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12th Standard Accountancy - Retirement and Death of a Partner Book Back Questions

Published on: 04/09/2019

Retirement and Death of a Partner

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Questions:

Generic 2

3 x 2 = 6

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.

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.

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 5

4 x 5 = 20

Varsha, Shanthi and Madhuri are partners, sharing profits in the ratio of 5:4:3. Their balance sheet as on 31^st December 2017 is as under:

Balance Sheet as on 31st December 2017
Liabilities	Rs.	Rs.	Asset	Rs.
Capital accounts:			Premises	1,20,000
Varsha	80,000		Stock	40,000
Shanthi	60,000		Debtors	50,000
Madhuri	20,000	1,60,000	Cash at bank	18,000
General reserve		48,000	Profit and loss A/c (loss)	12,000
Sundry creditors		32,000
		2,40,000		2,40,000

On 1.1.2018, Madhuri died and on her death the following arrangements are made:
(i) Stock to be depreciated by Rs. 5,000
(ii) Premises is to be appreciated by 20%
(iii) To provide Rs. 4,000 for bad debts
(iv) The final amount due to Madhuri was not paid
Prepare revaluation account, partners’ capital account and the balance sheet of the firm after death.

Distinguish between sacrificing ratio and gaining ratio.

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.

Prabu, Ragu and Siva are partners sharing profits and losses in the ratio of 3:2:1. Prabu retires from partnership on 1^st April 2017. The following adjustments are to be made:
(i) Increase the value of building by Rs. 12,000
(ii) Reduce the value of furniture by Rs. 8,500
(iii) A provision would also be made for outstanding salary for Rs. 6,500.
Give journal entries and prepare revaluation account.

Generic 3

1 x 3 = 3

Kavitha, Kumudha and Lalitha are partners sharing profits and losses in the ratio of 5 : 3 : 3 respectively. Kumudha retires from the firm on 31^st December, 2018. On the date of retirement, her capital account shows a credit balance of Rs. 2,00,000. Pass journal entries if:
i) The amount due is paid off immediately by cheque.
ii) The amount due is not paid immediately.
iii) Rs. 70,000 is paid immediately by cheque

Multiple Choice Question

5 x 1 = 5

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

10.

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

11.

‘ 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

12.

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

13.

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

3 x 2 = 6

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.

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

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 5

4 x 5 = 20

Dr Revaluation Account Cr
Particulars	Rs	Rs	Particulars	Rs
To Stock A/c		5,000	Premises A/c	24,000
To Debtors A/c		4,000
To Profit on revaluation
transferred to
Marsha's capital A/c	6250
(15,000 x 5/12)
Shanthi's capital A/c	5,000
(15,000 x 4/12)
Madhuri's capital A/c	3,750	15,000
(15,000 x 3/12)
		24,000		24,000

Dr Capital Account Cr
Particulars	Varsha Rs	Shanthi Rs	Madhuri Rs	Particulars	Varsha Rs	Shanthi Rs	Madhuri Rs
To Profits and				By Balance b/d	80,000	60,000	20,000
loss A/c	5000	4,000	3,000	By General
To Madhuri's				reserve A/c	20,000	16,000	12,000
Executor's A/c	-	-	32,750	By Revaluation
To Balance c/d	1,01,250	77,000	-	Alc (profit)	6,250	5,000	3,750

	1,06,250	81,000	35,750		1,06,250	81,000	35,750
				By Balance b/d	1,01,250	77,000	-

Balance Sheet as on 31st December 2017
Liabilities	Rs	Rs	Assets	Rs	Rs
Capital Account			Premises	1,20,000
Varsha	1,01,250		Add:
Shanthi	77,000	1,78,250	Appreciation	24,000	1,44,000
Madhuri's			Stock	40,000
Executor's A/c		32,750	Less: Depreciation	5,000	35,000
Sundry creditors		32,000
			Debtors	50,000
			Less: Bad debts	4,000
			Cash at bank		46,000
					18,000

		2,43,000			2,43,000

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

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

Journal entries
Date	Particulars		Debit Rs.	Credit Rs.
2017 April 1	Building A/c	Dr.	12,000
	To Revaluation A/c			12,000
	(Increase in the value of building accounted)
"	Revaluation A/c	Dr.	15,000
	To Furniture A/c			8,500
	To Outstanding salary A/c			6,500
	(Reduction in the value of furniture and outstanding salary accounted)
"	Prabu’s capital A/c	Dr.	1,500
	Ragu’s capital A/c	Dr.	1,000
	Siva’s capital A/c	Dr.	500
	To Revaluation A/c			3,000
	(Loss on revaluation transferred to capital accounts)

Dr. Revaluation Account Cr.
Particulars	Rs.	Particulars	Rs.	Rs.
To Furniture A/c	8,500	By Building A/c		12,000
To Outstanding salary A/c	6,500	By Loss on revaluation transferred to
		Prabu’s capital A/c (3/6)	1,500
		Ragu’s capital A/c (2/6)	1,000
		Siva’s capital A/c (1/6)	500	3,000
	15,000			15,000

Generic 3

1 x 3 = 3

Journal entries
Date	Particulars		Debit Rs.	Credit Rs.
2018 Dec. 31	(i) Kumudha’s capital A/c	Dr.	2,00,000
	To Bank A/c			2,00,000
	(Amount due paid immediately)
"	(ii) Kumudha’s capital A/c	Dr.	2,00,000
	To Kumudha’s loan A/c			2,00,000
	(Amount due transferred to loan account)
"	(iii) Kumudha’s capital A/c		2,00,000
	To Bank A/c			70,000
	To Kumudha’s loan A/c			1,30,000
	(Rs. 70,000 paid and the balance transferred to loan account)