Retirement of Partners

1. Krish, Vrish and Peter are partners sharing profits in the ratio of a 3 : 2 : 1. Vrish retired from the
firm. On that date the Balance Sheet of the firm was as follows :
BALANCE SHEET as on 31st March, 2020
Liabilities ₹ Assets ₹
Creditors 15,000 Bank 7,600
General Reserve 12,000 Furniture 41,000
Bills Payable 12,000 Stock 9,000
Outstanding Salary 2,200 Premises 80,000
Provision for legal damages 6,000 Debtors 6,000
Capitals : Less : Provision for Doubtful
Krish 46,000 Debts 4,00 5,600
Vrish 30,000
Peter 20,000

1,43,200 1,43,200
Additional Information :
(a) Premises to be appreciated by 20%, Stock to be depreciated by 10% and Provision for doubtful
debts was to be maintained @ 5% on Debtors. Further, provision for legal damages is to be
increased by ₹ 1,200 and furniture to be brought up to ₹ 45,000.
(b) Goodwill of the firm is valued at ₹ 42,000.
(c) ₹ 26,000 from Vrish's Capital Account be transferred to his loan account and balance to be paid
through bank; if required, necessary loan may be obtained from bank.
(d) New profit-sharing ratio of Krish and Peter is decided to be 5 : 1. Prepare Revaluation Account,
Partners' Capital Accounts and Balance Sheet.

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 2. A, B and C are partners in a firm sharing profits and losses in the ratio 3 :2 :1. Their Balance Sheet
as at 31st March, 2020 was as under :
Liabilities ₹ Assets ₹
Creditors 30,000 Cash at Bank 18,000
Bills Payable 16,000 Debtors 25,000
General reserve 12,000 Less : Provision for Doubtful
Debts 3,000 22,000
Capital A/c’s : Stock 18,000
A 40,000 Furniture 30,000
B 40,000 Machinery 68,000
C 30,000 1,10,000 Goodwill 12,000
1,68,000 1,68,000
B retired on 1st April, 2020 on the following terms :
(i) Provision for Doubtful Debts will be raised by ₹ 1,000.
(ii) Stock will be reduced by 10% and Furniture by 5%.
(iii) There is an outstanding claim for damages of «1,100 and it is to be provided in the books.
(iv) Creditors will be written back by ₹ 6,000, being not payable.
(v) Machinery will be reduced by 5%.
(vi) Out of the fire insurance premium paid during the year, ₹ 3,400 will be carried forward as
excess premium paid.
(vii) Goodwill of the firm is valued at ₹ 24,000.
(viii) B to be paid ₹ 10,000 by cheque and the balance to be transferred to his Loan Account.
(ix) A and C to share the future profits in the ratio of 3 : 2.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the firm after B's
retirement.

3. A, B and C were partners in a firm sharing profits in 3 : 2 : 1 ratio. On 31st March, 2020, B retired. On
the date of his retirement, the balance in his Capital Account was ₹ 3,50,000. The other assets and
liabilities of the firm on that date were as follows : Cash ₹ 1,50,000; Building ₹ 10,00,000; Plant and
Machinery ₹ 4,00,000; Stock ₹ 2,00,000; Debtors ₹ 2,00,000; and Investments ₹ 3,00,000.

Following was agreed among the partners on B’s retirement :

(a) Building to be appreciated by 20%.
(b) Plant and Machinery to be depreciated by 10%.
(c) A provision of 5% on debtors to be created for doubtful debts.
(d) Stock was to be valued at ₹ 1,80,000 and Investments at ₹ 3,50,000.
(e) An Old photocopier previously written off was sold for ₹ 20,000.
(f) Partners had to pay ₹ 50,000 to the family of an employee who died in an accident.
(g) B was paid in cash ₹ 1,00,000 and the balance in three equal yearly instalment; with interest
@ 10% p.a.starting from 31st March, 2021.
Pass the necessary Journal entries to record the above adjustments. The firm closes its books on
31st March every year.

