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12th Accountancy - Retirement and Death of a Partner Model Question Paper

Published on: 09/10/2019

Retirement and Death of a Partner

Download Tamil Nadu 12th Standard Accountancy question papers, model tests, one-mark questions, important questions, and public exam papers in PDF format. Free study materials and answer keys for TN State Board students.

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Questions:

Generic 2

6 x 2 = 12

Who is an outgoing partner?

Ramu, Somu, Gopu are partners sharing profits in the ratio of 3 : 5 : 7. Gopu retires and the share is purchased by Ramu and Somu in the ratio of 3 : 1. Find the new profit sharing ratio and gaining ratio

What is the purpose of calculating gaining ratio?

What is meant by retirement of a partner?

Rahul, Ravi and Rohit are partners sharing profits and losses in the ratio of 5:3:2. Rohit retires and the share is taken by Rahul and Ravi in the ratio of 3:2. Find out the new profit sharing ratio and gaining ratio.

Vivin, Hari and Joy are partners sharing profits and losses in the ratio of 3:2:1. On 31.3.2017, Hari retired. On the date of retirement, the books of the firm showed a general reserve of Rs. 60,000. Pass the journal entry to transfer the general reserve.

Generic 3

4 x 3 = 12

Balu, Chandru and Nirmal are partners in a firm sharing profits and losses in the ratio of 5:3:2. On 31^st March 2018, Nirmal retires from the firm. On the date of Nirmal’s retirement, goodwill appeared in the books of the firm at Rs. 60,000. By assuming fluctuating capital account, pass the necessary journal entry if the partners decide to
(a) write off the entire amount of existing goodwill
(b) write off half of the existing goodwill

List out the adjustments made at the time of retirement of a partner in a partnership firm.

Rathna, Baskar and Ibrahim are partners sharing profits and losses in the ratio of 2:3:4 respectively. Rathna died on 31st December, 2018. Final amount due to her showed a credit balance of Rs. 1,00,000. Pass journal entries if,
(a) The amount due is paid off immediately by cheque.
(b) The amount due is not paid immediately.
(c) Rs. 60,000 is paid immediately by cheque.

10.

Prince, Dev and Sasireka are partners in a firm sharing profits and losses in the ratio of 2:4:1. Their balance sheet as on 31^st March, 2019 is as follows:

Liabilities	Rs.	Rs.	Assets	Rs.
Capital accounts			Buildings	40,000
Prince	30,000		Plant	50,000
Dev	50,000		Furniture	10,000
Sasireka	20,000	1,00,000	Stock	15,000
Profit and loss appropriation A/c		10,000	Debtors	20,000
General reserve		15,000	Cash at bank	15,000
Workmen compensation fund		17,000
Sundry creditors		8,000
		1,50,000		1,50,000

Generic 5

4 x 5 = 20

11.

Chandru, Vishal and Ramanan are partners in a firm sharing profits and losses equally. Their balance sheet as on 31^st March, 2018 is as follows:

Liabilities	Rs	Rs	Asset	Rs	Rs
Capital accounts:			Furniture		60,000
Chandru	60,000		Machinery		1,20,000
Vishal	70,000		Sundry debtors	33,000
Ramanan	70,000	2,00,000	Less: Provision for doubtful debts	3,000	30,000
Bills payable		80,000	Bills receivable		50,000
			Cash at bank		20,000
		2,80,000			2,80,000

Ramanan retired on 31^st March 2019 subject to the following conditions:
(i) Machinery is valued at Rs. 1,50,000
(ii) Value of furniture brought down by Rs. 10,000
(iii) Provision for doubtful debts should be increased to Rs. 5,000
(iv) Investment of Rs. 30,000 not recorded in the books is to be recorded now.
Pass necessary journal entries and prepare revaluation account.

12.

Distinguish between sacrificing ratio and gaining ratio.

13.

Raghu, Ravi and Ramesh are partners in a firm sharing profits and losses in the ratio of 2 : 3 : 1. Their balance sheet as on 31^st March, 2019 was as follows:

Liabilities	Rs.	Rs.	Asset	Rs.	Rs.
Capital accounts:			Buildings		60,000
Raghu	30,000		Machinery		70,000
Ravi	40,000		Stock		20,000
Ramesh	20,000	90,000
Reserve fund		36,000	Debtors	18,000
Sundry creditors		33,000	Less Provision for bad debts	1,000
		1,76,000			1,76,000

Ramesh retires on 31.3.2019 subject to the following conditions:
(i) Goodwill of the firm is valued at Rs. 24,000
(ii) Machinery to be depreciated by 10%
(iii) Buildings to be appreciated by 20%
(iv) Stock to be appreciated by Rs. 2,000
(v) Provision for bad debts to be raised by Rs. 1,000
(vi) Final amount due to Ramesh is not paid immediately
Prepare the necessary ledger accounts and show the balance sheet of the firm after retirement.

