e rest at
losses e in the busin es s as loan
a b le to B sh a ll remain
mount p a y
( v i) A
18% p.a .
_@~ @I I ~ # ~ ~ U@ ; J l@
 / l SSets

S undry Creditors 45.000 Cash at Bank

Em ployees Provident Fund l 3.000 Debtors
6~
General resen·e 20.000 Less : Provision for
Capitals : doubtful debts
A k ul 1.60,000 Stock 58,o.;J I
BaJ.rul l ,20. 000 Furniture 80,~ ,
Cbandan 91.000 3, 72,000 I Plant and Machinery 90,oo:i
l,80 ()0c
4,50,000 ---• -l
- - - - - - - - - - - -- -- - - ' - - - - - - - - ----1 4,SQrin,,
~
Bakul retired on the above date and it was agreed that :
(1) Plant and Machinery was undervalued by I 0%.
(iI) Provision for doubtful debts was to. be increased to 15% on debtors .
(iii) Furniture was to be decreased to f87,000.
(iv) Goodwill of the firm was valued at f3 ,00,000 and Bakul's share wast0 be
adjusted through the capital accounts of Akul and Chandan.
(v) Capital of the new firm was to be in the new profit sharing ratio of th
continuing partners (actual cash to be brought in or paid off, as the case ma;
be.)
Prepare Revaluation account, Partners' Capital accounts and the Balance Sheet of
the reconstituted firm. ( C.B.S.E. 2019, MP.J
[Ans. Profit on Revaluation t 10,000; Bakul's Loan f2,52,000; Capital Accounts
Akul t 1,00,000 and Chandan t50,000; Cash brought in by Akul ~8,000 and
withdrawn by Chandan t8,000; Balance Sheet Total t4,60,000.]

Q. 106. G, E and F were partners in a firm sharing profits in the ratio of 7 : 2 : I.

The Balance Sheet of the firm as at 31st March, 2018, was as follows :
BALANCE SHEET OF G, E AND F
as at 31st March, 2018

l Liabilities f Assets
,7
I 90,000
Capitals : / Cash 24,000
G 1,40,000 ; Sundry Debtors
14,000
E 40,000 I IStock
.. ... . , ., , ,11 uruwin , • tlt ')( 0
'-- )\(}.' f\.. h , ')4()17
~l
\1\c panni:r!'thip \()()· I / . he I hi .
rntit\cd to : 1 ~ d~w~ ; i. 1 i,
t:tc(! llfov· .
~ Q
s 1~1
Ide, \hat f , ~: ht APril, ,
(1) I lis share or •. .
..
(11) lntcrcs\ on
tu p1ta\ °" the
rtt
.
,re
,1'K\ _Ht 20 6, wn.,
~ to be charged
. · -rnem
I "') H' cnp1ta\ r. nf l ~ ~- .
,11 1 is sh are of,w, \~1/, r. l~ Wl\l be
"Ptr .
Pr
(iv) His share of ofit in the cUlflttrn .
. · Ye ar or
&OO(
(v) His share in th iwin of fttirCTncrit
.,. . . th t firrn .
Acl u1tional m form.-.t· e Prof it/loss
" ,on · on rt\'al .
(a) Paresh 's share in:th uation or
a., ~ and liab,lrtics.
(b) Goodwill of the ti e profits f
o the firm fonhe
(c) The firm suffe ~rm was valu
re a loss of ~ 12 0
(d) It was decided to
ed at ~24,00() Year 20\6
.
-\7 wa, no.ooo . \
tran fi , 00 on the revaluation f
interest @ 60, s
10 er \he arnount due P O
instalments, the pe r ann assets and liabilities.
first . urn. The loan was to a:resh h'15
to be to _ ~oan account be
y o u are required to pr instalment to be . repaid aring
epare : paid on 31st March_in20tw18o .equal annual
(i) Paresh' s Capital A
ccount.
(ii) Paresh's Loan Acc
ount t\ l ..
lAns. Net Amount d 1 it 1s fina\\y closed
ue to Paresh ~ l 07 700· · (1.S.C. 2018)
Amount paid on 31st M
Amount ·d ar ch • '
2 & : ~:,'.
pa1 on 31st March 20Ol19 3,850 T Interes 462
: ~53,850 + Interestt f6f 3,,23l1
Death of
aPartner
Q. 110. Ajay, Bhawna
2 : 2 : 1. On July l, 2017 and Shreya were partners sharing profits in the ratio
Shreya died. The books of
every year. Sales for accounts are closed on Marc
the year 2016-17 amounte h 3\
to 30th June 2017 wer d to ~5 ,00 ,000 and thal from
e ~ 1,40,000. The rate of 1st April
been l 0% on sales. profit during the past three
Since Shreya' s legal rep yem had
specially abled, it was resentative was her only so
decided that the profit for n. who is
account is to be calcul the pu rpose of senling Shreya's
ated as 20% on sales.
Calculate Shreya' s sh
journal entry for the sa
me.
are of profits til\ the date
of her d~~-;: ~:/~:=
lAns. Shreya's share of
profit tS ,600) . f, sharing profits in the
Q. 111. Dev, Swati an d S k were partners m a mn ratio
of 2 : 2 : l. On 31-3-2 ~ s alar Sh eet was as follows :
020 their B ance
Liabilities
I · I II
Trade Payab\es l7.000 Building
, III
13,000 inventory
Bank Loan
 11
5. ! j-4
frJdt· Rt.x ci,-:1bks ·nRFMEl'• fl' OR DEATH OP /\
Capitals :
}{ I PAk.TNp..ll
c,,sb c) . 11.'- Buhitn, Chclun nn<J
Dev 77.000
Pt,..1fit &_ l,oSS :-Vl• 1 ., ~.15.S
87.000 i1f2 : I : I _rcsr<:c ti vc ly. Firm c1os!~1d nrc Partne-rs in a fir 1 . .
Swari 101h Scptcmhcr. 20 12 Th · ,is a<:counts on 31 m haring profits in the rati o
Sanskar 46.000 2J0.000 < • • be • . · ere Willi 1..... SI March e-very year Chetan died
;\111( \_'. ()Ulll ,n I1IC ·~1nn111g of the a ..,,In.nee ()r f I 2S < • • • ,
1.40.000 ,rship deed provide~ fi Year. In the • ,000 in Chetan s Capital
p'1r111c • • or the foll . event of death f 0 Lh
• (i) Interes t on capital will be nw,ng : arry partner, c
On 30th June, 2020 [)ey died. According t~ partncrs~ip a_g":cment Dev . calculated
01 (ii) n,e c~ccutor of deceased J)attncr at the rate of 6% p.a.
entitled to interest on capital :it 12% per annum. His share • t proht ti ll the date Of,1.t
t1 O f' l (' , hall be ~•id n 4 , lN'"' ~ h'IS S1WJC
~
goodwill.
. h f /VV 10f i..M 0f
death was to be calculated on the basis of the a,·erJge pro s ast our Yeats
(iii) H1s s are o Reserve Fund wh· 1.
profits of the last four years ,me : · 11,, . s hare o t· profit till the d tch '
(iv) Hts ' 12 '000 : , hall
be paid to his executor-
Years Pro tit . J . ate of death
It 1s a .so specified that the sal d . wi·11 be calculated on the basi, of sales
t r. . es unno , L _ • ·
sa Ies 1rom 1st Apnl, 2012 to )0th S O u ,c year 2011-12 were t4.00,000. The
20 I 6- 17 2.0-tOOO of the firm for the year end" , eptcmber, 20 I2 were t 1.20.000. the profit
2017-1 8 1.80,000 , mg 31 51 March, 2012 w
201 8-19 90.000 Prepare Chelan s Capital Account noo.ooo.
lo be presented lo hi,asexecutors.
2019-20 (Loss) 57,000
[A.ns. Amount due to Chetan's Ex (CBS£ 2013 Compfl.)
On 1-4-2020, Dev withdrew t I5,000 to pay for his medical bills. ecutors t 1,79,750.I
Prepare Dev' s account to be presented to his executors. Q. JJ4. Aman, Raman and Suman
3 • 2 : I respectively. The profit and w..ere partners sharing profits the ratio. of
[Am. Balance due to Dev's Executors t51 ,935 .] · sa Ies 1or the ye dd 3 M
t 3 1akh and tlO lakh respectively. ar en e I arch, 2017 were
Hint : Since drav.ing is not made out of capital, interest on capital will be allowed 0
Aman died on 30th . November' 201 7· Calculate the share of deceased partner in
t77,000. n the profits :tior th e penod from Ist Apri l' 20 17 10 30th November,
Q. 11 2. Vi.kas, Gagan and Momita were partners in a firm sharing profits in the calculated 20 17, 1•f the same 1s
·
ratio of 2 : 2 : I. The firm closes its books on 31 s~ ~arch every year. On 30th
September, 2020 Momita died. According to the prov1s10ns of partnership deed the (i) On the basis of sales which were t8 lakh from 1st Apri l, 20 17 to 30th
!~gal representatives of a deceased partner are entitled for the fo llowing in the event of November, 2017.
(ii) On the basis ofTime.
his/her death :
(i) Capital as per the last Balance Sheet. Also pass the necessary journal entry for the share.
(ii) Interest on capital at 6% p.a. till the date of her death. [A.ns. Aman's share of profit:
(iii) Her share of profit to the date of death calculated on the basis of average On the basis of Sales t 1,20,000;
profits of last four years. On the basis ofTime t l,00,000.]
(iv) Her share of goodwi ll to be determined on the basis of three years
Q. 115. Ram, Mohan and Sohan were partners sharing profits and losses in the
purchase of the average profits of last four years. The profits of last four
ratio of 5 : 3 : 2. On 31st March, 2017 their Balance Sheet was as under :
years were :
Assets CJ
'
l
Year Profit Liabilities 1,25,000
~ Leasehold
Capitals : 30,000
2016-17 30,000 1,50,000 Patents
Ram 1,50,000
20 17-18 50,000 1,25,000 Machinery
Mohan 1,90,000
2018-1 9 40,000 75,000 3,50,000 Stock 40,000
Sohan
2019-20 60,000 1,55,000 Cash al Bank
Creditors
The balance in Mo ·t , • 1 Workmen's Compensation
withdrawn t J 0,000 til l;~/d:t: a~/~e:ccount on 31-3-2020 was ~60,000 and she had 30,000 5,35,000
p . death. Interest on her drawmgs were ~300. Reserve ---c:
5,35,000
repare Mom1ta's Capital Account to be presented to her exec utors.
Ans
[ · ·• 8Inta1ance due t?M · , th
Hint omtta s Executors ~83 000] Sohan died on Ist August, 20 17• It was agreed at :
. erest on Capital t I,800. ' .
;· 2J&t.C.' ;) : ; 1
 RETII{ E~ !EN I ( 11( I Jl:f\ Tl I OF A. I>
-- - t\Jtl),,,.
I J .11 ~ I 75.000. --.. ' ... ~

