X, Y and Z are partners in a firm sharing profits and losses in the ratio 3 : 1 : 2. On 31st March, 2023, their Balance Sheet was as under:
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital Accounts: | Land & Building | 3,00,000 | |
| X 3,00,000 | Plant & Machinery | 2,00,000 | |
| Y 1,00,000 | Furniture & Fittings | 60,000 | |
| Z 2,00,000 | 6,00,000 | Debtors 42,000 | |
| Employee's Provident Fund | 50,000 | Less: Provision 2,000 | 40,000 |
| Workmen's Compensation Fund | 30,000 | Stock | 1,50,000 |
| General Reserve | 20,000 | Bank | 30,000 |
| Sundry Creditors | 1,00,000 | Cash | 20,000 |
| 8,00,000 | 8,00,000 |
On 1st June, 2023, Y retired from the firm on the following conditions:
- Land and Building to be valued at ₹ 3,27,000.
- Investment ₹ 25,000 not mentioned in the Balance Sheet is to be considered.
- Provision for doubtful debt to be increased to ₹ 3,800.
- Stock is to be reduced by 10%.
- 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.
- ₹ 23,200 to be paid immediately after retirement of Y and balance of Y's Capital Account to be transferred to his Loan Account. X and Z will share future profit and losses in the ratio of 3 : 2. Prepare Partners' Capital Accounts, Revaluation Account and Balance Sheet after Y's retirement.
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Start your 14-day free trial to unlock the full solution →On Y's retirement: Revaluation profit ₹35,200 (shared 3:1:2), General Reserve ₹20,000 and Workmen's Compensation Fund ₹30,000 distributed, Y's goodwill share ₹9,000 borne by X and Z in 3:2. Y gets ₹1,23,200 (₹23,200 paid, ₹1,00,000 to Loan A/c); new Balance Sheet totals ₹8,12,000.
Workings: Old ratio X:Y:Z = 3:1:2 (total 6). New ratio X:Z = 3:2. Gaining ratio = New − Old → X: 3/5 − 3/6 = 3/30, Z: 2/5 − 2/6 = 2/30, i.e. 3:2.
- Goodwill of firm ₹54,000; Y's share = 54,000×1/6 = ₹9,000, borne by X and Z in 3:2 → X ₹5,400, Z ₹3,600.
- General Reserve ₹20,000 (3:1:2) → X 10,000, Y 3,333.33, Z 6,666.67.
- Workmen's Compensation Fund ₹30,000 (no claim, 3:1:2) → X 15,000, Y 5,000, Z 10,000.
- Employees' Provident Fund ₹50,000 is a statutory liability — not distributed.
Revaluation Account
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Provision for Doubtful Debts (3,800−2,000) | 1,800 | By Land & Building (3,27,000−3,00,000) | 27,000 |
| To Stock (10% of 1,50,000) | 15,000 | By Investment (unrecorded) | 25,000 |
| To Profit transf. to Capitals (3:1:2): | |||
| X 17,600 | |||
| Y 5,866.67 | |||
| Z 11,733.33 | 35,200 | ||
| 52,000 | 52,000 |
Partners' Capital Accounts
| Particulars | X (₹) | Y (₹) | Z (₹) | Particulars | X (₹) | Y (₹) | Z (₹) |
|---|---|---|---|---|---|---|---|
| To Y's Capital (goodwill) | 5,400 | — | 3,600 | By Balance b/d | 3,00,000 | 1,00,000 | 2,00,000 |
| To Cash/Bank (paid to Y) | — | 23,200 | — | By General Reserve | 10,000 | 3,333.33 | 6,666.67 |
| To Y's Loan A/c | — | 1,00,000 | — | By Workmen's Comp. Fund | 15,000 | 5,000 | 10,000 |
| To Balance c/d | 3,37,200 | — | 2,24,800 | By Revaluation A/c (profit) | 17,600 | 5,866.67 | 11,733.33 |
| By X's & Z's Capital (goodwill) | — | 9,000 | — | ||||
| 3,42,600 | 1,23,200 | 2,28,400 | 3,42,600 | 1,23,200 | 2,28,400 | ||
| … |
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