14.

Mani, Rama and Devan are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. Their balance sheet as on 31^st March, 2019 is as follows:

Liabilities	Rs.	Rs.	Asset	Rs.
Capital accounts:			Buildings	80,000
Mani	50,000		Stock	20,000
Rama	50,000		Furniture	70,000
Devan	50,000	1,50,000	Debtors	20,000
Sundry creditors		20,000	Cash in hand	10,000
Profit and loss A/c		30,000
		2,00,000		2,00,000

Mani retired from the partnership firm on 31.03.2019 subject to the following adjustments:
(i) Stock to be depreciated by Rs. 5,000
(ii) Provision for doubtful debts to be created for Rs. 1,000.
(iii) Buildings to be appreciated by Rs. 16,000
(iv) The final amount due to Mani is not paid immediately
Prepare revaluation account and capital account of partners after retirement.

Multiple Choice Question

8 x 1 = 8

15.

The section related to the retirement of partner in Indian partnership Act is _____________

(a)

30(a)

(b)

31(1)

(c)

21(c)

(d)

20(a)

16.

At the time to retirement Balance Sheet items like profit and loss account and General reserve must be transferred to ___________

(a)

Revaluation Alc

(b)

Partners capital A/c

(c)

Both 'a and 'b'

(d)

None of the above

17.

A partner who retires from the firm is called an __________

(a)

Outgoing partner

(b)

admitted partner

(c)

death of a partner

(d)

none of these

18.

X, Y and Z were partners sharing profits and losses equally. X died on 1st April 2019. Find out the share of X in the profit of 2019 based on the profit of 2018 which showed Rs. 36,000.

(a)

Rs. 1,000

(b)

Rs. 3,000

(c)

Rs. 12,000

(d)

Rs. 36,000

19.

A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill of the firm was valued as Rs. 30,000. Find the contribution of A and C to compensate B:

(a)

Rs. 20,000 and Rs. 10,000

(b)

Rs. 8,000 and Rs. 4,000

(c)

Rs. 10,000 and Rs. 20,000

(d)

Rs. 15,000 and Rs. 15,000

20.

‘ A’ was a partner in a partnership firm. He died on 31^st March 2019. The final amount due to him is Rs. 25,000 which is not paid immediately. It will be transferred to

(a)

A’s capital account

(b)

A’s current account

(c)

A’s Executor account

(d)

A’s Executor loan account

21.

On retirement of a partner, general reserve is transferred to the

(a)

Capital account of all the partners

(b)

Revaluation account

(c)

Capital account of the continuing partners

(d)

Memorandum revaluation account

22.

A partner retires from the partnership firm on 30^th June. He is liable for all the acts of the firm up to the

(a)

End of the current accounting period

(b)

End of the previous accounting period

(c)

Date of his retirement

(d)

Date of his final settlement

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Answers Key:

Generic 2

6 x 2 = 12

A person who is retired from the firm is known as an outgoing partners or retiring partners.

Gopu 's share = \(\cfrac { 7 }{ 15 } \)
Share gained = Retiring partner's share x proportion of share gained
Ramu =\(\cfrac { 7 }{ 15 } \times \cfrac { 3 }{ 4 } =\cfrac { 21 }{ 60 } \)
Somu = \(\cfrac { 7 }{ 15 } \times \cfrac { 7 }{ 4 } =\cfrac { 7 }{ 60 } \)
Gaining ratio = \(\cfrac { 21 }{ 60 } :\cfrac { 7 }{ 60 } \) that is 3 : 1
New share of continuing partner = Old share + Share gained
Ramu = \(\cfrac { 3 }{ 15 } +\cfrac { 21 }{ 60 } =\cfrac { 12 }{ 21 } =\cfrac { 33 }{ 60 } =\cfrac { 11 }{ 20 } \)
Somu = \(\cfrac { 5 }{ 15 } +\cfrac { 7 }{ 60 } =\cfrac { 20+7 }{ 60 } =\cfrac { 27 }{ 60 } =\cfrac { 9 }{ 20 } \)
The new ratio of Ramu and Somu is \(\cfrac { 11 }{ 20 } :\cfrac { 9 }{ 20 } \) that is 11 : 9

The purpose of finding the gaining ratil:>is to bear the goodwill to be paid to the retiring partner.
The share gained is calculated as follows:
Share gained = New share - Old share
Gaining ratio = Ratio of share gained bythe continuing partners.

