Vijay, Ajay and Mohan started a computer-hardware business in partnership, introducing capitals of ₹50,000, ₹30,000 and ₹20,000 respectively, sharing profits in the ratio 4 : 2 : 1. On March 31, 2017, Ajay retires and the position of assets and liabilities is as follows:
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital Accounts: | Goodwill | 56,000 | |
| Vijay | 1,80,000 | Land and Buildings | 1,20,000 |
| Ajay | 1,20,000 | Machinery | 1,59,000 |
| Mohan | 1,00,000 | Motor Van | 31,000 |
| Bills Payable | 12,000 | Stock | 90,000 |
| General Reserve | 42,000 | Debtors | 66,000 |
| Creditors | 90,000 | Cash at bank | 22,000 |
| Total | 5,44,000 | Total | 5,44,000 |
On the date of retirement the following adjustments were to be made:
- Firm's goodwill was valued at ₹1,48,000.
- Assets and liabilities are to be valued as under: Stock ₹72,000; Land and Buildings ₹1,35,600; Debtors ₹63,000; Machinery ₹1,50,000; Creditors ₹84,000.
- Vijay to bring ₹1,20,000 and Mohan ₹30,000 as additional capital.
- Ajay was to be paid ₹97,200 in cash and the balance of his Capital Account transferred to his Loan Account.
Work out the amount due to Ajay and state how you will settle his account.
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →Ajay's capital of ₹1,20,000 is adjusted for the goodwill write-off (−₹16,000), his reserve share (+₹12,000), his revaluation loss (−₹2,400) and his share of the firm's goodwill (+₹42,285.71), giving ₹1,55,885.71 due. He is paid ₹97,200 in cash and the remaining ₹58,685.71 goes to his Loan Account.
Working Notes
1. Existing goodwill ₹56,000 is written off among all partners in the old ratio 4 : 2 : 1: Vijay ₹32,000, Ajay ₹16,000, Mohan ₹8,000.
2. Revaluation: losses — Stock ₹18,000, Debtors ₹3,000, Machinery ₹9,000; gains — Land & Buildings ₹15,600, Creditors ₹6,000. Net loss = ₹30,000 − ₹21,600 = ₹8,400 (4 : 2 : 1 → Vijay ₹4,800, Ajay ₹2,400, Mohan ₹1,200).
3. General Reserve ₹42,000 (4 : 2 : 1): Vijay ₹24,000, Ajay ₹12,000, Mohan ₹6,000.
4. Goodwill of the firm ₹1,48,000; Ajay's share = 2/7 × ₹1,48,000 = ₹42,285.71, borne by Vijay and Mohan in their gaining ratio (old mutual 4 : 1) — Vijay ₹33,828.57 and Mohan ₹8,457.14.
Ajay's Capital Account
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Goodwill A/c (write-off) | 16,000 | By Balance b/d | 1,20,000 |
| To Revaluation A/c (loss) | 2,400 | By General Reserve | 12,000 |
| To Cash A/c | 97,200 | By Vijay's Capital A/c (goodwill) | 33,828.57 |
| To Ajay's Loan A/c | 58,685.71 | By Mohan's Capital A/c (goodwill) | 8,457.14 |
| Total | 1,74,285.71 | Total | 1,74,285.71 |
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.