I'i
.5./56 . . . , linn is IO be v:-1 Ut' • , ' i i ~11 N r • >I{ IJJ' /\ 'rl I OP/\ PI\RTNJ-'k
-- - . G odwi/1 of tht -lO ooo· Pall'lllS al r40,000; Lens 1( 1 I i i . S 1~7
II (1) ,o . . tx· ,·a/ucJ :11 r I . . . 1!l1o1d
• 11fll (
• 111 1hr )' l';i r of dea th W!Jq k L ...._
I J IJC 1,u~d ' lhe h
(ii) Maduncl) .. d· ft' . . • " Jtl< ,· 1 •vc.ir~ plu ~ l<rn,. m aver;ige of the profi t~ of t c
,,,.J1 • ~0.oooonc/11 ~ a
, ,,. ,11 lll •
. ._. ban's share 111 the prol11s or2 017
, 1·· ( . Jcu/:111111.! ..,o I · ·1 8 I ·l·d
. 11 ~ Is l l\11g11., 1. 21120. flj q , . . I
Oil
. th. purpc.1Sl' 11 l
3
~ • ·rued 011 1hc same sea c as 1112016. , 'lit \ I he had druwn f 4 ()()(J- '-.--ap1 1aL
/\/c -~h(>we d a credi.t o f ? 50 ,000 o n I s·t
(iii) I-or_ t /d Ix· (;Jkl'll IO haw .1u: 17, \\ih:.; · 'l (J°' !I 11 11d
·
, 1irt1 ,- - qincc 111,1t datc .
prol11S s/~ou ·"qJ
' •. 1 ·ulatr the a1111111111 due to his Jc u" J .
iwn.· 0 ).000. . J Rc,·aluation Account. ( .1 l o-- rcprcscntat, vc;;.

',l
. . C-1 ,ira/ Al·cow11 .111
l'rcpan: Soll:ui ~ · I . - ~ I '? 6 000. / I '"'· ;\lllll ll lll payable lo .r :1 lcu,,f
.,...
rcpr . .
CSC1Jt;it1vcq U,t (,(, I
. \~,, han.:o f(i o(l(h .- •
• ro Soh:u1 ·s l:xccull,r.; ' .- . I .,.,~ _..;.=--- fUZJ.
/. \n•. Amounl dut: • --~ --~wbt'lbiJGi-., ~.;m,,etJsafimf "Reserve Soban•a
- - - - - . : . --:::--:-~ ss:iinooicwm .....-
~·= riirlieieii!ie"is 1 Q. I I 8. A. B an~ C were Pll'tnen. Their P11'111fflhip deed provided Ila Ibey were
Rbd = ~~ etedited to his account. to shaJ"C profi_ts thus, A 26 ~ ce_nt; B 34- per cenc; C 40 percem; and 111111 ib,--
dU5 reserve wdl be ..ortrvor.c: The partnership deed provides •
. . d his capital should remam In the businea for I lllled period 11 1 bed • of
6
Q. 11 - Ri
'sba and Nisha were.---·-·-·
balanced on 3 Jst December each year. ~e ' st, but that the deceased l)ll'tner'1 share lhoald .._ - , -.c.......a
. , . _ wnn - f« ...:.a.., -
(1) That the accowirs be
intere
Goodwill, based u~n one and a ~f year' 1 averap profits. for 1he five yeas ....,.10
his death, but be subJect to deduction of sper r.ent from the book debcs. c died. and the
,' (irJ The pro .sba as follows
tits be divided :
..L:-1 and carried to Reserve account one-si.~ rofits of the finn for five years were agreed at '20,000; f30,0()0; flS,000 (1cm);
·II Risha one-half, N1 one-uwu . ......._
~s,oOO (loss); and f45,000 respectively. Book Debts lloodat f90,000.
. the event of death of a partner, her executor will be entitled to
(iirJ That m Prepare a statement showing. the amount of Goodwin to be creciW':Jtd Ct
following:
A~o unt and give the Journal. entry in the firm's book "tf~ ,t to a,ry ~ - -
.... , to
(a) The cap1uu her credit at the date of death. u-ansactions.
· profits
...;0 n of profit to date of death based on the average . [Ans. C's Capital Account will be credited with f7,200]
,,., (h) Her propo,u
the last three completed years. . t.
Hin ·
Total Goodwill f22,500
(c) Her share of goodwill based on three year's purchase of the av· Net Goodwill= 22,500-4,500 (5% of Book Debts)= t'IS,000
profits for the three preceding completed years. C's Share
40
= 18,000 x 100 = t'7,200
On 31st December, 2016 the Trial Balance was as under :
Q. J 19. A, B and C were partners in a finn sharing profits in the ratio of S : 3 : 2.
On 31 st March, 2019 their Balance Sheet was as under :

