Ajay, Vijay and Sanjay were partners sharing profits and losses in the ratio of 3 : 3 : 2. Their Balance Sheet as on 31st March 2020 is as follows:
| Balance Sheet as on 31st March, 2020 | | | |
| --- | --- | --- | --- |
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Cre

Question

Ajay, Vijay and Sanjay were partners sharing profits and losses in the ratio of 3 : 3 : 2. Their Balance Sheet as on 31st March 2020 is as follows:
| Balance Sheet as on 31st March, 2020 |  |  |  |
| --- | --- | --- | --- |
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 32,700 | Bank | 19,800 |
| Reserve Fund | 12,000 | Stock | 19,800 |
| Capital Accounts: |  | Debtors | 15,000 |
| Ajay | 33,000 | Livestock | 30,000 |
| Vijay | 45,000 | Plant and Machinery | 62,100 |
| Sonjay | 24,000 |  |  |
|  | 1,46,700 |  | 1,46,700 |
On 1st April 2020 Sanjay retired from the firm on the following terms:
R.D.D. is to be maintained at 10% on debtors.
₹
300 to be written off from creditors.
Goodwill of the firm is to be valued at ₹ 12,000. however only Sanjay's share in it is to be raised in the books and written off immediately.
Assets to be revalued as: Stock ₹ 18,900, Plant and machinery ₹ 60,000, Live Stock ₹ 30,600.
The amount payable to Sanjay is to be transferred to his Loan account after retirement:
Prepare:
Revaluation Account
Partners' Capitol Account
Balance Sheet of the New firm.

Accepted Answer

>

> [!TLDR]
> Sanjay (2/8 share) retires. Revaluation gives a loss of ₹3,600; Reserve Fund ₹12,000 is distributed in the old ratio 3:3:2; only Sanjay's goodwill share ₹3,000 is raised and immediately written off by Ajay & Vijay (1:1). Sanjay's ₹29,100 is moved to his Loan A/c. New Balance Sheet total = ₹1,42,800.
>
> **Working Note 1 — Revaluation items**
> R.D.D. 10% on Debtors 15,000 = ₹1,500 (loss); Stock 19,800 → 18,900 = ₹900 (loss); Plant & Machinery 62,100 → 60,000 = ₹2,100 (loss); Creditors written off ₹300 (gain); Livestock 30,000 → 30,600 = ₹600 (gain).
>
> **Working Note 2 — Reserve Fund** ₹12,000 in old ratio 3:3:2 → Ajay ₹4,500, Vijay ₹4,500, Sanjay ₹3,000.
>
> **Working Note 3 — Goodwill** Firm goodwill ₹12,000; Sanjay's share = 2/8 × 12,000 = ₹3,000. Raised (credited to Sanjay), then written off by the continuing partners in their new/gaining ratio 3:3 = 1:1 → Ajay ₹1,500, Vijay ₹1,500.
>
> **Revaluation Account**
>
> | Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) |
> | --- | --- | --- | --- |
> | To R.D.D. (10% on Debtors) | 1,500 | By Creditors A/c (written off) | 300 |
> | To Stock A/c | 900 | By Livestock A/c | 600 |
> | To Plant & Machinery A/c | 2,100 | By Loss t/f to Capital A/cs — Ajay 1,350, Vijay 1,350, Sanjay 900 | 3,600 |
> | **Total** | **4,500** | **Total** | **4,500** |
>
> **Partners' Capital Accounts**
>
> | Dr. Particulars | Ajay | Vijay | Sanjay | Cr. Particulars | Ajay | Vijay | Sanjay |
> | --- | --- | --- | --- | --- | --- | --- | --- |
> | To Revaluation A/c (loss) | 1,350 | 1,350 | 900 | By Balance b/d | 33,000 | 45,000 | 24,000 |
> | To Goodwill A/c (written off) | 1,500 | 1,500 | — | By Reserve Fund | 4,500 | 4,500 | 3,000 |
> | To Sanjay's Loan A/c | — | — | 29,100 | By Goodwill A/c (share raised) | — | — | 3,000 |
> | To Balance c/d | 34,650 | 46,650 | — |  |  |  |  | …

Balance Sheet as on 31st March, 2020
Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	32,700	Bank	19,800
Reserve Fund	12,000	Stock	19,800
Capital Accounts:		Debtors	15,000
Ajay	33,000	Livestock	30,000
Vijay	45,000	Plant and Machinery	62,100
Sonjay	24,000
	1,46,700		1,46,700
On 1st April 2020 Sanjay retired from the firm on the following terms:
R.D.D. is to be maintained at 10% on debtors.
₹
300 to be written off from creditors.
Goodwill of the firm is to be valued at ₹ 12,000. however only Sanjay's share in it is to be raised in the books and written off immediately.
Assets to be revalued as: Stock ₹ 18,900, Plant and machinery ₹ 60,000, Live Stock ₹ 30,600.
The amount payable to Sanjay is to be transferred to his Loan account after retirement:
Prepare:
Revaluation Account
Partners' Capitol Account
Balance Sheet of the New firm.

Dr. Particulars	Amount (₹)	Cr. Particulars	Amount (₹)
To R.D.D. (10% on Debtors)	1,500	By Creditors A/c (written off)	300
To Stock A/c	900	By Livestock A/c	600
To Plant & Machinery A/c	2,100	By Loss t/f to Capital A/cs — Ajay 1,350, Vijay 1,350, Sanjay 900	3,600
Total	4,500	Total	4,500

Dr. Particulars	Ajay	Vijay	Sanjay	Cr. Particulars	Ajay	Vijay	Sanjay
To Revaluation A/c (loss)	1,350	1,350	900	By Balance b/d	33,000	45,000	24,000
To Goodwill A/c (written off)	1,500	1,500	—	By Reserve Fund	4,500	4,500	3,000
To Sanjay's Loan A/c	—	—	29,100	By Goodwill A/c (share raised)	—	—	3,000
To Balance c/d	34,650	46,650	—

🎓Unlock everything free for 14 days

Unlock everything free for 14 days