INDIAN SCHOOL AL WADI AL KABIR
ACCOUNTANCY XII
RETIREMENT & DEATH OF A PARTNER
1. How a partner can be retired from the firm?
2. Vinod, Singh and King were partners in a firm sharing profits in the ratio of 8:7:5. Singh
retired and his share was taken over by Vinod and King in the ratio of 1:2. Calculate the new
profit sharing ratio of Vinod and King.
3. Vinod, Mohan and Sohan were partners in a firm sharing profits in the ratio of 7:6:7. Mohan
retired and his share was divided equally between Vinod and Sohan. Calculate new profit
sharing ratio of Vinod and Sohan.
4. VK, SS and MM are partners sharing profits in the ratio of 2/5; 2/5 and 1/5. MM decides to
retire from the business and his share is taken by VK and SS in the ratio of 1:2. Calculate new
profit sharing ratio.
5. VK, NK and KK are partners sharing profits in the ratio of 5:3:2. KK retires and the new profit
sharing ratio between VK and NK is 5:3. Calculate gaining ratio.
6. PK, QK and RK were partners in a firm sharing profits in the ratio of 5:4:3. Their Capitals
were Rs.1,00,000; Rs.1,25,000; and Rs.2,50,000 respectively. State the ratio in which the
goodwill of the firm amounting to Rs.3,00,000 will be adjusted on the retirement of RK.
7. X, Y and Z were partners in the ratio of 3:2:1. Y retired and the new profit sharing ratio
between X and Z was 2:1. On Y’s retirement, the goodwill of the firm was valued at
Rs.1,80,000. Pass necessary journal entry for the treatment of goodwill on Y’s retirement.
8. RK, LK and BK are partners sharing profits in the ratio of 3:2:1. Goodwill is appearing in the
books at a value of Rs.1,80,000. LK retires and at the time of his retirement goodwill is valued
at Rs.2,52,000. RK and BK decided to share future profits in the ratio of 2:1. The profits for
the first year after LK’s retirement amount to Rs.1,20,000. Give the necessary journal entries
to record goodwill and to distribute the profits. Show calculations clearly.
9. AK, BK and NK are partners sharing profits & losses in the ratio of 14:5:6 respectively. BK
retires and surrenders his 5/25th share in favour of AK. The goodwill of the firm is valued at 2
years purchase of Super Profits based on average profits of last 3 years. The profits for the last
3 years are Rs.1,00,000, Rs.1,10,000 and Rs.1,00,000 respectively. The normal profit for the
first year after BK’s retirement was Rs.2,00,000. Give the necessary journal entries to adjust
goodwill and distribute profits showing your workings clearly.
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10.
11.
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12. A, B and C who are partners sharing profits in the ratio of 2:2:1. Their Balance Sheet as on 31st
March 2014 was as follows:
On 15th June 2014 while on his way to the business site, B met with an accident and died on the
spot. According
to the Deed, his legal representatives were entitled for:
i) Balance in the Capital Account
ii) Share of goodwill which was to be valued for the firm on the basis of thrice the average of
past 4 years profits.
iii) Share in profit upto the date of death on the basis of average profits for the past 4 years.
iv) Interest on capital @ 12 % p.a. to be provided
v) Profits for the years ending on 31st March 2011, 2012 , 2013 and 2014 respectively were `
Rs.15,000,Rs.17,000, Rs.19,000 and Rs.13,000
vi) B’s Legal representatives were paid the amount due in kind a plot of land valued Rs.1,00,000
and the balance in case through cheque.
vii) A and C continued as partners by taking over B share equally.
Prepare B’s Capital Account and B’s Executors Account. Identify the value involved by the firm.
13. Rajan, Babban and Aman are partners sharing profits in the ratio 2:2:1. Rajan decided to
retire from the firm on 31st March 2014. The Balance Sheet stood as under:
The other terms agreed were:
a) Freehold premises and stock are to be appreciated by 10 %.
b) Machinery and Furniture are to be depreciated by 10% and 6 % respectively.
c) Bad debts reserve is to be increased to Rs.4,000 and provision for discount be created at 2.5%
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d) Goodwill is valued at Rs.20,000 on retirement of Rajan from the firm.
e) The continuing partners have decided to adjust their capitals in the new profit sharing ratio 3:2
after retirement of Rajan, surplus/ deficit, if any, in their capital accounts to be adjusted through
current account.
Prepare Revaluation Account, Partners Capital Account and draw the Balance Sheet of
reconstituted firm.
14. Kavita, Ravita and Sunita were partners in a firm sharing profits in 2 : 1 : 2 ratio. On
31.3.2014 their Balance Sheet was as follows :
On 31.9.2014, Sunita died. The partnership deed provided for the following to the executors of
the deceased partner :
(a) Her share in the goodwill of the firm, calculated on the basis of three years’ purchase of the
average profits of the last four years. The profits of the last four years were Rs.1,98,000;
Rs.2,24,000; Rs.2,76,000 and Rs.3,27,000 respectively.
(b) Her share in the profit of the firm till the date of her death, calculated on the basis of the
average profits of the last four years.
(c) Interest @ 6% per annum on the credit balance, if any, in her Capital account.