• It:

Reserves Creditors
Bills Receivables Reserves
Investments A' s Capital
Cash B's Capital
Creditors C's Capital

· d ~ bis. ~utors
,
and ~
The profits for the three years were: 2014 f4,200; 2015 f3,900 and 2016 N,5 C died on 1st October, 2019. It was agree .
Nisha died on 31st May, 2017. Draw up the deceased Partner's Capital Ale remaining partners that: profits ofthe,orev.ilils
Executor's Ne. , urchase of the average ~ ~~ - -
(a) Goodwillbevaluedat2years_p 000· 2016: fl3,000; 2017' :~ ~ ~
[Ans. Balance due to Nisba's Executor's f77, 740.] . ti1ve years, which were 2015 . f 15, ' .,,. . .
19 : '_20•000: ry at , s,OOO; Buildings at t3o;ooo1.
Q. 11 7. In the partnership agreement between X Y and Z who were sharing pro 2018: ,1s,ooo and 20 2
in ~e ratio of 5 : 3 : 2, the goodwill was to be valued, on the death of any partner on (b) Patents be valued at f S,00.0, Mapl1ine . ___...,i t ~ same ~as t&
takJ as bavtn8-""1- a
(c) Profit for the year W.l 9•20 be en

~f-·
. 'dedal• ,.~
basis 0 ~ such ?artner's share of 2 year's profits calculated on the average of 5 "Yi
profits unmediately preceding the year of death less 10%. The firm's profits were
flO,OOO; 2017_ f30,000; 2018 f43,000 and in 2019 and 2020 losses of f6,000
4
f ,000 respectively. The deceased partner's share of profits for the ~riod o
Previous year.
(d) Interest on capital be proVI. ?I if'IIL.n..
 ,,,
· ~H•" rr o f{ D t- .\ Tf l o ,, " JJ, -s,: n u. 5. 159
, 1 Jllf. l
fcd ror lh c fo lk ,w ing on th e
e (':lf\ne"nhip de ed ptovK
/I docd m1rl tn 10 th lu ne . 21120. Th
, pf II p, cr .
,lc,,t I . o f the average
e ri ttn ~~ to~ va J~
d at ye a, ~· pu tt ~
1
. _ 19 . JI -J -2 0 18
.
(r ) Cioochv1ll of th fo r th e ye ar s eo o'i ng
. l hc prof it~ 3 1 1 200 an d -t 4-0. 00 0
profit ,1 of lr ti;t 5 yc an 70 .()(J< ,: f 60 ,I)(> {): ? 5'-0. 00
an d :l l •J -2 0 I( , w ere f
3 l -3 -2 ~ 17
n:s pcctavcl y . e
hi s de ath v ~ to be ca lc ol ak d on th
of
(i i} FJ' -:, shn~c of pr
o~ll or lo~, till the date ch~ 20 20,
o fit or lu ~~ fo r ~ year en di ng 31st M at
ba si s ot th e pr in g :
ca lc ul at e the fo llo w
Y ou ar e re qu ir ed to
(i ) G oo dw il l o f th e
firm an d 8
lo
'5
s!I
sh
o fl
a,
hc
e of
fir
go
m
odwill at the tim e of
till th e date of his death.
ms de at h.
I
e pr of it or
(i i) B 's sh ar e in th at h to be presented to
hi s
e of hi s de
C ap ita l N e at the
tim
(i ii) Pr ep ar e B 's
ex ec ut or s. th s)
s of the firm (f or 3 m on
0; a· sh ar e in t
e of G oo dw ill t4 5,00 6,2S0.]
05 5
[ , -.. B 's sh ar
11
s ~7 . the
?5 0 ~ A m ou nt du e to B 's Executor s an d ~ m
8 e er s sh ar in g pro-frt
t . Q . J22 . H ir en , Su re n an d C ha m an wer pa rtn
ea ch ve
., ar . H ir en di ed on 3 I st
31 st M ar ch
cl os ed th ei r books on
- of 2 · 1 · 1 · T he y =-~
------------------.--------
ra tio B al an ce Sh ee t w as as follow-s :
Ust 20 13 w he n th ei r f
- ~
, f
A ug • Li ab ili tie s 22 .0 00
4 ,5 50 Ba nk 6?60 0
Cr ed ito rs 6, 40 0 Sundry Debt or s
G en er al Re se rve 6,40 0
ve rti se m en t Su sp ense N e
Ad
Profit fo r 5 m on th s 3
I -8 -1
_ from l -4 - l 3 to 3
salaries) 4,050
(b ef or e in te re st an d
Capital A cc ou nt s :
6, 00 0
H ire n
10,0 00
Su re n
~ 4,000 20 ,0 00
Cha.man 35 ,0 00
35,000

rtn er sh ip de ed :
A cc or di ng to th e pa r s @ 6% p. a.
as al lo w ed to al l pa rtn e_
( i) In te re st on ca pi ta l w r m on th
tit le d to sa la ne s at t 10 0 and ?5 0 pe
m an w er e en
(i i) H ir en an d C ha va lu ed at 3 ye ar 's
oo dw ill w as to be re ce di ng death.. T he
re sp ec tiv el y. pa rtn er g d ea rs
t of de at h of a an d ~6 ,0 00
(ii i) In th e ev en pr of its 2o f2 ;o ~~ ~e -t~3 ~vere pt 4 ,0 00
of th e av er t
ag e ne 20 l l - 1 an - -
pu rc ha seits fo r th e ye ar s
ne t pr of
re sp ec tiv el y.
id to his executors.
H ir en , s sh ar e w as pa
pr ep ar e:
Y ou ar e re qu ir ed to
(i) H ir en ' s C ap ita
l A cc ou nt . st io n Pa pe r 20 15 )
(I. S. C. Sa m pl e Q ue
(ii ) H ir en ' s Ex ec ut
or 's Account.
-~.g; ~ ") 1 ~11 :i ,; i.g • v ::t~:J
 RETIREMENT ~ R_D~~12:f _?~ ~P~~
.160 - -- ----