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4. The Balance Sheet of X, Y and Z sharing profits and losses in the ratio of 2 : 3 : 5 at 31st March,
2020 is given below :
BALANCE SHEET OF X, Y AND Z
as on 31st March, 2020
Liabilities ₹ Assets ₹
Sundry Creditors 1,65,000 Cash 1,20,000
General Reserve 90,000 Debtors 1,35,000
Less : Provision for
Capital A/c’s : Doubtful Debts 15,000 1,20,000
X 2,25,000 Stock 1,50,000
Y 3,75,000 Machinery 4,50,000
Z 4,50,000 10,50,000 Patents 90,000
Building 3,00,000
Profit and Loss A/c 75,000
13,05,000 13,05,000
Z retired on the above date and it was agreed that :
(i) Debtors ₹ 6,000 will be written off as bad debts and a provision of 5% on debtors for doubtful
debts will be maintained.
(ii) Patents will be written off and stock, machinery and building will be reduced by 5%.
(iii) X and Y will share future profits in the ratio of 2 : 3.
(iv) Goodwill of the firm on Z's retirement was valued at ₹ 90,000.
Pass the necessary Journal entries for the above transactions in the books of the firm on Z's
retirement. It was decided that amount payable to Z shall be paid after two years together with
interest due @ 12% p.a.

5. P, Q and R were partners in a firm sharing profits in the ratio of 7 :2 :1. On 1st April, 2020 their
Balance Sheet was as follows :
BALANCE SHEET OF P,Q AND R as on 1st April, 2020
Liabilities ₹ Assets ₹
Capital A/c’s : Land 12,00,000
P 9,00,000 Building 9,00,000
Q 8,40,000 Furniture 3,60,000
R 9,00,000 26,40,000 Stock 6,60,000
General Reserve 3,60,000 Debtors 6,00,000
Workmen’s 5,40,000 Less : Provision for 5,70,000
Compensation Reserve Doubtful Debts 30,000
Creditors 3,60,000 Cash at Bank 2,10,000
39,00,000 39,00,000
On the above data Q retired.
Following was agreed:
(i) Goodwill of the firm was valued at ₹ 12,00,000.
(ii) Land was to be appreciated by 30% and Building was to be decreased by ₹ 3,00,000.
(iii) Value of furniture was to be reduced by ₹ 60,000.
(iv) Liability for Workmen's Compensation was determined at ₹ 1,40,000.
(v) Amount payable to Q was transferred to his loan account. His loan is to be paid after two years
with interest due @ 12% p.a.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.

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6. A, B and C are partners sharing profits and losses in the ratio of 2 :2 :1. Their Balance Sheet as at
31st March, 2020 was as follows :
Liabilities ₹ Assets ₹
Creditors 30,000 Cash in Hand 18,000
Bills Payable 16,000 Debtors 25,000
General Reserve 6,000 Less : Provision for 22,000
Doubtful Debts 3,000
Workmen Compensation Reserve 6,000 Stock 18,000
Capital A/c’s : Furniture 30,000
A 40,000 Machinery 70,000
B 40,000 Goodwill 10,000
C 30,000 1,10,000
1,68,000 1,68,000
B retired from business on 1st April, 2020 on the following terms :
(i) Stock to be reduced by 10% and furniture by 5%.
(ii) Creditors were overvalued by ₹ 3,900.
(iii) Goodwill of the firm is valued at ₹ 22,000.
(iv) Unrecorded office equipment sold for ₹ 5,000.
(v) Firm had to pay 5,000 to settle a dispute with an ex-employee.
(vi) A and C will share future profits in the ratio of 3 : 2.
(vii) B was to be paid ₹ 10,000 in cash on settlement and balance in three equal yearly instalments
with interest @ 9% p.a.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of new firm.

