Gaurav Goyal Commerce Classes

RETIREMENT OF A PARTNER
Class 12 - Accountancy

1. A, B and C were partners sharing profits in the ratio of , and . A retires and surrenders of his share in [1]
3 1 1 2

8 2 8 3

favour of B and remaining share in favour of C. Calculate new ratio and gaining ratio.
2. Kashyap, Lokesh, Manish and Naveen are partners sharing profits in the ratio of 3 : 2 : 1 : 4. Kashyap retires and [1]
his share is acquired by Lokesh and Manish in the ratio of 3 : 2. Calculate new profit-sharing ratio and gaining
ratio of the remaining partners.
3. Ranjana, Sadhna and Kamana are partners sharing profits in the ratio 4:3:2. Ranjana retires; Sadhna and Kamana [1]
decided to share profits in the future in the ratio of 5:3. Calculate the Gaining Ratio.
4. Madhu, Neha and Tina are partners sharing profits in the ratio of 5 : 3 : 2. Calculate new profit sharing ratio and [3]
gaining ratio if:
i. Madhu retires
ii. Neha retires
iii. Tina retires
5. Keshav, Nirmal and Pankaj are partners sharing profits and losses in the ratio of 4 : 3 : 2. Nirmal retires and the [3]
goodwill is valued at ₹ 72,000. Keshav and Pankaj decided to share future profits and losses in the ratio of 5 : 3.
Record necessary journal entries.
6. Jaya, Kirti, Ekta and Shewata are partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2 : 1. On [3]
Jaya’s retirement, the goodwill of the firm is valued at ₹ 36,000. Kirti, Ekta and Shewata decided to share future
profits equally. Record the necessary journal entry for the treatment of goodwill without opening Goodwill
Account.
7. Mitali, Indu and Geeta are partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On March 31, [4]
2017, their Balance Sheet was as under:

Liabilities Amount ₹ Assets Amount ₹

Capital Accounts: Goodwill 25,000

Mitali 1,50,000 Buildings 1,00,000

Indu 1,25,000 Patents 30,000

Geeta 75,000 3,50,000 Machinery 1,50,000

Sundry Creditors 55,000 Stock 50,000

General Reserve 30,000 Debtors 40,000

Cash 40,000

4,35,000 4,35,000

Geeta retires on the above date. It was agreed that Machinery be valued at ₹ 1,40,000; Patents at ₹ 40,000; and
Buildings at ₹ 1,25,000. Record the necessary journal entries for the above adjustments and prepare the

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 Revaluation Account.
8. The Balance Sheet of Ashish, Suresh and Lokesh who were sharing profits in the ratio of 5 : 3 : 2, is given below [4]
as on March 31, 2017.
Balance Sheet of Ashish, Suresh and Lokesh
As on March 31, 2017

Liabilities Amount ₹ Assets Amount ₹

Capitals: Land 4,00,000

Shyam 7,20,000 Building 3,80,000

Gagan 4,15,000 Plant & Machinery 4,65,000

Ram 3,45,000 14,80,000 Furniture & Fittings 77,000

Reserve Fund 1,80,000 Stock 1,85,000

Sundry Creditors 1,24,000 Sundry Debtors 1,72,000

Outstanding Expresses 16,000 Cash in hand 1,21,000

18,00,000 18,00,000

Suresh retires on June 30, 2017 date and the following adjustments are agreed upon his retirement.
i. Stock was valued at ₹ 1,72,000
ii. Furniture and fittings were valued at ₹ 80,000
iii. Profit share of Suresh till the date of his retirement is to be calculated on the basis of the firm's last year
profit which is ₹ 2,00,000.
iv. An amount of ₹ 10,000 due from Mr. Deepak, a debtor, was doubtful and a provision for the same was
required.
v. Goodwill of the firm was valued at ₹ 2,00,000.
vi. Suresh was paid ₹ 40,000 immediately on retirement and the balance was transferred to his loan account.
vii. Ashish and Lokesh were to share future profits in the ratio of 3 : 2.
Prepare Revaluation Account, Capital Account and Balance Sheet of the reconstituted firm.
9. Lalit, Pankaj and Rahul are partners sharing profits in the ratio of 4 : 3 : 3. After all adjustments, on Lalit’s [4]
retirement with respect to general reserve, goodwill and revaluation, etc., the balances in their capital accounts
stood at ₹ 70,000, ₹ 60,000 and ₹ 50,000 respectively. It was decided that the amount payable to Lalit will be
brought by Pankaj and Rahul in such a way as to make their capitals proportionate to their profit sharing ratio.
Calculate the amount to be brought by Pankaj and Rahul and record necessary journal entries for the same. Also,
record necessary entry for payment to Lalit. After Lalit’s retirement, the new profit sharing ratio between Pankaj
and Rahul is 3 : 3, i.e. 1 : 1.
10. Anil, Bhanu and Chandu were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On March 31, 2017, their [4]
Balance Sheet was as under:
Books of Anil, Bhanu and Chandu
Balance Sheet as on March 31, 2017

Liabilities Amount (₹) Assets Amount (₹)

Creditors 11,000 Building 20,000

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 Reserves Fund 6,000 Machinery 30,000