·creditors 1700()
:1~~~~~=HIRE ·us
pay able
Particulars ==~
N='S
JC
C
AP:I~T=
ALt~AC~C
=O
;UN=~T~==~=~===1==~Cr.
)r. Date Particulars ' Cash
;o;i;un
~;-0~-N
~-= ,
12,00o Debto
Date 2013 ~ •s~oan
28,00o a·11s rs 8,000
2013 Aug. 31 By Balance bid 6,00() capitals . I Reteiv
Aug. 31 11 0 Advertisement AJ1JI1 70,00() IFllrniture ables 13,000
3,200 31 By General Reserve 3,200 9,000
Suspense Ale Aug. 31 By Interest on Capital varun ~ I,3B,ooo1Mac~ery I
I
Aug. 31 To Hiren's
Executor's Ale
15,550
Aug.
(6% on f6,000 tior
5 months) lSO
_______ ~ :, ~ Karan s Capital
27,000
1,25,000
13,000
\ (balance tranSferred)
Aug. 31 By Salary (f 100 x 5) soo --On 30.9.2014, Karan died. Tue Partnershj 1 ~
Aug. 31 By P & L
tors Of the deceased Partner : PDeed provided for the fi .
execu . o11OWing to the
Appropriation Ale (a) His share m the goodwill of the finn I
(Note 1) 1,400 purchase of the average profits of the cal culated on the basis of three years'
Aug. 31 By Suren' s Capital Ale four years were tl,90,000; , ast four _ Years· Theprofitsofthelast
(Goodwill) 3,7S0 170000
respectively. ' ' ' ,i,so,ooo and fl,60,000
Aug. 31 By Chaman's Capital
Ale (Goodwill) 3,750 (b) His share in the profits of the firm till the date f .
O
basis of the average profits of the last four his death calculated on the
18,750 18,750 Years.
(c) Interest @ 8% p.a. on the credit balance, if any, in his Capital Accollllt
(d) Interest on his loan@l2% p.a.
HIREN 'S EXECUTOR'S ACCOUNT Cr.
Dr.
Particulars Prepare Karan' s Capital Account to be presented to his executors, assuming that
Particulars Date
Date his loan and interest on loan were transferred to his Capital Account.
2013
2013 15,550 (C.B.S.E. 2015, All India)
15,550 Aug. 31 By Hiren's Capital Ale [A 1., . Balance due to Karan's Executors t2,00,430.]
Aug. 31 To Bank Ale
, , 1 : Interest on capital will not be allowed since Karan's Capital Account shows a debit
Working Notes : balance.
( l) Profit for 5 months
'
4,050 '. 7 !. Ram, Krishna and Mohan are partners in a finn, sharing profits and_losses

Less . Interest on Capital 6% on .m the ratio

. of 3 .• 5 ·. 2· On 31st March, 2014' their Balance Sheet was as Wider .
. (t6 000 + '10,000 + ,4,000) BALANCE SHEET
' 6 5
for s months : 20,000 x 500 as at 31st March. 2014
100 x 12 Assets
Salary for 5 months : 5 x ( I00 + 50) 750 1,250 Liabilities t
48,000
2,800 39,200ILand and Building
Creditors 72,000
2 J6,000 I Plant 34,000
Hiren's share of profit = 2,800 x 4 = t l,400 General Reserve
Inventory 26,400
Capital A/cs :
Trade Marks

~,
(2) Valuation of Goodwill : Ram 76,800 I 39,200
) /Bills Receivables
Total profits for the two preceding years ('4,000 + ,6,000 10,000 69,600 I 24,000
Krishna 400 Cash in Hand
5,000 2,00, I . ment suspense 12,000
Average Profi t = 10,000 + 2 Mohan Advertise
15,000 2,55,600
Goodwill at 3 year's purchase = 5,000 X 3
Hiren's share of goodwill = 15,000 x
2 7,500
~
255,600 Ram
4 t was reached amongst ,
- ---- 4 An agreeroen
It wi ll be debited to Suren and Chaman in their gaining ratio i.e., l : 1. . . 201
0th September, · . fits of the
Krishna died on 3 entative that · f the average pro
Mohan and Krishna's legal repres ear's purchase 0
Q. 123. Arun, Varun and Karan were partners .ma fimn sh~g . Profits in the ratio aiued at 2 y
of 4 : 3 : 3. On 31 -3-20 I4, their Balance Sheet was as follows . (a) Goodwill to be v hich were :
previous three years, w m@u
~ l_j· ~ - i
 _ _ _ - ~ ~ ~E_N! ~ R- DE~T~-i_?~
~ ~A~ l~R ,
~ l~Z__ _ __ __ _ ___ ___ _ f{ c rrR£ MENT OR D~A_T1:! ~F_A PAR'fN
- - - - - ER
Year · 2011-12 2012-13 2013-14 y 0 u are required to :
~28,800 ~36, 000 .
Profit.: ~31 ,200 (i) Calculate the finn•s g
value OO<fw,11 on the · - - _ ~ -16J
~ 19,2 00; plant at 80% of its book with the fonnula)
(b) Trade marks to be revalued at date of~f -
llll(f · 'la's death <S
land building at ~57,600. (ii) Pass the necessary jou
his deat.h to be calculated on Lhe b~
. tnal entry to . how the working
. hna 's share of profit to the date of
(C) Kris
share of goodwill. cred11 ~f ,
of previous year 's profit. ,1a s Capital Aceoum .
[Ans. Rita's Capital Ale With her
(d) Interest on capital to be provided
@ I0% per annu m. N. , c · Dr. fl.Sc. 20!8)
to be ma s a?,tal Ale
(e) ~60,080 to be paid in cash to Kris
hna 's legal representative and balance To M1ta's Capital Ale Dr. 16,00o
loan acco unt. I0,667
transferred to the legal representative's 2 -
Q. J27. Pranav,KaranandD~L· Were 666
, 7J
o
You are required to prepare : ·
in the rat10
f 2
° : :•
2 J ''4ll.ll lJ
n 3 Ist Mar h, l 7th
c 20
Partners in afi
· llln Sharing pro fiits and losses
(i) Revaluation Account. Balance Sheet r p err Balance Sh
. follows :
eet was as
J ij ) Krishna 's Capital Account, and
I - ,. ... o ranav, Karan •ad
Ral!.un..,,.,,.,J!>~n-

--
1.,,ao'rlkte.s - A.1naunt
Account. (I.S C 2015)
(iii) Krishna' s Legal Representative's f Aue,,
..~K rishn : ''J ~r -t-<t~ ~ Renr,esentati
ve's Loan __ Ah, l,
- lAns. · AmO l!ntl t"dil i'lcf" ttutn creditors I ·, 3,00,000i Fixed As.sets
~50,000.] General Reserve 1,so,000 Stock 4,50,000
finn Capitals : 1,5-0,000
Q. 125. P, Q and R were partners shar
ing profits in the ratio of 2 : 2 : 1. The pranav 2 00 000 / Debtors 2,00,000
follo Wing Bank
. On June 30, 201 7, R died . The ' '
closes its books on March 31 every year Karan 2,00,0001
1,50,000
information is provided on R 's death: 000.
Rahim 1,00,000 ~ I
(i) Balance in his capital account
in the beginning of the year was f6,5 0, 9,50,0001 '-lt•
9,50,000
(i1) He withdrew f 60,000 on May
15, 2017 for his personal use.
t th .
Karan died on 12.6.2017. According O e Partnership deed, the legal
On · the date of death of a partner
the partnership deed provided for the · f h deceased partner were entitled to the following :
representatives o t e
following : ( i) Balance in his Capital Account.
(a) Interest on capital @ l O% per
annum.
(ii) Interest on Capital @12% p.a.
(b) Interest on drawings @ 12 % per
annum.
firm on Karan 's death was value{! at
till the date of death, to be calculate d on (iii) Share of goodwill. Goodwill of the
(c) His share in the profit of the firm
s of the previous year, which was ~60, 000.
the basis of the rate of Net Profit on Sale , calculated on the basis
date of his death
25 %. The Sales of the finn till June 30,
2017 were f6,0 0,00 0. (iv) Share in the profits of the finn till the
the year ended 31.3.2017 was
h to be presented to his executors. of last year 's profit. The profit of the finn for
Prepare R's Capital Account on his deat ~5,00,000.
(CB.SE. Sam ple Paper, 2018)
nted to his representati ves.
5,35 0.] Prepare Karan ' s Capital Account to be prese (C B.SE. 2018)
[A ns. Amount due to R's Executor's f6,3
ers in a finn sharing profits and losses
in the ?3,28 ,800·l
Q. 126. Rita, Nina and Mita are partn [An,,,_ Amount due to Karan's Executors
was decid ed ,. 4 S00· Share of Profit f40,000.
2017. On the date of her death, it
ratio of 3 : 2 : 1. Mita dies on l st April, profits of Hinh : Interest on Capital for 73 days ' , ,
's purchase of weighted average sharing profits in the ratio of
to value goodwill on the basis of two year
the firm for the last three years. Q. 118. Mee ra, Sarthak and Rohit were
.
pa$;:
as follows :
31 March, 2018
2 : l . On 3 J March, 20 I 8, their Balance
Sheet
hts assigned were : 2:
The profits of the last three years and weig bak and Robit
A ts
JU at
Amount
Weights assigned Balance Sheet of Meers, Sart sse t
Year Profit (r)
l Liabilities
Amount
( . 7,00,000
2014-15 30,000
(including gain from
speculation t I 0,000) Creditors
3,00,000r ~1xed Assets
0 000/ Stock .,.) ,ii • • •a
I
•,rl
2,00,000
*" ) - •
i'tl l