7. X, Y and Z were partners in a firm sharing profits in the ratio of 1/2 : 1/3 : 1/6 respectively. Balance
Sheet of the firm as on 31st March, 2020 was as follows :
Liabilities ₹ Assets ₹
Creditors 9,500 Cash at Bank 1,250
Bills Payable 2,500 Debtors 8,000
General Reserve 6,000 Less : Provision for 250 7,750
Doubtful Debts
Capital A/c’s : Stock 12,500
X 20,000 Machinery 21,500
Y 15,000 Building 22,500
Z 12,500 47,500
65,500 65,500
Y retired from the firm on the above date on the following terms:
(i) Goodwill of the firm be valued at ₹ 9,000. Y’s share is to be adjusted in the Capital Accounts of
X and Z.
(ii) Machinery was to be reduced to ₹ 19,150.
(iii) Stock to be appreciated by 20% and Building by 10%.
(iv) Provision for Doubtful Debts to be increased by ₹ 975.
(v) Liability for Workmen's Compensation Claim to the extent or ₹ 825 to be accounted.
(vi) It was agreed that X and Z will share future profits in the ratio of 3 : 2.
You are required to prepare Revaluation Account, Partners' Capital Accounts and the Balance
Sheet of the firm after the retirement of Y.

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8. A, B and C were partners in a firm. Their Balance Sheet as at 31st March, 2020 was as follows :
BALANCE SHEET OF A, B AND C as on 31st March, 2020
Liabilities ₹ Assets ₹
Bills Payable 20,000 Bank 20,000
Creditors 40,000 Furniture 28,000
General Reserve 30,000 Stock 20,000
Workmen 6,000 Debtors 45,000
Compensation Reserve
Capital A/c’s : Less : Provision for 5,000 40,000
Doubtful Debts
A 60,000 Land and Building 1,20,000
B 40,000
C 32,000 1,32,000
2,28,000 2,28,000
B retired on 1st April, 2020. A and C decided to share profits in the ratio of 2 : 1. The following
terms were agreed upon:
(i) Goodwill of the firm was valued at ₹ 30,000.
(ii) Bad-debts ₹ 4,000 were written off. The provision for doubtful debts was to be maintained @
10% on debtors.
(iii) Land and Building was to be increased to ₹ 1,32,000.
(iv) Furniture was sold for ₹ 20,000 and the payment was received by cheque.
(v) Liability towards Workmen Compensation was estimated at ₹ 1,500.
(vi) B was to be paid ₹ 20,000 through a cheque and the balance was transferred to his Loan
Account.
Prepare Revaluation Account, Partners' Capital Accounts and Bank Account.

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9. Kusum, Sneh and Usha were partners in n firm sharing profits in the ratio or 2: 3 : 2. Kusum
retired, Sneh and Usha decide to share future profits in the ratio of 3 : 4 . Workmen Compensation
Reservehad balance of ₹ 30,000. Land and Building existed at ₹ 4,00,000 and Machinery at ₹
6,00,000 in the Balance Sheet on Kusum's retirement. Goodwill of the firm was valued at ₹
2,80,000.
Dr. REVALUATION ACCOUNT Cr.
Particulars ₹ Particulars ₹
To Machinery A/c ? By Land and Building A/c ?
To Bad Debts A/c 10,000 By Loss transferred to :
Kusum’s Capital A/c ?
Sneh’s Capital A/c ?
Usha’s Capital A/c ? 70,000
1,90,000 1,90,000

Dr. PARTNER’S CAPITAL ACCOUNT Cr.

Kusum Sneh Usha Kusum Sneh Usha
Particulars Particulars
(₹) (₹) (₹) (₹) (₹) (₹)
To Revelation ? ? ? By Balance ? 6,00,000 4,00,000
A/c (Loss) b/d
To Kusum’s ? By Workmen ? ? ?
Capital A/c Compensation
(Goodwill) Reserve A/c
To Bank A/c 1,00,000 By Usha’s 80,000
Capital A/c
(Goodwill)
To Kusum’s ?
Loan A/c
To Balance ? ?
b/d
? ? ? 4,84,000 ? 4,04,000

Dr. BALANCE SHEET OF THE NEW FIRM as on 31st March, 2020 Cr.
Liabilities ₹ Assets ₹
Capital A/c’s : Land and Building ?
Sneh ? Machinery ?
Usha ? ? Closing stock 2,00,000
Kusum’s Loan A/c ? Sundry Debtors ?
Employee’s Provident 70,000 Cash at Bank 1,00,000
Fund
Workmen’s ?
Compensation Claim
Sundry Creditors 1,00,000
? ?
Complete the above on the basis of the given information.

