Question

A, B and C were sharing profits losses in the ratio of 3:2:1 and their Balance sheet as on 31^st December. 2011 was as follows:

B retires from the business on 31^st December 2011 on the following terms. 

a) Goodwill of the rm should be valued at Rs. 30000 and retiring partners share to be adjusted in the capital accounts of other partners. 

b) Motor van to be valued at Rs.60000 and Stock to be valued at Rs. 58,900. 

c) Provision for doubtful debts to be increased to 5% of debtors. 

d) Creditors include Rs.3000 not likely to be claimed and hence be written back.

e) There was the furniture of the value Rs. 2000 to be brought into books. 

f) There is a liability of Rs. 2000 for accident compensation to be paid. 

g) The relative profit sharing ratio between A and C is to be maintained.

Give journal entries; prepare Ledger Accounts and Balance Sheet of A and C.

Answer 1

Revaluation a/c

Capital A/c

Balance sheet

Journal

Note:

1. Old ratio = 3:2:1, As the relative ratio is not changed, the new ratio between A & C is 3:1. 

2. Goodwill of the firm = 30000 

B’s share of goodwill = 30000 x \(\frac{2}{6}\) = 10000 

Gaining ratio = 3:1 

3. Provision for doubtful debts = 30000 x \(\frac{5}{100}\) = 1500