J,0 • , • ..., ' ~ '

2015-16 80,000 2 Contingen cy Reserve ~ -!' ~
2016-17 1,00,000 3
 rarncwa n
To Provision for Doubtful Debts
'
By
i UT lll. U IUf .) ' "V\/ :'1!0<.k

Machinery -
400 19.6()(
18,00(
Ale
To -
To Outstanding Repairs N e
3,000 By

15,000
- On the above date B retired.
.,_
2,01,600
--- -
Building., 48,00<
1,00/XH
2.01,60{
To Profit transferred to : Goodwill of the finn be vaJu d
Of A d C hO e at ,36 000
w will share profits i 'ru ~ be adjusted
P's Capital Ale
Accounts an into the Capit:
Q' s Capital Ale . th . . . n ture in the t' f 3 : 2.
Fill m e m1ssmg information . th · ra 10 o
R' s Capital Ale th tn e Revaluat'
Accounts and e Balance Sheet of then fi •on Account, Panncr's Capi~
ew •nn after B's retirement
Dr. REVALVATION ACCOUNT .
Dr. Particulars ~ C
CAPITAL ACCOUNTS
To Provision for Doubtful Debts Panicuian f
Particulars p Q R Particula rs 600 By Building
To - 10,00(
t By -
To -
To Q' s Capital Ale By Balance b/d By -
To Profit Transferred to :
(Goodwill ) 18,000 By Revaluation A's Capital Ale
To Bank Ale By P ' s Capital Ne B' s Capital Ale
To Q' s Loan Ale (Goodwill) C's Capital Ale
To Balance c/d By R' s Capital Ne
(Goodwill)
=
Dr. CAPITAL ACCOUNTS
 - ~T~~E~ OR_D! AT~ _?~ ~ p~~
- Doubtful Debts . nr.MEN'f OR DEATH OP A PAR'fNv
S.168 1,000- lg --..: !{£ flru-- - - _ c:.K
Capitals : Stock R' s Capital Ale ~ I (6)30,00o 5.169
A
C - Machinery
Buildings
Prepaid Insurance
or.
~
60,00o
---- 60,000
~ PIT AL ACCOUNTS
Particulars Q R Cr.

- - --- - ;i
----- --sz - ~blem. 1. --- "ta] N . db' To Q's Capital
Partfcutar, p Q R

Answer a
Hints to o ue . n6
·u be debited With 000, B' s Cap1
,.
A's Capital Ale :,-v1 Ale will be Credited With t60,
000
.
c is e ited Will
IQ
A}c
(Goodwill) 18,000
' '
By Balance bltf.7l 4,50,000 3.00.000 1,50,000
By Revaluation
'
t24,000 and C's Capital {1 3) 66,000, Ncra,
To Bank Ale 50,000 15,000 10,000 5,000
' s Loan
By P's Capital
sJ~; to- -Problem
- - - - -
2. JOURNAL To Q (J l )
Ale 3,44,000
Ne

Date
particulors L.F. ~ To Balance c/d
I
4,47,000 (GoodwiUi9J 18,000
40,~(X} I ~
89,000 By R's Capital
Cs Capital Ale
Dr. I Ne
To A' s Capital Ale 10,00o - ---- - - (Goodwi11 { 10J
30,00o 4,65,000 3,94,000 1,55,000
-- 66,000 _ _
To B' s Capital Ale th I ss mshare of profits) (II) 4,65,000 3,.94,000 1,55,000
(C Compensates A and B for e __o_ _ ~ --
--
BALANCE SHEET OF THE FIRM (After Q's Retirement)
\\orl in \o ' : . fGainin
" nlSacrifice Ratio : as at 31st Dec.. 2018
Calculanon o El
Liabilities
I 4 _ 3 - 4 = .!. (Sacrifice) t .---- Assets t
A 3 - 9- 9 9 Creditors . !
1,08,000 Cash at Bank
Outstanding Repam; (3) 15 000 (f80,000 - tS0,000) 3-0,000
2 l= 6 - 2 = ±(Gain) 1 44 ' 0 MMO
 -- -- -- ----. • v.r I\ p~
"~ • - - -
~ 1! 0___ -~ --- --
(2) Missing figures o
~ C; ;c1e ~f~ :ru: atio n Ne : Credito
rs ii;00:-,~ .. ·rREM ENT OR DEA TH OP A
Rr:: I - - - - - - - PART - - - _ NER
Insurance (2,000. , J)~ o. Credit si~e o_f R.evaluati~n~~~; - - - •· -
2
decrease m liabilities __ _ _ _ ___ __ ~·~
ti Revaluation (3,000 . • nt shows increase ·1n the va Iue f
(3) Pro ton th s::: ...... o assets an d
dwill of e wrn i·s (36 ' 000'· B's share == t 12,000; Since Gaini .. 21. Entire share of retiring partner m
(4) G?0 A's and C's share will be t3,600 and
t8,4 00 respectiv·-1g
. IL.
e! '\ill~ ay be acquired by one
will.be 3 . 7' ts Balance: A ~90 ,900; Y dZ
(S) Capital Accoun C nJ,1 00; B's Loan Ale ,66)'. 22. X. an are partners in the ratio of! . ! . I partner.
~ I 96 800· Cash Balance n ,000. ,OOo· ratio of X and z will be . 2
.
3 · 7,'· On retuement of Y, the new
(6) Balance Sh ee t TOtal , ' ' 3 . I. ·

23, Incr ease in provision for doubtful d b . .