(d) Interest on her loan @ 12% per annum.
Prepare Sunita’s Capital Account to be presented to her executors.
15. Sunny, Honey and Rupesh were partners in a firm. On 31-3-2014 their Balance Sheet was as
follows :
Honey died on 31-12-2014. The partnership deed provides that the representatives of
the deceased partner shall be entitled to :
(i) Balance in the capital account of the deceased partner.
(ii) Interest on capital @ 6% p.a. upto the date of his death.
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(iii) His share in the undistributed profits or losses as per the balance sheet.
(iv) His share in the profits of the firm till the date of his death, calculated on the
basis of rate of net profit on sales of the previous year. The rate of net profit on
sale of previous year was 20%. Sales of the firm during the year till 31-12-2014
was Rs. 6,00,000.
Prepare Honey’s Capital Account to be presented to his executors.
16. Ashu, Sonal and Divya were partners in a firm sharing profits in the ratio of 4 : 3 : 2.
Goodwill appeared at Rs.81,000 and general reserve at Rs.54,000 in the books of the firm. Ashu
decided to retire from the firm. On the date of his retirement goodwill of the firm was valued at
Rs.1,35,000. The new profit sharing ratio of Sonal and Divya was 1 : 2. Record necessary journal
entries on Ashu’s retirement.
17. Priya, Karam and Anna were partners of a firm sharing profits in the ratio of 3 : 2 : 1. Their
Balance Sheet on March 31st, 2014, was as follows :
Karam died on June 12, 2014, and according to the Partnership deed his executors were entitled
to be paid as under : (a) His share in the profits of the firm till the date of his death which will be
calculated on the basis of average profits of last three completed years. (b) His share in the
goodwill of the firm which will be calculated on the basis of two years purchase of total profits
of last three years. (c) Profits for the last three years were : Rs.30,000, Rs.70,000 and Rs.80,000.
Prepare Karam’s capital A/c to be rendered to his executors.
18. Ram, Rahim and Robert were partners sharing profits in 2 : 3 : 1 ratio respectively. The
partnership deed provided that in case of death of a partner the deceased partner’s share of
capital will be donated for the construction of a hospital in the tribal area. Due to ill health
Robert died on 30th September, 2013. The Balance Sheet of Ram, Rahim and Robert on 31st
March, 2013 was as follows :
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On
the
date
of
Rob
ert’s
deat
h
i.e. 30th September, 2013, the following was agreed upon : (i) Goodwill is to be valued at two
years’ purchase of average profits of last three completed years i.e. 2010-2011 – Rs.45,000;
2011-2012 – Rs.90,000 and 2012-2013 – Rs.1,35,000. (ii) Robert’s share of profits till the date
of his death will be calculated the basis of average profits of last three years. (iii) Land was
undervalued by Rs.25,000 and stock overvalued by Rs.8,000. (iv) Provision for doubtful debts is
to be made at 5% of Debtors. (v) Claim of workmen compensation estimated at Rs.5,000.
Prepare Robert’s capital account to be presented to his executors. Also identify a value that Ram,
Rahim
and
Robert
wanted
to
communicate
to
the
society.
19. Monika, Sonika and Mansha were partners in a firm sharing profits in the ratio of 2 : 2 : 1
respectively. On 31st March, 2013 their Balance Sheet was as under :
Sonika died on 30th June, 2013. It was agreed between her executors and the remaining partners
that (a) Goodwill of the firm be valued at 3 years’ purchase of average profits for the last four
years. The average profits were Rs.2,00,000. (b) Interest on capital be provided at 12% p.a. (c)
Her share in the profits upto the date of death will be calculated on the basis of average profits
for the last four years. Prepare Sonika’s Capital Account as on 30th June, 2013.
20. L, M and N were partners in a firm sharing profits in the ratio of 2 : 1 : 1. On 1 st April, 2013
their Balance Sheet was as follows :
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On the above date N retired. The following were agreed : (i) Goodwill of the firm was valued at
Rs. 6,00,000. (ii) Land was to be appreciated by 40% and Building was to be depreciated by
Rs.1,00,000. (iii) Furniture was to be depreciated by Rs.30,000. (iv) The liabilities for
Workmen’s Compensation Fund was determined at Rs.1,60,000. (v) Amount payable to N was
transferred to his loan account. (vi) Capitals of L and M were to be adjusted in their new profit
sharing ratio and for this purpose current accounts of the partners will be opened. Prepare
Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.
21.
22. The Balance Sheet of DK, EK and FK as on 31 December 2009 :
EK died on 31st March, 2010. Under the partnership agreement, the executor of EK was entitled
to: (a) Amount standing to the credit of his capital account (b)Interest on capital which amounted
to Rs.1,500 (c) His share of goodwill Rs.30,000 (d) His share of profit from the closing of last
financial year to the date of his death which amounted to Rs.10,500. EK’s executor was paid
Rs.32,000 on 1st April 2010 and the balance in four equal yearly instalments starting from
31.3.2011 with interest @ 6% p.a. Pass the necessary Journal entries and draw up EK’s account
to be rendered to his executor and EK’s executor’s account till it is finally paid.
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