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Questions:

Generic 2

20 x 2 = 40

Mani, Gani and Soni are partners sharing the profits and losses in the ratio of 4:5:6. Mani retires from the firm. Calculate the new profit sharing ratio and gaining ratio.

Navin, Ravi and Kumar are partners sharing profits in the ratio of 1/2, 1/4 and 1/4 respectively. Kumar retires and his share is taken up by Navin and Ravi equally. Calculate the new profit sharing ratio and gaining ratio.

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

Sunil, Sumathi and Sundari are partners sharing profits in the ratio of 3 : 3 : 4. Sundari retires and her share is taken up entirely by Sunil. Calculate the new profit sharing ratio and gaining ratio

Kayal, Mala and Neela are partners sharing profits in the ratio of 2:2:1. Kayal retires and the new profit sharing ratio between Nila and Neela is 3:2. Calculate the gaining ratio.

Rosi, Rathi and Rani are partners of a firm sharing profits and losses equally. Rathi retired from the partnership on 1.1.2018. On that date, their balance sheet showed accumulated loss of Rs. 45,000 on the asset side of the balance sheet. Give the journal entry to distribute the accumulated loss.

Dheena, Surya and Janaki are partners sharing profits and losses in the ratio of 5:3:2. On 31.3.2018, Dheena retired. On the date of retirement, the books of the firm showed a reserve fund of Rs. 50,000. Pass journal entry to transfer the reserve fund.

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

What is the purpose of calculating gaining ratio?

10.

What is gaining ratio?

11.

What is meant by retirement of a partner?

12.

Naresh, Mani and Muthu are partners in a firm sharing profits and losses in the ratio of 2:2:1. On 31^st March 2019, Muthu retires from the firm. On the date of Muthu’s retirement, goodwill appeared in the books of the firm at Rs. 40,000. By assuming fluctuating capital method, 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 amount of existing goodwill.

13.

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.

14.

Raja, Roja and Pooja are partners sharing profits in the ratio of 4:5:3. Roja retires from the firm. Calculate the new profit sharing ratio and gaining ratio.

15.

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.

16.

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.

17.

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.

18.

Kiran, Vinoth and Vimal are partners sharing profits in the ratio of 5:3:2. Kiran retires and the new profit sharing ratio between Vinoth and Vimal is 2:1. Calculate the gaining ratio.

19.

Mary, Meena and Mariam are partners of a firm sharing profits and losses equally. Mary retired from the partnership on 1.1.2019. On that date, their balance sheet showed accumulated loss of Rs. 75,000 on the asset side of the balance sheet. Give the journal entry to distribute the accumulated loss.

20.

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.

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Answers Key:

Generic 2

20 x 2 = 40

Since, New profit sharing ratio, share gained and the proportion of share gained is not given, the new share is calculated by assuming that the share gained in the proportion of old ratio. Therefore the new profit sharing ratio and the gaining ratio between the continuing partners, Gani and Soni is their old profit sharing ratio, that is 5 : 6.

Kumar's share = \(\cfrac { 1 }{ 4 } \)
Share gained = Retiring partner's share \(\times\) proportion of share gained
Navin = \(\cfrac { 1 }{ 4 } \times \cfrac { 1 }{ 2 } =\cfrac { 1 }{ 8 } \)
Ravi = \(\cfrac { 1 }{ 4 } \times \cfrac { 1 }{ 2 } =\cfrac { 1 }{ 8 } \)
New share of continuing partner = old share + share gained
Navin = \(\cfrac { 1 }{ 2 } +\cfrac { 1 }{ 8 } =\cfrac { 4+1 }{ 8 } =\cfrac { 5 }{ 8 } \)
Ravi = \(\cfrac { 1 }{ 4 } +\cfrac { 1 }{ 8 } =\cfrac { 2+1 }{ 8 } =\cfrac { 3 }{ 8 } \)
Therefore, new ratio of Navin and Ravi is \(\cfrac { 5 }{ 8 } :\cfrac { 3 }{ 8 } \) that is 5: 3
Gaining ratio is 1 : 1