e ts is a gain for the finn.
OBJECTIVE TYPE QUESTIONS
(l3) fill in the Blanks:
(A) State Whether the folJoning statemen
t-; are Tru e or Fal se: J. Retirement of a partner results in
J. Gaining Ratio= New Profit Sharing ·············•· ........ of the finn .
Ratio - Old Profit Sharing Ratio. 2. :11e ratio in which the remaining partn
ers acquire the ret irin g~ · share
2. Gaining ratio means benefit ratio. 1s called ....................... .
3. Gaining ratio is used at the time of 3· Excess of credit side over debit
retirement. s,·de 1·n RevaIuat·10n Account 1s · call ed
4. Retirement of partner dissolves the part ······· ·················
nership. 4. On retirement of a partner, gain on reval
5. A partner can retire from the firm with uation is transferred to -······ ·········•·"·..
the consent of all other partners only partners' Capital accounts in .......................
. ratio .
6. Gaining ratio is calculated at the time 5. In case all debtors are good, the prov
ision for doubtful debts appearing in the
of admission of a partner.
balance sheet will be ...................... . in Reva
7. A retiring partner is entitled to have luation Account
a share in the goodwill of the firm. 6. Retiring partners' share of goodwill 1n,
ij, Revaluation of Assets and
is adjusted through remaining partners'
Liabilities of the firm is not necessar capital accounts in .................. ..... ratio.
y in case of
retirement of a partner from the finn. 7. ...... ................. Account is prepared
when amount payable to outgoing partner
'.J. Adjustment of goodwill is necessar is paid in instalments with interest.
y in case of retirement of a partner
from 8. In case of death of a partner, his share
the finn . of profit till the date of his death may
; O. The amount due to retiring partner, be estimated on the basis of ....... ................
if not paid in cash, is transferred to or ........................
Loan Account. his 9. The executor is entitled to all the right
s of a ........................
1J. If a partner retires, then other partners 10. Interest on drawings due from
have a gain in their profit sharing ratio deceased partner till the date of his death
. is
•.2. At the time of retirement or death ....... ................ to his capital account.
of a partner, the undistributed prof 11. As er Section 37 of the India
losses and reserves are distributed amo its or n Partners~p Act . 1932, in the absence
ng all partners in their old profit P . th • · artner is entitled to inter of
sharing ratio . partnership deed, e retmng P . est @ •··················--··
•J, Retiring partner gets full goodwill of till the amount due to him is not paid.
the firm on his retirement. . . . arin in the Balance Sheet, 1t. W1li . be
14, Retiring partner is not responsible 12. On retirement, if goodwill is ap~
for any loss incurred after his retireme ers~ capital accounts.
nt. ...... ... ......... ··... to .............. ....... .. p. · bal
•5, In. the event of death, the combined d b tran5ferring its ance to
will decrease .
share of profits of the continuing part
ners 13. Profit and Loss Suspense Ne 1s close Y
............. .......... A/c. . f "'20 000 not likely to be claimed will
'(]. Goo.dwil. l give.n to the ret· · creditors
mng pa rtner 1s· shared by contmu . mg
. partners m . their I4. On retirement of a partner, . Ne o , ,
sacnficmg ratio . •
be ....................... to Revaluation · .
17 G d ·11
, oo w1 is · give
· n to the retiring
partner in capital ratio. - A B d Care partners sharing profi
I :.,, , an fi t30 000 and to io
ts •en"
If? 3/10 and l/5. B retires se trmg hi. s
; •t60 000. New profit sharing ratio
)
11, Aartfamily. member f th '
~ e retm · ·ng partner will. automatically beco share of profit to A or '
P ner m a reconstituted firm . me the new
will be .. .-.................... .
J'.>, In the f .event of dea th, pro fiit or loss on
revaluation is transferred to the
con mumg partners in the old profit shar
ing ratio .
 __ ~~ _E ~!_ ~R_D~~~ 9~I\__P.\11,
5.172 ___ - - - - - - - - - - - - - lN,.
- - - . u Q esnous : ..... , '!I, itE··i·tR EME
_ NT - - OR
· DEA
- -TH- OF
- -A_PAR'l'NER.
C)
( j\1atcbtn,, thu . . ") Share f ood - -=..::..:..:: -
-:--:--- - -
of Retirement of a Part ner : ' ( " g will of
1. Match e following. in case
0
- - - - - - - - - - - -5.173
-
(a) Old + Gaining pa rt ncr rctinng (b) ' N
I cw profit sharing ratio
(,·) Sacrificing Ratio
. (iii) Workmen c-;;~ ~io-
(b) Old -Ne w . R - I-
.
(ii) Gaining Ratio appearing m the Balancen Sheservc (c) \ S -
(c) New -Old - _ eet acrificing ratio
(iii) New Ratio
. - - _ _ (d)~ ining ratio
2. Match the following items : 7. Match the following items at the tim \
(i) Profit or Loss on Revaluation (a) Sacrificing Ratio Reserve in Balance Sheet is tSO / of ~ - - .
rchrement Workmen Compcnsauon
00
(ii) Retirement of a Partner (b) Old Ratio '
(i) Actual claim for Workmen Claim
is N0,0 00 (a) Debit Workmen Compensa
(iii) Increase in Liabilities (c) Loss tion
Reserve by tS0,000 and Credit
('rv) Admission of a Partner (d) Gaining Ratio Provision for Workmen Claim by
?40,000 and Partner's Capital
3. Match the following items : A/cs by t I0,000
(;) The share of goodwill . of the (ii) Actual claim for Workmen Claim (b)
(a) Capital Ratio Debit Workmen Compensation
is t60,000
retiring partner is debited to Reserve by tS0,000 and
1
remaining partners in their Revaluation Ale by t I 0,000 and
1
Credit Provision for Workmen
(ii) In the event of death of a partn
er (b) New Ratio
the general reserve is transferred
IClaim by ?60,000
(c) \ Debit Provision for Workmen
to partners' capital A/cs in
Claim and
(c) Gaining Ratio Icredit revaluation Ne by
(d) Old Ratio tl0,000 I

(d) 1Debit partn m' capital Ncs and

4. Match the following items : ICredit ~orkmen Compensation
Reserve Ne by t 10,000
(i) At the end of the accountin
g (a) Profit and Loss Ale
1

period profit and loss suspense

8. Matc h the following items ·
Ale is closed by transferring its
balance to the
(ii) Balance of profit and loss Ale
I (i) Profit & Loss Appropriation
Account
(p) \ Distribution of General Reserve
I
I

lI
(b) Profit and Loss Appropriation I

I
Profit & (b) Distribution of Net Profit
appearing in the balance sheet is (ii) Loss Suspense Account ,
Ale (c) iDeceased Partners' share of loss
transferred to I I
upto the date of his death \
(c) Capital A/cs I I ll
Match the following items :
I ·

l
I
5. Match the following items : /o
. ] rofit sharing ratio
er leads to : (a) No change ID p
(;)
Debit the share of profit of the ' (a)
Revaluation Ale
(;) Rettrement of a partn
1 ds to:
I
I
I
(b) 'Loss 1Il p
. rofit sharing ratio
deceased partner upto the date of / (ii) Death of a partner ea .
I death to . f partner leads to .
(iii) Admission o a
. \ ( ) 1Gain in profit sharing ratio
c ,
I

