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Retirement and Death of a Partner

Accountancy
Inter Second Year
English
Very Short Answer Questions
Q1. State how a partner may retire from partnership firm

Q2. What is Ratio of Gaining?

Q3. Why ratio of gaining is to be ascertained?

Q4. X, Y and Z are partners sharing profits and losses in the ratio of 3:2:2. Calculate new profit sharing of; (a) X and Y if Z retires from the business. (b) Y and Z if X retires from the business. (c) X and Z if Y retires from the business.

Q5. A, B and C are partners sharing profits and losses equally. Mr. C retires from the business A and B decided to continue the business and sharing profits and losses in the ratio of 3:2 respectively. Calculate the ratio of gaining of A and B.

Q6. P, Q and R are partners sharing profits and losses in the ratio of 4:3: 2 respectively. R retires from the business and his share is purchased by P and Q in the ratio of 2: 1. Calculate New profit sharing ratio of P and Q.

Q7. Ram, Rahim and Akbar are partners sharing profits and losses in the ratio of 3: 2:1 respectively. Akbar retires from the business and Rahim purchased the share of Akbar. Calculate new profit sharing ratio of Ram and Rahim.

Q8. X, Y and Z are partners with profit sharing ratio of 5: 4:3 respectively. Z retires from the business. X and Y decided to share future profits in the ratio of 3:2. Calculate the ratio of gaining of X and Y.

Q9. A, B and C are partners sharing profits and losses at the ratio of 5:4:3 respectively. C retires from business. A and B decided to continue the business and sharing future profits in the ratio of 4:3. Calculate the ratio of gaining of A and B.

Q10. Sitha, Geetha and Savitha are partners sharing profits and losses in the ratio of 4:3:2 respectively. Savitha retired from the business. The value of goodwill is estimated at 72,000. There is no goodwill balance in the books. Create / Raise goodwill account in the books.

Q11. Vani, Rani, Radha are partners sharing profits and losses equally. Radha retires from the business. Goodwill of the firm is valued at 40,000. Goodwill account showing a balance of ?10,000 in the books. Pass journal entry to raise goodwill in the books.

Q12. Ramesh, Suresh and Rajesh are partners sharing profits and losses in the ratio of 32:1 respectively. Suresh retires from the business. Ramesh and Rajesh decided to continue the business and share future profits in the ratio of 3: 2, goodwill of the firm valued at 60,000. Give necessary journal entries to create and write off goodwill.

Q13. X, Y and Z are partners sharing profits and losses equally. Goodwill of the firm is valued at 45,000. X retires from the business. Y and Z devided to continue the business by sharing future profits and losses in the ration of 3: 2 respectively. Give necessary journal entries without raising goodwill account.(Share of goodwill payable to is 15,000, contributed by Y and Z in their respective share of gaining 4:1 ie 12,000 by Y and 3,000 by Z).

Q14. What is joint life policy?

Q15. How do you ascertain share of profit/loss payable to deceased partner ?

Q16. What are the amounts payable to deceased partner?

Q17. State the methods of accounting for payment of share of profit to deceased partner

Problems
Q1.

X, Y and Z are partners sharing profits and losses equally. Their balance sheet as on 31 March 2020 was as under:

Balance Sheet as on 31 March 2020

Liabilities Amount (₹) Assets Amount (₹)
Trade Creditors 25,000 Cash 10,000
Bills payable 17,000 Debtors 30,000
General Reserve a/c 18,000 Stock 35,000
Capital: X 40,000 Machinery 50,000
Capital: Y 30,000 Land 25,000
Capital: Z 20,000    
Total 1,50,000 Total 1,50,000

On the above date, Z retires from the business on the following conditions:

Terms of Z's Retirement

  1. Stock and Machinery to be depreciated by 10%.
  2. Provided for bad debts @ 5% on debtors.
  3. Land revalued at 35,000.
  4. Goodwill of the firm valued at 60,000.

