X, Y and Z are the partners of a firm and they share profits and losses in the ratio of 3 : 2 : 1. On 31st March, 2022, the Balance Sheet of the firm was an under:
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital A/cs: | Plant and Machinery | 40,000 | |
| X — 40,000 | Furniture & Fixture | 20,000 | |
| Y — 50,000 | Stock | 16,000 | |
| Z — 30,000 | 1,20,000 | Debtors | 10,000 |
| Reserve | 36,000 | Cash at Bank | 80,000 |
| Creditors | 10,000 | ||
| 1,66,000 | 1,66,000 |
Y retires on 1st October, 2022 on the following terms:
- Plant and Machinery to be reduced by ₹ 10,000.
- Provision for doubtful debts to be made at 5% on debtors.
- Goodwill of the firm is valued at ₹ 54,000 and value of goodwill will not be shown in the Balance Sheet after retirement of Y.
- Share of profit of the retired partner will get up to the date of retirement on the basis of last year’s profit. In the last year, the firm earned profit of ₹ 60,000.
- ₹ 30,000 is to be paid immediately at the time of retirement and the balance of his capital account is to be transferred to loan account of Y. Prepare Revaluation Account and Partners’ Capital Accounts in the books of the firm. (2 + 4) Or What do you mean by reconstruction of a partnership firm? Classify it. Give one example each of every classification. (2 + 2 + 2)
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Start your 14-day free trial to unlock the full solution →Revalue (Plant −10,000, PDD −500 → loss ₹ 10,500 in 3:2:1); share Reserve ₹ 36,000 in 3:2:1; charge Y's goodwill ₹ 18,000 to X and Z in gaining ratio 3:1; credit Y with profit to date ₹ 10,000. Y's capital ₹ 86,500 → ₹ 30,000 paid, ₹ 56,500 to Loan A/c; X ₹ 39,250, Z ₹ 29,750 carried forward.
This is a 6-mark (2 + 4) WBCHSE HS Accountancy partner-retirement problem (West Bengal Class-12 Commerce; aligned with the NCERT/CBSE curriculum).
Working Note 1 — Revaluation: Plant & Machinery reduced ₹ 10,000 (loss); Provision for Doubtful Debts 5% x 10,000 = ₹ 500 (loss). Total loss ₹ 10,500 shared in old ratio 3 : 2 : 1 → X 5,250, Y 3,500, Z 1,750.
Working Note 2 — Reserve ₹ 36,000 in 3 : 2 : 1 → X 18,000, Y 12,000, Z 6,000.
Working Note 3 — Goodwill: Firm's goodwill ₹ 54,000; Y's share = 2/6 x 54,000 = ₹ 18,000. As goodwill is not to appear in the books, it is borne by the continuing partners in their gaining ratio. X and Z continue to share in 3 : 1, so X bears 3/4 x 18,000 = ₹ 13,500 and Z bears 1/4 x 18,000 = ₹ 4,500.
Working Note 4 — Y's profit to date of retirement (1 Apr to 1 Oct = 6 months) on last year's profit ₹ 60,000: Y's share = 2/6 x 60,000 x 6/12 = ₹ 10,000 (credited via Profit & Loss Suspense A/c).
Revaluation Account
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Plant & Machinery | 10,000 | By Loss transferred to Capital A/cs: X 5,250; Y 3,500; Z 1,750 | 10,500 |
| To Provision for Doubtful Debts | 500 | ||
| Total | 10,500 | Total | 10,500 |
Partners' Capital Accounts
| Particulars | X (₹) | Y (₹) | Z (₹) | Particulars | X (₹) | Y (₹) | Z (₹) |
|---|---|---|---|---|---|---|---|
| To Revaluation A/c (loss) | 5,250 | 3,500 | 1,750 | By Balance b/d | 40,000 | 50,000 | 30,000 |
| To Y's Capital A/c (goodwill) | 13,500 | — | 4,500 | By Reserve | 18,000 | 12,000 | 6,000 |
| To Bank A/c | — | 30,000 | — | By P&L Suspense A/c (profit to date) | — | 10,000 | — |
| To Y's Loan A/c | — | 56,500 | — | By X's & Z's Capital A/c (goodwill) | — | 18,000 | — |
| To Balance c/d | 39,250 | — | 29,750 | ||||
| Total | 58,000 | 90,000 | 36,000 | Total | 58,000 | 90,000 | 36,000 |
Y's capital after adjustments = ₹ 86,500 (90,000 − 3,500). Of this, ₹ 30,000 is paid immediately through Bank and the balance ₹ 56,500 is transferred to Y's Loan Account.
Or — Reconstitution of a partnership firm: …
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