(ii) 1Decrease in the value of an asset -- -- -- -- -- •

(b) 'Profit and Loss Suspense Ale •J . Mat ch the following items :
/ Ale \ (a) New Ratio
(c) Profit and Loss Appropriatio )
n
~
1
(i) Advertisement Sus ~:t at the
A/c appearing in Baian::r1ner I _ _ __ _ _ __
6· Match the following
1
items : l time of death ofa .---
,;~ ~
tJ\.!)0.-;!J
1 Gain on revaluation on retirement
(;)
I (a) Iold profit sharing ratio ::=
 5.174 ··rllt Ef.•IF.NT (_ )I{ IJ I~/\ 111 UI'
A PARTNP.R
· _J :1/ter rctiren1cnr of ' (h ) Old Ratio itl·
(i11 Pt,.1fit c.'lf1 1t'U , 1. )\~ntch the 1·o II owtng
.
p.-utncr is Ji/:trioute-d 3 item s : .'l.17~
mo ~ (I) A. fJ ond , C nrc part
I ~ma.ining parmers in . ners· shunn
nn d t IlC new ratio
. g 1n
. 5. .
(d Sacrifice Rntio bctw 3
cc n A and
_ ("· · 2, fl n:lfrcs 1 ( f
partners gnin? a) 1I nnd /J bo'"
•.s 4 : I. Whk h1
(d) Gaining Ratio ~ ,n.
· u,
(ii) A. IJ nnd C arc partncr;· ;ha nng
. . 1n. 6
I. M tch the fullowing item
1U1d new rolto between A and C , ·. 4 ·. 5· IJ .
partners gain ? retire~I (h) : Onl A . , ,
1 3 s: _ 18 2
( :) ~ ~ ts~ din g is recorded on _ (a)_ _ __ : 3. Whk h I y e,Jlll/J
Debit Side Revaluatio~ A/~
(ii) (:redirors of {1 2,000 -- ----
were not 1 (b) Credit Side Rev
aluation Ale (L') ()nJ y C gains

-- likely ro be claimed

--- --
(c) Debit Partners Capital
(ti) Credit Partners Capital
A/cs
5. Match the following items
:
I

I
(J) A and /j both
sacn-fiice.
A/cs 1
- -
J1. Match the following item
(i) A, B & C are partners
. in 2-:-~
· · 4• B ·
firm . The capitals of A and c after retires from the (a ) ?53 ,3 33
s: all ad.
(i) At the rime of retirem
ent of a (a) Capital Account of retiring t 50,000 ~d n? ,000. Adjust their capiJustments .LS
tals in new
partner, profit on revaluation profit shanng ratio . Calculate the
is partner new capital of C.
credited to : (ii) A, Band Care partners in
2 : I : I. B retiresfro_m_tbe
- -(-b) ?60 ,000
(ii) At the rime of retirem
ent of a (b) Capital Accoun firm . The capital of new firm is
ts of all partners fixed at ~ 1,20,000 .
partner, loss on revaluation Calculate the new capital of part
is in old ratio ner A_
debited to : (c) N0,000 7
(iii) At the rime of retirem
ent of a (c) Capital Accounts of remaining (d) ?80,000 1
partner, goodwill appearing partners in new ratio
in J6. Match the following item
Balance Sheet is debited to s:
(i) A, Ban d Care partners
sharing profits in 3 : 2 : I. C (a)
(d) Capital Accounts of ?5,000
remaining retires from the firm. The
re is workmen
partners in old ratio compensation reserve appearing
in Balance Sheet of
t 1,20 ,000. Claim on account of
13. Match the following item
s:
Compensation is t 1,20,000 . Calc
Workmen
ulate the amount
_1 I
(i) , A, B & Ca re p~ credited to C for workmen compens
I
in a firm ! (a) Only A gains ation reserve. __ ,
Ut) A, B and C are partn""
Isharing in I : 2 : 3. C retires. I sharing profi~ _in J : 2 : I. C (b) !;,ii
, What will be the gaining rati . from the firm There is
o' , re trres workmen
·
compensation reserve appeari
between ng in Balance Sheet of
- ~ A and B. f I 20,000. Claim on acco
(ii) A, B & Car e partners ' unt of workmen
in a firm. C (b) I : 2 . • "'90
retires. C gives share to A compensation 1s " ,000· Calculate the amount
for mpensau.on reserve.
f8,000 and to B for f 4,00
credited to C for wor kmen co
-

------ - - - - - - -1 - -
0. - (c) ?20 ,Q.00
Calculate gaining ratio between
A
andB. . Match the ~
- (~
.~ ~
and C are partne~ m ~uo_; I. B~J
c0 a) Ne; - capital A -;r
(iii) A, ~ & Care partners in a finn. ~ce t 1,80,000 and of B
C (c) 2 : I
/
es'."c ·gives ·rus share to A for /
~P!...; •••

f I:00 ,000. Calculate gaining

ratio.
/
. "'m T'Y' ~aPI a
retires from the iu. Oo»oo· I
of A, Band care tl6 ' , • '
40 ooo and
'
'din cash brought
tJ,0 0,0 00. cw as to :: new
i ,. , ?" QM,
1· ( ,;. , .,.
I
capital of A
in by A and~- Whalt onstituted
~ :_·_ .J -_ J- -- --
fifirlll
and_B·~ th r -- "
~ new Yc ~@m l) ~· b /~ I ~ :" ~
 __ ~ 1:_R~ ~E~
-- - --
~ R_D_ ::~~ _9!:_ ~p ~h... jl £11~H~MJ~-~ 0 ! E~A2"'2. ~ p_A!~RTN ER
5.176
- - - - - - - - - - ers in ratio 3 : 2 : I. C (b) New capi -~~ (A) Retiring Partner's Ca i -- -- - -- --- - - -5.177
(ii) A, Band Ca re~ The Cap tal of.... '- To Goodwill N/ tal Ale -
ital Balance t2,4 0,00 0 and Dr.
retifeS froIIl the ~16.0 ooo· t l 40 ooo -i
and t 1,60,000 (B) All Partner's Capital Ncs .
of Jt
~~ 000. C was to be paid in cash b~ught
/ A sand car e, , , • ' • To Goodwill Ne (including retiring)
00 Dr. (in old ratio)

I lil Y
A
. b, and Band to leave t 1,00,000 m
the
(C) Remaining Partner's Ca i
To Goodwill Ne p tal Ncs Dr. (in gaining ratio)
Bank Account How muc h amo unt will be
, brought in by A an~ (D) Remaining Partner's C .
c) Amount brought . To Goodwill Ne ap1tal Ales Dr. (in new ratio)
~
(

1
IA 1s. ,"'l ,40,000 andUl by 6. What journal entry will be recorded ford

-- - -
(D) ;\tultipk Choice Quesrions:
Select the Best Alternate :
I. Retiring partner is compensated
f~r part ~g. with the firm's fu~ e prof
favour of remaining partners. The rem
compensation amount in :
(A) Gaining Ratio
(C) Sacrificing Ratio
2. 'Gaining Ratio ' means :
(A) Old Ratio - New Ratio
(C) Old Ratio - Sacrificing Ratio
J. What treatment is made
of accumulated profits and losses on
- ---l-
B is t60,000
c---
(d) Amount brought in b
A is t80, 000 and b y
11
by the closure of last balance sheet till h .
(A) Profit and Loss Ale
To Deceased Partner's Capital Ale
cceascd _partner ' s share in profit from
t e date ofh1s death ?
Dr.
is ~20 ,000 y (B) Deceased Partner's Capital Ale
Dr.
To Profit and Loss Ale
(C) Deceased Partner's Capital Ale
Dr.
To Profit and Loss Suspense Ale
(D) Profit and Loss Suspense Ale Dr.
its in To Deceased Partner's Capital Ale
allllilg partners contnbute to such
7. On retirement of a partner, goodwill
will be credited to the Capital Account
(B) Capital Ratio
of:
(D) Profit Sharing Ratio (A) Retiring Partner (B) Remaining Partners
(C) All Partners (D) None of the Above
8. On the death of a partner, the amount
(B) New Ratio - Old Ratio due to him will be credited to :
(D) New Ratio - Sacrificing Ratio (A) All partner's Capital Accounts
(B) Remaining partner's Capital Acco
unts
the retirement of (C) His Executor's Account I

