R, S and T are partners sharing profits in the ratio 5:3:2. Their capitals as on 31st March are R Rs 1,50,000; S Rs 1,00,000; and T Rs 80,000. On this date, T retires on the following terms: (i) Goodwill of the firm is valued at Rs 1,00,000; R and S will share future profits in t

Question

R, S and T are partners sharing profits in the ratio 5:3:2. Their capitals as on 31st March are R Rs 1,50,000; S Rs 1,00,000; and T Rs 80,000. On this date, T retires on the following terms: (i) Goodwill of the firm is valued at Rs 1,00,000; R and S will share future profits in the ratio 3:2, so their gaining ratio is also 3:2. (ii) Assets are revalued resulting in a net profit on revaluation of Rs 20,000, to be shared in the old ratio. (iii) The General Reserve of Rs 25,000 standing in the books is to be distributed among the partners in the old ratio. (iv) T is to be paid Rs 40,000 in cash immediately, and the balance is to be transferred to his Loan Account. Prepare T's Capital Account and calculate the amount transferred to T's Loan Account.

Accepted Answer

**Step 1 — T's share of goodwill.** T's old share = 2/10 = 1/5. T's share of goodwill = 1/5 × Rs 1,00,000 = Rs 20,000, funded by R and S in their gaining ratio 3:2: R = 3/5 × 20,000 = Rs 12,000; S = 2/5 × 20,000 = Rs 8,000.

**Step 2 — Revaluation profit, shared in the OLD ratio 5:3:2 (10 parts).**

| Partner | Share | Amount |
|---|---|---|
| R | 5/10 | 10,000 |
| S | 3/10 | 6,000 |
| T | 2/10 | 4,000 |

**Step 3 — General Reserve Rs 25,000, shared in the same old ratio 5:3:2.**

| Partner | Share | Amount |
|---|---|---|
| R | 5/10 | 12,500 |
| S | 3/10 | 7,500 |
| T | 2/10 | 5,000 |

**Step 4 — T's Capital Account.**

| Dr. T's Capital Account | Amount (Rs) | Cr. | Amount (Rs) |
|---|---|---|---|
| To Cash/Bank A/c | 40,000 | By Balance b/d | 80,000 |
| To T's Loan A/c (balancing figure) | 69,000 | By R's & S's Capital A/cs (goodwill) | 20,000 |
| | | By Revaluation A/c (profit) | 4,000 |
| | | By General Reserve A/c | 5,000 |
| Total | 1,09,000 | Total | 1,09,000 | …

Q.R, S and T are partners sharing profits in the ratio 5:3:2. Their capitals as on 31st March are R Rs 1,50,000; S Rs 1,00,000; and T Rs 80,000. On this date, T retires on the following terms:

Concept understanding — Settlement of the Retiring or Deceased Partner's Account

Dr. T's Capital Account	Amount (Rs)	Cr.	Amount (Rs)
To Cash/Bank A/c	40,000	By Balance b/d	80,000
To T's Loan A/c (balancing figure)	69,000	By R's & S's Capital A/cs (goodwill)	20,000
		By Revaluation A/c (profit)	4,000
		By General Reserve A/c	5,000
Total	1,09,000	Total	1,09,000

Q.R, S and T are partners sharing profits in the ratio 5:3:2. Their capitals as on 31st March are R Rs 1,50,000; S Rs 1,00,000; and T Rs 80,000. On this date, T retires on the following terms:

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