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

Sunil = \(\frac{3}{10}+\frac{4}{10}=\frac{7}{10}\)
(Sundar share is added with old ratio)
Sumathi = \(\cfrac { 3 }{ 10 } +0=\cfrac { 3 }{ 10 } \)
New ratio = 7 : 3
Sacrificing ratio = 4 : 0

Share gained = New share - Old share
Mala = \(\cfrac { 3 }{ 5 } -\cfrac { 1 }{ 5 } =\cfrac { 1 }{ 5 } \)
Neela = \(\cfrac { 2 }{ 5 } -\cfrac { 1 }{ 5 } =\cfrac { 1 }{ 5 } \)
Therefore, the gaining ratio of Mala and Neela is 1:1

Journal entry
Date	Particulars		Debit Rs	Credit Rs
2018	Rosi A/c (45,000)	Dr	15,000
January	Rathi A/c	Dr	15,000
	Rani A/c	Dr	15,000
	To Profit and loss A/c			45,000
	(Accumulated loss transferred to all
	partner's capital account in the old profit sharing ratio)

Journal entry
Date	Particulars	Debit Rs	Credit Rs
2018	General reserve A/c Dr	50,000
March 31	To Dheena A/c		25,000
	To Surya A/c		15,000
	To Janaki A/c		10,000
	(General reserve transferred to all
	partner's capital account in the profit sharing ratio)

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

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.

10.

Gaining Ratio is the proportion of the profit which is gained by the continuing partner.
Gaining ratio = Ratio of share gained by the Conitinuing partners.
Share gained = New share - Old share

11.

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.

12.

(a) Write off the entire amount of existing goodwill

Journal entry
Date	Particulars		Debit Rs.	Credit Rs.
2019 March 31	Naresh’s capital A/c (40,000 × 2/5)	Dr.	16,000
	Mani’s capital A/c (40,000 × 2/5)	Dr.	16,000
	Muthu’s capital A/c (40,000 × 1/5)	Dr.	8,000
	To Goodwill A/c			40,000
	(Existing goodwill written off)

(b) Write off half of the amount of existing goodwill, that is Rs. 20,000

Journal entry
Date	Particulars		Debit Rs.	Credit Rs.
2019 March 31	Naresh’s capital A/c (20,000 × 2/5)	Dr.	8,000
	Mani’s capital A/c (20,000 × 2/5)	Dr.	8,000
	Muthu’s capital A/c (20,000 × 1/5)	Dr.	4,000
	To Goodwill A/c			20,000
	(Half of the existing goodwill written off)

13.

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)

14.

Since, new profit sharing ratio, share gained and the proportion of share gained is not given, the new share is calculated by assuming that the share gained is in the proportion of old ratio. Therefore, the new profit sharing ratio and the gaining ratio between the continuing partners, Raja and Pooja is their old profit sharing ratio, that is 4:3.

15.

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.

16.

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.

17.

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

18.

Share gained = New share – Old share
Vinoth \(=\frac{2}{3}-\frac{3}{10}=\frac{20-9}{10}=\frac{11}{30}\)
Vimal \(=\frac{1}{3}-{2}{10}=\frac{10-6}{30}=\frac{4}{30}\)
Therefore, the gaining ratio of Vinoth and vimal \(\frac{11}{30}:\frac{4}{30}\), that is, 11:4

19.

Journal entry
Date	Particulars		Debit Rs.	Credit RS.
2019 January 1	Mary’s capital A/c	Dr.	25,000
	Meena’s capital A/c	Dr.	25,000
	Mariam’s capital A/c	Dr.	25,000
	To Profit and loss a/c			75,000
	(Accumulated loss transferred to all partners’ capital account in the old profit sharing ratio)

20.

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)