Partnership and LLP AccountsQ-8 | Partnership and LLP AccountsQuestion 5197 of 108
All Questions

X, Y and Z were partners sharing profit and losses in the ratio of 5: 3 2. Their Balance Sheet as on 31st March 2023 is as follows: Balance Sheet as on 31st March 2023 Liabilities Amount Assets Amount Capital Accounts X Y Z General Reserve Trade Creditors 4,25,000 2,55,000 1,40,000 25,000 30,000 Building Machinery Debtors Stock Bank 2,00,000 3,50,000 1,95,000 1,05,000 25,000 8,75,000 8,75,000 Y retired from the business on 1st April 2023 on the following terms; (i) To appreciate building by 20% and to depreciate machinery by 5%. (ii) Provision for doubtful debts is to create at 10%. (iii) Goodwill of the firm is valued at 1,60,000 and Goodwill is not to be raised in the books of account. New profit sharing ratio will be 5 : 3. (iv) Entire sum payable to Y should be brought by X and Z in such a way to make their capital ratios according to new profit ratio. Balance of Y to be paid immediately. You are required to prepare Revaluation Account, Partners Capital Accounts and Balance Sheet after retirement. [Dec. 2023, 10 Marks]

For any discrepancies in this question, email contact@cadada.in

Ad

Detailed Solution & Explanation

Revaluation A/ c Particulars Amount Particulars Amount To Machinery A/ c To Provision for doubtful debts A/c To Profit on revaluation: X Cap. A/c (5/10) 1500 Y Cap. A/c (3/10) 900 Z Cap. A/c (2/10) 600 17,500 19,500 3,000 By Building A/ c 40,000 40,000 40,000 Partner's Capital A/ c Particulars X Y Z Particulars X Y Z To Y's Cap. A/ c (WN2) 20,000 28,000 By Bal. b/ d 4,25, 000 2,55, 000 1,40, 000 To Bank A/ c (Final payment) 3,11, 400 By Revaluation A/c 1,500 900 600 To Balance c/d (WN 3) 5,30, 000 3,18, 000 By General Reserve 12,500 7,500 5,000 By X's & Z's Cap. A/c (WN 2) • 48,000 By Bank (WN4) 1,11,000 2,00,400 Total 5,50, 000 3,11, 400 3,46, 000 Total 5,50, 000 3,11, 400 3,46, 000 Balance Sheet after retirement of Y Liabilities Amount Assets Amount X's Capital A/ c Z's Capital A/ c Trade Creditors 5,30,000 3,18,000 30,000 Building Machinery Debtors 1,95,000 Less: Provision 19,500 Stock 2,40,000 3,32,500 1,75,500 1,05,000 Bank 25,000 8,78,000 8,78,000 Bank A/c Particulars Amount Particulars Amount To Balance b/d To X's Capital A/ c To Z's Capital A/ c 25,000 1,11,000 2,00,400 By Y's Capital A/ c By Balance c/d 3,11,400 25,000 3,36,400 3,36,400 Working notes: 1. Calculation of gaining ratio: New old X = 5 / 8 – 5 / 10 = 5 / 40 (gain) Y = nil – 3 / 10 = - 3 / 10 (sacrifice) Z = 3 / 8 – 2 / 10 = 7 /40 (gain) Gaining Ratio = 5 : 7 2. Goodwill Treatment : X' Capital a/c [1,60,000 X 5/40] Dr. 20,000 Z' Capital a/ c [ 1,60,000 X 7 / 40] Dr. 28,000 To Y's Capital a/c [1,60,000 X 3/10] 48,000 3. Calculation of New firm's Capital: Balance of X and Z's Capital after all adjustment (4, 19,000 + 1,17,600) 5,36,600 Add: Amount required to pay to Y 3,11,400 New Firm's Capital 8,48,000 X' Capital's new capital balance = 8,48,000 X 5/8 5,30,000 Z' Capital's new capital balance = 8,23,000 X 3/8 3,18,000 4. Cash to be brought in by continuing partners: Cash brought by X = 5,30,000 - 4,19,000 = 1,11,000 Cash brought by Z = 3,18,000 - 1,17,600 = 2,00,400

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Balance Sheet

A statement showing the financial position of a business at a particular date, listing all assets on one side and all liabilities and capital on the other side. It is not an account but a statement.

Goodwill

An intangible asset representing the good reputation, brand name, customer loyalty, and earning capacity of a business over and above its net tangible assets. It arises in accounting during partnership changes or business acquisitions.

Related Comparison Tables

Revenue Expenditure vs Capital Expenditure: AccountsTrading Account vs P&L Account: Final Accounts ExplainedSLM vs WDV Depreciation: CA Foundation Accounts

More Questions from Partnership and LLP Accounts

Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

What is Piecemeal payments method under Partnership Dissolution? Briefly explain the two methods followed for determining the order in which the payments are made? [CA Inter May 2010, 2 Marks]

Explain Garner v. Murray rule applicable in the case of partnership firms. State, when is this rule not applicable? [CA Inter May 2013, 4 Marks]

Explain the Limitations of Liability of Limited Liability Partnership is of Liability of Limited Liability (LLP) and its partners.

Under what circumstances, an LLP can be wound up by the Tribunal. [CA Inter May 2015, 4 Marks]

Rules applicable in absence of partnership deed OR Discuss the rules if there is no Partnership Agreement. [Jan. 2021, 5 Marks]

Ready to Master Partnership and LLP Accounts?

Practice all 108 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free