P4 Illustration 16 - 19 |Revaluation & Reassessment of Assets & Liabilities Retirement of A Partner|

12th Accountancy
TS GREWAL 2021-22 / Sultan Chand SCS / CBSE / NCERT / RBSE / Double Entry Book Keeping / NIOS / DK GOEL / VK Publication /

Chapter :- 6 ( Retirement of A Partner )
Topic :- Revaluation & Reassessment of Assets & Liabilities Valuation & Adjustment of Goodwill ( #Increase #Decrease #No_Change)
Part :- 4
Questions :- Illustration 16 to 19.

Illustration 16 : A, B and C are partners in a firm sharing profits in the ratio of 4 : 3 : 1. B retires selling his share of profit to A and C for Rs 8,100, Rs 3,600 being paid by A and Rs 4,500 by C. Profit for the year after B's Retirement was 10,500.
You are require (i) to Give journal entries to record the transfer of B's Share to A and C (ii) to Calculate new profit sharing ratio and distribute the profit between A and C. A and C bring the necessary amount.

Illustration 17 : Armaan, Anup and Sushant were partners in firm sharing profit in a ratio of 3 : 2: 1. Sushant retired and the new profit sharing ratio between Armaan and Anup was 1 : 2. On sushant's Retirement, Goodwill of the firm was valued at Rs 30,000. Pass necessary journal entry for the treatment of goodwill on Sushant's Retirement.

Illustration 18 : Amal, Bikki and Chandu are partners sharing profits in the ratio of 1:2:3. Chandu retires and his capital, after making adjustments for reserves and gain (profit) on revaluation is Rs 2,20,000. Amal and Bikki agreed to pay him Rs. 2,50,000 in full settlement of his claim. Pass necessary Journal entry for the treatment of goodwill if new profit-sharing ratio is decided at 1:3.​

Illustration 19 : Balance sheet of Deepika Jyotika and Alia sharing profit and losses in the ratio of 5 : 3 : 2 as at 31st March 2021 was.
Liabilities Amount Assets Amount
Sundry Creditor 15000 Cash at Bank 27000
Capital Debtors 16000
Deepika 46000 Less Provision for Doubtful Debts 800 15200
Jyotika 34000 Stock 12800
Alia 25000 105000 Plant and Machinery 35000
Land & Building 30000
120000 120000
Jyotika Retires from the firm on 1st April 2021. Deepika and Alia Decided to share future profit & Losses in the ratio of 3 : 1. Following adjustment are agreed:
(i)Debtors of 1,100 be written off as it is no longer receivable.
(ii) Provision for doubtful debts be maintained at the existing rate.
(iii)Stock be written down by 1055.
(iv) Land & Building be written up by 11,000.
(v) Plant & Machinery be reduced to 34,000.
(vi) Sundry creditor of 700 be written back as no longer payable.
(vii) A provision of Rs 600 be made for repairs.
(viii) An old computer completely written off was sold for Rs. 2,000 as scrap.
(ix) Firm had to pay Rs 5,000 to an employee injured in an accident.
(x) An unrecorded machinery valued at Rs. 10,000 is to be recorded.
To give effect to the above adjustment, you are required to pass necessary journal entries. Also prepare the revaluation account.

Example : Amit Sumit and Jatin were sharing profit and losses in ratio of 5 : 3 : 2. Jatin retired and Amit and Sumit decided to continue the firm sharing profit and losses equally after Jatin's Retirement. They decided to record the effect of the following revaluation without affecting the book values of assets and liabilities by passing an adjustment entry :
Book Value Revised Value
Land & Building 5,00,000 5,50,000
Plant & Machinery 2,50,000 2,40,000
Sundry Creditors 60,000 55,000
Outstanding expenses 60,000 75,000
Pass the necessary adjustment entry.

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