12th Accountancy - Unit 6 Retirement and Death of a Partner Model Question Paper | QB365

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12th Accountancy - Unit 6 Retirement and Death of a Partner Model Question Paper

Published on: 12/08/2019

Retirement and Death of a Partner

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Questions:

Generic 3

2 x 3 = 6

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

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 2

8 x 2 = 16

Raji, Mohana, Sonu were partners in a firm sharing profits in the ration of 4;3;2 Mohana retired. Her share was taken over equally by Raji and Sonu. In which ratio will be profit or loss on revaluation of assets and liabilities on the retirement of Mohana be transferred to the capital accounts of the partners.

If the retiring partner is not paid the full amount due to him immediately on retirement, how should his capital account be shown in subsequent balance sheet?

What is New profit sharing ratio?

What is the journal entry to be passed to transfer the amount due to the deceased partner to the executor of the deceased partner?

Suresh, Senthamarai and Raj were partners in a firm sharing profits and losses in the ratio of 3:2:1. Suresh retired from partnership. The goodwill of the firm on the date of retirement was valued at Rs. 36,000. Pass necessary journal entries for goodwill on the assumption that the fluctuating capital system is followed.

Kumar, Kesavan and Manohar are partners sharing profits and losses in the ratio of 1/2, 1/3 and 1/6 respectively. Manohar retires and his share is taken up by Kumar and Kesavan equally. Find out the new profit sharing ratio and gaining ratio.

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.

10.

Arya, Benin and Charles are partners sharing profits and losses in the ratio of 3:3:2. Charles retires and his share is taken up by Arya. Calculate the new profit sharing ratio and gaining ratio of Arya and Benin.

Generic 5

3 x 5 = 15

11.

Saran, Arun and Karan are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 3. Their balance sheet as on 31.12.2016 was as follows:

Liabilities	Rs	Rs	Asset	Rs	Rs
Capital accounts:			Buildings		90,000
Saran	60,000		Machinery		40,000
Arun	50,000		Investment		20,000
Karan	40,000	1,50,000	Stock		12,000
General reserve		15,000	Debtors	25,000
Creditors		35,000	Less: Provision Provision for bad debts	1,000	24,000
			Cash at bank		44,000
		2,00,000			2,00,00

Karan retires on 1.1.2017 subject to the following conditions:
(i) Goodwill of the firm is valued at Rs. 21,000
(ii) Machinery to be appreciated by 10%
(iii) Building to be valued at Rs. 80,000
(iv) Provision for bad debts to be raised to Rs. 2,000
(v) Stock to be depreciated by Rs. 2,000
(vi) Final amount due to Karan is not paid immediately
Prepare the necessary ledger accounts and show the balance sheet of the firm after retirement.

12.

Manju, Charu and Lavanya are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their balance sheet as on 31^st March, 2018 is as follows:

Liabilities	Rs	Rs	Asset	Rs
Capital accounts:			Buildings	1,00,000
Manju	70,000		Furniture	80,000
Charu	70,000		Stock	60,000
Lavanya	70,000	2,10,000	Debtors	40,000
Sundry creditors		40,000	Bills receivable	50,000
Profit and loss A/c		50,000	Cash at bank	20,000
		3,00,000		3,00,000

Manju retired from the partnership firm on 31.03.2018 subject to the following adjustments:
(i) Stock to be depreciated by Rs. 10,000
(ii) Provision for doubtful debts to be created for Rs. 3,000.
(iii) Buildings to be appreciated by Rs. 28,000
Prepare revaluation account and capital accounts of partners after retirement

13.

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

10 x 1 = 10

14.

Revaluation account is operated to find out gain or loss at the time of ____________

(a)

Admission of a partner

(b)

Retirement of a partner

(c)

Death of a partner

(d)

All of these

15.

______is calculated to determine the amount of compensation to be paid by each of the continuing partners to the outgoing partners

(a)

Old ratio

(b)

Gaining ratio

(c)

New ratio

(d)

Sacrifice ratio

16.

The net result of revaluation is adjusted through the__________ accounts of the partners

(a)

Capital

(b)

Real

(c)

Nominal

(d)

None of these

17.

If the goodwill account is raised for 50,000, the amount is debited to ____________

(a)

The capital accounts of partners

(b)

Goodwill account

(c)

Cash account

(d)

Loan account

18.

The policy amount received from the insurance company is used to settle the amount due to the __________

(a)

Increased partner

(b)

Deceased partner

(c)

Partnership at will

(d)

Partnership deed

19.

The firm is reconstituted and other partners continue the partnership firm with a new __________

(a)

Contract

(b)

agreement

(c)

start business

(d)

none of these

20.

When a partner leaves from a partnership firm, it is known as __________

(a)

Admission

(b)

Retirement

(c)

dissolution

(d)

death

21.

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

22.

A, B and C are partners sharing profits in the ratio of 4:2:3. C retires. The new profit sharing ratio between A and B will be

(a)

4:3

(b)

3:4

(c)

2:1

(d)

1:2

23.

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 3

2 x 3 = 6

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 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 2

8 x 2 = 16

The profit or loss on revaluation of assets and liabilities on the retirement of Mohana will be transferred to the capital accounts of the partners in their old ratio i.e. 4:3:2.