Anil’s Capital 30,000 Stock 10,000

Bhanu’s Capital 25,000 Patents 11,000

Chandu’s Capital 15,000 70,000 Debtors 8,000

Cash 8,000

87,000 87,000

Anil died on October 1, 2017. It was agreed between his executors and the remaining partners that:
i. Goodwill to be valued at 2 1

2
years' purchase of the average profit of the previous 4 years, which were 2013-
14: ₹ 13,000; 2014-15: ₹ 12,000; 2015-16: ₹ 20,000 and 2016-17: ₹ 15,000.
ii. Patents be valued at ₹ 8,000; Machinery at ₹ 28,000; and Building at ₹ 25,000.
iii. Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year.
iv. Interest on capital be provided at 10% p.a.
v. Half of the amount due to Anil to be paid immediately.
Prepare Anil's Capital Account and Anil's Executor's Account as on October 1, 2017.
11. Pankaj, Naresh, and Saurabh are partners sharing profits in the ratio of 3 : 2 : 1. Naresh retired from the firm due [6]
to his illness on Septmber 30, 2017. On that date the Balance Sheet of the firm was as follows:
Books of Pankaj, Naresh, and Saurabh
Balance Sheet as on March 31, 2017

Liabilities Amount ₹ Assets Amount ₹

General Reserve 12,000 Bank 7,600

Sundry Creditors 15,000 Debtors 6,000

Bills Payable 12,000 Less: Provision for Doubtful Debt 400 5,600

Outstanding Salary 2,200 Stock 9,000

Provision for Legal Damages 6,000 Furniture 41,000

Capitals: Premises 80,000

Pankaj 46,000

Naresh 30,000

Saurabh 20,000 96,000

1,43,200 1,43,200

Additional Information:
i. Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be
made 5% on debtors. Further, provision for legal damages is to be made for ₹ 1,200 and furniture to be
brought up to ₹ 45,000.
ii. Goodwill of the firm be valued at ₹ 42,000.
iii. ₹ 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank;
if required, necessary loan may be obtained from Bank.

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 iv. Naresh share of profit till the date of retirement is to be calculated on the basis of last years’ profit, i.e., ₹
60,000.
v. New profit sharing ratio of Pankaj and Saurabh is decided to be 5 : 1.
Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.
12. Puneet, Pankaj and Pammy are partners in a business sharing profits and losses in the ratio of 2 : 2 : 1 [6]
respectively. Their balance sheet as on March 31, 2019 was as follows:
Books of Puneet, Pankaj and Pammy
Balance Sheet as on March 31, 2019

Liabilities Amount ₹ Assets Amount ₹

Sundry Creditors 1,00,000 Cash at Bank 20,000

Capital Accounts: Stock 30,000

Puneet 60,000 Sundry Debtors 80,000

Pankaj 1,00,000 Investments 70,000

Pammy 40,000 2,00,000 Furniture 35,000

Reserve 50,000 Buildings 1,15,000

3,50,000 3,50,000

Mr. Pammy died on September 30, 2017. The partnership deed provided the following:
i. The deceased partner will be entitled to his share of profit up to the date of death calculated on the basis of
previous year’s profit.
ii. He will be entitled to his share of goodwill of the firm calculated on the basis of 3 years’ purchase of average
of last 4 years’ profit. The profits for the last four financial years are given below:
for 2015–16; ₹ 80,000; for 2016–17, ₹ 50,000; for 2017–18, ₹ 40,000; for 2018–19, ₹ 30,000.
The drawings of the deceased partner up to the date of death amounted to ₹ 10,000. Interest on capital is to
be allowed at 12% per annum. Surviving partners agreed that ₹ 15,400 should be paid to the executors
immediately and the balance in four equal yearly instalments with interest at 12% p.a. on the outstanding
balance.
Show Mr. Pammy’s Capital account, his Executor’s account till the settlement of the amount due.
13. Following is the Balance Sheet of Prateek, Rockey and Kushal as on March 31, 2020. [6]

Books of Prateek, Rockey, and Kushal

Balance Sheet as on March 31, 2020

Liabilities Amount (₹) Assets Amount (₹)

Sundry Creditors 16,000 Bills Receivable 16,000

General Reserve 16,000 Furniture 22,600

Capital Accounts: Stock 20,400

Prateek 30,000 Sundry Debtors 22,000

Rockey 20,000 Cash at Bank 18,000

Kushal 20,000 70,000 Cash in Hand 3,000

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 1,02,000 1,02,000

Rockey died on June 30, 2020. Under the terms of the partnership deed, the executors of a deceased partner were
entitled to:
a. Amount standing to the credit of the Partner’s Capital account.
b. Interest on capital at 5% per annum.
c. Share of goodwill on the basis of twice the average of the past three years’ profit and
d. Share of profit from the closing date of the last financial year to the date of death on the basis of last year’s
profit.
Profits for the year ending on March 31, 2018, March 31, 2019 and March 31, 2020 were ₹ 12,000, ₹ 16,000 and
₹ 14,000 respectively. Profits were shared in the ratio of capitals.
Pass the necessary journal entries and draw up Rockey’s capital account to be rendered to his executor.
14. Discuss the various methods of computing the share in profits in the event of death of a partner. [4]

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