RETIREMENT, DEATH & DISSOLUTION OF PARTNERSHIP FIRM

1. A, B and C are partners sharing profits equally. A died on 30 th April, 2022.the firm
had Workmen Compensation Reserve of Rs. 20,000, against which there is a claim
of Rs.2,000 on this date. The firm had investment of market value Rs. 1,90,000
appearing in the books at Rs. 2,00,000. Investment fluctuation fund appears at Rs.
40,000. Pass journal entries for treatment of these reserves.

2. X, Y and Z are partners in a firm sharing profits in the ratio of 5: 3: 2. Z died on 30th
September, 2021 and his share of profit till the date of death was to be calculated
on the basis of sales. Sales for the year ended 31st March, 2021 amounted to Rs.
1,50,000 and that from 1st April to 30th September, 2021 amounted to Rs. 90,000.
The profit for the year ended 31st March, 2021 was Rs. 50,000. Calculate Z's share
of profit upto the date of death and pass necessary Journal entry if:
Case. 1 - X and Y decided not to change their future profit-sharing ratio.
Case. 2 - X and Y decided to share future profits in the ratio of 7:3.

3. P, Q and R were partners in a firm sharing profits in the ratio of 4: 3: 1. The firm
closes its books on 31st March every year. On 1-2-2022 Q died and it was decided
that the new profit sharing ratio between P and R will be equal. The partnership
deed provided for the following, on the death of a partner:
a) His share of goodwill is calculated on the basis of the half of the profits credited
to his account during previous four completed years. The firm's profit for the
last four years was:
2017-2018 Rs. 1,20,000, 2018-2019 Rs. 80,000, 2019-2020 Rs. 40,000 and
2020-2021 Rs. 80,000.
b) His share of profit in the year of his death was to be computed on the basis of
average profits of past two years.
Pass necessary Journal entries relating to goodwill and profit to be
transferred to Q's Capital Account. Also show your working clearly.

4. Sandeep, Praveen and Tara are partners sharing profits in the ratio of 3: 2: 1. On
1st April, 2022 Sandeep gave a notice to retire from the firm. Praveen and Tara
decided to share future profits, in the ratio of 2: 3. The capital accounts of Praveen
and Tara after all adjustments showed a balance of Rs. 64,000 and Rs. 1,00,000
respectively. The total amount to be paid to Sandeep was Rs. 1,23,000. This amount
was to be paid by Praveen and Tara in such a way that their capitals become
proportionate to their new profit sharing ratio.
Pass necessary Journal entries for the above transactions in the books of the
firm. Show your working clearly.

Prepared by- Shubham jagdish 8112601234

 5. A, B and C were in a partnership sharing profits and losses equally. Their Balance
Sheet as at 31st March, 2021 was as under:
Liabilities Rs. Assets Rs.
Capital A/c’s: Plant and Machinery 19,010
A - 30,880 Furniture and Fixtures 3,392
B - 10,080 Sundry Debtors 11,330
C - 15,760 56,720 Investments 9,684
Sundry Creditors 14,176 Bills Receivable 6,890
Bills Payable 6,720 Stock-in-Trade 23,950
Cash at Bank 3,360
77,616 77,616
Investments had market value of Rs. 24,000 which were held to be sold to enable the
settlement of accounts with partner's estate in case of death of a partner during the
continuance of the firm.
A died on 1st April, 2021. The remaining partners could not arrive at any
understanding with legal representatives of Field. Consequently, it was decided that
the firm would be dissolved, subject to the following adjustments:
(i) Investments were sold and amount was realised Rs. 24,000.
(ii) Plant and Machinery realised at 70% of the book value.
(iii) Furniture and Fixtures were taken over by C at a market value of Rs. 2,000.
(iv) Bills Receivable and Sundry Debtors had to be discounted at 5%.
(v) Stock-in-Trade comprised:
a) Easily Marketable Items: 70% of the total inventory which were realised in
full.
b) Obsolete Items: 10% of the total inventory which had to be discarded.
c) The rest of the items in the Stock realised 50% of their book value.
(vi) A liability of Rs. 1,100 which had not been recorded in the books of the firm had
to be settled by the firm before its dissolution.
You are required to prepare the Realisation Account.

6. Susan, Geeta and Rashi are partners sharing profits and losses in the ratio of 5:3:2.
Their Balance Sheet as at 31st March, 2017, is as under:
BALANCE SHEET as at 31st March, 2017
Liabilities Rs. Assets Rs.
Sundry Creditors 50,000 Cash at Bank 70,000
Workmen Compensation Sundry Debtors 65,000
Reserve 25,000 Less: Provision for
Employees' Provident Doubtful Debts (5,000) 60,000
Fund 5,000 Goodwill 50,000
Bank Loan 55,000 Furniture 1,00,000
Prepared by- Shubham jagdish 8112601234
 Capital A/c’s: Building 3,80,000
Susan - 2,20,000
Geeta - 1,70,000
Rashi - 1,35,000 5,25,000
6,60,000 6,60,000
The partners decided to dissolve their partnership on 31st March, 2017. The
following transactions took place at the time of dissolution:
a) Realisation expenses of Rs. 2,000 were paid by Susan on behalf of the firm.
b) Geeta took over the goodwill for her own business at Rs. 40,000.
c) Building was taken over by Rashi at Rs. 3,00,000.
d) Only 80% of the debtors paid their dues.
e) Furniture was sold for Rs. 97,000.
f) Bank Loan was settled along with interest of Rs. 5,000.
You are required to prepare the Realisation Account.

7. A, B and C were partners in a firm whose Balance Sheet as at 31st March, 2018 was
as below:
Liabilities Rs. Assets Rs.
Creditors 7,096 Cash at bank 6,496
General Reserve 3,000 Debtors 9,000
Capitals: A 8,000 Stock 10,600
B 6,000 Furniture 2,000
C 4,000 18,000
28,096 28,096
B retired on that date and in this connection it was decided to make the following
adjustments:
(a) To reduce stock and furniture by 5% and 10% respectively; and
(b) To provide for doubtful debts at 5% on debtors.
Rent outstanding (not provided for as yet) was 260. Goodwill was valued at
14,200. A and C decided:
(i) To share profits and losses in 5: 3 respectively;
(ii) To re-adjust their capitals in the profit-sharing ratio; and
(iii) To bring in sufficient cash to pay off B immediately and to leave a balance
of Rs. 1,000 in the Bank. B was paid off.
Give Journal entries to record the above and draft the Balance Sheet of the
new firm.

Prepared by- Shubham jagdish 8112601234

 8. Pass the necessary journal entries for the following transactions on the
dissolution of the firm of P and Q after the various assets (other than cash) and
outside liabilities have been transferred to realisation account.
a) Bank loan ₹ 12,000 was paid.
b) Stock worth ₹ 16,000 was taken over by a partner Q.
c) Partner P paid a creditor ₹ 4,000.
d) An asset not appearing in the books of accounts realised ₹ 1,200.
e) Expenses of realisation ₹ 2,000 were paid by partner Q.
f) Profit on realisation ₹ 36,000 was distributed between P and Q in 5 : 4 ratio.

Prepared by- Shubham jagdish 8112601234