a partner? I
(D) Governments ' Revenue Account
(A) Credited to all partner's capital acco
unts in old ratio. 9. How goodwill is recorded on the retire
I
(B) Debited to all partner' s capital acco
unts in old ratio. R aining partner's Capital Ncs
ment of a partner? II
(C) Credited to remaining partner' s capi Dr. (In Gaining Ratio) . I
tal accounts in new ratio. (A) emTo Retiring partner's Capital Ale
(D) Credited to remaining partner's capi (with his share of_goodw,11)
tal accounts in gaining ratio. . . , . al Ncs Dr. (In New Ratio)
(B) Remammg Partner s CapitC
·· At the time of retirement of a partner, ·ta1 N (with his share of goodwill)
profit on reva luation will be credited To Retiring Partner's apt c
to : Dr.
(C) Goodwill Ale . al N s
(A) Capital Account ofretiring partner To All partner's Cap1t (In Old Ratio)
c Dr.
(B) Capital Accounts of all partners in (with his share)
the old profit sharing ratio. (D) Goodwill Ale
To Retiring partner ,s Cap!·ta1 Ne
(C) Capital Accounts of the remaining
(D) Ca?ital Accounts of the remaining
partners in their old profit sharing ratio
· · 2 B wants
to retire from the finn . The profit )
partners in their new profit sharing 10. A B and Care partners in 3 ·· 4 ·f
36 ooo. New ratio of A and C is· 5 ·· 3· Pro fit

j
rat10
o~ revaluation on that d~te .:;e d as':
. t. jour
5. Wha . nal entry WI·11 be recorded for writ on revaluation will be dtStrl u
ing off the goodwill alreadY
existmg m Balance Sheet at the time of
retirement of a partner? fJ ~ ~
- RETIRE MENT OR DEA TH
Ap
---- - - ---- ---- ---- --OF-- ~~~ 1.t flR EM ENT OR DEATH OP A PA
~1_:s_ - - - - - - o-oo- -n-•1 1ooo· c is,ooo ... , "
0
- - - - __RTNER
A tl6 . ' -,
(A) 'ooo: B t I6,000;' C {8,000 l'). A, Band C arccqualp -----
favour of A and 2/Sth in~ers. C retires. He - -

II
(B) A tl2, , - - - - - ~ 179
(,/\} 3 : 2 avour of B. New ratisur r~s 3/Sth of his share in
(C) A t 22,500; C t I3,50~
(D) A t23 ,625 ; C
7 (C) 7 : 8 (8) g : ~ Will be :
tl 2.3 ' _ . . .
aring profits m the rauo of 5 . 2 . I. If the ne (D) 2 · 3
d care partners sh . . . ? W rau 20. P, Q and R arc partners sharin
11. A. B an f A . . 7 what will be the gaming ratio . ·
1.10
on the retirement o is 3 . - , (B) 3 : 2
share was taken up by p a d : ~rofits in the ratio of 4 . .
be : n in the ratio . 3 2 . . .
(A) II ~14 (A) 16: 29 3 2 . · · . • Q rettres and his
(D ) 14 : JI · · New profit sharing ratio wi ll
(C) 2 : ., (C) 3 : 2
R artners sharino profits in the ratio of 5 : 4 : 3. Q retires (8)29 : 16
(D) 2 · 3
12· P, Q andd 'daret p LnrO future p;;,fits equally . Gaining Ratio will be: artdp 21. L, P and G are three partners sharin ,
andR :c1 e o swu" .·
(B) 1 : 1 and P decided to share profits in e g profi_ts m~e-ratio 15 : 9 : 8. G reti res. L
(A) 5 : ., (A) IS : 9 qua( ratio. Gaming ratio will be :
(D) 3 : I
(C) I : 3 (C) 7 : I (B) 9 : 15
ers sharino profits in the ratio of 1/2 : I/4 : 1/4 New . (D) 1 : 7
13. A. B an d C are Partn ° · ratio 22. On I st April, 2019 A, Band C were artn .
on the retirement of B ·wi ll be : ratio of S : 3 : 2 respective! On ~ ers s~ng profits and losses .in the
(A) 2 : 4
(B) 1 : 2
(D) 1/4: 1/2
ratio of A and C will be . i.'a . 8
~his da~e _retires. The new profit sharing
3 · · ammg ratio will be ·
(C) 2 : I (A) I : 2 (B) 2 : I ·
J.t A, Band c are partners sharing profits in the ratio of 1/4 : (C) I : I (D) 5 : 2
3/ 10 : 9/20. The
New ratio on the retirement of C will be : 23. B, P and L sharing profits in the ratio 4 : 3 : 2. B retires p and L decided
to
(A) 6 : 5 share profits in future in the ratio of S : 3. Gaining ratio ~11 be :
(B) 5 : 6 "l
(C) 4 : 3 (D) 4 : 10 (A)ll: 21 (8)21 : II
(C) 11 : 13 (D) 13 : 11
15. X yand z have been sharing profits in the ratio of 4 : 2 : 1 Z retires.
X and y 24. P, Q and R were partners sharing profits in the ratio 2 : 2 : 1. Q retires
take Z 's share equally. New profit sharing ratio will be : and the
new profit sharing ratio of P and R will be 3 : I. Gaining ratio will be :
(A) 5 : 2 (B) 5 : 3 (A) 1 : 7 (B) 2 : I
(C) 9 : 5 (D) 4 : 2 (C) I : 2 (D) 7 : I
16. P, Q and R have been sharing profits and losses in the ratio of 5 : 25. A, B and C are equal partners in a finn. B retires and the remaining partners
3 : 2. Q
retires. His share is taken by P and R in the ratio of 2 : 1. New profit sharing decide to share the profits of the new finn in the ratio of S : 4. Gaining ratio
ratio will be: will be:
(A) 1 : 1 (B) I : 2
(A) 6 : 4 (B) 7 : 3
(D) S : 4
(C) 7 : 2 (D) 6 : 3 (C) 2: 1
26. A B and Care partners sharing profit or Joss in the ratio of 3 :_ 2 : l. B r:tires
17. A, Band C share profits and losses of the finn equally . B retires from
business ~d after B's retirement A and C agreed to share profit or loss m the ratio of
and his share is purchased by A and C in the ratio of 2 : 3. New profit sharing
3 . 2 in future. Their gaining ratio will be :
ratio between A and C respectively would be : · . (B) l : 3
(A) 01 : 01 (B) 02: 02 (A) 3 . 1 (D) None of the above
(C) 07 : 08 (C) 3: 7
(D) 03 : 05 .
. rofit or loss in the ratio of 4 : 3 : 2. C retires
27. A, Band Care partners sharing P eed to share profit or loss in the ratio
of
18- P, Q and R have been sharing profits in the ratio of 8 : 5 : 3. P retires. and after C's retirement A and B_ agr ·11 be .
Q takes
31_16th share from P and R takes 5116th share from P. New profit sharing ratio • aining ratio wt ·
4 : 3 in future. Thetr g (B) 4 : 3
will be :
(A) 3 : 2 (D) 1 : 1 ,
(A) I : I
(C) 9 : 7
(B) 10 : 6 cq 3: 4 ~ ~ (! ,~ ll~f ij@ ~
(D) 5: 3