Settlement of Amount Due to Retiring partner

4 Marks Question

1. Sita, Geeta and Rita were partners sharing profits in the ratio of 2:2:1

respectively. Following was their balance sheet as at 31st March, 2013.

Balance Sheet

as at 31st March, 2013

Liabilities Amt (₹) Assets Amt (₹)

Capitals A/cs Sita 1,20,000 Cash 41,000

Geeta 80,000 Stock 60,000

Rita 1,00,000 Debtors 3,00,000 44,000

Creditors Building 60,000 2,00,000

Bills Payable Plant 40,000 80,000

Profit and Loss A/c 25,000 4,25,000

On the above date Sita retired and following were agreed

1. Stock was valued at Rs. 59,000; debtors Rs. 40,000; building Rs. 2,10,000;

plant Rs. 70,000 and creditors Rs. 50,000.

1. Amount due to Sita will be transferred to Sita's loan account. Prepare revaluation account and Sita's capital account. (Compartment 2014) Ans. Dr

Revaluation Account Cr

Particulars Amt (₹) Particulars Amt (₹)

To Stock A/c 1,000 By Building A/c 10,000

To Debtors A/c 4,000 By Creditors A/c 10,000

To Plant A/c 10,000 To Profit on Revaluation Transferred to Sita's Capital A/c 2,000 Geeta's Capital A/c 2,000 Rita Capital A/c 5,000 1,000 20,000 20,000

Dr Cr

Sita's Capital Account

Particulars Amt (₹) Particulars Amt (₹)

To Sita's Loan A/c By Balance b/d 1,32,000 1,20,000

By Profit and Loss A/c 10,000

By Revaluation A/c (Profit) 2,000

1,32,000

Working Note

Share in profit and loss = <math>25,000 \times \frac{2}{5} = ₹10,000</math>

6 Marks Questions

1. Following is the balance sheet of X, Y and Z as on 31st March, 2008. They shared profits in the ratio of 3:3:2

Balance Sheet

as at 31st March, 2008

Liabilities Amt (₹) Assets Amt (₹)

Sundry Creditors Cash at Bank 2,50,000 50,000

General Reserve Bills Receivable 80,000 60,000

Partners' Loan A/cs Debtors 80,000

Χ 50,000 (-) Provision for Doubtful Debts (4,000) 76,000

Υ 40,000 Stock 90,000 1,24,000

Capital A/cs Fixed Assets 3,00,000

Х 1,00,000 Advertisement Suspense A/c 16,000

Υ 60,000 Profit and Loss A/c 4,000

Z 50,000 2,10,000 6,30,000

On 1st April, 2008, Y decided to retire from the firm on the following terms

1. Stock to be depreciated by Rs. 12,000.
2. Advertisement suspense account to be written-off.
3. Fixed assets to be appreciated by 10%.
4. Provision for doubtful debts to be increased to Rs. 6,000.
5. Goodwill of the firm valued at Rs. 80,000 and the amount due to the retiring partner be adjusted in X's and Z's capital account.

Prepare revaluation account, partners' capital account and the balance sheet to give effect to the above. (All India 2009)