Continuing the data of Questions 6 and 8 (Ravi, Suresh and Mahesh sharing 5 : 3 : 2; Suresh retires), Suresh's Capital Account showed a credit balance of ₹1,00,000 before any of the retirement adjustments. He is entitled to a share of goodwill of ₹18,000, his share of the revalua

Question

Continuing the data of Questions 6 and 8 (Ravi, Suresh and Mahesh sharing 5 : 3 : 2; Suresh retires), Suresh's Capital Account showed a credit balance of ₹1,00,000 before any of the retirement adjustments. He is entitled to a share of goodwill of ₹18,000, his share of the revaluation profit as computed in Question 6, and his share of the General Reserve as computed in Question 8. The firm pays him ₹58,400 immediately by cheque and transfers the balance to his Loan Account, carrying interest at 6% p.a. under Section 37 of the Indian Partnership Act, 1932. Prepare Suresh's Capital Account and pass the journal entry for the transfer to his Loan Account.

Accepted Answer

**Step 1 — Compute the total amount due to Suresh.**

| Item | Amount (₹) |
|---|---|
| Opening Capital balance | 1,00,000 |
| Add: Share of Goodwill | 18,000 |
| Add: Share of Revaluation Profit (Question 6) | 2,400 |
| Add: Share of General Reserve (Question 8) | 18,000 |
| **Total amount due** | **1,38,400** |

**Step 2 — Suresh's Capital Account.**

| Dr. | Amount (₹) | Cr. | Amount (₹) |
|---|---|---|---|
| To Bank A/c (cheque) | 58,400 | By Balance b/d | 1,00,000 |
| To Suresh's Loan A/c | 80,000 | By Ravi's & Mahesh's Capital A/cs (Goodwill) | 18,000 |
| | | By Revaluation A/c (profit) | 2,400 |
| | | By General Reserve A/c | 18,000 |
| **Total** | **1,38,400** | **Total** | **1,38,400** |

**Step 3 — Journal entry for the transfer of the unpaid balance to Suresh's Loan Account.**

| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Suresh's Capital A/c Dr. | 80,000 | |
|   To Suresh's Loan A/c | | 80,000 |
| (Being the balance due to Suresh on retirement transferred to his Loan Account, to carry interest @ 6% p.a. under Section 37 of the Indian Partnership Act, 1932, in the absence of any agreed rate) | | | …

Item	Amount (₹)
Opening Capital balance	1,00,000
Add: Share of Goodwill	18,000
Add: Share of Revaluation Profit (Question 6)	2,400
Add: Share of General Reserve (Question 8)	18,000
Total amount due	1,38,400

Dr.	Amount (₹)	Cr.	Amount (₹)
To Bank A/c (cheque)	58,400	By Balance b/d	1,00,000
To Suresh's Loan A/c	80,000	By Ravi's & Mahesh's Capital A/cs (Goodwill)	18,000
		By Revaluation A/c (profit)	2,400
		By General Reserve A/c	18,000
Total	1,38,400	Total	1,38,400

Particulars	Dr. (₹)	Cr. (₹)
Suresh's Capital A/c Dr.	80,000
To Suresh's Loan A/c		80,000
(Being the balance due to Suresh on retirement transferred to his Loan Account, to carry interest @ 6% p.a. under Section 37 of the Indian Partnership Act, 1932, in the absence of any agreed rate)

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