Required: Give necessary journal entries, ledger accounts and opening balance sheet of X and Y.
Q2.

X and Y are partners sharing profits and losses in the ratio of 3:2. Their balance sheet as on 31 March 2020 was as follows:

Balance Sheet as on 31 March 2020

Liabilities Amount (₹) Assets Amount (₹)
Capital: X 30,000 Buildings 30,000
Capital: Y 20,000 Machinery 25,000
General Reserve 15,000 Investments 15,000
P&L a/c 10,000 Stock 28,000
Creditors 25,000 Debtors 20,000
Bank overdraft 20,000 Cash 2,000
Total 1,20,000 Total 1,20,000

X retires from the business on the following terms:

  1. Goodwill is valued at 20,000.
  2. Depreciate stock and machinery by 10%.
  3. Provide for bad debts at 6%.
  4. Buildings are valued at 35,000.

Required: Give journal entries, necessary Ledger accounts and the Balance sheet.
Q3.

S, P and G were partners sharing profits and loss in the ratio of 4:3:3. Their balance sheet as on 31 March 2020 was as under:

Liabilities Amount (₹) Assets Amount (₹)
Capital: S 1,20,000 Buildings 1,20,000
Capital: P 60,000 Furniture 4,000
Capital: G 40,000 Machinery 60,000
General Reserve a/c 24,000 Stock 20,000
Creditors 36,000 Debtors 21,600
    Cash 54,400
Total 2,80,000 Total 2,80,000

G Retires from the business on the following terms:

  1. Buildings valued at 1,30,000.
  2. Depreciate Furniture and Machinery by 10%.
  3. Provide for bad debts at 1,600.
  4. Creditors 6,000 need not be paid.
  5. Goodwill valued at 27,000.
  6. G will be paid 17,700 immediately and the balance is transferred to his loan account.

Required: Give journal entries, ledger accounts and balance sheet of S and P.
Q4.

Ajay, Vijay and Vinay were partners sharing profits and losses in the ratio of 5:3:2. Their balance sheet as on 31 March 2020 was as under:

Liabilities Amount (₹) Assets Amount (₹)
Creditors 20,000 Bank 5,000
Bills payable 26,000 Debtors 40,000
General Reserve a/c 24,000 Stock 30,000
Capital Accounts: Ajay 60,000 Plant & Machinery 50,000
Capital Accounts: Vijay 40,000 Furniture 10,000
Capital Accounts: Vinay 30,000 Buildings 55,000
    Goodwill 10,000
Total 2,00,000 Total 2,00,000

Vinay retires on the above date on the following conditions:

  1. Goodwill of the firm is valued at 50,000.
  2. Appreciate buildings by 20%.
  3. Create a provision for bad debts at 1,000.
  4. Depreciate plant and machinery by 10%.
  5. Ajay and Vijay bring in cash ₹25,500 and 19,300 towards additional capital to pay the amount due to retiring partner Vinay.

Required: Give journal entries and necessary ledger accounts and balance sheet of a new firm.
Q5.

Ganga, Yamuna and Saraswathi are partners sharing profits and losses in the ratio of 3:2:1 respectively. Their balance sheet as on 31 March 2019 was under.

Liabilities Amount (₹) Assets Amount (₹)
Creditors 38,000 Bank 12,000
Bills payable 10,000 Debtors 24,000
General Reserve 24,000 Stock 50,000
Capital Accounts: Ganga 80,000 Furniture 16,000
Capital Accounts: Yamuna 60,000 Machinery 70,000
Capital Accounts: Saraswathi 50,000 Buildings 90,000
Total 2,62,000 Total 2,62,000

Saraswathi retired from the business on the following conditions:

  1. Depreciate machinery by 10% and furniture by 15%.
  2. Stock to be appreciated by 20%.
  3. Buildings are to be appreciated by 10%.
  4. Goodwill of the firm is valued at 36,000.

Required: Write up necessary Journal entries, ledger accounts and balance sheet of new firm.