When a partner leaves from a partnership firm it is known as retirement. The reasons for the retirement of a partner may be illness, old age better opportunity elsewhere, disagreement with other partners, etc.

Rohit's share \(\frac{2}{10}\)
Share gained = Retiring partner’s share × Proportion of share gained
Rahul = \(\frac{2}{10}\times\frac{3}{5}=\frac{6}{50}\)
Ravi = \(\frac{2}{10}\times\frac{2}{5}=\frac{4}{50}\)
Gaining ratio \(\frac{6}{50}:\frac{4}{50}\) that is, 3 : 2
New share of continuing partners = Old share + Share gained
Rahul \(=\frac{5}{10}+\frac{6}{50}=\frac{25+6}{50}=\frac{31}{50}\)
Ravi \(=\frac{3}{10}+{4}{50}=\frac{15+4}{50}=\frac{19}{50}\)
The new profit sharing ratio of Rahul and Ravi is \(\frac{31}{50}:\frac{19}{50}\) that is 31 : 19.

Journal entry
Date	Particulars		Debit Rs.	Credit RS.
2017 March 31	General reserve A/c	Dr.	60,000
	To Vivin’s capital A/c (60,000 × 3/6)			30,000
	To Hari’s capital A/c (60,000 × 2/6)			20,000
	To Joy’s capital A/c (60,000 × 1/6)			10,000
	(General reserve transferred to all partners’ capital account in the old profit sharing ratio)

Generic 3

4 x 3 = 12

Journal entry
Particulars		Depit Rs	Credit Rs
Balu's capital A/c	Dr.	30,000
Chandru's capital A/c	Dr	18,000
Nirmal's capital A/c	Dr	12,000
To Goodwill A/c			60,000
(value of goodwill entirely shared to all partners)

Journal entry
Particulars		Debit Rs	Credit Rs
Balus capital Alc	Dr	15,000
Chandru's capital A/c	Dr	9,000
Nirmal's capital A/c	Dr	6,000
To Goodwill A/c			30,000
(Half of the existing goodwill written off)

The following adjustments are necessary at the time of retirement of a partner.
(i) Distribution of accumulated profits, reserves and losses.
(ii) Revaluation of assets and liabilities.
(Hi) Determination of new profit sharing ratio and gaining ratio.
(iv) Adjustment for goodwill.
(v) Adjustment for current year's profit or loss upto the date of retirement.
(vi) Settlement of the amount due to the retiring partner.

Journal entries
Particulars		Debit Rs.	Credit Rs.
(a) Rathna’s Executor A/c	Dr.	1,00,000
To Bank A/c			1,00,000
(Amount due paid immediately)
(b) Rathna’s Executor A/c	Dr.	1,00,000
To Rathna’s Executor loan A/c			1,00,000
(Amount due transferred to loan account)
(c) Rathna’s Executor A/c		1,00,000
To Bank A/c			60,000
To Rathna’s Executor loan A/c			40,000
(Rs. 60,000 paid and the balance transferred to loan account)

10.

Journal entry
Date	Particulars		Debit Rs.	Credit RS.
2019 March 31	Profit and loss appropriation A/c	Dr.	10,000
	General reserve A/c	Dr.	55,000
	Workmen compensation fund A/c	Dr.	17,000
	To Prince’s capital A/c (42,000 × 2/7)			12,000
	To Dev’s capital A/c (42,000 × 4/7)			24,000
	To Sasireka’s capital A/c (42,000 × 1/7)			6,000
	(Accumulated profits and reserve transferred to allpartners’ capital account in the old profit sharing ratio)

Generic 5

4 x 5 = 20

11.

