RETIREMENT OR

2018
31st March
By
NTIOF AART
Interest on
18,252 16,900 8% p.a.
ILLUSTRATION 50.
Y Yand Z were in partnership sharing profits in the rati
2015 the Balance Sheet of the firm stood as followe

Liabilities
Assets
of3:2:1.OOnn lst Ayi
Provision for Doubtful
Debts 1,300 Cash at Bank
Sundry Creditors 15,000 Debtors
Capitals Stock
78,750 Machinery 1600
70,000 Land and Building 20.300
61,250 2,10,000
2,26,300
120 0
Z retires on the above date and the new profit sharing ratio betwenn 2,26,30
were agreed: Ywill
be 5:4. Following terms
(1) Land and Buildings be
reduced by 10%.

(2) Out ofthe insurance premium paid during the year 75,000be
be carried
carriod forwand
as unexpired.

(3) There is no need of any provision for doubtful debts.

(4) Goodwill of the firm be valued at 754,000.
() X and Ydecided that their capitals will be adjusted in their new proftshurig
ratio, by bringing in or paying cash to the partners. 2's alc will be transfemd
to his loan a/c.
(a) Pass necessary journal entries; prepare the capital accounts and thene
balance sheet.
is paid 79,300 on the date of retirement
(b) Zthree
amount
and the remaining
equal instalments together with interest at the rate of 10% pa. onte

outstanding balance. Show Z's loan a/c for 3 years.

JOURNAL ENTRIES
SOLUTION: (a)
L.F Dr. () C
Date Particula7s 5,000
2015 Prepaid Insurance A/c Dr.
1,300
April 1 Provision for Doubtful debts Alc Dr. 630
To Revaluation A/c
(Increase in the value of assets) 12,000
Dr. 12
Revaluation A/c
To Land and Buildings Alc
(Decrease in the value of assets)
 DEATH
REMENT ORDE OFA PARTNER
5.61
r's Capital Alc
Dr. 2,850
y's Capital A/c
Dr. 1,900
Ts Capital Ac
Dr. 950
To Revaluation A/c
5,700
(Loss
on
revaluat
transferred)
' s Capital A/c
Dr. 3,000
' s Capital A/c
Dr. 6,000
A/c
To Z's Capital
9,000
Goodwill adjusted in the gaining ratio 1:2)
Ts Capital A/c
Dr. 69,300
To Bank A/c
9,300
To Z's Loan A/c
60,000
The balance of Z's Captal A/c transferred to his loan

Alc)
BankA/c2) Dr. 2,100
To X's Capital A/c
2,100
(The amount brought in by X to raise his capital to
profit sharing ratio)
Ys Capital A/c2)
Dr. 2,100
To Bank Ac
2,100
(The amount withdrawn by Yto bring his capital to
profit sharing ratio)

Dr. CAPITAL ACCOUNTS Cr.

Particulars Particulars
X
To7sCapital Ale 3,000 6,000 B y Balance b/d 78,750 70,000 61,250
(Goodwill) By X's Capital 3,000
To Revaluation Alc (Goodwill)
C 2,850 1,900 950 By Ys Capital 6,000
To Bank A/c 9,300 A/c (Goodwil1)
ToZs Loan Ac 60,00
To Balance cld 72,900 62,100
78,750 70,000 70,250 78,750 70,000 70,250
To Bank A/c 2,100 By Balance b/d 72,900 62,100
To Balance c/d
75,000 60,000 By Bank A/c 2,100
75,000 62,100 75,000 62,100 -

NEW BALANCE SHEET

as at Ist April, 2015

Liabilities Assets
Sundry Creditors 15,000 Cash at Bank (T10,000+
CsLoan 60,000 2,100-2,100-9,300) 700
Capitals Debtors 16,000
 REREMENTsORDEATHOF APRT
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Maxchiney
nd and Buktings

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