NCERT Solutions

Explain the modes of payment to a retiring partner.

How will you compute the amount payable to a deceased partner?

Explain the treatment of goodwill at the time of retirement or on the event of death of a partner?

Discuss the various methods of computing the share in profits in the event of death of a partner.

Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3 : 2 : 1. Manisha retires and goodwill of the firm is valued at Rs. 1,80,000. Aparna and Sonia decided to share future in the ratio of 3 : 2. Record necessary journal entries. (Ans : Dr. Aparna's Capital A/c by Rs. 18,000, Dr. Sonia's Capital A/c by Rs. 42,000, Cr. Manisha's Capital A/c by Rs. 60,000).

Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 2 : 3 : 5. Goodwill is appearing in the books at a value of Rs. 60,000. Sangeeta retires and goodwill is valued at Rs. 90,000. Saroj and Shanti decided to share future profits equally. Record necessary journal entries.

Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs. 36,000 and Profit and Loss Account (Dr.) Rs. 15,000. Record the necessary journal entries to the above effect.

Radha, Sheela and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2019, Sheela retires from the firm. On that date, their Balance Sheet was as follows:

The terms were: a) Goodwill of the firm was valued at Rs. 13,500. b) Expenses owing to be brought down to Rs. 3,750. c) Machinery and Loose Tools are to be valued at 10% less than their book value. d) Factory premises are to be revalued at Rs. 24,300.

Prepare:

Following is the Balance Sheet of Prateek, Rockey and Kushal as on March 31, 2020.

Rockey died on June 30, 2020. Under the terms of the partnership deed, the executors of a deceased partner were entitled to: a) Amount standing to the credit of the Partner's Capital account. b) Interest on capital at 5% per annum. c) Share of goodwill on the basis of twice the average of the past three years' profit and d) Share of profit from the closing date of the last financial year to the date of death on the basis of last year's profit.

Profits for the year ending on March 31, 2018, March 31, 2019 and March 31, 2020 were Rs. 12,000, Rs. 16,000 and Rs. 14,000 respectively. Profits were shared in the ratio of capitals.

Pass the necessary journal entries and draw up Rockey's capital account to be rendered to his executor.

Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2, 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2020 was as follows:

Bajaj retires from the business and the partners agree to the following: a) Freehold premises and stock are to be appreciated by 20% and 15% respectively. b) Machinery and furniture are to be reduced by 10% and 7% respectively. c) Bad Debts reserve is to be increased to Rs. 1,500. d) Goodwill is valued at Rs. 21,000 on Bajaj's retirement. e) The continuing partners have decided to adjust their capitals in their new profit sharing ratio after retirement of Bajaj. Surplus/deficit, if any, in their capital accounts will be adjusted through current accounts. Prepare necessary ledger accounts and draw the Balance Sheet of the reconstituted firm.

The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015:

Pramod retired on the date of Balance Sheet and the following adjustments were made: a) Stock is to be reduced by 10%. b) Factory buildings were appreciated by 12%. c) Provision for doubtful debts be created up to 5%. d) Provision for legal charges to be made at Rs. 265. e) The goodwill of the firm be fixed at Rs. 10,000. f) The capital of the new firm be fixed at Rs. 30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2. Record journal entries and prepare the balance sheet of the reconstituted firm after transferring the balance in Pramod's Capital account to his loan account.

Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2020.

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2020 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs.20,000; Office furniture, Rs.14,250; Plant and Machinery Rs.23,530; Land and Building Rs.20,000. A provision of Rs.1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs.9,000. The continuing partners agreed to pay Rs. 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan. Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.

What are the different ways in which a partner can retire from the firm.

Write the various matters that need adjustments at the time of retirement of a partners.

Distinguish between sacrificing ratio and gaining tab.

Why do firm revaluate assets and reassers their liabilities on retirement or on the event of death of a partner.

Why a retiring/deceased partner is entitled to a share of goodwill of the firm.