Journal entries
Date	Particulars		Debit Rs	Credit Rs
2018	Machinery A/c	Dr	30,000
March 31	To Revaluation A/c			30,000
	(Increase in the value of Machinery accounted)
2018	Revaluation AI c	Dr	12,000	10,000
March 31	To Furniture AI c
	To Provision for doubtful
	debts A/c
	(Furniture and provision made for doubtful debts adjusted)
2018	Investments A/c	Dr	30,000
March 31	To Revaluation A/c			30,000
	(Unrecorded investement brought into accounts)
2018	Revaluation A/c	Dr.	48,000
March 31	To Chandrus capital A/c			16,000
	To Vishal's capital A/c			16,000
	To Ramanans capital A/c			16,000
	(Parnosffietrroend retvoalcuaaptiitoanl account)

Dr Revaluation A/c Cr
Particulars	Rs	Rs	Particulars	Rs
To Furniture A/c		10,000	By Machinery A/c	30,000
To Provision for doubtful debts A/c		2,000	By Investments A/c	30,000
To Profit on revaluation transferred to
Chandrus capital A/c (48,000 x 113)	16,000
Vishal's capital A/c (48,000 x 113)	16,000
Ramanan's capital A/c (48,000 x 113)	16,000
		48,000
		60,000		60,000

12.

Basic Sacrificing ratio Gaining ratio 1. Meaning It is the proportion of the profit which is sacrificed by the old partners in favour of a new partner It is the proportion of the profit which is gained by the continuing partners from the retiring partner 2. Purpose It is calculated to determine the amount to be adjusted towards goodwill for the sacrificing partners It is calculated to determine the amount to be adjusted towards goodwill for the gaining partners 3. Method of Calculation It is the difference between the old ratio and the new ratio Sacrificing ratio = Old profit sharing ratio - New profit sharing ratio It is the difference between the new ratio and the old ratio Gaining ratio = New profit sharing ratio - Old profit sharing ratio 4. Time of calculation It is calculated at the time of admission of a new partner It is calculated at the time of retirement of a partner

13.

Dr. Revaluation Account Cr.
Particulars	Rs.	Rs.	Particulars	Rs.
To Machinery A/c		7,000	By Buildings A/c	12,000
To Provision for bad debts A/c		1,000	By Stock A/c	2,000
To Profit on revaluation transferred to
Raghu’s capital A/c (2/6)	2,000
Ravi’s capital A/c (3/6)	3,000
Ramesh capital A/c (1/6)	1,000	6,000
		14,000		14,000

Dr. Capital Account Cr.
Particulars	Raghu Rs.	Ravi Rs.	Ramesh Rs.	Particulars	Raghu Rs.	Ravi Rs.	Ramesh Rs.
To Ramesh’s capital A/c	1,600	2,400	-	By Balance b/d	30,000	40,000	20,000
To Ramesh’s loan A/c			31,000	By Reserve fund A/c	12,000	18,000	6,000
To Balance c/d	42,400	58,600	-	By Revaluation A/c	2,000	3,000	1,000
				By Raghu's capital A/c	-	-	1,600
				By Ravi's capital A/c	-	-	2,400
	44,000	61,000	31,000		44,000	61,000	31,000
				By Balance b/d	42,400	58,600

Balance sheet as on 31st March 2019
Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Capital accounts:			Buildings	60,000
Raghu	42,400		Add: Appreciation	12,000	72,000
Ravi	58,600	1,01,000	Machinery	70,000
Ramesh’s loan		31,000	Less: Depreciation	7,000	63,000
Sundry creditors		50,000	Stock	20,000
			Add: Appreciation	2,000	22,000
			Debtors	18,000
			Less: Provision for bad debts	2,000	16,000
			Cash at bank		9,000
		1,82,000			1,82,000

14.

Dr. Revaluation Account Cr.
Particulars	Rs.	Rs.	Particulars	Rs.
To Stock A/c		5,000	By Buildings A/c	16,000
To Provision for doubtful debts A/c		1,000
To Profit on revaluation transferred to
Mani’s capital A/c (4/10)	4,000
Rama’s capital A/c (3/10)	3,000
Devan’s capital A/c (3/10)	3,000	10,000
		16,000		16,000

Dr. Capital Account Cr.
Particulars	Mani Rs.	Rama Rs.	Devan Rs.	Particulars	Mani Rs.	Rama Rs.	Devan Rs.
To Mani’s loan A/c	66,000			By Balance b/d	50,000	50,000	50,000
To Balance c/d		62,000	62,000	By Revaluation A/c	4,000	3,000	3,000
				By Profit and loss A/c	12,000	9,000	9,000
	66,000	62,000	62,000		66,000	62,000	62,000
				By Balance b/d		62,000	62,000