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Q.

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 & Building3,00,000
X 3,00,000Plant & Machinery2,00,000
Y 1,00,000Furniture & Fittings60,000
Z 2,00,0006,00,000Debtors 42,000
Employee's Provident Fund50,000Less: Provision 2,00040,000
Workmen's Compensation Fund30,000Stock1,50,000
General Reserve20,000Bank30,000
Sundry Creditors1,00,000Cash20,000
8,00,0008,00,000

On 1st June, 2023, Y retired from the firm on the following conditions:

  1. Land and Building to be valued at ₹ 3,27,000.
  2. Investment ₹ 25,000 not mentioned in the Balance Sheet is to be considered.
  3. Provision for doubtful debt to be increased to ₹ 3,800.
  4. Stock is to be reduced by 10%.
  5. 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.
  6. ₹ 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.
West Bengal WbchseWBCHSE West Bengal HS (Class-12) Commerce Board 2024Subjective· 10mImportance★★★★★
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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)1,800By Land & Building (3,27,000−3,00,000)27,000
To Stock (10% of 1,50,000)15,000By Investment (unrecorded)25,000
To Profit transf. to Capitals (3:1:2):
 X 17,600
 Y 5,866.67
 Z 11,733.3335,200
52,00052,000

Partners' Capital Accounts

ParticularsX (₹)Y (₹)Z (₹)ParticularsX (₹)Y (₹)Z (₹)
To Y's Capital (goodwill)5,400—3,600By Balance b/d3,00,0001,00,0002,00,000
To Cash/Bank (paid to Y)—23,200—By General Reserve10,0003,333.336,666.67
To Y's Loan A/c—1,00,000—By Workmen's Comp. Fund15,0005,00010,000
To Balance c/d3,37,200—2,24,800By Revaluation A/c (profit)17,6005,866.6711,733.33
By X's & Z's Capital (goodwill)—9,000—
3,42,6001,23,2002,28,4003,42,6001,23,2002,28,400
…

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