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 10. Following is the Balance Sheet of X, Y and Z as on 31st March, 2020, who have agreed to share
profits and losses in proportion of their capitals :
Liabilities ₹ Assets ₹
Capital A/c’s : Land and Building 4,00,000
X 4,00,000 Machinery 6,00,000
Y 6,00,000 Closing Stock 2,00,000
Z 4,00,000 14,00,000 Debtors 2,20,000
Employee’s Provident 70,000 Less : Provision for
Fund Doubtful Debts 20,000 2,00,000
Workmen Compensation Reserve 30,000 Cash at Bank 2,00,000
Sundry Creditors 2,00,000 Cash-in-Hand 1,00,000
17,00,000 17,00,000
On 31st March, 2020, X retired from the firm and the remaining partners decided to carry on the
business. It was agreed to revalue the assets and reassess the liabilities on that date, as follows:
(i) Land and Building to be brought up to 130% of its book value.
(ii) Machinery be depreciated by 30%.
(iii) There were Bad Debts of ₹ 35,000.
(iv) Claim on account of Workmen Compensation was estimated at ₹ 15,000.
(v) Goodwill of the firm was valued at ₹ 2,80,000 and Xs share of Goodwill was adjusted against
the Capital Accounts of the continuing partners Y and Z who have decided to share future
profits in the ratio of 3 : 4 respectively.
(vi) Amount due to X be settled by paying cheque of ₹ 1,00,000 immediately and balance by
transferring to his Loan Account.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the firm after X's
retirement.

11. A, B and C are partners in a firm sharing profits and losses in the ratio 5 :3 :2. On 31st March, 2020,
the Balance Sheet of the firm stood as follows :
Liabilities ₹ Assets ₹
Capital A/c’s : Fixed Assets 2,50,000
A 2,00,000 Stock 1,00,000
B 1,00,000 Book Debts 90,000
C 80,000 3,80,000 Cash at Bank 1,71,000
General Reserve 30,000
Sundry Creditors 1,53,000
Outstanding Expenses 58,000
6,21,000 6,21,000

On 1st April, 2020, B retired from the firm. For this purpose:
(a) Goodwill was valued at ₹ 1,90,000.
(b) Fixed Assets were valued at ₹ 3,00,000.
(c) Stock was valued at ₹ 10,000.
(d) A liability oft ₹ 1,900 for outstanding rent was not shown in the books of the firm. The same is
to be recorded now.
(e) Insurance premium amounting to ₹ 5,700 was debited to Profit and Loss Account, of which ₹
1,900 is related to next year.
(f) A and C were to share profits in the ratio of 3 : 2 in future.
(g) Amount due to B is to be settled by cheque.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm.

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12. Smart & Co. has three partners A, B and C who shared profits and losses in the ratio of 5 : 3 : 2
respectively. Following was their Balance Sheet as on 31st March, 2020 :
Liabilities ₹ Assets ₹
Trade Creditors 58,000 `Goodwill 1,00,000
Bills Payable 59,000 Furniture 12,000
A’s Loan 8,000 Stock 1,67,000
General Reserve 8,000 Debtors 2,80,000
Investment Fluctuation 2,000 Less : Provision for 7,000 2,73,000
Reserve Doubtful Debts
Capital A/c’s : Investments 50,000
A 2,37,500 Cash and Bank Balance 73,000
B 1,72,500
C 1,30,000 5,40,000
6,75,000 6,75,000
A retired on 1st April, 2020 on the following terms:
(a) His Capital Account was credited with ₹ 30,000 for his share of goodwill.
(b) Furniture and Stock were each depreciated by 10%.
(c) Provision for Doubtful Debts was increased to 5%.
(d) Investments were appreciated by 2%.
(e) A was to be paid through cash brought by B and C in their new profit-sharing ratio of 1 : 1.
You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of
B and C after A's retirement.