If the retiring partner is not paid fully immediately on retirement, then the remaining balance of his capital account will be transferred to his loan account and will be shown as his loan on the liabilities side . of the balance sheet of the firm

New profit sharing ratio is the agreed proportion in which future profit will be distributed to the continuing partners

To transfer the amount due to the deceased partner to the executor or legal representative of the deceased partner

Particulars	Debit Rs	Credit Rs
Deceased partner's capital AI c Dr.	xxx

To Deceased partner's executor's A/c		xxx
(Amount transferred to executor's account

As the new profit sharing ratio and gain made by the continuing partners is not mentioned, it is assumed that they gain in their old profit sharing ratio of 2:1. Therefore, gaining ratio is 2:1.
Suresh’s share of goodwill \(=36000\times\frac{3}{6}=Rs.18000\)

Journal Entries
Particulars		Debit Rs.	Credit Rs.
Senthamari’s capital A/c (18,000 × 2/3)	Dr.	12,000
Raj’s capital A/c (18,000 × 1/3)	Dr.	6,000
To Suresh’s capital A/c			18,000
(Suresh’s share of goodwill adjusted)

Gaining ratio is 1:1 as Manohar’s share is taken up by Kumar and Kesavan equally.
Manohar’s share = \(\frac{1}{6}\)
Share gained = Retiring partner’s share × Proportion of share gained
Kumar \(=\frac{1}{6}\times\frac{1}{2}=\frac{1}{12}\)
Kesavan \(=\frac{1}{6}\times\frac{1}{2}=\frac{1}{12}\)
Therefore, gaining ratio of Kumar and Kesavan \(\frac{1}{12}:\frac{1}{12}\) that is 1:1
New share of continuing partners = Old share + Share gained
Kumar \(=\frac{1}{2}+\frac{1}{12}=\frac{6+1}{12}=\frac{7}{12}\)
Kesavan \(=\frac{1}{3}+\frac{1}{12}=\frac{4+1}{12}=\frac{5}{12}\)
Therefore, new profit sharing ratio of Kumar and Kesavan is \(\frac{1}{12}:\frac{1}{12}\) that is 7 : 5.

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.

10.

Share gained by Arya = \(\frac{2}{8}\)
Gaining ratio = \(\frac{2}{8}\): 0 that is, \(\frac{1}{4}:\)0 or 1 : 0
New share of continuing partner = Old share + Share gained
Arya \(=\frac{3}{8}+\frac{2}{8}=\frac{5}{8}\)
Benin \(=\frac{3}{8}+0=\frac{3}{8}\)
Therefore, new profit sharing ratio of Arya and Benin is \(\frac{5}{8}:\frac{3}{8}\) that is 5:3

Generic 5

3 x 5 = 15

11.

Dr Revaluation A/c Cr
Partivulars	Rs	Rs	Particulars	Rs
To StockA/c		2,000	By Machinery AI/c	4,000·
To Provision for bad debts		1,000	By Building A/c	20,000
To Profit on revaluation
transferred to
Saran's capital A/c	8,400
Arun's capital A/c	6,300
Karan's capital a/c	6,300	21,000
		24,000		24,000

Dr Capital Account Cr
Particulars	Saran Rs	Arun Rs	Karan Rs	Particulars	Saran Rs	Arun Rs	Karan Rs
To Karan's capital A/c	3,600	2,700	-	By Balance b/d	60,000	50,000	40,000
To Karan's loan A/c	-	-	57,100	By Reserve fund A/c	6,000	4,500	4,500
To Balance c/d	70,800	58,100	-	By Revaluation A/c	8,400	6,300	6,300
				By Saran's capital A/c	-	-	3,600
				By Arun's capital A/c	-	-	2,700
	74,400	60,800	57,100		74,400	60,800	57,100
				By Balance b/d	70,800	58,100	-

Balance Sheet as on 31st January 2017
Liabilities	Rs	Rs	Assets	Rs	Rs
Capital Accounts	-		Buildings	60,000
Saran	70,800		Add: Appreciation	20,000	80,000
Arun	58,100	1,28,900
Karan's loan		57,100	Add: Appreciation	4,000	44,000
Sundry creditors		35,000	Investment		20,000
			Stock	12,000
			Less: Depreciation	2,000	10,000
			Debtors	25,000
			Less: Provision for bad Debts	2,000	23,000

			Cash at bank		44,000
		2,21,000			2,21,000

NOTE:
1. As new profit sharing ratio and proportion of gain is not given, it is assumed that the continuing partners gain in their old profit sharing ratio of 4 : 3 ratio.
2. Karan share of goodwill = \(21,000\times \cfrac { 3 }{ 10 } \)
= Rs. 6,300
Goodwill of Karan to be borne by
Saran: 6,300 \(\times\) 4/7 = 3,600
Arun: 6,300 \(\times\) 3/7 = 2,700

12.

Dr Revaluation A/c Cr
Particulars	Rs	Rs	Particulars	Rs
To Stock A/c		10,000	By Buildings A/c	28,000
To Provision for doubtful debts
To Profit on revaluation transferred to		3,000
Manju's Capital A/c (15,000 x 5/10)	7,500
Charus capital A/c (15,000 x 3/10	4,500
Lavanya's capital A/c (15,000 x 2/10)	3,000	15,000

		28,000		28,000

Dr Capital Account Cr
Particulars	Manju Rs	Charu Rs	Lavanya Rs	Particulars	Manju Rs	Charu Rs	Lavanya Rs
To Balance c/d	-	89,500	83,000	By Balance b/d	70,000	70,000	70,000
To Manjus				By Revaluation A/c	7,500	4,500	3,000
loan A/c	1,02,500	-	-	By Profit and loss A/c	25,000	15,000	10,000

	1,02,500	89,500	83,000		1,02,500	89,500	83,000
				By Balance b/d	-	89,500	83,000

13.

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